ED sleuths target Adani after boss’ rap

SLEW OF NOTICES IN THE PIPELINE

THE Enforcement Directorate's investigation of Adani Enterprises has cranked into high gear after a stern reprimand from the agency's top boss to the Mumbai team tasked with the high-profile probe.
    In the past few weeks, it has booked the Ahmedabad-based company for alleged violations of foreign exchange law and is preparing to slap Adani Enterprises with more show cause notices, including for money laundering, a top official connected with the investigation said.
    The burst of activity follows a letter in August by Arun Mathur, the director of the agency, who upbraided the investigators in Mumbai for 'callousness' and 'inordinate delay' in filing complaints against the Adani group, perceived as close to politicians such as Gujarat chief minister Narendra Modi and agriculture minister Sharad Pawar.
    The Adani group, whose business interests include trading, infrastructure and energy, did not respond to phone calls and emails seeking comments for this story.
    Two show cause notices were issued last month to Adani Enterprises alleging illegal payment of overseas commission and claiming illegal value addition in the export of diamonds during 2004-05 and 2005-06. Such a notice marks the commencement of adjudication by a quasi-judicial authority to give the alleged offenders a chance to explain their version of events. Adanis face laundering charges
    THE authority's verdict can be challenged in an appellate tribunal and the tribunal's order can be contested in a high court.
    Three more show cause notices are being readied, investigators said. These relate to Adani Enterprises availing buyers' credit without permission of the Reserve Bank of India, opening bank accounts and setting up companies abroad without RBI's approval, and illegal acquisition and holding of foreign exchange.
    The Mumbai investigators have also asked Mr Mathur for permission to register a complaint against the group for money laundering, a criminal offence. They claim Adani Enterprises manipulated and forged overseas suppliers' invoices to facilitate transfer of funds and borrowed money overseas without the central bank's approval. The investigation into the Adani group went into a lull after April 2009, when Adani Enterprises, the flagship company, was issued a show cause notice alleging violations of foreign exchange law involving a sum of over 1,000 crore. Samir Bajaj, a deputy director in Mumbai, attributed the delay in the investigation to 'staffing issues'.
    "As directed by the head office, the investigation has been given top priority and it will be ensured that any delay in the past owing to staffing issues will not recur," he said in a letter to Mr Mathur. ET has seen a copy of this letter.
    Founded by Gautam Adani, who began his career as a trader, the three listed companies of the Adani group — Adani Enterprises, Adani Power and Mundra Port & Special Economic Zone — have a combined market value of nearly 1.5 lakh crore. It has announced ambitious plans over the next decade for the ports, power and coal mining businesses, projects which will require investments of tens of thousands of crore. Investigators said Adani Enterprises and its associate companies engaged in 'irregular' export and import of cut and polished diamonds during 2004-05 and 2005-06 to the tune of 1,990 crore.
    An official described the investigation of the group as the agency's "largest and most complicated", involving a large number of transactions in Singapore, Dubai and Hong Kong. The Adani group raised buyers' credit and foreign loans of 8,149 crore for the import of diamonds and investigators are examining whether RBI guidelines were flouted while raising these loans, the official said. Two of India's largest public sector banks are under the directorate's scanner for facilitating this and bank officials have been questioned. The agency has also written to 22 other banks in Ahmedabad for further information about the import and export of diamonds by Adani Enterprises in 2004-05 and 2005-06.
    Investigators also said the group opened several offshore companies and bank accounts in Dubai, Hong Kong and Singapore without the RBI's approval or knowledge. They named Adani Global in the UAE and Adani Global Pte in Singapore as two of the subsidiaries that are being investigated. These offshore subsidiaries and bank accounts were used to route money from one location to another, they claimed. Four companies in Singapore — Emperor Exports Pte Ltd, Gracious Exports Pte Ltd, Planica Exports Pte Ltd and Orchid Overseas Pte Ltd — were used to transfer illegal foreign exchange, directorate officials claimed.
    Earlier this year, the group was raided by the Customs department and Gautam Adani's younger brother and group managing director Rajesh Adani was briefly in custody for alleged violation of Customs rules.

FEELING THE HEAT: Gautam Adani