Why the CBI case against the Chidambarams is a witch hunt     

The twin probes by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) against Senior Congress leader and former Union Minister P Chidambaram in the INX Media case smell more like a witch hunt under political duress than sincere investigations into a case of scam and fraud. A large section of the mainstream media, specially TV channels and newspapers, is also complicit in peddling a narrative that is far from the truth.

The CBI had, on May 15, 2017, filed an FIR against Karti Chidambaram, Member of Parliament from the Congress and the former Union Minister’s son, Peter Mukerjea, Indrani Mukerjea and a few others. The FIR claimed that INX Media, promoted by the Mukerjeas, had brought in Rs 305 crore of foreign investment in 2007-2008 in violation of the Foreign Investment Promotion Board (FIPB) approval of only Rs 4.62 crore. In the chargesheet recently filed against Chidambaram, Karti and 12 others, CBI has contradicted the amount it quoted in its FIR. It has revised the amount of foreign money brought in allegedly by INX Media to Rs 403 crore. News channels and dailies have led with these figures. However, nothing could be further than the truth.

To begin with, the letter of approval from the FIPB to INX Media does not mention any amount. It mentioned that INX Media was free to bring in foreign investment which did not go beyond 46.2 per cent of the shareholding in INX Media.

Now, the Department of Industrial Policy and Promotion’s (DIPP) Press Note 7 of 1999 Series states:

As per existing provision, the foreign collaboration approvals are subject to the condition that the total non resident shareholding including foreign holding in the Indian company should not exceed the amount as well as the percentage specified in the approval letter. For any proposed increase in the amount as also the percentage of non resident shareholding, prior approval of the Government is necessary.

Proposals are received by the government for financial restructuring in the following manner :

A) In the case of joint venture companies, proposals for increase in the amount of non resident equity within the approved percentage of non resident equity and

B) In case of wholly owned subsidiaries or holding companies of foreign companies in India, proposals relating to enhancement of paid up capital.

Government, keeping in view the desirability of infusion of additional funds as equity by the foreign company, leading to increased investment inflows, has reviewed the existing provision for obtaining prior approval of the government for increase in the amount of foreign equity without change in the percentage of equity in the above type of cases and decided that henceforth, there would be no need for obtaining prior approval of FIPB/Government for increase in the amount of foreign equity within the percentage of foreign equity already approved in all cases in which the original project cost was up to Rs 600 crore. Any company can henceforth infuse additional funds by way of foreign equity as a result of financial restructuring (provided there is no change in the percentage of foreign equity) and notify the same to the Secretariat of Industrial Assistance (SIA) within thirty days of receipt of funds as also allotment of shares to non resident shareholders.

This basically means that INX Media was free to bring in any amount of money as long as it was restricted to the 46.2 per cent cap.

When INX Media had sought permission for the FIPB approval which came through on May 31, 2007, INX Media’s valuation was around Rs 10 crore. So, the press release of FIPB had mentioned that Rs 4.62 crore FDI proposal for INX Media has been approved. However, the letter of approval, apart from mentioning the 46.2 per cent cap, also mentioned that the “valuation of shareholding shall be subject to Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) regulations.”

By the time the money arrived in two tranches — the last one being in February, 2008 — INX Media’s valuation had increased manifold and a 46.2 per cent shareholding corresponded to the amount that was brought in to INX Media.

Now, in February 2008, the Income Tax (IT) department (which falls under Revenue department, Ministry of Finance) and the Information and Broadcasting (I&B) Ministry flagged the Finance Ministry and the FIPB on a certain amount of money invested in INX News Pvt Ltd, a downstream investment by INX Media.

In its application to the Secretariat of Industrial Assistance (SIA) for approval of FDI in INX Media, the company had stated that it intended to “make a downstream financial investment to the extent of 26 per cent of the issued and outstanding equity share capital of INX News Private Limited.” However, it did not apply for a formal permission.

Accordingly, the FIPB wrote back to the IT and I&B industry, saying that INX Media had informed the FIPB of the downstream investment and was in the process of applying for permission for the downstream investment. The company applied for the same and was granted permission sometime in August-September, 2008.

In this connection, it is important to understand the composition of the FIPB. The FIPB was an inter-ministerial department which had bureaucrats from ministries of Finance, Commerce, External Affairs, Economic Affairs, Industrial Policy and Promotions etc.

