In a setback for the Directorate of Revenue Intelligence (DRI), the Bombay High Court Thursday ruled in favor of Adani Enterprises Ltd (AEL) and quashed all Letter Rogatories (LRs) sent by DRI to Singapore and other countries while probing Adani Group firms for alleged overvaluation of Indonesian coal imports between 2011 and 2015.
A LR is a formal request between two countries 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 high court order assumes significance as apart from the Adani Group, the DRI is probing at least 40 companies including two companies of the Anil Dhirubhai Ambani Group (ADAG), two Essar Group firms and a few public sector power firms for alleged overvaluation of coal imports from Indonesia pegged at Rs 29,000 crore between 2011 and 2015. Now with the court order the cases against Adani and other companies is likely to come to a halt.
A division bench of Justice Ranjit More and Justice Bharati H Dangre allowed the writ petition filed by Adani Enterprises Ltd (AEL), that claimed the 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 case.
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 of imports of Indonesian coal.
Last year, AEL moved the Bombay High Court seeking to quash all LRs issued by DRI in 2017 to foreign countries including Singapore against Adani Group firms that are being probed for alleged overvaluation of Indonesian coal imports. The Bombay High Court in September 2018, gave an interim stay to AEL, however, the DRI moved the Supreme Court as its probe came to a halt, following the high court ruling. The apex course has now directed the high court to decide the case by the end of this month.
The DRI had earlier told the court that Adani Enterprises moved high court to question the issuance of LRs only after a Singapore court allowed India’s request to access documents that allegedly contain “clinching evidence” against Adani Group’s “blatant” price hike of imported coal for “siphoning” money and “increasing” the cost of power sold to public in India.
AEL in its petition in the Bombay High Court claimed the LRs were issued by DRI without cognizance of any offence or registering of First information Report (FIR) against the Adani firms in the coal case.It also said that the LRs were issued without any notice and hearing the companies.
The DRI probe against Adani and other companies began after the agency 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. DRI alleged that money was being “siphoned” outside the country and the electricity-generating firms were availing of “higher tariff compensation based on artificially inflated cost of the imported coal”.
The DRI alleged that Indonesian coal was directly imported from ports in that country 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, according to sources, found that inflated invoices received in India were issued by intermediaries, allegedly subsidiary companies of Indian importers or their fronts. The DRI alleged that in certain cases, the import value of Indonesian coal was artificially inflated by about 50 to 100 per cent by changing test reports which measure the calorific value of coal. Artificial inflation of value of the imported coal increases the landed cost of coal, which is a primary fuel in coal fired thermal power plants. The higher tariff dispensed by the electricity regulator to the power generator enhances the cost of purchase of the power distributor, which in turn factors this artificially enhanced cost in its billing to consumers.