Under the terms of the Foreign Exchange Management Act (FEMA), 1999, the Directorate of Enforcement (ED) seized movable and immovable goods worth Rs. 62.52 crore from M/s Farmax India Limited (FIL), its promoters, and directors. M/s Farmax India Limited, its Managing Director Morthala Srinivasa Reddy, and his brother M. Malla Reddy (Executive Director of Farmax India Ltd.) are among the confiscated items. Equity shares of M/s Farmax India Limited in the name of promoters and shares of M/s MSR India Ltd. originally held by Morthala Srinivasa Reddy and later transferred to his brother and other family members are also among the confiscated items.
Under the provisions of FEMA, 1999, the ED launched an inquiry into M/s Farmax India Limited, its promoters, directors, and others in connection with the fraudulent issuing of Global Depository Receipts (GDRs) and non-use of the same for legitimate purposes. Morthala Srinivasa Reddy, MD of FIL, in collusion with Arun Panchariya and others, issued GDRs in the name of his firm in two tranches in 2010 and did not purposefully repatriate the GDR revenues worth USD 71.45 million to India as required by law.
The ED inquiry further discovered that Arun Panchariya’s wholly-owned firm “Vintage, FZE, Dubai” was the sole subscriber to the GDRs. Vintage, FZE, Dubai had obtained a loan from EURAM Bank, Viena for this purpose via a loan agreement dated May 5, 2010. According to this agreement, M/s Farmax India Limited committed to pledging the full GDR profits to guarantee the loan given by EURAM Bank to Vintage, FZE.
EURAM Bank approved a loan to Vintage, FZE solely to subscribe to GDRs and the GDR revenues received by FIL were pledged to secure the credit given to Vintage.
USD 15.60 million was moved from the money obtained overseas to its subsidiary, Farmax FZE, Dubai, a shell corporation in the UAE, and from there to numerous other organizations owned by Arun Panchariya. Euram Bank deducted another USD 56.57 million for Vintage FZE’s failure to repay a loan. Additional research is being conducted.
