NDTV Frauds, page 4
NDTV Ltd. and its group companies in India further received USD 83,909,977 and USD 21,972 from its overseas subsidiaries namely NDTV Mauritius Media and NDTV Worldwide Mauritius Ltd. under the automatic route of RBI in the guise of Foreign Direct Investment (FDI). RBI has pointed out that bringing funds in its group companies by NDTV Ltd. from its overseas subsidiaries is not a genuine and bonafide business activity and is a contravention of Regulation 6 (2)(ii) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004. Thus, NDTV Ltd. received an amount of Rs. 1113.31 crores approximately in total in contravention of FEMA provisions.
NDTV Ltd. has issued Corporate Guarantees (CG) in favor of NNPLC to the tune of USD 84 Million relating to the arrangement of funds of USD 170 Million and loans taken by NNPLC which were not reported to RBI. RBI has pointed out that not seeking RBI approval and not reporting to RBI to issue a Corporate Guarantee is a contravention of Regulation 6(2)(vi) and Regulation 6(4) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004.
NDTV Studios Ltd. (another group company of NDTV Ltd.) has deposited a sum of Rs.200 crores with Bank of Baroda, Corporate Financial Branch, and Parliament Street, New Delhi relating to USD 70 Million Loan by NNPLC. NDTV Studios Ltd. has contravened the provisions of Section 3 (d) of FEMA.
NDTV Ltd. bought back the transferred shares of its group companies namely NDTV Labs Limited, NDTV Imagine Limited, NDTV Convergence Limited, NDTV Lifestyle Limited and NGEN Media Services Ltd. to the tune of Rs. 296.74 crores from NNPLC to its group companies namely NDTV Lifestyle Holdings Limited and NDTV Networks Limited. RBI has pointed out that such transactions are in contravention of Regulation 6(2) (ii) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004. Thus NDTV Ltd. has contravened this Regulation read with Regulation 10B of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, for the amount of Rs. 296.74 crores.
The ED’s Show Cause Notice issued said that NDTV Ltd. has contravened the provisions of the above said provisions of FEMA and Regulations issued there under, in which the amount involved is around Rs. 2030.05 crores.
In the initial days NDTV tried to bully the ED sleuths. Only some accountants were sent to ED to give evasive replies. Flabbergasted, the ED officers warned the NDTV staffers, that they would summon Prannoy Roy. Then NDTV sent its CEO K V L Narayan Rao. Rao was questioned extensively by the ED and the Income Tax Department and after which he admitted that the rationale for setting up multiple shell companies abroad was only to circumvent the restrictions imposed by Indian regulations.
"While all these covert deals, tax evasion, cross border "laundering structures" of dummy companies were created and more importantly Roys carried out a covert change of control, Independent Directors (who owe a fiduciary responsibility) looked the other way. NDTV has had the best names in Indian business as independent directors - Mr. N R Narayana Murthy of Infosys (who resigned in 2010) and Mr. Bhaskar Menon (former Chairman of record company EMI) who also resigned in 2016. In addition the ones who have continued on the Board are individuals like - Mr. Amal Ganguli (former Chairman of Price Waterhouse Coopers (PWC) India and Board member of many other public companies including some Tata companies), Mr. Pramod Bhasin (a very illustrious and well known founder of Genpact and a GE associate), Mr. Kaushik Datta (very strange, till 2011 was the signing partner of NDTV accounts being a PWC staffer and the statutory auditor). All these individuals have a lot of answering to do to its shareholders, SEBI, ED and now of course CBI and EOW. Mr. Datta is a more interesting one of the whole lot; he was the signing partner of RRPR Holding and NDTV at the same time when the alleged illicit change of control and controversial ICICI Bank loan was disbursed. Why did all these eminent individuals look the other way? Wasn't remaining silent meaning abetting all these acts of the Company and its Promoters? Why hasn't SEBI or the stock exchanges asked any questions from them?"
Subramanian Swamy was looking for an appropriate time to strike. In August 2016, he wrote to the Prime Minister that CBI should also register a case of cheating and conspiracy. His masterstroke was the demand of conversion of FEMA case to violations of PMLA (Prevention of Money Laundering Act). In FEMA, there was only fine. But in PMLA, the case is registered against persons along with companies and envisages jail term of three years to seven years. During the FEMA probe, ED can convert the case to PMLA, however, ED requires registration of a predicated offence or commonly known as a “Schedule Offence”. This registration can only be done under specified laws such as IPC, SEBI Act and many other such laws. Now, it is incumbent on EOW (Delhi Police), CBI and SEBI to register offences under the Schedule and thereafter, PMLA will be invoked by ED.
