 "Singapore aid sought in coal import case")
The Indian government will approach its Singapore counterpart seeking information on companies accused of having over-invoiced coal imports.
The government is going ahead with this after the reported inability of the State Bank of India (SBI) to divulge details, citing banking secrecy rules of the Monetary Authority of Singapore (MAS) prohibiting disclosure about clients without their consent.
The Directorate of Revenue Intelligence (DRI), Mumbai, had asked the largest bank in the country in December last year for information about coal imports from Indonesia that get routed via locations such as Singapore, Hong Kong and Dubai, in the process getting over-valued in different legs.
The local branches of Indian banks maintain documents of negotiation between Indonesian suppliers and Indian importers.
According to officials of investigative agencies, the imported coal from Indon-esia was overvalued to the extent of three times the actual value declared in the country of origin.
The SBI had expressed its inability to share the information, stating Singapore's law prohibited sharing specifics of clients without permission.
"The SBI has conveyed to the DRI that the Monetary Authority of Singapore, pursuant to a written clarification requested by us, and has asked our Singapore branch not to share the required information without the client's consent, as the same is prohibited under Singapore's banking secrecy laws. Client consent was sought and refused. The SBI also requested the DRI to obtain the information required by them from Singapore authorities through the appropriate government channels, which they are entitled to do," said a source in the SBI.
News website PGurus.com has published the written communication between Revenue Secre-tary Hasmukh Adhia and SBI Chairman Arundhati Bhattacharya on its site. Bhattacharya has expressed the bank's inability to share the data. The documents for sale and purchase of coal between the Indonesia supplier and the invoicing agent based either in Singapore, Hong Kong or Dubai were negotiated by foreign branches of a few Indian banks, including SBI, Adhia's letter of May 20 said.
While the DRI's request to furnish information was honoured by all other Indian banks present in Singapore and Dubai, the "State Bank of India is yet to do the same citing legal constraints," the letter said.
When contacted, Revenue Secretary Hasmukh Adhia neither confirmed nor denied that he had written a letter to Arundhati Bhattacharya.
"To bring the investigation to a logical end, documents negotiated by the State Bank of India for the sale and purchase of Indonesian coal are required by the DRI. As a public sector bank, your bank's co-operation in the matter is of great importance," Adhia wrote, adding: "You are requested to kindly ensure that the documents as sought by the DRI are made available to them, at the earliest."
"The SBI has extended all possible cooperation promptly to the DRI in a manner that ensures compliance by our Singapore branch with the applicable laws of Singapore (as also clarified in writing by the MAS). Compliance with laws of all jurisdictions we operate in is of paramount importance to SBI, as it should be in all organisations with operations in various jurisdictions. SBI follows the highest standards of governance and has always extended full cooperation to all investigative agencies within the ambit of its powers," the source told Business Standard.
According to a DRI official who also did not wish to be named, 40 energy companies, both from the public and private sectors, and traders were involved in alleged over- invoicing of imported coal.
DRI is working on the Letter Rogatory (LR) to send to Singapore, Hong Kong, Dubai and British Virgin Island, the official said.
He also added that the DRI and Department of Revenue were in talks with the Finance Ministry and the Prime Minister's Office to intervene in the matter.
"We are examining consignments of all 40 coal companies made between 2011 and 2014. We came across evidences that clearly shows that consignments had inflated bills," said the DRI source.
The probe agency is verifying the calorific value of the imported coal, which is the most critical part of the investigation.
The DRI team had found that said companies had imported low-value coal (4,000 kcal/kg) but were issued high-value certification as typically, coal of high valuation is above 6,300 kcal per kg, added the official.
India is the world's third-largest importer of coal with Indonesia accounting for 70 per cent of the country's imports.
Besides, the probe also revealed that companies did not claim concessional duties for imports from Indonesia because while doing so they need to show the real value of the coal import," the source explained.
SBI's stance is a matter of interpretation.
According to M S Ananth, leader, anti-corruption practice at Nishith Desai Associates, sharing of information between regulatory bodies in two different jurisdictions is generally as per a mutually agreed procedure between two countries, or as per procedures prescribed under a domestic law of one country.
"The ability of a bank in Singapore (SBI branch in Singapore) to share such information is therefore a matter of procedure prescribed under Singapore law."
"While the issue relates to Singapore law, as per our reading of Section 47 of the Singapore Bank Secrecy Act, it appears to us that it may be reasonable for SBI, Singapore Branch, to refuse disclosure of? information that has not been requested strictly as per procedures prescribed under Singapore law," Ananth said, adding, since there was no order of a court of law or an official complaint, the bank's Singapore branch, could be justified to refuse such information.
However, Ananth maintained that prima facie it seemed that a request from the Reserve Bank of India could be sufficient compliance for Section 47.
Ravi S Raghavan, tax counsel, Majmudar & Partners differs. "Prima facie, in our view, the SBI or the Monetary Authority of Singapore is using a different rule to make a point," Raghavan said, adding, a customer related information falls under the banking secrecy rules and could require the customer's permission.
"However, there are certain exceptions to the secrecy obligations. So, if a disclosure is necessary for compliance with an order or even a request made under any specified written law to furnish information for the purposes of an investigation or prosecution of an offence alleged or suspected to have been committed under any written law, then such information will have to be provided to any police officer or a public officer duly authorized under the specified written law to carry out the investigation or prosecution or to receive the complaint or report, or any court," Raghavan said.
