The Enforcement Directorate has seized India-based assets worth Rs 2,032.81 crore belonging to Anil Ambani-led Reliance Power Limited, escalating a long-running foreign-exchange investigation into one of the country's most closely watched corporate probes.
The central agency said on Wednesday that the seized assets include the company's bank balances and its shareholding in Sasan Power Limited. The value of the assets, it said, is equivalent to foreign exchange allegedly held outside India in contravention of Section 4 of the Foreign Exchange Management Act. The seizure order, issued on October 12, was passed under Section 37A of FEMA.
How the probe began
The investigation started on information received from the Securities and Exchange Board of India, relating to write-offs and provisions aggregating Rs 2,101.46 crore made by Reliance Power in its books of account. According to the agency, those write-offs were connected to overseas investments and advances made to companies in the British Virgin Islands and the Cayman Islands. Search operations under FEMA were conducted between March 6 and 8 this year, during which the agency said it seized incriminating evidence and recorded statements of several people.
The $300-million trail
The agency's statement traces the money to Reliance Natural Resources Limited, which has since merged with Reliance Power. The merged entity had raised $300 million through foreign currency convertible bonds in 2006, of which $275 million was invested in its wholly owned Singapore subsidiary, Reliance Natural Resources (Singapore) Pte Ltd. The agency claims the Singapore unit placed the funds on deposit with Deutsche Bank (Suisse) SA in Geneva, and that the deposits were used as collateral for loans extended to entities incorporated in the British Virgin Islands. It further alleges that those entities were controlled and managed from India by the Reliance Anil Ambani Group through front persons acting on the group's directions.
Company disputes allegations
Reliance Power, in a regulatory filing on Tuesday, disputed the allegations, saying the investments were made with all applicable approvals and that the seizure order was provisional, subject to confirmation by the competent authority under the Act. The company also said the Sasan Power shares were already pledged to Power Finance Corporation, a government undertaking, under security arrangements in place for more than a decade, and that no penalty had been imposed. It said it was assessing the financial implications and would take appropriate legal steps to protect the interests of shareholders and other stakeholders.
Sources:
- The Hindu: ED seizes assets worth over Rs 2,000 crore linked to Reliance Power Ltd. under FEMA
- ET CFO: Enforcement Directorate Seizes Rs 2,033 Crore in Reliance Power Assets Over Alleged FEMA Violations
The central agency said on Wednesday that the seized assets include the company's bank balances and its shareholding in Sasan Power Limited. The value of the assets, it said, is equivalent to foreign exchange allegedly held outside India in contravention of Section 4 of the Foreign Exchange Management Act. The seizure order, issued on October 12, was passed under Section 37A of FEMA.
How the probe began
The investigation started on information received from the Securities and Exchange Board of India, relating to write-offs and provisions aggregating Rs 2,101.46 crore made by Reliance Power in its books of account. According to the agency, those write-offs were connected to overseas investments and advances made to companies in the British Virgin Islands and the Cayman Islands. Search operations under FEMA were conducted between March 6 and 8 this year, during which the agency said it seized incriminating evidence and recorded statements of several people.
The $300-million trail
The agency's statement traces the money to Reliance Natural Resources Limited, which has since merged with Reliance Power. The merged entity had raised $300 million through foreign currency convertible bonds in 2006, of which $275 million was invested in its wholly owned Singapore subsidiary, Reliance Natural Resources (Singapore) Pte Ltd. The agency claims the Singapore unit placed the funds on deposit with Deutsche Bank (Suisse) SA in Geneva, and that the deposits were used as collateral for loans extended to entities incorporated in the British Virgin Islands. It further alleges that those entities were controlled and managed from India by the Reliance Anil Ambani Group through front persons acting on the group's directions.
Company disputes allegations
Reliance Power, in a regulatory filing on Tuesday, disputed the allegations, saying the investments were made with all applicable approvals and that the seizure order was provisional, subject to confirmation by the competent authority under the Act. The company also said the Sasan Power shares were already pledged to Power Finance Corporation, a government undertaking, under security arrangements in place for more than a decade, and that no penalty had been imposed. It said it was assessing the financial implications and would take appropriate legal steps to protect the interests of shareholders and other stakeholders.
Sources:
- The Hindu: ED seizes assets worth over Rs 2,000 crore linked to Reliance Power Ltd. under FEMA
- ET CFO: Enforcement Directorate Seizes Rs 2,033 Crore in Reliance Power Assets Over Alleged FEMA Violations