Swamy’s main contention was that the major money laundering happened through a London based shell company of NDTV. He produced the directorship and shareholding pattern of the London based company NDTV Networks Plc. In this company apart from Mr. and Mrs. Roy, NDTV’s senior journalists Barkha Dutt, Vikram Chandra and Suparna Singh were either shareholders and/ or directors (Annex 2). Swamy in his letter to Prime Minister Narendra Modi and Directors of CBI and ED argued that the case should be registered under the main faces of NDTV under PMLA (Swamy’s complaint Annex 3).
In addition to Swamy, the petition filed by QSL (minority shareholder) before the Delhi HC wherein the ED and DG (Investigation) Income Tax are parties, it is clearly spelt out that PMLA should be invoked against RRPR Holding P Ltd. also as it has committed various violations covered under IPC, SEBI Act and Money Laundering.
ED also unearthed that NDTV have a 50 million dollar money trail during the Aircel-Maxis scam. The Investigation team led by Rajeshwar Singh had found that in 2006, the accused Malaysian company Maxis had a money trail with NDTV, at the same period money from Maxis flown to Finance Minister P Chidambaram’s son Karti’s company Chess Management Private Limited.
After Swamy’s case, many actors in the NDTV looting started changing their positions in the organization to save their skins. When the BJP government came to power, the first to change colors was Barkha Dutt who declared herself as a consulting staffer and started her own ventures. Vikram Chandra also changed his position from a managerial position. Is it like rats jumping first from the sinking ship? Prannoy Roy started staying mostly in his South African home. Is he going to be an absconder like fugitive Vijay Mallya and Lalit Modi? In fact, just a few weeks back, Barkha has completely washed her hands off NDTV and is not even associated with them as a consultant. One won’t be surprised if Chandra does the same and many more high profile exits follow.
In the FEMA case, NDTV is expected to get a severe fine. But the nightmare for the NDTV leadership is when the ED decides to charge them under PMLA because in PMLA related cases, the minimum jail term is three years, ranging to a maximum of seven years, apart from the attachment of properties worth more than Rs.2000 crores, leading to the shutting down of the corrupt empire built under the garb of journalism. In any case, it is time that the broadcasting license of NDTV be suspended (all channels taken off air) as SEBI has filed an affidavit in the Delhi HC in December 2016 clearly stating that as far back as August 2009, the Promoters (Radhika Roy and Prannoy Roy) in a clandestine arrangement took over Rs. 400 crores from VCPL and signed off control to the Reliance Group. This act itself is illegal as it is mandatory that no change of control of a media broadcaster can take place without MIB’s specific permission.
Income Tax slaps Rs.525 crore on NDTV frauds
After the eight years of tax fraud, NDTV was finally caught by the Income Tax Department in June 2016, after strict instructions from Prime Minister Narendra Modi’s Office, removing the hurdles created by the Finance Minister Arun Jaitley. Income Tax sleuths slapped Rs.525 crores fine on NDTV for illegally routing money through Bermuda and other tax havens in 2008. In fact, in addition to this the Department put together evidence along with a witness confirming that NDTV Promoters and key management along with advisors from PriceWaterhouse entered into “pre-meditated” tax fraud. It is after this that K.V.L. Narayan Rao (in September 2015) and now in February 2016, Vikram Chandra have been summoned and examined by the Tax Department.
ITD found that NDTV received unexplained money of Rs.642,54,200 ($150 million13) from NBC Universal Inc and Universal Studios International BV in USA13. This money was routed through a shell company in Netherlands named NDTV Networks International Holdings BV to avoid paying income tax. Income Tax sensed a fraud in 2010 when this transaction was suppressed in the statements submitted to it. That Assessment Year 2009-10 claimed Rs.64 crores as loss! At that time the UPA-2 was in power and in strict adherence to coalition dharma, the Income Tax officers who questioned the covert money routing were silenced.
