Anil Ambani-promoted Reliance Infrastructure (Rel Infra) violated the country’s overseas borrowing and foreign exchange rules by investing funds raised abroad in the domestic capital market, said Minister of State for Finance Pawan Kumar Bansal in the Parliament today.
In a written response, Bansal said that the Enforcement Directorate (ED) was now examining the violation for necessary action.
Bansal said the violation related to overseas borrowings of around $360 million by Rel Infra (then Reliance Energy) in July 2006. The company in April 2007 brought $300 million into India and invested it in debt mutual funds. It then remitted $500 million, including the “proceeds of the $300 million brought into India” in March 2008 to invest in an overseas subsidiary.
When contacted, a Rel Infra spokesperson said: “As legally advised, there’s no Fema violation.”
The minister said that the external commercial borrowing rules in force at that time required funds raised overseas to be kept outside India until actually needed and they couldn’t be used for investing in the capital market.
The Reserve Bank of India (RBI) in August 2008 had imposed a penalty of Rs 125 crore on the company as compounding fees for parking its foreign loan proceeds in the country.
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However, the company in its third quarter report said that its application for compounding in respect of the issue had been deemed by RBI as never to have been made subsequent to withdrawal of the compounding application.
Accordingly, there is no liability in respect of the compounding fee of Rs 125 crore specified by RBI.
The company also said it had not received any notice from any agency so far on the issue.
Shares of Reliance Infrastructure closed at Rs 501.20, down 3.41 per cent on the Bombay Stock Exchange today.