ED imposes penalty of ₹566 crore on Chennai based company for dubious transfer of shares of its entity to Mauritius-based Fund, German entity

The Directorate of Enforcement (ED), Chennai, has imposed a penalty of ₹566 crore and confiscated properties worth ₹195 crore of a city-based company for ‘dubious transfers of shares to foreign firms and violation of the provisions of law’.

The ED conducted an investigation under the provisions of the Foreign Exchange Management Act (FEMA), 1973, against GI Retail Pvt. Ltd., a Chennai-based company and others. It unearthed the modality of dubious transfer of shares of the Indian entity, Hermes I Ticket Pvt. Ltd. (owned by GI Retail), to a Mauritius-based fund structure -- emerging markets investment Fund (EMIF) 1A. The said EMIF in turn, within weeks, transferred the shares to a German entity Wirecard AG, at exorbitantly enhanced value, the ED said in a press release.

“The entire gamut of transactions is found to have been fraudulently designed in such a manner so as to conceal the fact that the shares of Hermes I Ticket were always meant to be bought by Wirecard AG at an already fixed price. It was further found that the transactions through EMIF 1A were meant merely to facilitate the delinquent shareholders of GI Retail to hold and conceal the excessive amount of the actual sale price outside India which was ₹195 crore approximately. This amount was parked in the accounts of two UAE-based entities (indirectly controlled by the Indian Beneficiaries) under the guise of fictitious services provided by these entities, the ED said.

Having found the beneficiaries to have acquired and held huge amounts of foreign exchange but failed to repatriate the same into India, the ED invoked provisions of FEMA seizing various equivalent properties belonging to the perpetrators in India to the tune of ₹195 crore.

The complaint filed by ED regarding various FEMA contraventions by the notices alongwith prayer to confiscate the seized properties, was taken up for adjudication. In due process of law, vide Adjudication Order dated October 30, a total penalty of nearly ₹566.5 crore has been imposed by the Adjudicating Authority upon various respondents in addition to the confiscation of their properties worth nearly ₹195 crore, the ED said.

Published - November 02, 2024 12:26 am IST