When Income Tax asked NDTV to explain how this Rs.642 crores originated from America to Bermuda to Netherlands to India, NDTV gave curious and funny explanations that they were selling a “dream” and that the project would not succeed later.
The Income Tax officials noted in file that “Assessee’s (NDTV) theory of having sold a “Dream” to the investor has not been substantiated by any credible evidence as no details have been filed whatsoever for the so-called business projections and the basis of compulsion of the sale price of the share at the astronomical price of Rs.7015 which is 159 times of its face value of Rs.45. Needless to mention that the subject company whose shares were sold was incurring huge losses and there was hardly any worthy business to justify the above sale price.”
This illegal money routing happened in the second half of May 2008 during the UPA-1 tenure when Chidambaram was the Finance Minister. The 150 million dollars came from the US giant General Electrics’ (GE) subsidiary NBC Universal Inc and Universal Studios International BV13. If it was a legitimate deal, the US Company would have to invest directly to NDTV’s India office. But the GE’s subsidiary invested money through its tax haven unit in Bermuda and NDTV received through its shell company in Netherlands to fool the Income Tax and other Indian agencies. The interesting part is that the shell company in Netherlands - NDTV Networks International Holdings BV – had just one person on its payroll. This man is shown as the CEO, Clerk, Peon etc. The multifaceted person was NDTV’s Managing Editor Vikram Chandra, resident of India. The address was just a paid attorney’s address in NDTV to fool the ITD. While doing this blatant fraud, NDTV continued to spout ethics and morality day after day! With slick English speaking anchors, the truth was buried and facts were twisted. Every officer who questioned the deal was mercilessly shot down by the system controlled by corrupt politicians and top officials from 2008 to 2015.
The company which received Rs.640 crores unexplained money had the audacity to show Rs.64 crores loss to Income Tax! There appears to be a hidden story behind this deal. Those days in 2006 to 2008, the US giant GE was trying to bag Rs.16,000 crores ($3.74 billion[16]) sweet deal from Indian Railways for creation of an Electrical Locomotive factory in the then Railway Minister Lalu Prasad Yadav’s constituency in Madhepura. Though the word “electric” is in GE’s name, GE was not an Electric Locomotive manufacturer. GE has only a Diesel Locomotive factory and they lost the tender in Railways for the Diesel Locomotive factory announced by Lalu at Marhowra in Bihar.
After losing the tender for Marhowra Diesel Locomotive factory implementation bid, GE tried every trick in the book to get the Madhepura Electrical Locomotive factory implementation bid. But there was a problem for GE as it was not an Electric Locomotive Engine manufacturer. The creative minions in GE produced false certificates to Indian Railways claiming that they are producing Locomotive Engines for Kyrgyzstan Railways, which was later caught red-handed in 2010 by Indian Railway officials. Was GE confused between Kyrgyzstan and Kazakhstan[17]? GE’s legal team member Seema Sapra became a whistle-blower in this scam and was hounded and hunted.
A perusal of NDTV’s annual reports from Fiscal Year 2008-2013 can be summarized using the following graphic:
Figure 4. Consolidated Financials of NDTV FY 2008-13
It can be easily seen that NDTV did not much care about their 45,000 shareholders. Every decision was directed at minimizing the tax footprint and enriching the pockets of a few individuals.
The timing of GE’s subsidiary routing of 150 million dollar money to NDTV really needs investigation along with blatant frauds including alleged perjury committed by GE in trying to bag the Rs.16,000 crores worth contract from Indian Railways. Are these two linked in some sort of a quid-pro-quo arrangement?
So how did GE end up investing in NDTV? Thereby appears to be another tale here. Planning Commission Member Montek Singh Ahluwalia was pushing for GE’s Rs.16,000 crores contract in Indian Railways and as usual many Cabinet Ministers were also supporting this deal. Needless to say that GE’s proposals had the blessings of the then Finance Minister P Chidambaram. Without Finance Minister’s support huge contracts worth more than Rs.16,000 crore would not have seen the light of the day.
