Wockhardt facing ED charges for fund diversion

Wockhardt Ltd, a pharmaceutical company, and two of its directors are defending charges under the erstwhile FERA, for allegedly maintaining ...

Wockhardt Ltd, a pharmaceutical company, and two of its directors are defending charges under the erstwhile FERA, for allegedly maintaining foreign bank accounts without the RBI’s permission and diverting funds from these accounts to other purposes instead of bringing them into India.

A show-cause notice from the Enforcement Directorate, Mumbai, is now under adjudication. Wockhardt’s chairman and managing director Habil F. Khorakiwala is named in the notice along with Juzer S. Khorakiwala, executive director, and the company itself. An e-mail from this correspondent to the company elicited a short response from their spokesperson, Shyam Kumar: ‘‘We have not violated the laws. We have contested the Enforcement Directorate’s interpretations and cannot comment further as the matter is sub judice.’’

The ED’s probe began when some faxes were found by the income-tax department during a raid on the offices of Wockhardt in September 2000. The faxes contained correspondence about the Dubai and Singapore bank accounts.

The major allegation is that the company had acquired forex in Switzerland from Mundi Pharma, by its own admission, since the mid-seventies, and transferred it to an account in Singapore. The amount, now totalling $7 lakh, should have been brought into India within 90 days of it being acquired.

The ED knows the number of the Singapore account, but beyond that, the statements of the two directors and the vice president (finance), recorded during the investigation, start falling apart. While Juzer Khorakiwala said the amount was collected in the Swiss account was the differential of overinvoiced imports of a chemical they were importing from Mundi Pharma, Switzerland, Habil Khorakiwala said it was credits of the pre-agreed discounts that the exporter company was giving Wockhardt. He could not produce documents to support this claim, citing reasons of records lost during the Poonam Chambers building crash in 1998. The company had an office in the building.

The Singapore account is jointly held by Taizoon Khorakiwala, a cousin of Juzer, and promoter of Biostadt Marketing, Singapore and Wockhardt. And since it was found that Wockhardt in fact was the beneficiary of the account being operated by Biostadt, the charges stand against the company also. An FIRC copy (foreign inward remittance certificate) dated November 29, 2000 showing a remittance of Singapore $1.25 mn (equivalent to almost US $7 lakh) was submitted to FERA authorities after the investigations began. The remittance has come from Taizoon Khorakiwala, Singapore to Wockhardt Life Sciences Ltd.

The company claimed that they had therefore brought back the amount held in the Singapore account. The directorate’s correspondence with the bank, BNP Paribas, where the remittance was received, revealed that the entire amount (approx Rs 3.31 crore) had been withdrawn by Wockhardt Life Sciences.

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The other is Juzer Khorakiwala’s account in a branch of Merrill Lynch in Dubai in the name of a firm called Zamyad. Contradictions abound in respect of this account also, with Juzer first claiming it was his, and then that he held it in trust on behalf of Taizoon F Khorakiwala. The ED has charged him with acquiring $1.5 mn from Taizoon in Dubai, and for lending $4.90 lakh out of this to one Mamoowala in Pakistan. Another $3.86 lakh were diverted to the Singapore account, to be held as a fixed deposit for Juzer. The balance of $7 lakh are allegedly still lying in the Dubai account, the ED has alleged.