ED Seizes Rs 2,032 Crore in Reliance Power Assets
The Enforcement Directorate has seized assets worth Rs 2,032.81 crore from Reliance Power Ltd during a FEMA investigation into overseas fund transfers.
In a massive crackdown involving high-stakes financial irregularities, the Enforcement Directorate (ED) has seized assets worth Rs 2,032.81 crore belonging to Reliance Power Ltd (RPL). The action comes as part of an ongoing investigation under the Foreign Exchange Management Act (FEMA), 1999.
The seizure, executed under Section 37A of FEMA, includes the company's bank balances and its shareholding in Sasan Power Limited. According to the federal agency, the value of these seized assets is equivalent to foreign exchange held outside of India in violation of Section 4 of the Act.
The SEBI Connection and Overseas Write-offs
The investigation was triggered by information provided by the Securities and Exchange Board of India (SEBI). The probe focuses on massive write-offs and provisions totaling Rs 2,101.46 crore recorded in Reliance Power's books of account.
The ED revealed that these financial write-offs were linked to overseas investments and advances made to companies located in tax havens, specifically the British Virgin Islands (BVI) and the Cayman Islands.
The Singapore-Geneva Money Trail
The agency's findings have mapped out a complex web of international transactions. The investigation highlighted the following sequence of events:
- Fund Raising: Reliance Natural Resources Ltd (which has since merged with RPL) raised US $275 million.
- Singapore Subsidiary: These funds were moved into a wholly owned Singapore-based subsidiary, Reliance Natural Resources (Singapore) Pte Ltd (RNRL-S).
- Geneva Deposits: RNRL-S deposited these funds with Deutsche Bank (Suisse) SA in Geneva.
- Collateral for BVI Loans: These deposits were subsequently used as collateral to secure loans for entities incorporated in the British Virgin Islands.
The ED alleged that these BVI entities were not independent actors but were actually controlled and managed from India by the Reliance Anil Ambani Group (RAAG) through various front persons acting on the group's instructions.
Allegations of Round-Tripping and Fabricated Documents
The probe has taken a darker turn with allegations of round-tripping. The agency stated that the loan proceeds were used for various purposes, including temporarily moving funds back into India through foreign entities based in Mauritius to benefit the Reliance Anil Ambani Group while keeping the bulk of the wealth parked outside the country.
When the BVI entities failed to repay the loans provided by Deutsche Bank, the ED claims a cover-up operation was launched. The agency alleges that:
- Fabricated Documentation: Documents were created to falsely suggest that RNRL-S and RPL's Indonesian subsidiaries had made advances to the BVI entities for legitimate business reasons.
- Backdating: The investigation found that these documents were backdated to make the suspicious transactions appear as genuine, long-standing business dealings.
The ED had previously conducted searches between March 6 and March 8 this year, during which they recovered incriminating evidence and recorded statements from several individuals involved in the matter.