INX media case: What is it? Why is Chidambaram in trouble?
In 2006, a company called INX media was co-founded by Peter Mukherjea and Indrani Mukherjea. (The same couple who were accused with the killing of their daughter Sheena Bora and disposing of the body without a trace)This company needed foreign investment. The foreign direct investment can be made under
- a) Automatic route: Foreign Investment is allowed under the automatic route without prior approval of the government or the Reserve bank of India.
- b) Approved route: when Foreign Investment is not allowed under the automatic route requires prior approval of the government. Ex: Defence, Media, Banking, etc. Government has created a Foreign Investment Promotion Board (FIPB) to approve such foreign investments. In 2007 INX Media sought permission from the Foreign Investment Promotion Board for two purposes.
First, to issue equity shares to three non-resident investors- 1) Dunearn Investment( Mauritius) Private Ltd, 2) NSR PE Mauritius LLC and 3) New Vernon Private Equity Ltd. Second , to make downstream, investment to the extent of 26 per cent of the issued and outstanding equity share capital of INX News Private Ltd.
Foreign Investment Promotion Board agrees to allow investment up to 4.62 crore, which means INX Media cannot bring in investment for more than 4.62 crores from foreign companies. Also, they cannot make the downstream investment, which means INX Media cannot make the investment in other Indian companies.
Why the Case files?
The Finance Ministry received an application from INX media for FIPB approval on March 15, 2007. However, the Foreign Investment Promotion Board did not approve downstream investment by INX Media into INX News Private Ltd. And FIPB allowed inflow only up to 4.62 crores. But As per CBI FIR, contrary to the FIPB approval, INX Media deliberately violated conditions and allegedly generated over Rs 305 crore of FDI in INX Media against Rs 4.62 crore and issued shares to foreign investors at a premium of Rs 800 per share. They also made the downstream investment up to 26 percent in the capital of INX news which was not allowed.
In 2008, the investigation wing of the Income Tax Department received a complaint about the INX after which it sought clarification from FIPB which in turn shot off a letter to INX Media questioning the irregularities in the investments.
Then the Mukerjeas sought the help of Karti Chidambaram, son of P.Chidambaram, former Union Minister of Finance in Congress-led Government, to let them out of the tricky situation. Karti Chidambaram was Director of Chess Management Services Ltd. Mukerjeas hired this company as a consultant. Then INX Media issued clarifications to the letter by FIPB, which then mysteriously agreed and ignored previous allegations and irregularities involved in the matter. There was no investigation of money laundering of Rs 305 crores and downstream investment. Also, FIPB then advised INX Media to apply for a fresh proposal on the downstream investment which was later granted.
Finance Ministry officials not just continued to grant undue favors to INX Media, but also ignored requests from the Revenue Department to investigate the matter. Though Chess Management Services, which was directly controlled by Karti Chidambaram, provided services to INX Media, the invoice against the company for payments of Rs 3.5 crore was raised by Advanced Strategic Consulting Ltd and other firms thereby to conceal Karti’s identity.
What happened thereafter?
On may 2017, a money laundering case was filed against Karti Chidambaram, INX media and its directors. Subsequently, the CBI also filed a case against Karti. There were several raids on the offices and residences owned by the Chidambaram’s and questioned Karti several times. A lookout notice which alerts airports to stop passengers from traveling abroad was also issued against Karti Chidambaram as they suspected him to park the money in foreign bank accounts.
In Feb 2018, Karti Chidambaram was arrested in money laundering case where he was accused of receiving Rs 1 million money from media company for using his influence to manipulate a tax probe against it. In Oct, Enforcement Directorate attached assets worth Rs 54 crore of Karti in Delhi, Ooty, Chennai, London, and Spain.
Now, Indrani confessed to bribing Karti and his father P. Chidambaram. The high court denied anticipatory bail to Chidambaram saying that Chidambaram was Finance Minister at the relevant time and he had given clearances of Rs 305 crore FDI. The magnitude of the offense dissuades the court from granting bail.