New Delhi, Jul 19 (PTI) The ED on Friday said it has arrested a former CMD of a Mumbai-based insolvent company as part of a money laundering probe linked to an alleged bank loan fraud of more than Rs 975 crore.

Fomer chairman and managing director (CMD) of Mandhana Industries Limited Purushottam Chhaganlal Mandhana was arrested on Thursday. The company has been liquidated and is now known as GB Global Limited.

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Purushottam Mandhana was produced before a special Prevention of Money Laundering Act (PMLA) court in Mumbai on Friday and it sent him to six days in Enforcement Directorate (ED) custody, the agency said in a statement.

The money laundering case stems from a Central Bureau of Investigation (CBI) FIR filed against the company Mandhana Industries, Purushottam Mandhana, Manish Mandhana, Biharilal Mandhana and others on the basis of a complaint filed by the Bank of Baroda for "defrauding" a consortium of banks to the tune of Rs 975.08 crore.

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"The company and its directors hatched a criminal conspiracy to cause loss to banks and corresponding wrongful gain to themselves by diverting loan funds through fraudulent transactions and circular trading," the ED said. The CBI has not filed a charge-sheet in the case yet.

Purushottam Mandhana, the agency claimed, hatched a criminal conspiracy along with the other directors of the company and caused a "wrongful" loss to the banks for personal enrichment.

"He with an ulterior motive incorporated numerous fictitious entities in the name of his employees and used such entities for layering of funds of the company including the loan funds. In pursuit of his ill motive to dupe the banks, he made bogus sales and purchases with different entities," it alleged.

Searches were conducted twice in this case by the ED in June and early this month, and the agency had said it seized gold jewellery worth about Rs 3 crore and luxury cars like Lexus and Mercedes Benz apart from expensive watches, including brands like Rolex and Hublot.

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