The decade-old case of INX Media
Written by Deeptiman Tiwary | Published: March 1, 2018
CBI arrested Karti Chidambaram in connection with the INX Media case Wednesday. It said Chidambaram had been resisting summons for questioning, and not cooperating with investigations. In the lone questioning session he attended, Karti was evasive and gave incorrect statements in the face of evidence — therefore, he had to be arrested, CBI said.
However, the grounds for the arrest were probably laid as early as in 2008, even before INX Media secured all clearances from the Foreign Investment Promotion Board (FIPB). In January 2008, the Financial Intelligence Unit (FIU-IND) flagged foreign direct investment of over Rs 305 crore by three Mauritius-based companies in INX Media Pvt Ltd (now called 9X Media Pvt Ltd), formerly owned by Peter and Indrani Mukerjea.
The FIU alert was picked up by the investigation wing of the Income-Tax (I-T) Department in Mumbai, which subsequently forwarded the case to the Enforcement Directorate (ED). In 2010, ED registered a case against INX Media for alleged violations of the Foreign Exchange Management Act (FEMA).
Last year, while investigating a company associated with Karti, ED found some documents related to the INX Media deal in the computer of Karti’s CA Bhaskarraman. The documents indicated payments made to Karti’s alleged company by INX Media at the time the Finance Ministry granted it FIPB approval. ED sent a reference in this regard to CBI, which registered a case of corruption in May 2017, and searched premises connected to both Karti and his father P Chidambaram. Following this, ED lodged a case of money laundering against Karti.
According to the CBI FIR, on March 13, 2007, INX Media approached the FIPB for permission to issue 14.98 lakh equity shares and 31.22 lakh convertible non-cumulative redeemable preference shares of Rs 10 a piece to three non-resident investors — Dunearn Investment (Mauritius) Pte Ltd, New Silk Route PE Mauritius LLC, and New Vernon Pvt Equity Ltd, under the FDI route. These shares represented 46.21% of the issued equity capital of INX Media.
INX Media, according to CBI sources, sought this approval to start a music channel, 9XM, a Hindi general entertainment channel (GEC), and multiple entertainment channels in other languages.
According to CBI, the media firm, in its application to FIPB in 2007, also mentioned its intention to “make a down stream financial investment to the extent of 26 per cent of the issued and outstanding equity share capital of INX News Pvt Ltd, a subsidiary of INX Media”.
While the FIPB granted permission to INX Media on May 30, 2007 to bring in FDI of Rs 4.62 crore, it rejected the proposal of downstream investment of INX Media in INX News. The CBI has alleged that INX Media flouted the conditional approval of FIPB, and brought in over Rs 305 crore of FDI in the firm against the approved inflow of Rs 4.62 crore. According to sources, the foreign entities bought shares of INX at Rs 862.31 a piece, which was 86.2 times more than their face value. The media organisation also made a downstream investment of 26% in its subsidiary, INX News.
CBI has alleged that on May 26, 2008, when FIPB sought clarification from INX Media after the I-T Department began its probe, the media firm engaged Karti Chidambaram, promoter director of Chess Management Service (P) Ltd, to “amicably” resolve the issue by “influencing the public servants of the FIPB unit of Ministry of Finance by virtue of his relationship with the then Finance Minister, P Chidambaram”.
Based on clarifications suggested by Chess Management, INX Media through its letter dated June 26, 2008, tried to justify its action on two counts: On the downstream investment issue, the company claimed that it was in accordance with the approval granted to it; on the excess foreign inflow, it said that was justified as premium received against shares issued.
However, CBI has alleged that Karti exercised influence over certain FIPB officials, and the department, instead of investigating the case, extended undue favours to the media firm by asking INX News to apply for fresh FIPB approval on the downstream investment already received by it.
At the same time, ED investigations have found, Advantage Strategic Consulting Pvt Ltd, a company that CBI has claimed is “indirectly controlled” by Karti, received a payment of Rs 10 lakh from INX Media on July 15, 2008. Although invoices issued by SPCL claimed that the service rendered was management consultancy, the ledger extract produced by INX Media to investigators showed that the payment had been made for “reply towards FIPB notification and clarification”.
ED has also claimed to have found four invoices, dated in September 2008, raised by ACPL, its Singapore subsidiary and two other companies for US $ 700,000. According to CBI, INX Media was later granted FIPB permission for the investment in violation of norms.
In 2008, the media firm launched NewsX, an English news channel. Within a year of the launch, the channel was sold to Indi Media Network, a joint venture between Nai Duniya owner Vinay Chhajlani and journalist Jehangir Pocha.
In March 2009, Peter and Indrani Mukerjea exited the company after selling their 30% stake in the loss-making INX Media. In April 2010, the Hindi GEC of the company was sold to Zee Network for Rs 64 crore. The same year, INX Media was renamed as 9X Media. Subsequently, in 2011, New Silk Route increased its stake in the company to 80% by buying out all the other private equity investors in the company. Both Peter and his wife Indrani, founders of INX Media, are accused in the Sheena Bora murder case and are lodged in jail in Mumbai.
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