MUMBAI: The Enforcement Directorate (ED) has registered a case of money laundering concerning the alleged fraud in setting up oxygen plants in hospitals during the COVID-19 pandemic, police said on Saturday.

The police's economic offences wing (EOW) had on November 24 arrested contractor Romil Chheda of M/s Highway Construction Company for allegedly causing the Brihanmumbai Municipal Corporation (BMC) a loss of Rs 6 crore, an official said.

The ED on Friday registered a case under the Prevention of Money Laundering Act (PMLA) in connection with the fraud, he said.

Chheda was awarded a contract to set up oxygen plants in nine BMC-run hospitals and two jumbo COVID-19 centres despite allegedly not having prior experience in executing such work, he said.

According to the EOW, the fraud took place between April 2021 and January 2022 at the municipal workshop in Byculla and the oxygen plants on the premises of civic-run hospitals - V N Desai, Dr Babasaheb Ambedkar, GTB, Kasturba, BYL Nair, R N Cooper, K B Bhabha, KEM and ATMG Sion.

A preliminary probe has revealed that the concerned civic officials had overlooked the eligibility rules while awarding the contract, and the oxygen plants were not set up within the stipulated timeline, causing a loss of Rs 6 crore to the BMC, the official said.

As per the contract, the work had to be completed in 30 days or the contractor had to be fined 1 per cent of the contract amount for every week of delay, he said.

While Chheda was fined Rs 3.16 crore for the delays, investigations revealed that the civic officials should have collected another Rs 6 crore as a penalty from him, the official said.

The EOW has registered a case against Chheda and some BMC officials under the Indian Penal Code sections 418, 465, 467, 468, 471, 218, 120 (B) and 34 for cheating, forgery, causing wrongful loss, framing incorrect record to save someone from punishment and other offences.