Amid a swirl of allegations involving Lalit Modi’s business interests, the government is examining evidence of tax evasion and unlawful foreign exchange transactions between the ousted IPL commissioner and BJP MP Dushyant Singh.
Sources told HT the Enforcement Directorate (ED), which tracks overseas transactions and money laundering deals, is scrutinising transactions involving Modi’s investment in Delhi-based Heritage Hotels Pvt Ltd Limited (NHHPL) and Anand Heritage Hotels Pvt Ltd (AHHPL) that the agency believes flouted foreign direct investment (FDI) rules.
Sources in the ED told HT the agency is pushing for pressing stringent punitive measures under the Prevention of Money Laundering Act (PMLA).
Singh, who is Rajasthan chief minister Vasundhara Raje’s son, is the owner of NHHPL, which received Rs 11.63 crore during 2008-2010 from Modi’s Anand Heritage Hotels. The ED is investigating the transactions because Modi allegedly paid 9,600 times the value of a share in Singh’s firm.
Modi’s lawyers have denied any wrongdoing. Singh did not respond to HT’s phone calls and text messages on Saturday.
AHHPL allegedly acquired 815 NHHPL shares in two instalments in 2008 and 2009 -- Rs 10 shares were reportedly bought at a premium of around Rs 96,000 each. AHHPL is also learnt to have given an unsecured loan of Rs 3.80 crore to NHHPL.
The agency is also examining tax returns to find out whether Singh, the titular king of Dholpur, paid the appropriate capital gains tax on the income he and his firm earned by selling shares to the Lalit Modi-controlled AHHPL at a hefty premium.
AHHPL transferred the fund to Singh’s NHHPL through a Mauritius-based firm Wilton Investment Limited. The agency is examining whether Singh’s NHHPL made appropriate disclosures to the Reserve Bank of India (RBI) as required under FDI rules. It is set to seek details from the RBI on the transaction and separately from Mauritius authorities on Wilton Investment Limited, which is suspected to be a shell firm.
The ED is also examining whether the Foreign Investment Promotion Board (FIPB) had given the required approvals for the investments in NHHPL.
The financial dealings between Singh and Lalit Modi came into the open when Poonam Chand Bhandari, an advocate from Jaipur, reported them to the ED. Bhandari, who also filed a public interest litigation in the Delhi high court in November 2013, says the former IPL chief transferred crores of rupees in Singh’s company by using a fictitious company.
“If ED presses PMLA, it could examine NHHPL directly. Mauritius may also then give prompt and adequate help to ED in the probe since FEMA, unlike PMLA, is a civil law,” said the source in the agency.
The ED is gathering evidence to corroborate suspicions that both the firms were not conducting substantial business activities when the transaction took place.
“The ED is trying to establish the reasons why the FDI sum came from the Mauritius-based firm actually, since it was not used for the intended purposes. The ED suspects the fund was diverted for other purposes,” said the source.
The ED has allegedly not been provided details that could reflect that assets were created in proportion to the received FDI, said the source.
Modi’s lawyers have denied any wrongdoing.
In a statement released on Thursday, Singh said, “The transactions done by my firm, Niyant Heritage Hotels Private Limited, were in accordance with company rules and income tax rules. The facts on them were mentioned in full in income tax returns and are on record. My company did not flout any rule, nor did it commit any irregularity.”
The ED may even summon Modi to join the probe in the country or via video-conferencing if required.
External Affairs Minister Sushma Swaraj and Raje are in the middle of a controversy for helping Modi. While Swaraj is facing criticism for helping him get documents to travel Portugal, Raje is accused of endorsing his application to stay in the UK.
(With inputs from Jaipur)