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PC’s Karti versus Modi’s ED: Part 01

What happens when a country’s arguably best investigation agencies want to pin some powerful people down and yet are unable to? And when these powerful people happen to be the Chidambarams – with clout in the country’s main Opposition party, close to the Gandhi family, well connected lawyers themselves and with the might of other top lawyers behind them?

Faced with the dire situation of battling such might, the investigation agencies are likely to resort to some tactics of their own. After all, a war must be won, in their eyes. And so come the selective leaks, the whisperings of details of alleged corruption and irregularities, the feeding of monstrous sums of alleged black money to the press.

The press, again, is a hungry beast, eager for any tidbit that it can headline as “exclusive” or “first on”. And so it goes into the public domain. Leaks, allegations, counter allegations and claims of victimhood – all uncontested, unchecked and without having been analysed or questioned. We saw this with the 2G case as well – and that case ended in acquittal.

It is time for an inane disclaimer here, for the sake of the times we live in – an age of boxing media houses into pro-right or pro-liberal or pro-left. Inane, because journalists did not have to do this thus far. So here goes – this report is not about defending the Chidambarams or hailing the investigating agencies. This report is also not about defaming the Chidambarams or shredding the investigating agencies. This report is about facts. As all journalistic reports should be.

There is no need to introduce the Chidambarams to the Indian reader. Father P Chidambaram is a former Finance Minister and Home Minister under the UPA government. Son Karti P Chidambaram is a businessman. Both hail from the quaint Karaikudi in Sivaganga district of Tamil Nadu and are largely based in Chennai. The elder Chidambaram is also one of the most strident voices against the present dispensation at the Centre.

The Chidambarams are far from defenceless. They have the means to launch a legal attack that could trample most. They have the connections to ensure that justice is sped up for them. Take for instance the dramatic midnight anticipatory bail given to Karti Chidambaram on 09 June – he knocked on the doors of the Chief Justice of the Madras High Court at around 11.30pm as the Income Tax Department had issued an arrest warrant against him for not appearing when summoned for questioning. The Chief Justice directed him to go to the relevant judge and he, woken up, signed off on anticipatory bail until June 28. The ordinary citizen, if unfortunate enough to be caught in such a case, would not have been able to get all of this done. P Chidambaram too managed to get anticipatory bail until 10 July, just before the Enforcement Directorate summoned him for questioning.

Are the Chidambarams guilty of corruption, money laundering, illegal possession of undeclared assets and hoarding black money? Maybe they are and maybe they are not. As of now, a section of India is firmly convinced of their guilt and another section, of their innocence. 

But investigating agencies and courts cannot go by belief or prejudice. They cannot rely on circumstantial evidence. Their job is to find hard proof. Do the investigating agencies have that hard proof in the cases against Karti and P Chidambaram? That is what this report seeks to do – to clear the cobwebs around the insinuations and the bits and pieces of information selectively leaked by the CBI, the ED and the IT Department.

In Part 01 of this 2-part series, we look into the complex case of INX Media.

By Sandhya Ravishankar (@sandhyaravishan)

 

When five different complaints of corruption landed on the desks of the CBI in New Delhi, the officers’ generally expressionless faces likely became impossibly more so. It was 2017, although the exact dates of the complaints remain uncertain. All five complaints, which arrived in quick succession, revolved around two persons hailing from Tamil Nadu – former union Finance and Home Minister P Chidambaram and his son Karti Chidambaram.

“Ours is not to question the timing of the complaints or who sent them or with what motive,” said a CBI officer on condition of anonymity. “Our job is to check out the veracity of the complaints and if there is a case, proceed with investigations.”

Of the five complaints, prima facie, only one was “actionable,” according to the officer. The other four were binned. But in this particular case, the “who” matters – the complainant, described in the case that was “actionable” is named in the CBI’s FIR as a ‘source’.

This ‘source’, also the complainant in all five cases, was the Enforcement Directorate.

The timing too matters, contrary to what the officer said. In 2019, India goes to polls again, as Prime Minister Narendra Modi will appeal to the people to give him another term. High on his list of promises in 2014 when he swept to power was a stringent ‘anti-corruption’ drive. Just a little over a year to go now – and the guns of Modi’s ED seem to be trained on the Chidambaram father-son duo.

