RBI suggests probe into DE Shaw deal

The deal was approved in 2007,Amar Ujala complained the deal illegal and in violation FDI rules.

Reserve Bank of India has asked the government to consider a probe by Enforcement Directorate into alleged violations of foreign exchange regulations by global private equity major DE Shaw in a Rs 117-crore deal.

The matter relates to an 18 per cent stake purchase by DE Shaw in Amar Ujala in 2007,but the Indian print media company later accused the US-based company of indulging in fraudulent practices in this deal.

After looking into the complaints of alleged violation of foreign investment norms in the deal,RBI has written to the Finance Ministry that the matter can be referred to ED,which possesses investigation and adjudication powers under FEMA (Foreign Exchange Management Act),sources said.

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Hearing a petition filed by Amar Ujala,the Delhi High Court last month issued notices to DE Shaw in this regard. The court had also asked RBI,the government’s foreign investment clearance body FIPB and Ministry of Corporate

Affairs to explain their stand on the DE Shaw-Amar Ujala deal The notices have been issued after the court heard a petition filed by Amar Ujala Publications,wherein the media company has accused DE Shaw of indulging in fraudulent practices in acquiring the stake The matter has been posted for next hearing tomorrow. Amar Ujala in its suit claimed that the agreement was entered into fraudulently between the erstwhile management of Amar Ujala Publications Ltd and DE Shaw on the basis of false representations made by the global fund house.

The deal was approved by FIPB way back in 2007,but Amar Ujala earlier this year complained that the deal was illegal and in violation of foreign investment rules.

Amar Ujala also claimed that DE Shaw misled the FIPB by not informing them about certain conditions of the deal.

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Subsequently,FIPB had sought clarifications from DE haw on whether the deal was in conformity with all the terms and conditions specified in its approval.Both Amar Ujala and DE Shaw have filed petitions against each other in the High Court.DE Shaw,in its reply to FIPB and in its petition to the court,has claimed that the deal was in conformity with the regulations.