CHANDIGARH: The Enforcement Directorate has stepped up its investigation into the alleged diversion and laundering of hundreds of crores of government funds in the IDFC First Bank and AU Small Finance Bank case, conducting searches at 14 premises across Chandigarh, Mohali and Panchkula and uncovering what the agency describes as further evidence of the movement, layering and concealment of alleged proceeds of crime.
The latest operation, carried out by the ED’s Chandigarh Zonal Office-II on September 29, is part of a money-laundering investigation into the alleged embezzlement of ₹645 crore from accounts linked to the Haryana Government, the Chandigarh Municipal Corporation and other government entities. The investigation is being conducted under the Prevention of Money Laundering Act, 2002.
The case originated with an FIR registered by Haryana Police in February 2026 after discrepancies were detected in the balances of government bank accounts maintained by the Development and Panchayats Department with IDFC First Bank and AU Small Finance Bank. Subsequent investigation widened the scope of the alleged financial irregularities, with reports indicating that accounts belonging to several government departments and public bodies came under scrutiny.
The latest searches focused significantly on jewellery businesses and their associated entities. According to the ED, premises linked to Malik Jewellers, KLG Jewels and its associate entities, M.B. Gold Traders, Sham Jewellers and Sunder Jewellers were searched. Investigators also searched premises associated with Gourav Kansal, whom the agency has described as an alleged intermediary involved in routing and layering the suspected proceeds of crime.
The jewellery trail has emerged as a key element of the money-laundering investigation.
According to the ED’s findings reported following the searches, money allegedly diverted from government accounts was subsequently routed through bank accounts of various jewellers and shown as business transactions. Investigators suspect that this mechanism was used to make the movement of funds appear legitimate while obscuring their alleged original source.
The agency has described these transactions as part of an alleged process of layering—moving money through multiple accounts, entities and transactions to make the financial trail more difficult to follow. The ED alleges that the transactions were carried out in connivance with accused persons to conceal and project the alleged proceeds of crime as legitimate funds.
The investigation has also brought the alleged role of government officials into sharper focus. According to the ED, some of the money allegedly moved through the jewellery network ultimately reached IAS officers and other government employees who are accused in the underlying bank-fraud case.
This aspect of the investigation is being pursued alongside the Central Bureau of Investigation’s probe into the alleged diversion of government funds. The CBI has filed a third chargesheet before the Special Court in Panchkula naming six Haryana-cadre IAS officers and other government servants in connection with the case.
The allegations against the officials, however, remain matters before the investigating agencies and courts. Being named in a chargesheet or being investigated does not by itself establish guilt, and the allegations will ultimately have to be tested through the judicial process.
The financial scale of the case has evolved as different agencies have examined different parts of the alleged transactions. The ED has put the alleged embezzlement under its money-laundering investigation at ₹645 crore. The CBI, in an earlier stage of its investigation, had filed a chargesheet relating to an alleged ₹504-crore diversion of Haryana Government funds, while later reporting has referred to a broader CBI assessment of approximately ₹661 crore when funds involving different government bodies are considered. These figures reflect different stages and scopes of investigation and should not be treated as a final judicial determination of the loss.
The case has already resulted in arrests and substantial asset action by the ED.
The agency has so far arrested four accused in connection with the alleged money-laundering offence. It has also attached, seized or frozen movable and immovable assets valued at approximately ₹211 crore. In addition, the ED has filed a prosecution complaint against 14 accused before the Special PMLA Court in Panchkula.
The latest searches have added another layer of evidence to the investigation. The ED said its teams recovered documents and other material relating to the alleged routing, layering, concealment and projection of proceeds of crime through different entities and bank accounts. The material is now being examined by investigators.
The alleged modus operandi has emerged progressively through the parallel investigations of the ED and CBI. According to reporting on the case, the investigation has examined whether public money was transferred from government accounts into accounts at selected branches of the two private banks and subsequently moved through shell entities, jewellery businesses and other commercial channels. The objective, investigators allege, was to convert or disguise the origin of the funds before they reached their intended beneficiaries.
Earlier CBI investigations have also focused on the alleged involvement of bank officials and public servants in opening or operating accounts through which government funds were allegedly diverted. The CBI’s first chargesheet named bank officials, public servants and individuals linked to shell entities, while subsequent investigation expanded the alleged network and examined the role of senior government officials.
The role attributed to jewellers in the alleged laundering process is particularly significant because investigators are examining whether apparently routine commercial transactions were used to provide a legitimate-looking trail for money that had allegedly originated from government accounts.
In its latest operation, however, the ED has not publicly disclosed the complete value or nature of any fresh recoveries from the 14 premises. The agency has said that additional evidence was recovered and that documents and other material are being examined.
The investigation therefore now extends across several interconnected layers: the alleged diversion of government funds, the role of bank officials and public servants, the use of intermediary or shell entities, the movement of money through jewellery businesses, and the alleged eventual transfer of proceeds to persons accused in the underlying fraud.
For Haryana and Chandigarh, the case has particular significance because the money under investigation is alleged to have originated from accounts holding public funds. Any proven diversion of such funds would raise questions not only about financial controls within government departments but also about banking oversight, account management and the mechanisms used to authorise and monitor government transactions.
The case also highlights the importance of following the money beyond the initial withdrawal. While the original investigation focused on discrepancies in government bank accounts, the ED’s mandate under the PMLA has led it to examine what allegedly happened to the funds after they left those accounts—where they travelled, which entities received them, how they were represented in financial records and who ultimately benefited.
The latest searches suggest that investigators are attempting to reconstruct that complete financial trail.
At the same time, the distinction between an allegation, an investigative finding and a proven offence remains important. The ED’s assertions represent the agency’s case at the investigation stage. The individuals and entities named in connection with the probe will have the opportunity to contest the allegations before the appropriate legal forums, and final responsibility can only be determined through due process.
With four arrests already made by the ED, approximately ₹211 crore in assets attached, seized or frozen, and prosecution proceedings initiated against 14 accused, the case has moved well beyond its initial stage. The third CBI chargesheet naming six Haryana-cadre IAS officers has further expanded the scope of the investigation into the alleged public-funds diversion.
The fresh evidence recovered from the 14 locations will now be examined alongside banking records, financial transactions and material collected during earlier searches and investigations. Investigators are expected to use this evidence to establish the complete chain of transactions and determine the roles, if any, of the different individuals and entities under scrutiny.
For now, the ED investigation remains active, with further examination of financial records and documentary evidence underway. The central question for investigators is whether the complex network of bank accounts, commercial transactions and intermediaries was deliberately used to disguise the alleged diversion of public money—and, if so, who ultimately controlled and benefited from those funds.
The latest searches in Chandigarh, Mohali and Panchkula mark another significant step in an investigation that has now drawn the ED, CBI, banks, government departments, senior public servants and private business entities into the same financial trail.
