The Enforcement Directorate (ED) has confiscated movable and immovable assets totaling Rs. 62.52 Crore belonging to M/s Farmax India Limited (FIL), its promoters, and directors, citing violations of the Foreign Exchange Management Act (FEMA), 1999. The seized assets encompass 23 immovable properties of M/s Farmax India Limited, including those owned by Managing Director Morthala Srinivasa Reddy and his brother M. Malla Reddy (Executive Director in Farmax India Ltd.).
In addition to these properties, the seizure also extends to equity shares of M/s Farmax India Limited held by the promoters, as well as shares of M/s MSR India Ltd., initially owned by Morthala Srinivasa Reddy and later transferred to his brother and other family members.
The ED launched an investigation into M/s Farmax India Limited, its promoters, directors, and others under FEMA, 1999, focusing on the fraudulent issuance of Global Depository Receipts (GDRs) and the subsequent non-utilization of the funds for legitimate purposes. The ED’s findings indicate that Morthala Srinivasa Reddy, the MD of FIL, collaborated with Arun Panchariya and others to issue GDRs in two tranches in 2010, intentionally failing to repatriate the GDR proceeds, valued at USD 71.45 million, to India in compliance with statutory requirements.
The investigation further unveiled that the entity “Vintage, FZE, Dubai,” a wholly-owned subsidiary of Arun Panchariya, was the exclusive subscriber to the GDRs. Vintage, FZE, Dubai secured a loan from EURAM Bank, Vienna, on May 05, 2010, with M/s Farmax India Limited pledging the entire GDR proceeds to guarantee the loan granted to Vintage, FZE. EURAM Bank sanctioned the loan solely for the purpose of subscribing to the GDRs, with the GDR proceeds subsequently pledged to secure the loan provided to Vintage.
Out of the funds raised internationally, USD 15.60 million was diverted to Farmax FZE, Dubai, a shell company in the UAE, and subsequently directed to various other entities controlled by Arun Panchariya. An additional USD 56.57 million was set off by EURAM Bank against the non-repayment of the loan by Vintage FZE.
The ED inquiry is still ongoing, with further investigations in progress.
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