 

The INX Media Case

The solitary complaint that turned into an FIR is what is now known as the INX Media case. The FIR filed on 15 May 2017 is under Sections 120-B (criminal conspiracy) read with Section 420 (cheating and fraud). The Prevention of Corruption Act 1988 too has been invoked in the FIR against unknown public servants.

The alleged offence dates back to 2007-08 and a total of seven accused persons are listed, including Indrani Mukerjea and Peter Mukerjea, then Directors of INX Media, Karti Chidambaram and his Chess Management Services and Advantage Strategic Consulting. Unknown officers/officials of Ministry of Finance and Government of India are also named.

On 13 March 2007, INX Media applied for approval with the FIPB (Foreign Investment Promotion Board) to preferentially allot shares upto 46.216% to three NRI investors – Dunearn Investment (Mauritius), NSR – PE Mauritius LLC and New Vernon Pvt Equity.

The second part of the application for approval was to make a downstream investment – meaning an investment in a sister company, in this case, their news channel NewsX – to the extent of 26% of the issued and outstanding share capital of INX News. On 31 May 2007, the FIPB approved everything but the downstream investment. FDI was capped at Rs 4.62 crore calculated on the basis of what the Mukherjeas had submitted in their application.

But the company, according to the FIR, went ahead to make the downstream investment without permission. They even sold the permitted stakes at a premium of Rs 800 per share instead of the permitted Rs 10 per share. Thanks to this they raked in Rs 305 crore, much higher than the Rs 4.62 crore they were allowed to make.

When the IT Department, in 2008, raised questions over this with the Finance Ministry, officials then wrote to the company demanding a clarification about the excessive FDI inflow and later asked INX Media to apply for a fresh downstream investment application with the FIPB board. This application was approved on 11 November 2008 and the matter laid to rest quietly.

In itself post-facto approval is not illegal, admit the CBI, but the RBI should have been notified and a penalty levied on INX Media for raising foreign funds without due permission, a FEMA violation.

This is also where the younger Chidambaram seems to enter the picture. “INX Media (P) Limited in order to wriggle out of the situation without any punitive action, entered into a criminal conspiracy with Shri. Karti P. Chidambaram, son of Shri. P. Chidambaram, the then Finance Minister of India, and Promoter/Director of M/s Chess Management Services (P) Limited, Chennai, so as to get the issued resolved/addressed amicably by influencing the public servants of the FIPB Unit of Ministry of Finance by virtue of his relationship with the then Finance Minister,” states the FIR.

The allegations are that Karti, through Chess Management Services of which he was then the Director, influenced members of the FIPB in an effort to help INX Media when they applied for the second time.

The CBI has in its possession emails written by a member of the legal team of Chess Management Services who has drafted the response of INX Media to the queries of the Finance Ministry. This person has also written an email to INX Media asking whether they had received “our invoice” from Advantage Consulting. In effect, an employee of Chess Management Services draws up a draft response to the Finance Ministry, while payment of around Rs 10 lakh is invoiced by Advantage Strategic Consulting. These emails, according to the CBI, show that Advantage Strategic Consulting is in fact a ‘benami’ for the younger Chidambaram.

The CBI also has ledgers/records of INX Media that show that Rs 10 lakh was given to Advantage Consulting towards “FIPB notification” work.

Karti was arrested on 28 February and kept in CBI custody until 12 March this year. He is currently out on bail.

But what actually does the CBI have?

  1. Rs 10 lakh as payment from INX Media to Advantage Strategic Consulting and emails to link them up to Karti Chidambaram.
  2. Invoices worth Rs 3.5 crore paid by INX Media to Geben Trading (Greece), another Rs 35 lakhs paid to Advantage Strategic Consulting, a sum of USD 20,000 paid to the Singapore subsidiary of Advantage Strategic Consulting and Rs 60 lakhs to North Star Software Solutions.

The catch in these though is that the invoices have been found in the possession of INX Media – there is no evidence of any such amounts having been paid from the bank accounts of INX Media group companies. The invoices themselves are on white paper – not on letterhead. The signature is that of Peter Mukherjea, Director of INX Media, a mystery in itself, considering that the vendor’s signature would have to be on the invoices rather than that of the person making the payments.

