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Income Tax (IT) and Enforcement Directorate (ED) documents show that the two agencies started their enquiries into NDTV founder Prannoy Roy, his wife Radhika Roy and companies controlled and owned by them during the UPA regime.
The recent search by the CBI is only an offshoot of the continuing investigations by the IT Department and Enforcement Directorate since year 2011-12.
The two agencies started their investigation of various cases of tax evasion and foreign exchange violations against the couple way back in 2011 and 2012 respectively.
The tax evasion cases included:
1. Money laundering of Rs 1,100 crore through shell companies floated by the promoters of NDTV in the UK, Mauritius, Netherlands, Sweden and UAE.
2. Purchase and sale of NDTV stock, quoted at Rs 140 per share, at a low price of Rs 4 per share amongst promoters and their holding company.
3. Diversion of an interest-bearing loan from ICICI Bank taken by M/s RRPR Holdings Pvt Ltd to the promoters, namely Prannoy Roy and Radhika Roy, without charging any interest in contravention of the terms of the loan agreement between RRPR Holdings and ICICI Bank.
4. Covert sale of a controlling interest in NDTV to Vishvapradhan Commercial Pvt Ltd without paying taxes on the gain of Rs 403.85 crore.
5. Transfer or issue of securities to foreign residents outside India and transfer or issue of foreign securities in violation of FEMA regulations. The amount involved was Rs 2,030 crore.
According to these documents, unaccounted income of Rs 642 crore (shown in a shell company based in the Netherlands as the premium on share capital of only Rs 6 lakh sold to a subsidiary of a Bermuda-based company) was brought to tax on February 21, 2014 (during the UPA regime) after an appeal by the NDTV group was rejected by the Dispute Resolution Panel.
The group filed a further appeal against the order before the IT Appellate Tribunal (ITAT), which is pending disposal.
Income-Tax Department documents indicate that in 2006, NDTV had only two subsidiaries situated in India. But from December 2006 to September 2012, NDTV incorporated, floated and operated 32 paper companies including 14 foreign shell companies having no real business, no employees and no business premises in the UK, Netherlands, Mauritius, Sweden and UAE.
The documents show that these shell companies were used to launder Rs 1100 crore of unaccounted income. The 14 foreign shell companies -- except the one located in Mauritius -- were dissolved after the laundering operation, posing a huge problem for the IT Department to obtain information on them.
These paper companies claimed to have raised Rs 1100 crore through entities situated in the British Virgin Islands, Cayman Islands, UK, USA and the Swiss Confederation as well as through a subsidiary of CA Holding CV Bermuda in the Netherlands during 2007-2009. However, the IT probe says the claim was found to have been false.
In response to this charge, NDTV claimed that the investors who invested Rs 1100 crore in these companies recovered only Rs 400 crore and suffered a loss of Rs 700 crore within one and a half year. The IT Department says this was a false claim.
An amount of Rs 642.5 crore out of the Rs 1100 crore was introduced by the subsidiary company of CA Holding CV Bermuda in the Netherlands to a subsidiary of NDTV, also in the Netherlands, which was held as undisclosed/concealed income of the NDTV Group in an assessment order passed by the assessing officer for the assessment year 2009-10 on Feb. 21, 2014.
The documents indicate that immediately after receipt of Rs 642.5 crore by the shell company, the entire amount was siphoned off as a dividend declared exclusively to the NDTV Group. The order of the assessment officer was confirmed by the Dispute Resolution Panel and NDTV’s appeal is pending before the ITAT.
Out of the Rs 1100 crore raised, Rs 400 crore was transferred through Mauritius-based shell companies to NDTV in India and Rs 700 crore was retained in the UK and Netherlands, the IT documents show. Out of this, Rs 400 crore was claimed to have been returned to unidentified investors and the balance of Rs 300 crore has remained unaccounted.
Further, the assessing officer’s order detecting concealed income of Rs 47 crore earned by Radhika and Prannoy Roy through transactions of sale and purchase of shares at a low price of Rs 4 per share as against the quoted price of Rs 140 per share during the financial years 2008-09 and 2009-10 was confirmed in the first appeal.
The Enforcement Directorate’s documents indicate that the Reserve Bank of India detected violation of several FEMA provisions to the tune of Rs 2030 crore by the NDTV Group.
The ED has issued show cause notices on this matter and adjudication proceedings are in progress. The agency is also probing certain financial transactions of the group under PMLA.
SEBI has informed the Delhi High Court that proceedings against Vishwapradhan Commercial Private Limited were initiated for concealing change of control in NDTV pursuant to an agreement with RRPR dated July 21, 2009.
RRPR Holding Pvt Ltd purchased 97,95,434 shares of NDTV at 438.98 per share on July 3, 2008 for a consideration of Rs 429.99 crore by taking a interest-bearing loan of Rs 429.99 crore from M/S India Bulls Financial Services. The loan was raised on June 24, 2008. Later on, the quoted price of NDTV started falling from August 2008 and ultimately declined to Rs 156 per share on October 14, 2008.
Taking into account the sharp fall, India Bulls asked RRPR to return the loan. In these circumstances, RRPR swapped the loan of M/s India Bulls with a loan of Rs 375 crore from ICICI Bank at 19 per cent per annum on October 14, 2008. The loan was ultimately retired on August 7, 2009.
ICICI Bank granted the loan to a private holding company of NDTV having no other business and having paltry assets of Rs 73.97 crore (value of 47,41,721 shares of NDTV @ Rs 156 per share).
The bank granted the loan on the basis of a security of a paltry Rs 24 crore, the documents show. The bank also allegedly ignored the terms and conditions of its agreement with RRPR by allowing it to divert a part of the loan, Rs 91 crore, to Prannoy Roy and Radhika Roy.
The CBI contends that the settlement of the loan resulted in wrongful gain of Rs 48 crore to Prannoy Roy and Radhika Roy and RRPR Holdings due to reduction of interest rate from 19 per cent to 9.5 per cent and a corresponding wrongful loss to ICICI Bank.