[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he Government continued to tighten the screws around the New Delhi Television Limited (NDTV) in a case of foreign exchange violation. The Enforcement Directorate (ED) has served a show-cause notice of regulatory foreign exchange rule violations involving Rs 2,030 crore ($207 million) against the private broadcaster.
The ED issued the notice in a case probed under the Foreign Exchange Management Act (FEMA) since 2011.
The NDTV is facing charges of violating rules and regulations in setting up companies in the U.K., the Netherlands, Sweden and Mauritius.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he NDTV has been highly critical of Prime Minister Narendra Modi’s role in the Gujarat 2002 riots. Seen as an anti-BJP channel, the public broadcaster also ran a sustained campaign against Modi for years. Sources said that the Modi government started a preliminary probe against NDTV soon after the BJP came to power in May last year.
According to a report prepared by the ED, the Investigation has revealed financial transactions in FEMA contraventions by NDTV Ltd. by availing the facilities provided by RBI relating to Overseas Direct Investment (ODI) and Foreign Direct Investment (FDI) as under-
The NDTV Ltd. through its step down subsidiary in UK, NDTV Networks Plc. (NNPLC) was permitted by FIPB to raise overseas funds through public offerings of equity shares and through AIM listing at London Stock Exchange and remit those funds in its group companies. But NNPLC raised funds by way of overseas loan, bonds and optionally convertible preference shares. NDTV Ltd. has violated Regulation 5 (1) of FEM (Transfer or Issue of Security to Persons resident outside India) Regulations, 2000 issued under Section 6 (3) (b) of FEMA by not complying with the terms and conditions of FIPB approval.
The NDTV raised funds outside India to the tune of $170 Million through NNPLC and brought USD 163.78 Million (Rs. 725.56 crore approximately) in its group companies in India during the period March, 2007 to October, 2010. RBI has pointed out that bringing funds in its group companies by NDTV Ltd. from NNPLC is not a genuine and bonafide business activity and is a contravention of Regulation 6 (2) (ii) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004 issued under Section 6 (3) (a) of FEMA.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he public Broadcaster in its group companies in India further received USD 83,909,977 and USD 21,972 from its overseas subsidiaries namely NDTV Mauritius Media and NDTV Worldwide Mauritius Ltd. under the automatic route of RBI in the guise of FDI. RBI has pointed out that bringing funds in its group companies by NDTV Ltd. from its overseas subsidiaries is not a genuine and bonafide business activity and is a contravention of Regulation 6 (2)(ii) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004.
Thus, NDTV Ltd. received an amount of Rs. 1113.31 crore ($168.36 million) approximately in contravention of FEMA provisions, the ED report said.
According to the Ed report, the NDTV issued Corporate Guarantees (CG) in favour of NNPLC to the tune of USD 84 Million relating to the arrangement of funds of USD 170 Million and loans taken by NNPLC which were not reported to RBI. RBI has pointed out that not seeking RBI approval and not reporting to RBI to issue a Corporate Guarantee is a contravention of Regulation 6(2)(vi) and Regulation 6(4) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004.
The ED report said that the NDTV Studios Ltd. (another group company of NDTV Ltd.) has deposited a sum of Rs. 200 crores ($30.25 million) with Bank of Baroda, Corporate Financial Branch, Parliament Street, New Delhi relating to USD 70 Million Loan by NNPLC. NDTV Studios Ltd. has contravened the provisions of Section 3 (d) of FEMA.
According to the ED, the NDTV bought back the transferred shares of its group companies namely NDTV Labs Limited, NDTV Imagine Limited, NDTV Convergence Limited, NDTV Lifestyle Limited and NGEN Media Services Ltd. to the tune of Rs. 296.74 crore from NNPLC to its group companies namely NDTV Lifestyle Holdings Limited and NDTV Networks Limited. RBI has pointed out that such transactions are in contravention of Regulation 6(2) (ii) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004. Thus NDTV Ltd. has contravened this Regulation read with Regulation 10B of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, for the amount of Rs. 296.74 crore ($44.88 million).
“Thus in the Show Cause Notice issued, NDTV Ltd. has contravened the provisions of the above said provisions of FEMA and Regulations issued thereunder, in which the amount involved is Rs. 2030.05 crore ($307 million) approx,” the ED has said.
In its response NDTV confirmed receiving the ED notice.
“… the company along with Dr. Prannoy Roy, Executive Co-Chairperson, Mrs. Radhika Roy, Executive Co-chairperson, Mr. K.V.L. Narayan Rao, Executive Vice Chairperson and NDTV Studios Ltd. (erstwhile subsidiary of the Company since merged with the Company) have on November 19, 2015 received a showcause notice from the Directorate of Enforcement as to why adjudication proceedings should not be held for alleged contraventions of provisions of FEMA (Foreign Exchange Management Act),” said the company in a filing to BSE Ltd.
NDTV also said it has been advised that the allegations of the contraventions of FEMA norms in the showcause notice are not “legally tenable”. The company said it will file a reply to the ED notice soon.
1. The conversion rate used in this article is 1 USD = 66.11 Rupees.
2. Text in Blue points to additional data on the topic.