[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]n a big setback to New Delhi Television Ltd. (NDTV), the Reserve Bank of India (RBI) rejected the Television (TV) channel’s application to compound from the Rs.2030 crores ($304 million) Foreign Exchange Management Act (FEMA) notice by the Enforcement Directorate (ED). NDTV’s move to file to RBI for compounding was an attempt to escape from prosecution by paying a fine and escape being tried under Prevention of Money Laundering Act (PMLA) which can mean a three to seven year jail term for the accused persons.
NDTV’s case was a clear-cut instance of Money Laundering and the ED is expected to convert the FEMA violation case to that of a PMLA case.
Filing compounding application to RBI by those who served notice under FEMA means, that they have admitted their contravention in routing money from abroad and plead guilty by paying a fine. So NDTV admitted its guilt and offered its readiness to pay a fine. Many FEMA defaulters were using this compounding method to escape from being prosecuted under the FEMA. Continuing prosecution under FEMA also has a danger of converting the case to PMLA, when Money Laundering aspect is established.
NDTV’s case was a clear-cut instance of Money Laundering and the ED is expected to convert the FEMA violation case to that of a PMLA case. So Lutyens Delhi’s top lawyers advised NDTV to opt RBI compounding method to try and close the case by paying a fine. After RBI’s rejection of NDTV’s petition, the ball has again landed in ED’s court.
The Government noticed that many were trying to escape using this route and the Prime Minister’s Office (PMO) has ordered to plug the fraud and issued a circular that ED’s concurrence is a must for such RBI compounding. Due to this timely intervention, NDTV’s move to escape from frauds was nipped.
In November 2015, ED had slapped a fine of Rs.2030 crores on NDTV under FEMA for blatant violation of money routing. Income Tax has already slapped Rs.525 crores ($79 million) on NDTV, which has now started retrenching its staff and taking other cost cutting measures. How much longer before NDTV throws in the towel? Only time will tell.
1. The conversion rate used in this article is 1 USD = 66.78 Rupees.
2. Text in Blue points to additional data on the topic.
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