Why Chidambaram And His Son Are In Trouble

On the third anniversary of Narendra Modi’s historic 2014 victory yesterday (16 May), special teams of the Economic Offences Wing of the Central Bureau of Investigation (CBI) carried out raids at premises belonging to the accused in the INX Media scam. The agency carried out simultaneous raids at as many as 14 locations in Delhi, Mumbai, Hyderabad and Chennai after it had filed a First Information Report (FIR) against former finance minister P Chidambaram’s son Karti; Mumbai-based INX Media Private Limited, represented through the then directors Indrani and Peter Mukherjea; Chennai-based Chess Management Services Private Limited, represented through its director Karti Chidambaram; Advantage Strategic Consulting Private Limited, represented through its director Padma Vishwanathan, alias Padma Bhaskararaman, and some unknown officials in the Finance Ministry.

The raids were part of a series of such searches carried out throughout the country. While Chidambaram, his son and the Congress party cried vendetta, Finance Minister Arun Jaitley called it a day of reckoning for the corrupt.

The allegations in the FIR against the accused are very simple, and the simplicity of these allegations is what is damning. According to the report, the Mukherjeas, who co-founded INX Media in 2006, wanted to enter the business of creating, operating, managing and broadcasting, and for this purpose they needed money, which had to come via the foreign direct investment (FDI) route.

In 2007, INX Media sought permission from the Foreign Investment Promotion Board (FIPB) for two purposes. First, to issue equity shares to three non-resident investors - Dunearn Investment (Mauritius) Private Ltd, NSR PE Mauritius LLC and New Vernon Private Equity Ltd. Second, to make a downstream financial investment to the extent of 26 per cent of the issued and outstanding equity share capital of INX News Private Limited.

The board approved the first proposal with an FDI inflow cap of Rs 4.62 crore based on the fact that they had sought permission for issuing the shares at a face value of Rs 10 each. However, regarding the second request, it said that INX would need to send a separate proposal. This was neither sought nor granted.

However, the Mukherjeas, violating the rules, made a downturn investment for which they didn’t have approval. Then, they knowingly flouted the FDI cap of Rs 4.62 crore and generated more than Rs 305 crore FDI in INX Media by issuing shares to foreign investors at a premium of more than Rs 800 per share.

In 2008, the investigative wing of the Income Tax department received a complaint about the INX shenanigans after which it sought clarification from FIPB, which, in turn, shot off a letter to INX Media questioning the irregularities in their conduct on both the accounts. Until this point, it was only a matter of corrupt practices. Now enter the criminal conspiracy charges.

The Mukherjeas sought the help of Karti to get out of their tricky situation. Mentioning Chess Management Services Limited, where Karti was a director, INX Media issued clarifications to the letter by the FIPB, which then mysteriously agreed and ignored the serious illegality involved in the matter. The FIPB then advised INX Media to apply for a fresh proposal regarding downturn investment, which was later granted.

Imagine this: X wants to open a school and applies to concerned government departments, but his proposal is not accepted. X opens the school anyway and, when caught by Y (the government official), approaches Y’s son who advises him to mention his name, hearing which Y lets X go and asks him to apply again. Only this time it gets approved!

The FIR also notes how officials in the Finance Ministry not just continued to grant undue favours to INX Media but also ignored requests from the Revenue Department to investigate the matter. Apart from conspiracy charges, there are allegations of corruption too, against Karti. Though Chess Management Services, directly controlled by Karti, provided services to INX Media, the invoice against the company for payments of Rs 3.5 crore was raised by Advanced Strategic Consulting Limited and other firms so as to conceal Karti’s identity, who was controlling these companies indirectly, the FIR alleges.

In a press statement, the CBI said that it has registered a case under Section 120-B of Indian Police Code (IPC) r/w 420 of IPC and Section 8, 13(2) r/w 13(1) of Prevention of Corruption Act, 1988, against all the accused.

The Central Board of Direct Taxes (CBDT) is also likely to investigate the matter. "We received information on Karti some two years ago, we have been investigating the cases. We will act on all information shared by the CBI. We are monitoring the case on a regular basis and can call Karti for questioning as well," India Today quoted CBDT chairman as saying. He also held a meeting with Prime Minister Narendra Modi yesterday (16 May) regarding the same.

Chidambaram Jr is alleging political vendetta, though he is an electoral lightweight who couldn’t even save his deposit in the 2014 general election and stood fourth. His father claims the government is going after his son because of his critical articles in newspapers. Rejecting this charge, Power Minister Piyush Goyal mockingly said, "His columns did not exactly set the Yamuna on fire.”

The Chidambarams seem to be in big trouble and it is showing.