The CBI suspects that the payments could have been made using accounts outside of India and Letters Rogatory are being readied for various countries, asking for details of these transactions.

  1. Statement from Indrani Mukherjea, a Director at INX Media that she and/or her lawyer met with Karti Chidambaram at Hotel Hyatt in Delhi in order to strike a deal for getting FIPB approvals for INX Media in 2008. There is no corroboration on this point except for Mukherjea’s word. She is now a witness in the case and the CBI says she may get some leniency due to this. Peter Mukherjea though has not corroborated any of the statements made by Indrani so far. The Mukherjea husband-wife duo is in jail, facing charges of murdering Indrani’s daughter Sheena Bora.
  2. The CBI also has not specified a public servant, essential for a case under the Prevention of Corruption Act. Neither has a chargesheet been filed, which, according to the CBI, is likely to take two more months.

Yet the raids are relentless – the CBI raided his home, office and the homes of his friends and business associates on 23 and 28 August 2017. The ED conducted raids on 18 January and 15 February this year.

Karti’s friends say no one with even a remote connection to him has been spared. “Several mischievous, delusional individuals have made sensationalist claims in the media against us,” Mohanan Rajesh told The Lede in his first interview to the press on the subject.

He is a childhood friend of Karti’s as well as the current Director of Advantage Strategic Consulting.

“While all those facts may sound fascinating, the truth is far different from fiction. The 3 central agencies are now basically chasing fairies in the wind and trying to verify if atleast one of those fictitious facts can be established as the truth. For this, they have summoned almost every single client and service provider of ASCPL to Delhi, all under the garb of investigation. None of these entities or individuals has even the slightest connection to the Aircel or INX transactions. Karti’s maternal uncle was also raided by the ED. Basically, this “reverse investigation” is being done to somehow try and prove the sensationalist allegations that have been reported by the media,” he said.

A month after the CBI filed the FIR against Karti, a notice was issued to him by the investigating agency to appear before the investigation officer on 29 June 2017 at 10:30am. This summons was issued by the CBI on 15 June 2017. Although there were two weeks for Karti’s date with the CBI, the agency suddenly, on 16 June 2017, issued a “Look out Circular” (LOC) against him.

The Madras High Court issued an interim stay on the LOC on 10 August 2017. The CBI challenged the stay before the Supreme Court and got the stay lifted.

On 16 February 2018, the First Bench of the Madras High Court, in its order observed that “on the face of the materials on record, there was no attempt on the part of the petitioner to deliberately evade arrest or deliberately not appear before the CBI, at least when the LOC was issued.” (emphasis in original document)

Allowing Karti Chidambaram to travel to the United Kingdom for business purposes after informing the CBI, the order continued – “There is no allegation in the FIR of financial irregularities in the running of the companies with which the petitioner is associated. It is not the case of the CBI that there is likelihood or even possibility of the petitioner fleeing the country to evade the process of law and the allegation of tampering with evidence also appears somewhat farfetched considering the nature of the allegation in the FIR.” Karti was allowed to travel abroad until 28 February 2018. Upon his return, he was arrested at the Chennai airport by the CBI.

Karti applied for bail before the Delhi High Court and Justice SP Garg, in his order granting bail, dated 23 March 2018, pointed out – “None of the senior officers claimed to have ever been approached or influenced in the grant of approvals by the petitioner. The said senior officers (names are not being disclosed here) did not name any official in the ‘FIPB’ who was ever prevailed upon by the petitioner or his associates to impact their decision. During the entire investigation, none of the public servants has been identified or apprehended so far who was allegedly approached or influenced by the petitioner to scuttle the action against ‘INX Media’ for the irregularities or illegalities committed by them.”

As for the emails that have been found by the CBI which they claim link Chess Management Services to Advantage Consulting, Rajesh claimed to have no knowledge of the same. “We were unable to verify the veracity of these emails. It is reiterated that Advantage had provided professional services, in its normal course of business, to INX Media. It did not have the slightest connection to FIPB approvals. We deny all the allegations,” said Rajesh.

