Enforcement Directorate is set to begin penal action for alleged foreign exchange dealings and money laundering in award of contracts in the 2010 Commonwealth Games, beginning with a notice for alleged forex violation to the tune of Rs 185 crore.
The Directorate, according to sources, is set to issue a series of violation notices for amount which could total to Rs 500 crore in the CWG contracts as the agency has recently obtained information from the RBI against various contracting firms and agencies for contravention of the Foreign Exchange Management Act (FEMA).
According to sources, the ED is set to issue FEMA notices to a Singapore-based firm Pico Event Marketing India Private Limited (PEMI) and its three Directors for allegedly "blatantly flouting the mandatory regulatory framework relating to foreign exchange investments in India" involving an amount of Rs 185 crore.
When contacted, ED Deputy Director and Investigating Officer (IO) of the CWG probe Rajeshwar Singh refused to comment on the status of the probe.
The ED has already filed its complaint (equivalent of a charge sheet) in this regard with the adjudicating authority of Foreign Exchange Act in the country.
The ED, according to its charge sheet, has found that PEMI was "incorporated solely for the purpose of getting overlays contract from Organising Committee of CWG with 100% foreign directorship."
The agency, according to sources, has found that PEMI, despite a 100% wholly owned subsidiary of foreign company Pico Indian Exhibit Contractor Private Limited Singapore and being a de-facto branch/liaison office for conducting its business in India, was required to have prior approval of RBI for conducting business in the country.
"However, it (PEMI) failed to seek RBI approval as provided under the FEMA regulations. The matters relating to issuance of shares to foreign party was also not reported by PEMI to RBI within the mandatory stipulated period," the agency said.
A number of cases involving other CWG contracts, which were under ED scanner since it took over the probe after the sporting extravaganza in October 2010, will now see the beginning of penal and penalty proceedings, the sources said.
Instances of money laundering are also under probe by the agency and notices will be issued soon to few individuals.
"The first CWG complaint has been registered under the provisions of FEMA and there is a provision of 300% penalties," the sources said.
The Singapore-based firm PEMI earlier had a tie-up with an Indian company 'Deepali', run by a relative of BJP leader Sudhanshu Mittal, for Games-related works but it was terminated subsequently.
The premises of 'Pico-Deepali' consortium were also searched by the I-T department early last year during their probe related to the Games.