FIR says INX hired firm linked to Karti when FIPB asked questions
The Central Bureau of Investigation on Tuesday conducted raids at premises linked to Karti Chidambaram, son of former finance minister P Chidambaram, and the residence of Peter Mukerjea and Indrani Mukerjea, among 14 locations spread across Mumbai, Chennai and Delhi NCR, in connection with a case of alleged corruption.
The raids were conducted after CBI filed an FIR against Karti and INX Media, among others, for alleged irregularities in FIPB approval given to the media house for foreign direct investment (FDI) in 2007.
The CBI has alleged that INX Media’s FDI proposal was “deceitful and fallacious” but was approved by then finance minister P Chidambaram. The CBI FIR has alleged that INX’s FDI inflow had been initially flagged by FIPB for irregularities and it had sought clarification from the media house. However, after it roped
in a company owned by Karti Chidambaram for consultancy, its fresh proposal was approved by FIPB “by virtue of influence exercised over them by Karti P Chidambaram”, the CBI FIR says.
By doing this, the CBI has alleged that the officials “not only CBI raids Karti Chidambaram, alleges he pulled strings with father’s ministry to clear FDI for media firm ignored the serious illegality on the part of M/S INX Media… but also embarked on showing undue favour to INX Group by abusing their official position”.
In return of the services, CBI has alleged, Karti Chidambaram got a payment of Rs 10 lakh through Advantage Strategic Consulting, “which was controlled by him (Karti) indirectly”. It has also alleged that it got vouchers of payments of Rs 3.5 crore from INX Media to various companies allegedly associated with Karti and “where there are common directors”.
The agency has registered the case against INX Media through its director Indrani Mukerjea, INX News; through its director Peter Mukherjea, Karti Chidambaram, Chess Management Services through its director Karti; Advantage Strategic Consulting through its director Padma Vishwanathan and unknown officers of the finance ministry.
Both Karti and his father P Chidambaram are also facing a probe by the CBI and Enforcement Directorate in the Aircel-Maxis deal. Premises connected to Karti Chidambaram have earlier been searched by ED in connection with its alleged money laundering probe into the case. ED had recently said in a press statement that it was probing the role of P Chidambaram in the grant of FIPB approval in the Aircel Maxis deal case. Although a special court has discharged Dayanidhi Maran in the case, ED has gone to the High Court challenging the order.
The INX Media case has been on the radar of investigative agencies as early as January 2008 when the Financial Intelligence Unit (FIU-IND) flagged the foreign direct investment of over Rs 305 crore by three Mauritius-based companies in INX Media Pvt Ltd (now called 9X Media Pvt Ltd), formerly owned by Peter and Indrani Mukerjea.
The alert generated by the FIU was picked up by the investigation wing of the Income Tax (IT) department in Mumbai,which later forwarded the case to the Enforcement Directorate (ED). In 2010, ED registered a case against INX Media for alleged violations of the Foreign Exchange Management Act (FEMA).
According to the CBI FIR, on March 13, 2007, INX Media approached the FIPB for permission to issue 14.98 lakh equity shares and 31.22 lakh convertible non-cumulative redeemable preference shares of Rs 10 a piece to three non-resident investors — Dunearn Investment (Mauritius) Pte Ltd; New Silk Route PE Mauritius LLC and New Vernon Pvt Equity Ltd under the FDI route. These shares represented 46.21 percent of the issued equity capital of INX Media.
INX Media, according to CBI sources, sought this approval to start a music channel, 9XM, a Hindi general entertainment channel (GEC) and multiple vernacular entertainment channels. The CBI said the media firm, in its application to FIPB in 2007, also mentioned its intention to “make a down stream financial investment to the extent of 26 per cent of the issued and outstanding equity share capital of INX News Pvt Ltd, a subsidiary of INX Media.”
While the FIPB granted permission to INX Media on May 30, 2007 to bring in FDI of Rs 4.62 crore, it rejected the proposal of downstream investment of INX Media in INX News. The CBI has alleged that INX Media flouted the conditional approval of FIPB and brought in over Rs 305 crore of FDI in the firm against the approved inflow of Rs 4.62 crore. According to sources, the foreign entities bought shares of INX at Rs 862.31 a piece, which was 86.2 times more than the face value of the shares.
The media firm also made a down stream investment of 26 per cent in its subsidiary, INX News.The CBI has alleged that on May 26, 2008, when the FIPB sought clarification from INX Media after the income tax department began its probe, the media firm engaged Karti Chidambaram, promoter director of Chess Management Service (P) Ltd, to “amicably” resolve the issue by “influencing the public servants of the FIPB unit of the ministry of finance by virtue of his relationship with the then finance minister, P Chidambaram.”
The CBI has alleged that Karti Chidambaram exercised influence over certain FIPB officials and the department, instead of investigating the case, extended undue favours to the media firm by asking INX News to apply for fresh FIPB approval on the downstream investment already received by it. According to the CBI, INX Media was later granted FIPB permission for the investment in violation of norms.
In 2008, the media firm launched NewsX, an English news channel. Within a year of launch, the news channel was sold to Indi Media Network, a joint venture between Nai Duniya owner Vinay Chhajlani and Jehangir Pocha.
In March 2009, Peter and Indrani exited the company after selling their 30% stake in the loss-making INX Media. In April 2010, the Hindi GEC of the company was sold to Zee Network for Rs 64 crore.
The same year, INX Media was renamed as 9X Media. Subsequently, in 2011, New Silk Route increased its stake in the company to 80% by buying out all the other private equity investors in the company. Both Peter and his wife Indrani, founders of INX Media, are accused in the Sheena Bora murder case and are lodged in jail in Mumbai.