The G V Films Limited is involved in the investigation of Foreign Exchange. The AML Watchdog ED investigated the case in detail.
WHAT IS GDR?
A Global Depository Receipt (GDR), also known as international depository receipt (IDR), is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. The procedure of issuing GDRs by an Indian company involves issuing of its equity shares (in Rupees) to the depository bank situated in a foreign country and then the issue of GDRs by the depository bank against the said equity shares to the foreign investors in foreign currency
WHAT IS FEMA?
The Foreign Exchange Management Act, 1999 (FEMA), is an Act of the Parliament of India “to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. FEMA authorized the Central Government to impose restrictions and supervise three things related to foreign exchange- payments or receipts made to any person outside India.
ABOUT G V Films Limited CASE
ED seized immovable property belonging to M/s G V Films Limited, Chennai valued at Rs. 9.84 crore at Thanjavur under the provisions of section 37A of Foreign Exchange Management Act (FEMA), 1999. Seizure took place in connection to siphoning off foreign exchange in the form of issuance of 6.4 million number of Global Depository Receipts (GDR) amounting to Rs. 345.6 crore.
The investigation under the provisions of FEMA, 1999 revealed that M/s G V Films Limited opened a bank account in Banco Efisa S.A. (bank), Lisbon, Portugal for the purpose of handling the GDR proceeds. The intention to the bank account was to misuse the proceeds of GDR.
Further they conspired with M/s Whiteview Trading Corporation, a British Virgin Island Company and M/s White view entered into a credit agreement with the Banco Bank and took a loan of $ 40 million US for subscribing the GDRs of M/s G V Films Limited. Then as per conspiration, M/s GV Films Limited entered into an account charge agreement with Banco and pledged entire GDR proceeds as collateral against loan taken by M/ Whiteview. By taking loan M/s whiteview subscribed to entire 6.4 million numbers of GDRs of M/s G V Films and M/s G V Films pledged the entire proceedings against loan taken by M/s Whiteview.
By doing so M/s G V Films siphoned off $ 40 million which was supposed to repatriate to India and utilized foe intended purpose. M/s G V Films as a part of pre-plan issued 160000000 number of underlying equity shares of value Rs. 172.8 crore representing the said 6.4 million GDRs and sold in Indian market through the subscriber entities.
A multi-screen theater complex namely G V Complex at Thanjavur valued Rs. 8.94 crore as per annual reports od M/s G V Films were seized. But the market value of the said theater appears to be higher that is being ascertained from the Competent Authority.
Further investigation under the Foreign Exchange Management Act, 1999 is under process.
