Mumbai: The Enforcement Directorate (ED), an agency that deals with violations of India’s foreign exchange laws, issued a show-cause notice to Adani Enterprises Ltd (AEL), the flagship company of the Adani Group, on 24 April, for alleged violations of the country’s foreign exchange laws to the tune $228.7 million (Rs1,132 crore today), through a government scheme introduced in September 2004 to increase growth in exports.
The show-cause notice, which has been reviewed by Mint, has been sent to AEL, five related entities and some key officials of the group.
A show-cause notice is not an indictment. It only requires the company, AEL and a few related entities in this case, to explain their side of the story.
The government scheme, known as Target Plus, was introduced with the objective of pushing export growth by rewarding recognized export houses. It provided that exporters who have achieved a certain level of growth would be entitled to duty credit, based on the extent to which they exceeded the fixed annual export target.
According to the scheme, any export house with an incremental growth of 20-25% in a year was entitled to a duty credit of 5%. Similarly, export houses with growth above 25% and up to 100% were given 10% of duty credit. For export houses achieving more than 100% growth, the duty credit was 15%.
The scheme was discontinued in April 2006, possibly because of large-scale misuse by some exporters.
The show-cause notice, signed by ED’s special director K. Nageshwar Rao, has asked AEL and others to file their reply within 30 days “as to why adjudication proceedings as contemplated under section 16 of the Foreign Exchange Management Act (Fema), 1999, should not be” taken against them.
Under section 16, the government can appoint officers to hold an inquiry into the alleged irregularities and if found guilty, the company could be penalized. The Act does not specify the quantum of penalty.
While AEL has allegedly violated Fema norms for foreign exchange transactions worth $228.7 million, a related entity Aditya Corpex Pvt. Ltd has allegedly done so on transactions worth $106.27 million, and Hinduja Export Pvt. Ltd, $59 million.
Other related entities that have been served show-cause notices are Jayant Agro Organics Ltd, Bagadiya Brothers Pvt. Ltd and Midex Overseas Ltd.
Rao has directed the key officials of these firms to “appear either in person” or through lawyers with documents “relevant to the subject matter of enquiry” and said that in case they do not do so, the “adjudication proceedings will be initiated...ex parte”.
In an email response to Mint’s queries, Devendra Amin, senior vice-president (corporate communication) at Adani Group, said: “A formal communiqué has been received by the company. The same is being studied by us for response. As a policy, we do provide information and cooperate with (the) authority whenever called for.”