While the Union Finance Minister headed it, there were six full secretaries on the FIPB board including former Department of Economic Affairs secretary D Subbarao and the Revenue Secretary. Note that IT comes under Revenue. The FIPB unit consists of five joint secretaries, including that of Revenue, and other officials.

Subbarao, who was also the then FIPB chairman, has told officers probing the INX Media case that “violations” in the deal approving the Foreign Direct Investment (FDI) for the company were not brought to the notice of the FIPB board by the FIPB unit. He added, “Everything was clear in papers and hence the board recommended for approval to the then finance minister.”

It is surprising that approval for the second tranche of FDI infusion was given by a board without the knowledge of the said ‘non-compliance’ in a meeting where the Revenue Secretary’s representative was present to give his views. It was the same IT department, under Revenue, which had raised the red flag over INX Media’s downstream investment. It is difficult to believe that the top bureaucrat of the department was not aware of such a sensitive matter.

The CBI is now claiming that P Chidambaram and the five-member FIPB unit hatched the conspiracy to get the approval passed without the knowledge of the six secretaries. The absurdity of the charges in this case do not end here.

The CBI had earlier also alleged that instead of ordering investigation into the irregularities, the FIPB — under Chidambaram — suggested to INX Media to simply apply for fresh approval for downstream investment of overseas funds it had already received. However, the fact is it is Chidambaram who actually requested the Serious Fraud Investigation Office (SFIO) to look into the allegations of financial impropriety in INX Media in 2008 when its employees lodged a complaint with the Union I&B Ministry.

According to a report filed by the SFIO in April, 2013, IM Media, the majority stakeholder in INX News, was a front for Mukesh Ambani’s Reliance Industries Limited (RIL). As per SFIO, Chhajlani’s Nai Dunia, which bought INX Media, was also indirectly owned by Mukesh Ambani, thus making IM Media and Nai Dunia related companies. The SFIO report recommended charges be filed for causing wrongful losses to the ordinary shareholders of RIL under Indian Penal Code Sections 120B (conspiracy), 415 (cheating), 418 (cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect), and 420 (cheating and dishonestly inducing delivery of property). This was also reported by Outlook magazine. Why the CBI and the ED have neglected this part is anyone’s guess.

The CBI said that Karti Chidambaram, P. Chidambaram’s son and Lok Sabha MP, allegedly used his influence and accepted kickbacks to settle the mess INX Media found itself in. In January 2008, the Financial Intelligence Unit of the Finance Ministry discovered the anomaly in the moneyflow into INX Media. As it involved foreign funds, the Income Tax department forwarded the case to the ED.

To wriggle out of the probe and settle the matter with the finance ministry, CBI says, INX Media allegedly engaged Karti Chidambaram’s firm, Chess Management Service Pvt. Ltd. Karti is the founder director of Chess Management Services. The CBI FIR stated that Karti received funds to the tune of Rs 9.96 lakh in the case. The agency said during its searches at Karti’s homes and offices, sleuths reportedly recovered vouchers for this amount issued in favour of Advantage Strategic Consulting (P) Limited, a firm which the CBI said is “indirectly” owned by Karti. Karti was arrested by the CBI in February, 2018, in connection with the INX Media case but was released on bail the following month. Till now, the CBI has not presented any proof openly in the court that shows Karti owns the firm. The CBI has allegedly placed a lot of documents in sealed covers, the contents of which even the accused and their counsels are not aware of.

In March 2018, Indrani Mukerjea told the CBI that a deal of $1 million was struck between Karti and the Mukerjeas to secure approval from the FIPB in favour of INX Media. The CBI chargesheet is based on the testimony of Indrani Mukerjea whose credibility is not just seriously dented by the fact that she is accused of murdering her own daughter, Sheena Bora, but also by the web of lies and deceptions she had sewn around to protect herself in the case.

Also, the sum quoted by the CBI as bribe, i.e. Rs 9.96 lakh, is ridiculously paltry vis-à-vis the amount quoted in the FDI transaction as has been pointed out by many. If the matter is duly probed, the CBI stands a good chance of ending up with egg on its face while the Chidambarams get exonerated.