How INX made deal with Karti Chidambaram to get Finance Ministry off its back

The CBI FIR claims Chidambaram’s approval of INX Media’s downstream investment was “deceitful and fallacious” as it happened after the foreign funds came in; INX records show Karti’s Chess Management

Published: 17th May 2017 03:33 AM  |   Last Updated: 17th May 2017 04:09 AM   |  A+A-

The CBI FIR claims Chidambaram’s approval of INX Media’s downstream investment was “deceitful and fallacious” as it happened after the foreign funds came in. | Express News Service

By Express News Service

M/s INX Media Private Ltd. sought approval for engaging in the business of creating, operating, managing and broadcasting of bouquet of television channels including Hindi entertainment channel, multiple vernacular entertainment channels. The said company in its application sought for issuing the shares at its face value of Rs 10 each.

The company in its application had also mentioned about its intention, subject to the provisions of applicable laws, make a downstream financial investment to the extent of 26% of the issued and outstanding equity share capital of M/s INX News Private Limited.

The application of the company seeking FIPB approval was received and acknowledged by the Deptt. of Economic Affairs, FIPB Unit, Ministry of Finance, through its letter dated 15/03/2007. Thereafter, vide Office Memorandum dated 16/03/2007, the FIPB Unit forwarded the proposal to various departments of Govt. of India for forwarding their comments on the same.

CBI officers in charge of
the raid at Karti P
Chidambaram’s house
in Chennai discuss
proceedings | ROMANI
AGARWAL

The information further discloses that the FIPB Unit while sending the brief of the proposal which was to be put to the FIP Board for its meeting scheduled on 18/05/2007 had clearly mentioned the inflow of Foreign Direct Investment to the extent of Rs  4,62,16,000 (Rs 4.62 crore) taking the proposed issue at its face value.

The FIPB Unit also clearly stated that for downstream investment in INX News (P) Limited a separate FIPB approval will be required.

The Foreign Investment Promotion Board in its meeting held on 18/05/2007 recommended the proposal of INX Media (P) Limited to the above effect for consideration and approval of the Finance Minister. However, in the meeting, the Board did not approve the downstream investment by INX Media (P) Limited in INX News (P) Limited. Accordingly, the recommendations were approved by the then Finance Minister.

It is further disclosed that in the press release dated 30/05/07 issued by the FIBP Unit indicating the details of proposals approved in the FIPB meeting the quantum of FDI/NRI inflow against M/s INX Media was shown as Rs 4.62 crores.

Information further disclosed that contrary to the approval of FIPB conveyed through Letter dated 31/05/07 and condition mentioned therein, M/s INX Media (P) Limited deliberately and in violation of the conditions of the approval (i) made a downstream investment to the extent of 26% in the capital of INX News (P) Limited without the specific approval of FIPB which included indirect foreign investment by the same foreign investors and (ii) generated more than Rs 305 crores Foreign Direct Investment in INX Media (P) Limited against the approved foreign inflow of Rs 4.62 crores by issuing the shares to the foreign investors at a premium of more than Rs  800 per share.

The information further disclosed that upon receipt of a complaint in this regard, the Investigation Wing of the Income Tax Department, in February 2008 sought clarifications on the above two issues from the FIPB Unit of Ministry of Finance. Based on such information received from the Income Tax and finding it to be contrary to the policy and procedures of Foreign Direct Investment, the FIBP Unit informed the Income Tax Authorities that the matter was being verified. Parallelly, FIPB unit through its letter dated 26/05/08 sought clarifications from M/s INX Media (P) Limited on both the issues.

Upon receipt of this letter from the FIPB Unit, M/s. INX Media (P) Limited in order to wriggle out of the situation without any punitive action, entered into a criminal conspiracy with Shri Karti P Chidambaram, son of Shri P Chidambaram, the then Finance Minister of India, and Promoter Director of M/s Chess Management Services (P) Limited, Chennai, so as to get the issues resolved/addressed amicably by influencing the public servants of the FIPB Unit of Ministry of Finance by virtue of his relationship with the then Finance Minister.

‘Justified actions’

Based on the clarifications suggested by M/s Chess Management Services (P) Limited, M/s INX Media (P) Limited through their letter dated 26/06/08 tried to justify their action on both the two counts as under: (i) On the unapproved and unauthorized downstream investment, M/s INX Media falsely claimed that the same was in accordance with the approval, and (ii) on the excess foreign inflow received, the same was justified as premium received against the shares issued.

