Enforcement Directorate Seizes Assets Worth Rs. 62.52 Crore in Farmax India Limited Case
Movable and Immovable Properties, Including 23 Real Estate Holdings, Confiscated Under FEMA, 1999
In a significant development, the Directorate of Enforcement (ED) has successfully taken control of movable and immovable assets amounting to Rs. 62.52 Crore linked to M/s Farmax India Limited (FIL), its promoters, and directors. Acting under the provisions of the Foreign Exchange Management Act (FEMA), 1999, the ED’s action includes the confiscation of 23 immovable properties owned by M/s Farmax India Limited, its Managing Director Morthala Srinivasa Reddy, and Executive Director M. Malla Reddy. Furthermore, equity shares of M/s Farmax India Limited held by promoters and shares of M/s MSR India Ltd., initially owned by Morthala Srinivasa Reddy and later transferred to family members, have also been seized.
This move comes following the initiation of an investigation by the ED into M/s Farmax India Limited, its promoters, directors, and others, focusing on the fraudulent issuance of Global Depository Receipts (GDRs) and their non-utilization for legitimate purposes under the FEMA, 1999. The probe brought to light the collaboration of Morthala Srinivasa Reddy, the Managing Director of FIL, with Arun Panchariya and others in issuing GDRs in two tranches in 2010. Shockingly, the GDR proceeds amounting to USD 71.45 million were intentionally not repatriated to India, a direct violation of statutory requirements.
Further revelations from the ED investigation highlighted that “Vintage, FZE, Dubai,” a wholly-owned entity of Arun Panchariya, was the exclusive subscriber to the GDRs. Vintage, FZE, Dubai, had secured funds from EURAM Bank, Vienna, as per a loan agreement dated May 05, 2010. Under this agreement, M/s Farmax India Limited pledged the entire GDR proceeds to secure the loan granted by EURAM Bank to Vintage, FZE. Shockingly, the funds raised abroad, totaling USD 15.60 million, were diverted to Farmax FZE, Dubai, a shell company in the UAE, and subsequently transferred to various entities controlled by Arun Panchariya. Another USD 56.57 million was utilized by Euram Bank to offset the non-repayment of the loan by Vintage FZE.
The Enforcement Directorate’s investigation remains ongoing, with additional inquiries being undertaken to delve deeper into the matter.
