Antrix-Devas deal: ED slaps Rs 1,200 crore FEMA violation notice

NEW DELHI(PTI):ED on Monday slapped a Rs 1,200 crore FEMA violation notice in connection with alleged “wrongful” gain made to private multi-media company Devas by Antrix, the commercial arm of ISRO.

An order issued by the agency’s Special Director (southern region) in Chennai found Ms Devas Multimedia Private Limited, Antrix and others “contravening” the provisions of the Foreign Exchange Management Act (FEMA) on at least three counts after completing the over three year investigation in the deal that was struck in 2005.

The agency had registered a FEMA case in 2012 and is also probing the deal under anti-money laundering laws. Antrix had signed a deal with Devas in January, 2005 to provide it with crucial S-Band wavelength, which is primarily kept for strategic interests of the country.

As per the order, accessed by PTI, the total violation under FEMA that has been established in the case is Rs 1,217.76 crore.

If the charges stand after the adjudication process that will begin now, the accused will be liable to penalty which could be three times of the amount contravened.

The show cause notice said ED probed the Foreign Direct Investment (FDI) received by Ms Devas Multimedia Private Limited Bangalore from various overseas investors including Ms CC Devas Mauritius Limited, Ms Telecom Devas Mauritius Ltd, Ms Deutsche Telkom Asia Private Limited, Ms Devas Employees Mauritius Private Limited and the Indian firm (Antrix), between May 2006-June 2010, received a total of $131.44 million (about Rs 578.54 crore).

It said this FDI was in violation of FEMA and FIPB rules.

“The share subscription agreements entered into by the Indian company contained clauses relating to settlement of disputes at courts other than India and applicability other than Indian laws on matters of dispute and thus the FDI received by Ms Devas Multi Media were contrary to the conditions specified in the approvals granted by the Foreign Investment Promotion Board (FIPB) and thus contravening the provisions of FEMA.

The extent of contravention on the said count is Rs 578.54 crore,” the order said.

The second contravention pertains to Devas Multimedia assuring overseas investors an annual 8 per cent priority dividend (in addition to the other dividends and distributions) on cumulative basis.

“Such assured dividends are not the nature of any equity instrument and contrary to the provisions of FDI regulations under FEMA. The investments received by the Indian company with such assured returns is Rs 571.72 crore,” it said.

The Enforcement Directorate said the last violation of FEMA in this case occurred when Antrix “for one particular tranche of receipt, issued a security in the nature akin to an External Commercial Borrowing as per the extant regulations and promised return higher than the ceiling fixed by RBI which is also in contravention to the provisions of FEMA. The extent of contravention on this count is Rs 67.50 crore,” the order said.

The spectrum, as part of the Antrix-Devas deal, was meant for running digital multi-media service by leasing 90 per cent transponders on two satellites – GSAT-6 and GSAT-6A.

Following complaints of massive irregularities, the UPA government had scrapped the contract in 2010 and ordered an inquiry by a high-powered review committee headed by the then CVC Prityush Sinha in February, 2014 following which CBI took up the case.

CBI had slapped sections like 120-B (criminal conspiracy) and 420 (cheating) of Indian Penal Code along with relevant sections of Prevention of Corruption Act against the accused.

The Antrix-Devas deal had seen the early exit of G Madhavan Nair as Chairman of ISRO as he was the head of the Governing Council of Antrix when the deal was finalised.

CBI had alleged that the accused persons had entered into a criminal conspiracy and the government officials abused their position by favouring Devas by unauthorisedly giving it rights for delivery of videos, multi-media and information services to mobile phones using S-Band through GSAT-6 and GSAT-6A satellites and terrestrial systems in India.

Posted by on June 6, 2016. Filed under Economy. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.