The government is going ahead with this after the reported inability of the State Bank of India (SBI) to divulge details, citing banking secrecy rules of the Monetary Authority of Singapore (MAS) prohibiting disclosure about clients without their consent.
The Directorate of Revenue Intelligence (DRI), Mumbai, had asked the largest bank in the country in December last year for information about coal imports from Indonesia that get routed via locations such as Singapore, Hong Kong and Dubai, in the process getting over-valued in different legs.
The local branches of Indian banks maintain documents of negotiation between Indonesian suppliers and Indian importers.
According to officials of investigative agencies, the imported coal from Indon-esia was overvalued to the extent of three times the actual value declared in the country of origin.
The SBI had expressed its inability to share the information, stating Singapore's law prohibited sharing specifics of clients without permission.
"The SBI has conveyed to the DRI that the Monetary Authority of Singapore, pursuant to a written clarification requested by us, and has asked our Singapore branch not to share the required information without the client's consent, as the same is prohibited under Singapore's banking secrecy laws. Client consent was sought and refused. The SBI also requested the DRI to obtain the information required by them from Singapore authorities through the appropriate government channels, which they are entitled to do," said a source in the SBI.
News website PGurus.com has published the written communication between Revenue Secre-tary Hasmukh Adhia and SBI Chairman Arundhati Bhattacharya on its site. Bhattacharya has expressed the bank's inability to share the data. The documents for sale and purchase of coal between the Indonesia supplier and the invoicing agent based either in Singapore, Hong Kong or Dubai were negotiated by foreign branches of a few Indian banks, including SBI, Adhia's letter of May 20 said.
While the DRI's request to furnish information was honoured by all other Indian banks present in Singapore and Dubai, the "State Bank of India is yet to do the same citing legal constraints," the letter said.
When contacted, Revenue Secretary Hasmukh Adhia neither confirmed nor denied that he had written a letter to Arundhati Bhattacharya.
"To bring the investigation to a logical end, documents negotiated by the State Bank of India for the sale and purchase of Indonesian coal are required by the DRI. As a public sector bank, your bank's co-operation in the matter is of great importance," Adhia wrote, adding: "You are requested to kindly ensure that the documents as sought by the DRI are made available to them, at the earliest."
"The SBI has extended all possible cooperation promptly to the DRI in a manner that ensures compliance by our Singapore branch with the applicable laws of Singapore (as also clarified in writing by the MAS). Compliance with laws of all jurisdictions we operate in is of paramount importance to SBI, as it should be in all organisations with operations in various jurisdictions. SBI follows the highest standards of governance and has always extended full cooperation to all investigative agencies within the ambit of its powers," the source told Business Standard.
According to a DRI official who also did not wish to be named, 40 energy companies, both from the public and private sectors, and traders were involved in alleged over- invoicing of imported coal.
DRI is working on the Letter Rogatory (LR) to send to Singapore, Hong Kong, Dubai and British Virgin Island, the official said.
He also added that the DRI and Department of Revenue were in talks with the Finance Ministry and the Prime Minister's Office to intervene in the matter.
"We are examining consignments of all 40 coal companies made between 2011 and 2014. We came across evidences that clearly shows that consignments had inflated bills," said the DRI source.
The probe agency is verifying the calorific value of the imported coal, which is the most critical part of the investigation.
The DRI team had found that said companies had imported low-value coal (4,000 kcal/kg) but were issued high-value certification as typically, coal of high valuation is above 6,300 kcal per kg, added the official.
India is the world's third-largest importer of coal with Indonesia accounting for 70 per cent of the country's imports.
Besides, the probe also revealed that companies did not claim concessional duties for imports from Indonesia because while doing so they need to show the real value of the coal import," the source explained.
SBI's stance is a matter of interpretation.
According to M S Ananth, leader, anti-corruption practice at Nishith Desai Associates, sharing of information between regulatory bodies in two different jurisdictions is generally as per a mutually agreed procedure between two countries, or as per procedures prescribed under a domestic law of one country.
"The ability of a bank in Singapore (SBI branch in Singapore) to share such information is therefore a matter of procedure prescribed under Singapore law."
"While the issue relates to Singapore law, as per our reading of Section 47 of the Singapore Bank Secrecy Act, it appears to us that it may be reasonable for SBI, Singapore Branch, to refuse disclosure of? information that has not been requested strictly as per procedures prescribed under Singapore law," Ananth said, adding, since there was no order of a court of law or an official complaint, the bank's Singapore branch, could be justified to refuse such information.
However, Ananth maintained that prima facie it seemed that a request from the Reserve Bank of India could be sufficient compliance for Section 47.
Ravi S Raghavan, tax counsel, Majmudar & Partners differs. "Prima facie, in our view, the SBI or the Monetary Authority of Singapore is using a different rule to make a point," Raghavan said, adding, a customer related information falls under the banking secrecy rules and could require the customer's permission.
"However, there are certain exceptions to the secrecy obligations. So, if a disclosure is necessary for compliance with an order or even a request made under any specified written law to furnish information for the purposes of an investigation or prosecution of an offence alleged or suspected to have been committed under any written law, then such information will have to be provided to any police officer or a public officer duly authorized under the specified written law to carry out the investigation or prosecution or to receive the complaint or report, or any court," Raghavan said.
Additional inputs by Dilasha Seth