ED moves to prosecute Devas under PMLA for Fema violation

NEW DELHI: While Devas Multimedia, the former joint venture partner of Isro's commercial arm Antrix, may be celebrating a hefty compensation it has won from an international tribunal, the Bengaluru-based company still has to contend with an ED move to prosecute it under the Prevention of Money Laundering Act (PMLA) for violating Foreign Exchange Management Act (FEMA) norms.
An ED investigation against Devas and its directors and foreign subsidiaries under PMLA and FEMA is underway, with the agency only last month issuing a showcause notice to the directors of Devas for over Rs 1,200 crore, twice the amount the company had invested in its joint venture with Antrix. The idea is to recover from Devas the amount it hopes to earn through international arbitration. The possible course of action may include imposition of penalty on Devas, and prosecution of the company and all its directors under PMLA, a top source said.
A showcause notice is a precursor to attachment of assets of the company for an amount equivalent to the FDI violations. Besides, the government said on Tuesday it was liable to pay as compensation only up to 40 per cent of the value of the investment Devas had made in the JV. FDI of $131.44 million (Rs 578.54 crore) was received between 2006 and 2010 by Devas Multimedia Pvt Ltd from various overseas investors. The foreign firms are also being investigated under PMLA.
The ED's FEMA case is based on the premise that FIPB approval to Devas for FDI was subject to the conditions that the agreement between the Indian company and the foreign investors were subject to Indian laws.
While the compensation may discomfit the Centre because of the financial implication, sources in the government said they were not surprised by the outcome of the row. For, they realise, and this is one of the subjects of investigation, that the terms of the contract were loaded in favour of Devas.