Chennai, May 29 (IANS): The Enforcement Directorate (ED) on Monday said it has provisionally attached 30kg gold bars worth Rs.8,56,99,350 belonging to businessman J.Sekhar Reddy and his associates in the new-for-old currency notes scam.

The action, under the provisions of the Prevention of Money Laundering Act, 2002, follows the provisional attachment of Rs 34 crore in new currency notes belonging to Reddy and his associates on May 5.

In a statement issued here, the ED said following demonetisation of old Rs 500/1,000 notes, the the Income Tax Department searched various places belonging to Reddy, Managing Partner of SRS Mining, and seized about Rs 97 crore in old currency notes, Rs 34 crore in new currency notes and 177 kg of gold bars.

Subsequently, the Central Bureau of Investigation registered an FIR against Reddy and his associates for converting demonetised currencies into new currency notes in a fraudulent manner, the ED said.

According to ED, Reddy was examined under the provisions of PMLA.

"He has stated that cash seized by the Income Tax department belongs to his SRS Mining company and he admitted that it was unaccounted money. He has not divulged the actual source of new currencies other than stating that it is from the sand mining business," it said.

The ED said Reddy's associate Srinivasulu had stated that he used to receive money from SRS Mining and used part of it to be converted into gold bars through M. Premkumar as per Reddy's instructions.

Remaining cash was kept at various premises and the same was earlier recovered and seized by Income Tax department, the ED said.

"Partners of SRS Mining stated that they used to transport huge cash by road without accompanying accounts for the said amounts. It was admitted that they have not maintained any accounts against the collections, expenses, etc. So as to conceal the illegal earnings from the accounted income, they converted a part of such unaccounted monies into gold bars through Premkumar," it said in the statement.

The Income Tax department had recovered the 30 kg of gold bars from Premkumar's residence.

According to ED, Premkumar had stated that he used to receive money from Reddy's associate Srinivasulu, for purchase of one kg gold bars. The seized 30 kg gold bars were purchased using the demonetised currencies belonging to Reddy.

The ED said Srinivasulu and Reddy has admitted that the gold bars were procured from unaccounted money belonging to SRS Mining.

"However other two partners of SRS Mining, Ramachandran & Rethinam denied the same and stated that they never instructed for purchase of gold bars and it may be as per the instructions of Sekhar Reddy only," it added.