The Indian government on Tuesday said three companies of the Anil Dhirubhai Ambani (ADA) group—Reliance Infrastructure Ltd (RInfra), Reliance Natural Resources Ltd (RNRL) and Reliance Communications Ltd (RCom)—have violated overseas debt norms, reports PTI.
While the matter pertaining to RInfra has been referred to the Enforcement Directorate (ED) over non-payment of penalty, the RNRL case has also been handed over to the ED for further investigation.
In a written reply in the Rajya Sabha, minister of state for finance Namo Narain Meena said end-use violations have been detected by the Reserve Bank of India (RBI) in respect of two external commercial borrowing (ECB) transactions of $360 million and $150 million by RInfra.
The company brought the proceeds raised through the ECBs to India and kept these invested in debt mutual funds, pending utilisation for the declared end-use, in gross violation of the existing guidelines, the minister said.
A penalty of Rs124.7 crore was imposed on RInfra, he said, adding that since it did not pay the penalty in accordance with the rules and provisions of the Foreign Exchange Management Act (FEMA), the violations were referred to the ED in December 2008 for adjudication.
RNRL had issued foreign currency convertible bonds worth $300 million for a project under the automatic route. As much as $275 million (about Rs1,127 crore) was brought to India in May 2007 and parked in debt mutual funds pending utilisation.
Subsequently, in August 2008, Rs1,160 crore ($275 million) was invested in a wholly-owned subsidiary in Singapore, the minister said.
Since the alleged transactions have a cross-border angle and since the RBI does not have privileges of investigation, the issue has been referred to the ED for further investigation, he said.
He added that RCom’s audited annual report for 2007 revealed that Rs5,142 crore of unutilised funds raised through foreign currency convertible bonds (FCCBs) had been deposited interest-free with a wholly-owned subsidiary, which in turn has parked the money in bank deposits.
After ascertaining the facts, the company was advised to apply for ‘compounding’. In its response, RCom denied any contravention of the regulations and maintained that the FCCB proceeds were utilised for telecom capital expenditure, taking into account the business exigencies. The minister said the company’s reply is being examined before initiating further action.