The Enforcement Directorate on Monday issued a show-cause notice in connection with foreign direct investments of over Rs. 578 crore received by the Bengaluru-based Devas Multimedia Private Ltd. between 2006 and 2010, allegedly in violation of foreign exchange regulations.
The notice was issued against Indian investors, the company’s directors, its key functionaries and also the foreign investors. Should the charges be proved in court, the accused will be liable for penalty up to thrice the sum involved.
The company is also being probed by the CBI for a deal worth Rs. 1,000 crore with Antrix, the marketing arm of ISRO, in 2005 despite alleged ineligibility. Under the deal, 10 transponders in satellites GSAT-6 and GSAT-6A, then to be launched by ISRO, were to be leased out to the company for payments to be made over 12 years.
The ED initiated a probe into suspected contravention of rules under the Foreign Exchange Management Act, in connection with the FDI received by the company from investors, including CC Devas Mauritius Limited, Telecom Devas Mauritius Ltd, Deutsche Telkom Asia Private Limited and Devas Employees Mauritius Private Limited.
“The company received investments of Rs.578.54 crore from May 2006 to June 2010. The Foreign Investment Promotion Board (FIPB) had granted approval for investments subject to various conditions and limitations. One condition was that the agreement between the company and the foreign investors are subject to Indian laws,” said an official.
However, the share subscription agreements entered into by the company allegedly contained clauses relating to settlement of disputes in courts abroad and applicability of laws other than those in India.
“Therefore, foreign investments received by Devas were not in consonance with FIPB conditions. Also, the company had assured the investors of an annual 8 per cent priority dividend, in addition to the other dividends and distributions, on a cumulative basis. Such assured dividends contravene provisions of FDI regulations under FEMA. Investments received on such assured returns amounted to Rs.571.72 crore,” said the official.
The company also allegedly issued a security in the nature of external commercial borrowing promising returns higher than the ceiling fixed by the Reserve Bank of India, allegedly in violation of FEMA involving Rs.67.50 crore.
For its part, the CBI had last year registered a case against then Antrix executive director K.R. Sridhara Murthi, R. Vishwanathan and M.G. Chandrasekhar (former ISRO scientist) of Forge Advisors LLC, USA; and Devas Multimedia, besides unknown officials of Antrix, ISRO and Department of Space.
The agency has alleged that Mr. Murthi extended favours to Devas by giving the rights for delivery of video, multimedia and information services via S-band, causing a wrongful gain of Rs.578 crore to the company. The company had allegedly submitted false information about its capability to deliver the services.
The CBI alleged that the wrongful gain was made through various investors from the U.S., Mauritius, Singapore and other countries.
