The Enforcement Directorate has issued a show-cause notice to construction major Emaar MGF Land Limited for alleged violation of the Foreign Exchange Management Act (FEMA) worth about Rs.8,600 crore by false representation on utilisation of foreign direct investment (FDI).
Forex rule violation
The ED, during an investigation into allegations of forex rule violations, noticed that the funds in question were received by the company and its four subsidiaries from Dubai, Cyprus, Mauritius and other foreign countries under the FDI scheme of the Reserve Bank of India since April 2005.
“The RBI scheme has given facility to Indian companies under an automatic route to receive funds from abroad for a number of business activities, including construction development projects. In this hassle-free facility, Emaar MGF Land and its subsidiaries had to disclose the purpose — from the list of permitted activities by RBI — for which the FDI had been received,” said an ED official.
The official said the company and its subsidiaries disclosed the use of FDI in construction projects, but allegedly utilised the overseas funds in the purchase of agricultural land and other plots in India. This use of overseas funds was not disclosed to the RBI nor was it permitted under the FDI scheme.
“Investigations under FEMA have revealed that foreign investments received by the companies were utilised in the purchase of land (including agricultural land) through various methods either directly or through other associated companies by diverting overseas funds,” said the official, adding that the ED had accordingly found Emaar MGF and its four subsidiaries guilty of contravention of Section 6(3)(b) of the Act, for a total amount of about Rs.8,600 crore.
“We have not received any communication from government authorities, and hence we are not in a position to comment.
“We emphasise that the company continues to uphold the highest standards of corporate governance and follows the laws of the land,” a spokesperson for Emmar MGF said in an email statement to PTI.
It is expected, sources said, that the penalty proceedings against these violations would also be undertaken which could take up the total penalty amount to Rs.25,000 crore, which is 300 per cent of the violations detected.
Emaar MGF Land is a joint venture between Emaar Properties of Dubai and MGF Development Limited of India.