ED's money laundering probe against Kerala CM Pinarayi Vijayan’s daughter: The Exalogic-CMRL story so far

In March 2024, the Kochi zonal office of the Enforcement Directorate (ED) registered a case under the Prevention of Money Laundering Act, 2002 (PMLA) against Veena T, daughter of Kerala Chief Minister Pinarayi Vijayan, her firm Exalogic Solutions and controversial company CMRL. The case was based on observations made in an order issued by the interim settlement board under the Income Tax Department, which, in turn, stemmed from extensive searches conducted at CMRL premises in 2019.

 

 

 

However, CMRL challenged the ED’s Enforcement Case Information Report (ECIR) in the Kerala High Court, citing the absence of a predicate offence. The ED now contends that a potential complaint from the Serious Fraud Investigation Office (SFIO)—which has concluded its probe into financial dealings involving CMRL, Veena T’s now-defunct company, and a network of politicians across party lines—may open the door to establishing a predicate offense.

 

 

 

As the ED prepares to register a fresh ECIR, here’s a look back at the contents of its original ECIR: 

 

 

 

The 2024 ECIR notes that the Income Tax search revealed that CMRL had inflated its expenditures by booking bogus cash expenses worth Rs. 133.82 crores between FY 2012-13 and 2018-19 under the heads of transportation and sludge handling. Notably, these funds in cash were used to make illegal payments to politicians, public servants, and media houses. “Furthermore, Rs. 1.72 crores were paid to M/s Exalogic Solutions Pvt. Ltd., a company promoted by Smt. Veena Vijayan, without any actual services rendered in return,” says the ECIR.

 

 

 

ED observed that CMRL being a public listed company with 48.75% public shareholding and 13.41% shareholding by the Kerala State Industrial Development Corporation (KSIDC), the misappropriation of funds amounted to a loss to public and state shareholders. And, this became the ground to register a case under the PMLA.

 

 

 

 

 

The ECIR noted that the acts from CMRL constitute criminal conspiracy and cheating under the Indian Penal Code (IPC), and the proceeds of such crime are being investigated under PMLA. ED also notes that the information under Section 66(2) of the PMLA was also disclosed to Kerala Police against the accused, including CMRL Managing Director S.N. Sasidharan Kartha and Veena. However, no FIR has been registered.

 

 

 

The CMRL and the other then moved to Kerala High Court to quash the ECIR, claiming the absence of a scheduled offence. They also requested interim relief to stay the investigation. However, the High Court directed the petitioners to cooperate and join the investigation. Following this, employees of CMRL appeared before the ED and their statements were recorded.

 

 

 

In the ECIR, the Enforcement Directorate (ED) claimed that during its investigation, the IT Head of CMRL confirmed that neither Veena T nor her company, Exalogic Solutions, had provided any IT services to the firm. The agency further alleged that CMRL's Chief Financial Officer (CFO) admitted no Exalogic staff had ever been deployed at CMRL, and that payments to Veena were made solely on the instructions of Managing Director S.N. Sasidharan Kartha. The CFO also reportedly stated that large sums were paid in cash to politicians and bureaucrats to avert business threats.

 

 

 

According to the ECIR, Kartha admitted that the expenses booked were fictitious and the cash generated was used to pay off politicians and government officials. The ECIR also noted that Kartha named several political figures as beneficiaries, including Kerala Chief Minister Pinarayi Vijayan, Muslim League leaders Kunjalikutty and Ibrahim Kunju, and Congress leaders the late Oommen Chandy and Ramesh Chennithala. The payments, it states, were made through their respective representatives. Kartha also allegedly said Veena was known to him as the Chief Minister’s daughter and was paid for her perceived proximity to influential figures in the government.

 

 

 

“The investigation so far has established that key managerial personnel of CMRL, in criminal conspiracy with external beneficiaries, including Smt. Veena Vijayan and various politicians, siphoned off company funds. These funds, disguised as legitimate business expenses, were transferred dishonestly and without business justification, thereby defrauding public shareholders and generating proceeds of crime under PMLA,” the ECIR stated.

 

 

 

Despite the gravity of these allegations, the ED made little headway after registering the ECIR last year. However, the agency now views a potential complaint from the Serious Fraud Investigation Office (SFIO)—which recently concluded its probe into the financial dealings of CMRL and Exalogic—as a fresh predicate offence, paving the way to either file a new case or revive the earlier one by merging it with the current findings.

India