NEW DELHI: The Enforcement Directorate (ED) has issued a showcase notice to Bangalore based Devas Multimedia Private Limited and others on Monday for allegedly violating Foreign Exchange Management Act (FEMA) in a bid to wrongfully gain funds from abroad after inking agreement with Antrix Corporation, the commercial arm of ISRO.
The agency has established that the total violation under FEMA by Devas and others is around Rs 1,217 crore and issued a show cause notice. The notice was issued by the agency's Special Director in Chennai.
The probe agency alleged suspected contraventions of the provisions of the Foreign Exchange Management Act in the Foreign Direct Investment (FDI) received by Devas Multimedia Private Limited, Bangalore from various overseas investors, including CC Devas Mauritius Limited, Telecom Devas Mauritius Ltd, Deutsche Telkom Asia Private Limited and Devas Employees Mauritius Private Limited.”
“Devas received investments during the period from May 2006 to June 2010 totaling Rs 578.54 crore,” said a senior ED officer.
The ED officials are of the view that the Foreign Investment Promotion Board (FIPB) granted approval for FDI with the conditions that the agreement between the Devas and the Foreign Investors are subject to Indian laws. But the share subscription agreements entered by Devas contained clauses relating to settlement of disputes at courts other than India and applicability other than Indian laws on matters of dispute.
The officials further pointed out that the FDI received by Devas were contrary to the conditions specified in the approvals granted by the FIPB and which is contravening the provisions of FEMA, 1999. “The extent of contravention on the said count is Rs 578.54 crore,” ED officials stated.
Interestingly, Devas also assured the overseas investor an annual 8 percent 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, 1999. The investments received by the Devas with such assured returns are Rs 571.72 crore,” ED officials said.
Further, Devas 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 agency officials said.
The alleged violation came to light during while the agency is probing a case under the Provisions of the Money Laundering Act on the basis of an FIR filed by the Central Bureau of Investigation in this regard.
The agency had registered the case against Executive Director of Antrix, KR Sridhara Murthi, MG Chandrasekhar and R Vishwanathan of Forge Advisors, Devas Multi-media Private Ltd and unnamed officials of Antrix, ISRO and Department of Space and some private persons.
It is alleged that the accused people had entered into a criminal conspiracy and the government officials abused their position by favouring Devas by giving them rights for delivery of videos, multimedia and information services to mobile phones using S-Band through GSAT-6 and GSAT-6A satellites and terrestrial systems in India.
The deal was fallout of ISRO’s decision to open the space sector for private investment in year 2000 to enhance satellite-based communication technology for commercial consumption.
Antrix signed an MoU in 2003 with US-based Forge Advisors to attract investment in digital multimedia services. Forge Advisors later formed Devas Multimedia in 2004, hired former ISRO officials and was headquartered in Bengaluru.
It is alleged that ISRO scientists cheated the government by abusing their official position to favour Devas Multimedia.
In 2005, Antrix had signed a deal with Devas to provide it with crucial S-Band wavelength, which is primarily kept for strategic interests of the country. The spectrum was meant for running digital multi-media service by leasing 90 percent transponders on two satellites -- GSAT-6 and GSAT-6A.