INX Media case has become sensation due to the involvement of senior Congress Leader and former Union Finance Minister P. Chidambaram. This case involves the issue of money laundering that allegedly took place in 2007 when Mr. Chidambaram was Finance Minister. Money laundering means conversion of money, which is obtained illegally, in a way that it seems to have gained from a legitimate source. As far as money laundering is concerned, it is said to have developed from the mafia ownership of Laundromats in the United States. It became a matter of concern only in the 1980s in the United States. In India, Money Laundering is known by the name of ‘Hawala Transactions’ and became popular during 1990s. Judiciary and Legislature has come up with several judgments and laws respectively to curb the menace of venality. This Article will be discussing the controversial INX Media Case, Union Minister’s involvement and on-going proceedings.
WHAT IS THE STORY BEHIND THE CASE?
At the outset, let us know about the INX Media, it was co-founded by Peter and Indrani Mukherjae in 2007. The story starts when the Directors of INX Media approached to Foreign Investment Promotion Board on 15th March, 2007 in order to get approval to issue equity shares to three Non-Resident Investors (NRI) based in Mauritius through Foreign Direct Investment. That application to Board also expressed its intention to downstream financial investment to the extent of 26 % of issued equity and outstanding equity share capital of INX News Private Limited.
On Application, the Board granted approval only for Rs. 4.62 Crores and did not approve downstream investment. It was alleged in the FIR that the INX Media deliberately and in contravention of the conditions and approval went ahead with the downstream investment and generated FDI exceeding Rs. 305 Crores by issuing shares to foreign investors at a premium of around Rs. 800 per share.
Further, in February 2008 when the Income Tax Department had sought clarification on this point from INX Media; the Directors allegedly reached to Karti Chidambaram to wiggle out of the mess by offering kickbacks to him so that their names can be scuttle from the probe. Consequently, They entered into criminal conspiracy with Karti Chidambaram, whose father P Chidambaram was then Finance Minister, to avoid any punitive actions. CBI alleges that due to Karti’s influence, the concerned officers and officials of the Board not only ignored the violations on the part of INX Media but also advised them to file for fresh FIPB approvals which was later approved by the then Finance Minister P. Chidambaram.
ON GOING PROCEEDING
In January 2008, the Financial Intelligence Unit of the Finance Ministry found anomaly in money through Mauritius based firms into INX Media. On top of it, the Enforcement Director registered a case against INX Media for alleged Foreign Exchange Management Act violation in 2010.
After so long , CBI filed an FIR on 15th May, 2017 alleging irregularities in FIPB’s clearance to INX Media to receive overseas fund of Rs. 305 Crores in 2007 during the tenure of P. Chidambaram as Finance Minister. In the same year on 16th June, the Foreigners Regional Registration Officer and Bureau of Immigration under the Union Home Ministry issued ‘Look out Circular’ against Karti Chidambaram which was later stayed by Madras High Court, but later on , the Supreme Court over turned the decision of the Madras High Court. After which CBI reported the Apex Court that it has furnished details of probe on ‘possible transactions’ foreign countries and 25 alleged offshore properties of Karti Chidambaram.
On 16th February, 2018 CBI arrested CA S. Bhaskararaman who allegedly assisted Mr Chidambaram to manage his ill-gotten wealth in Indian and abroad. Further, on 28th February, Karti also was arrested and sent to one day police custody in INX Media case and got bail after 23 days in jail.
The case took pace when on 11th October, 2018, Enforcement Director attached Karti Chindambaram’s assets worth Rs. 54 Crores in India, UK and Spain.
One of the prime accused Indrani Mukharjae turned approver on 11th July 2019 in the case. Eventually P. Chidambaram was arrested on 21st August, 2019 by CBI. The Proceeding in the matter is going on before the Special CBI Court and P. Chidambaram is represented by Senior Advocate Kapil Sibbal ,Abhishek Manu Sighvi and others on the other side, Additional Solicitor General KM Natraj and Solicitor General Tushar Mehta are representing CBI.
On the next day of arrest, CBI Special Court remanded him under CBI Custody till 26th August 2019 observing that allegations against him in the INX Media Case are of ‘serious nature’ for which a detailed and in depth investigation is required.
Thereafter, on 5th September, CBI Special Court, where proceeding has been taking place, observed that the allegations against the Accused were found serious that’s why he was remanded to Police Custody. And, as the CBI has apprehension that because of his status and position, the investigation may be hampered by the accused. Also added, It is not a case where the accused can be ‘released’ at the stage of considering his extension of remand as submitted by the Accused. Now, having considered all the facts and circumstances of case, the nature of investigation, the accused Mr. Chidambaram was remanded to judicial custody.
