ED imposed Rs 14-crore penalty on Videocon, 6 group companies in 2017

The order passed by ED on May 26 last year but previously not reported assumes significance since the inquiries revolved around loans disbursed and investments made by Videocon overseas company, Tusker Overaeas Inc.
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Following a directions from the Reserve Bank of India (RBI), the Enforcement Directorate (ED), Mumbai in May 2017 had imposed a penalty of Rs 14 crore on Videocon, six group companies and promoter Venugopal Dhoot for the violation of foreign exchange laws by the companies.
 
The ED had imposed penalty after RBI examined these entities as part of a probe into conflict of interest allegations against ICICI CEO Chanda Kochhar in 2016
 
An extra penalty of Rs 45 lakh was also imposed collectively on Venugopal Dhoot and on directors of Videocon and the six group companies.
 
The order passed by ED on May 26 last year but previously not reported assumes significance since the inquiries revolved around loans disbursed and investments made by Videocon overseas company, Tusker Overaeas Inc.
 
The Cayman Island based Tusker Overseas Inc. was set by the six Videocon group companies on January 10, 2006. Subsequently, Tusker Overseas came under the scanner of the Reserve Bank of India (RBI) for loans disbursed to it by ICICI’s overseas branches.
 
Tusker finds a significant mention in RBI’s 2016 report on allegations of quid pro quo with regard to extension of facilities by ICICI Bank to Videocon. According to allegations levelled by a whistleblower in 2016, the loans to Videocon, were a quid pro quo for investments by Videocon-lined entities to a company owned by Chanda Kochhar’s husband Deepak Kochhar. As first reported by ET on April 12, RBI said it could not “conclusively establish” the accusations. An internal probe by ICICI Bank’s chairman MK Sharma in 2016 cleared Chanda Kochhar.
 
ED’s order exclusively accessed by ET states that the inquiry was handed over to it by RBI. “Investigation in the case was initiated based on information received from RBI, Mumbai.” reads the order.
 
Besides Videocon Industries Limited (the flagship company), the six group companies which have been penalised are: M/s Value Industries Ltd (formerly M/s Videocon Appliances Ltd); M/s Tekcare India Private Ltd (formerly M/s Macotax consultants pvt ltd); M/s Force Appliances Pvt Ltd (formerly M/s Videocon Exports pvt ltd); M/s Century Appliances Pvt Ltd (formerly M/s Rajkumar engineering pvt ltd); M/s Shree Dhoot Trading and Agencies Ltd and M/s Trend Electronics Ltd. These seven companies were asked to cough up over Rs 14 crore as penalty.
 
Besides, Venugopal Dhoot, chairman and other directors namely PN Dhoot, RN Dhoot and Suresh G Hegde — were saddled with a “collective” penalty of Rs 45 lakh. Of this, Venugopal Dhoot alone was penalised to the extent of Rs 30 lakh.
 
The ED’s order said that inquiries revealed that the guarantees offered by the group companies/flagship company (Videocon) “were violative of the provisions of Foreign Exchange Management (Guarantee) Regulation 2004.”
 
Responding to queries, Venugopal Dhoot said, “An appeal has been filed (against the ED order)”. He said that the penalty has been stayed (by the court) stayed till further hearing. Dhoot added (via text message) that the “proceedings in question are civil (under FEMA) and not criminal.”
 
RBI had informed ED that these companies had filed separate compounding applications (all dated May 5, 2009) before the RBI under Section 15 of FEMA seeking compounding of contravention of an RBI regulation.
 
RBI had rejected the compounding application and had referred the matter to ED for conducting “necessary investigation.
 
 
 
 
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