The information further disclosed that upon receipt of such letter from the company M/s. INX Media (P) Limited, the concerned officers and officials of the FIPB Unit of Ministry of Finance, by virtue of the influence exercised over them by Karti P Chidambaram, not only ignored the serious illegality on the part of M/s INX Media (P) on both the counts but also deliberately embarked on showing undue favour to M/s. INX Group by abusing their official position and advised M/s. INX News (P) Limited to apply afresh for FIPB approval in respect of the downstream investment which had already been made by INX Media (P) Limited. In their endeavour to show undue favour M/s. INX group, the officers/officials of FIPB Unit also ignored the request of the Department of Revenue to investigate the matter as to how downstream investment in M/s INX News Pvt Ltd was made by the company without FIPB approval.

‘Criminal conspiracy’

The information further discloses that M/s. INX News (P) Limited by deliberately concealing the fact that they had already received the investment in INX News (P) Limited to the extent of 26% including indirect foreign investment, in pursuance to a criminal conspiracy, again approached FIPB Unit of Ministry of Finance on their suggestion and sought permission for downstream investment. Such deceitful and fabulous proposal was favourably considered by officials of Ministry of Finance and approved by the then Finance Minister.

The concurrence to the ‘proposed investment’ which had already been made without the approval of the Finance Ministry show the malafide and dishonest intention on the part of officials of the Ministry for (a) not taking any punitive action against the proven violation by the company (b) covering such illegality by seeking an application from the company and granting permission to the company as if the company was yet to receive the Foreign Investment.

By such partisan and malafide acts done pursuant to the criminal conspiracy with the beneficiary company and the intermediaries, the senior officials of Ministry of Finance not only granted the illegal approval but also misinformed the investigation being conducted by the Investigation Wing of the Income Tax in this regard.

The information further disclosed that for the services rendered by Shri Karti P. Chidambaram to M/s. INX group through Chess Management Services (P) Limited in getting the issues against INX group scuttled, by influencing the public servants of the FIPB Unit of the Ministry of Finance, consideration in the form of payments were received against invoice raised on INX Media (P) Limited by M/s Advantage Strategic Consulting (P) Limited (ASCPL). The source informs that the very reason for getting the invoice raised in the name of M/s ASCPL for the services rendered by M/s. Chess Management Services (P) Limited was with a view to conceal the identity of Shri Karti P. Chidambaram in as much as on the date when the invoice was raised or when payment was received, Shri Karti P. Chidambaram was promotor Director of M/s. Chess Management Services (P) Limited, whereas M/s. ASCPL was being controlled by him indirectly.

Information also disclosed that the invoice is for approximately an amount of Rs 3.5 crores were also got raised in favour of M/s. INX Group in the name of other companies in which Shri Karti P. Chidambaram was having a sustainable interest either directly or indirectly.

Such invoices were falsely got raised for creation, acquisition of media content, a consultancy in respect of market research, acquisition of content of various genre of Audio/Video etc. However, INX group in its record has clearly mentioned the purpose of payment of Rs 10 lacs to M/s. Advantage Strategic Consulting (P) Ltd as towards “Management consultancy charges towards FIPB notification and clarification”.

The above acts of omission and commission prima facie disclose commission of offence under Section 120-B r/w 420 IPC, Section 8 and Section 13 (2) r/w, 13 (1) (d) of PC Act, 1988 against (1) M/s. INX Media (P) Limited through its then Director, Smt Indrani Mukherjea and others (2) M/s. INX News (P) Limited through its then Director, Sh. Pratim Mukherjea and others (3) Shri Karti P. Chidambaram, (4) M/s. Chess Management Services (P) Limited through its Director Sh. Karti P. Chidambaram and others (5) M/s. Advantage Strategic Consulting (P) Limited throught its Director, Smt. Padma Vishwananthan @ Padma Bhaskaraman and others (6) Unknown officers / officials of FIPB Unit of Ministry of Finance, Govt. of India and other unknown persons.
A regular case is, therefore, registered and entrusted to Shri R. Parthasarthy, DY.SP/CBI/EOU-IV/New Delhi for investigation. (sic)

Congress calls it vendetta, Stalin says PC will face it legally

While Congress leaders in the State are accusing the BJP and Centre of using the CBI to silence former Union Minister and Member of Parliament P Chidambaram, DMK working president MK Stalin said the senior Congress leader would face it legally.

Reacting to CBI’s swoop on the premises of Chidambaram and his son Karthi on Tuesday, he told reporters, “Chidambaram, who had been the Finance minister, will face it legally.” Stalin added that he reiterated his accusations against Central agencies like CBI and the Income Tax department.

Stating that things like raids will not stop Chidambaram from discharging his duties, Tamil Nadu Congress Committee (TNCC) president S Thirunavukkarasar promised that the party would stand by him in countering BJP’s act of ‘political vendetta.’ “No one can, through these actions, stop Chidambaram from going about his activities. Tamil Nadu Congress will stand by him in countering BJP’s act of political vendetta,” Thirunavukkarasar said in a statement.

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