After the arrest, Chidambaram filed bail plea in Delhi High Court directly which was strongly opposed by the CBI. During the hearing , Chidambaram told the Court that the offences of cheating and criminal conspiracy alleged against him are not so grave and he should be released on bail. Further, Counsels, Senior Advocate KapilSibbal and Senior Advocate Abhishek Manu Singhavi contented that it was not a case of taking out money from the country or cheating a bank and instead money has come in and it was not an economic offence as alleged by probing agency. Chidambaram also denied the allegation that he used the influential office of the Finance Minister for personal gains in connivance with his co-conspirators. The Court decided not to release him on bail relying on the evidences produced by CBI which alleged that ‘two material witnesses were approached by the accused to not say anything against him.’
P. Chidambaram has been under judicial custody since 5th September 2019 where he has been kept in a separate cell and is also allowed to use western toilets. Now on 3rd October 2019, he has filed regualar bail application in the Supreme Court to seek bail after the High Court rejected his earlier bail petition on 30th September 2019.
To have better understanding of the case one must be aware of the laws applied in this case. The brief summary of some of the laws applicable in this case is as following.
The Prevention Of Money Laundering Act, 2002
The Prevention of Money Laundering Act, 2002 came into effect on 1st July, 2005. It deals with an offence of money laundering which is said to be committed when a person in any way deals with proceeds of crime. These proceed includes the normal and schedule crime. Further, it also prescribes the punishment for money laundering from 3 to 7 years of rigorous imprisonment with fine. And, in case of offences mentioned under Part-A, imprisonment would extend upto 10 years.
The impact of money laundering –
- Destabilise economy of the country causing financial crisis.
- Policy distortion occurs because of measurement error and misallocation of resources.
- Discourage foreign investors.
- Weaken the ‘democratic institutional of the society.’
Foreign Exchange Management Act, 1999
This act is commonly known as FEMA and was enacted with the aim to encourage external payments and cross border trades in India. This Act repealed Foreign Exchange Regulation Act. It facilitates external trade and payments in India and help in orderly development and maintenance of foreign market in India.
This act also prescribes procedure, formalities and dealing of all foreign exchange transactions, which are categorised as current account transactions and capital account transactions. The head office of FEMA is situated in Delhi and is known as Enforcement Directorate.
The Prevention of Corruption Act, 1988
Corruption includes illegal acts like bribery, extortion, embezzlement, use of speed money. Section 7 of this Act defines corruption as ‘acceptance or demand of illegal gratification for doing an official act by public servants.’ This act was passed on the existing principle legislation against corruption. It is a four in one piece of legislation because it consolidates important provisions of the now repealed Prevention of Corruption Act 1947, the Criminal Amendment Act 1952 and also Section 161- 165A of the Indian Penal Code 1860, and Certain Provisions of the Criminal Law (Amendment) Ordinance ,1944.
This Act extends the scope and ambit of the public servant and brings within its sweep each and every person who holds an office by virtue of which he was required to perform any public duty and enhances penalties provided for offences in earlier laws. The underlying idea was to eradicate the evil of corruption.
Foreign Investment Promotion Board (FIPB)
The Board considers the Foreign Direct Investment proposals which need government approval and gives composite approval including foreign investment and foreign technology. For FDI, government approval is mandatory for some types of investment for which institution are created, FIPB is one of them. It is located in Department of Economic Affair Ministry. The board is headed by Finance Minister and considers FDI below Rs. 5000 Crores and above this amount the Cabinet Committee on Economics Affair is authorised to grant approval.
The various legislations enacted by Parliament are worth appreciation. The legislations are not only safeguarding the country from the menace of corruption but are uprooting the corruption practices. Further, the ambit of ‘public servant’ has been widened under Corruption and Prevention Act so that none can be left covered under this clause. Nevertheless, the strict prompt action of court and its co-operation with probing agency to ascertain the matter is also highly appreciable. However, few question arises, that was the offence so grave that the bail cannot be granted to the Former Finance Minister? though the bail is a matter of right. Another question arises on probing agencies that, the matter was reopened in 2017 which was closed for 7 years, why? Further, the cases of Politicians always come into light when the Opposite Party is in governance and not when its own party is ruling. Why ? Indeed such questions remain unanswered.
- What is INX Media case; a look at the genesis of P.Chidamabaram and son Karti Chidambaram posted by BT Economy on 22 August 2019
- INX Media Case : How Chidambaram got into trouble posted by Economic Times on 21 August 2019
- Infographic; History of INX Media case that led to arrest of P Chidambaram on 21 August 2019
- All about INX Media posted by Hindustan Times on 21 August 2019
- INX Media Case ; Chidambaram tells HC offences alleged against him are not grave by Press Trust Of India on 26 September 2019
- INX Media Case ; why Delhi Court Court Rejected Chidambaram?s bail plea written by MunishPandey, published by India Today on 30 September 2019
- Research paper on Money Laundering by Paridhi Saxena