No evidence against individuals yet
Tobacco giant ITC Ltd and some of its executives may have to fork out a staggering Rs 300 crore in penalties for violating the Foreign Exchange Regulation Act. The Enforcement Directorate will issue a show-cause notice to this effect next month, sources in the investigative agency said.
Hypothetically, the penalty imposed can be five times the money laundered. But, the penalty on the company is estimated to be around Rs 300 crore, the sources said.
We are examining prosecutions on an individual level, but no evidence of personal gain by any of the executives has been detected until now, the sources said. The directorate is still continuing its investigations in this regard.
A team of Enforcement directorate officials is leaving for Singapore tomorrow to investigate violations involving ITC Global - the overseas trading subsidiary of ITC Ltd. The directorate has collected evidence against ITC which has to be matched with the books of account of the companys trading partners.
Last year, the creditors of the company had approached a Singapore court, which appointed KPMG-Peat Marwick as the judicial manager of the company.
KPMG, which has appointed its own auditors, is co-operating with the ED in the investigation.
The judicial manager had taken over the reins of the company after ITC Global defaulted in payments due to banks. ITC Globals losses are reported to be around $70 million this year. The directorate has said that ITC was apparently pumping money into ITC Global to settle some
outstanding dues of the subsidiary. ITC Global had suffered losses of over $16.3 million in its controversial deals with the US-based Chitalias, ITCs erstwhile partners.
The ED had arrested four senior executives of the company for Fera violations amounting to $100 million on October 31 last year. They were: GKP Reddy, former chairman and director of International business division; R K Kutty, chairman and director of IBD; R B Ravindranath, former vice-president, IBD; and M B Rao, former export manager of IBD.
The tobacco major has been charged with irregular foreign exchange transactions of well over $100 million by the overseas trading arm of the company between 1991 and 1996. Of this, the most transactions comprise deals in agricultural commodities. ITC had also allowed some $82.5 million to be parked abroad by the Chitalias under a 165-day interest free credit. Some $12 million worth of export remittances are still outstanding.
THE CHARGES
Fera violations of over $100 million
$4m stashed abroad and transferred to some US-based NRIs
Setting up front companies
Proceeds from under-invoiced exports retained abroad
$82.5 million, the proceeds from over-invoicing of imported machinery from Italy for ITC Bhadrachalam, transferred to India on ITCs instructions
$6.5 million transferred from ITC Global holdings to Chitalias and remitted to ITC showing it as an export transaction.