In reality, GE was trying to start its Locomotive Engine production facility using India’s tax money without any expertise in the field. There was a huge quarrel among Planning Commission members on Montek Singh’s move to push the deal towards GE. Some officers of Planning Commission found that though the deal was stated as Rs.16,000 crores, by the time it completes, the Indian Railways would have to shell more than Rs.30,000 crores to the US giant GE. The deal fell through despite UPA-2 head Sonia Gandhi’s blessings as from 2010 onwards, the country started witnessing a huge wave of anti-corruption movements after the exposure of 2G Scam. On November 9th, 2015, GE and Alstom signed a deal worth Rs. 40,000 crores for setting up Diesel and Electric Locomotive factories[18].
The Income Tax slapping of Rs.525 crores for receiving money from GE’s subsidiaries through a circuitous route has really affected NDTV. They never thought their eight year old crime would be caught. NDTV used its might to scuttle the Income Tax’s action but failed due to the efforts of some honest officers. The case is now at the appeal stage at Income Tax Appellate Tribunal (ITAT) and the maximum NDTV can buy is time or perhaps a small reduction in fine. Paying this huge fine would certainly sound the death knell for the TV channel.
The detailed 14 page Income Tax notice slapping Rs.525 crores fine is published. See Annex 4.
The Confession:
NDTV’s CEO K V L Narayan Rao admitted to the fraud of floating a shell company in Netherlands to receive 150 million dollars in June 2016, after he was exhaustively questioned by the officers. Rao’s confession is adequate grounds for Enforcement Directorate to register case for money laundering under PMLA, which envisages jail terms for the major players of NDTV frauds.
“In this regard, it is pertinent to mention that the statement of Mr. K V L Narayan Rao, Director of the assessee company (NDTV) and the then Group CEO, was recorded under on oath under section 131 of the Act on July 23, 2015, copy of which is enclosed. In this statement, in response to question No. 3, when asked about the rationale of incorporation of plethora of foreign subsidiaries, he admitted that “the foreign subsidiaries were incorporated to circumvent the restriction imposed by Indian regulations, which confined the foreign direct investment in news channel companies to a maximum of 26 percent,” said an Income Tax Officer, on how 150 million dollar from US based GE Group company was flown illegally to NDTV through Netherlands. The 54 page document on this regard which includes the 33 page handwritten confession by Narayan Rao is available here[19].
The confession also exposes the shell companies floated by Prannoy Roy, wife Radhika Roy, Barkha Dutt, and Vikram Chandra abroad. These companies were just addresses of paid attorneys of those countries. Most of these paper companies were closed down by NDTV after various complaints were filed in 2010 onwards by several persons.
Prannoy Roy and wife Siphoned Rs.146 crores to personal accounts
There is a Chinese proverb: Never judge a person until the coffin is nailed. This suits Prannoy Roy, who became an icon due to the largesse of the public broadcaster Doordarshan. In 1998 he was caught by the CBI for cheating Doordarshan of around Rs.5 crores. But all his contacts in Delhi saved him. But then he started looting his own baby NDTV.
He formed a shell company in his and wife’s name – RRPR Holdings Private Limited somewhere in 2008. RRPR expands to Radhika Roy Prannoy Roy. This shell company was floated to loot the money he got in the name of NDTV, which is a public limited company listed on the Stock Exchange with more than 40,000 shareholders.
The ITD in December 2015 found that in October 2008 Prannoy Roy and wife siphoned Rs.92 crores into their personal accounts[20]. Soon Income Tax also found that in March 2010, Prannoy Roy siphoned another sum of around Rs.54 crores to his personal account for a total of Rs.146 crores.
First siphoning of Rs 92 crores:
The Income Tax Department in December 2015 found that in October 2008, within two days of receiving Rs.375 crores loan from ICICI Bank, Prannoy Roy diverted Rs.21 crores to himself and Rs.71 crores to wife Radhika Roy as interest free loans20. The role of ICICI Bank was also under controversy in this murky deal because the loan was allotted to the shell company RRPR Holdings Private Limited, which controls NDTV. There is little doubt that this dubious loan allotment to RRPR was given with the blessings of top ICICI Bank officials including its then head K V Kamath.
It is a matter of complete disbelief and points towards corruption (quid pro quo) or some other behind the scenes “sweet deal”… How is it possible for a Bank regulated by RBI to give a loan of Rs. 375 crores to a company that has a negative net worth, no earnings or cash flows and to top it all inadequate collateral? Shouldn’t CBI be investigating this act of ICICI Bank along with the beneficiaries (Roys)?
