The Directorate of Revenue Intelligence (DRI), on November 19, filed a special leave petition (SLP) in the Supreme Court challenging a Bombay High Court order that has quashed all letter rogatories (LRs) sent by the agency to foreign countries in connection with the alleged overvaluation of Indonesian coal imports from 2011 to 2015 by two Adani Group companies.
An LR is a formal request between two nations party to a mutual legal assistance treaty (MLAT), seeking judicial assistance in accessing information on an offshore entity in connection with an ongoing probe. The DRI has contended that the Customs Act, 1962 is a self-contained law to deal with smuggling of goods and even the legislature has made it evident that magisterial intervention is not required for initiating a probe under the customs rules.
According to the DRI, an investigation by officers of the Customs, Enforcement Directorate, Wildlife Crime Control Bureau, Narcotics Control Bureau and Serious Fraud Investigation Office under the Customs Act, Prevention of Money Laundering Act, Wildlife (Protection) Act, NDPS Act and the Companies Act, respectively, does not start by registering FIRs or by seeking an order from a Magistrate unlike police officers. Therefore, the DRI feels that under the Customs Act, an FIR under the Code of Criminal Procedure or magisterial intervention is not required for initiation of Customs investigation.
On October 17, the Bombay HC had allowed the writ petition filed by Adani Enterprises Ltd, claiming that LRs were issued “without any notice and hearing the companies” and “no cognizance of any offence” under the Customs Act, 1962 has been registered till now by the DRI against the Adani firms in the coal imports case. The agency said that the HC order has not only halted its investigations into the coal case against 40 companies, including the Adani firms, but also has the potential to impact the LRs sent by other enforcement agencies in different cases.
So far, the DRI had issued 14 LRs to multiple foreign jurisdictions, such as Singapore, Hong Kong, Switzerland, UAE among others, seeking information in the alleged over-valuation in Indonesian coal imports. It has specifically sought import documents negotiated by the Singapore and Dubai branch of Indian banks with Indonesian coal suppliers.
These documents contain the actual price of coal before it was allegedly inflated. While private banks have submitted the data to DRI, public sector banks have declined to submit the information citing confidentiality clauses of the foreign country.
The DRI probe against these 40 companies began after it issued a general alert to its field formations across India in March 2016, outlining the modus operandi of over-invoicing of coal imports from Indonesia. The DRI alleged that money was being “siphoned” outside India and electricity-generating firms were availing of “higher tariff compensation based on artificially inflated cost of the imported coal”.
It also alleged that Indonesian coal was directly imported from ports in Indonesia to India while import invoices were routed through one or more intermediaries based in Singapore, Hong Kong, Dubai and British Virgin Islands to artificially inflate its value.
The agency, as per sources, found that inflated invoices received in India were issued by intermediaries, allegedly subsidiary firms of Indian importers or their fronts.