The Enforcement Directorate (ED) has seized movable and immovable properties worth ₹62.52 crore of Farmax India Limited, its promoters, and directors under the Foreign Exchange Management Act (FEMA).
The seized properties include 23 immovable properties of Farmax India, its managing director Morthala Srinivasa Reddy, and his brother and the company’s executive director, M. Malla Reddy.
The company’s equity shares in the name of promoters and the shares of MSR India Limited, originally held by the managing director and later transferred to his brother and other family members, have also been attached, the agency said.
The ED had initiated the inquiry against Farmax India and others under the FEMA provisions in connection with the alleged fraudulent issuance of Global Depository Receipts (GDR) and non-utilisation of the same for bona fide purposes. It purportedly found that the company’s managing director, in connivance with one Arun Panchariya and others, had issued GDRs in the name of his company in two tranches in 2010.
As alleged, he did not deliberately repatriate the GDR proceeds worth $71.45 million to India in accordance with the statutory requirements.
The ED on November 22 said its investigation also revealed that “Vintage, FZE, Dubai”, a wholly owned entity of Mr. Panchariya, was the sole subscriber to the GDRs. For that purpose, Vintage had availed itself of a loan from Euram Bank, Vienna, vide an agreement dated May 5, 2010. Under the agreement, Farmax India had agreed that the entire GDR proceeds would be pledged to secure the loan granted by Euram Bank to Vintage.
“The loan was sanctioned by EURAM Bank to Vintage, FZE, solely for the purpose of subscribing to the GDRs and in turn the GDR proceeds received by FIL [Farmax India Limited] were pledged for securing the loan advanced to Vintage,” it said.
Of the funds raised abroad, $15.60 million was diverted to its subsidiary, Farmax FZE, Dubai, a shell company in the UAE, and from there to various other entities controlled by Mr. Panchariya. Another $56.57 million was adjusted by Euram Bank against non-repayment of loan by Vintage FZE, the agency has alleged.