Karti’s co-accused in the INX Media case is S Bhaskararaman, a chartered accountant and friend, husband of Padma Vishvanathan a.k.a. Padma Bhaskararaman, a Director of Advantage Strategic Consulting Pvt Ltd. Padma Bhaskararaman too is an accused in the case.

Bhaskararaman’s affidavit in court on 26 August 2017 acknowledges the payment of Rs 10 lakhs to Advantage Strategic Consulting and states – “In 2008, the said client (INX Media) approached M/s ASCPL to advise them on sources for digital content. I took up the assignment on behalf of M/s ASCPL. I advised M/s INX Media on information relating to established players such as Saregama (HMV), T-Series, Veeline Media, Moser Baer, Sagarika Acoustronics, Jai Electronics; regional players, such as, Vedu Electronics, Meta Audio, Keeshtuganam, Aboobacker Audio & Video, Coney Audio & scores others; content available with various entities; employees who were experienced in the entertainment field, etc. For the work done, M/s ASCPL raised an invoice of Rs 11,23,600 (including Service Tax) and after deductions of TDS, received a sum of Rs 9,96,296 by cheque. The income was duly reflected in the Income Tax Return of M/s ASCPL for AY 2009-2010.”

Mohanan Rajesh told The Lede – “The allegations are all baseless and completely false and malafide. The only payment received from INX Media is Rs 10 lakhs which has been duly accounted for in the books of accounts and all applicable taxes have been paid. Neither ASCPL nor any of its subsidiaries have received any other amounts from INX.”

Team Karti alleges that the ED and the CBI are harassing them needlessly in the hope of finding a non-existent case. For instance, the ED has called for bank statements of Karti Chidambaram since 1981 when he was 10 years old detailing all transactions of more than Rs 1 lakh. The bankers are said to have been flummoxed with this request, since all bank transactions in the past ten years only have been digitised.

“Yes, I completely agree (about allegations of harassment). The entire allegation in the FIR is that Mr Karti Chidambaram misused his position as the son of the then Finance Minister, Mr P Chidambaram to influence members of the FIPB who then granted undue favours to INX Media,” continued Mohanan Rajesh. “There is no allegation of any wrongdoing by ASCPL or its Directors. The transaction between ASCPL and INX was between two private parties for a transaction which has been explained in detail. To allege that ASCPL collected Rs 10 lakhs on behalf of Mr Karti Chidambaram as bribe money is completely baseless and contrary to facts on record. The FIR was registered in May 2017, without even so much as a preliminary enquiry, for a transaction which occurred 9 years ago. It is therefore clear that the objective is to somehow try and link ASCPL to Mr Karti Chidambaram by using this transaction of Rs 10 lakhs as a feeble excuse,” he added.

The CBI alleged in Supreme Court in 2017 that Karti Chidambaram was “tampering with evidence” during his trips abroad and that he had closed down undisclosed foreign bank accounts.

Team Karti argues that the truth was, thanks to the “adverse publicity” being spread about Karti, the UK banks themselves forced Karti to close his personal bank accounts maintained with them, “despite being fully compliant with all applicable laws”. In effect the banks did not want any truck with a potential troublemaker. The Lede was unable to verify this independently.

As for the ‘invoices’ signed by Peter Mukherjea and the alleged payments made overseas to various Karti companies by INX Media, including Advantage Singapore and Advantage India, Rajesh denied any such payments. “Advantage has raised only one invoice for Rs 10 lakhs. INX Media made the payment after deducting TDS. The receipt was disclosed by Advantage in its bank statements, books of accounts and service tax returns. There are no other invoices raised by Advantage. All the investigating agencies have collected complete bank statements, including statements from foreign banks, of Advantage and its foreign subsidiaries right from the date of incorporation of the entities. There is no receipt of money from INX other than Rs 10 lakhs. Neither are there any other transactions which we have been unable to explain. Again, the veracity of the purported signed invoices is doubtful,” he said.

Karti Chidambaram is now out on bail in the INX Media case and is fighting a variety of legal battles on different cases. In the next and final part of this series, we delve into the details of the Aircel Maxis case – the one in which both father and son are being made to sweat.

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