MUMBAI: Edelweiss Group chairman Rashesh Shah was asked to join an Enforcement Directorate probe into alleged violations of foreign exchange rules amounting to more than. Rs 2,000 crore but he did not turn up for questioning and sought to appear at a later date, officials said on Friday. The agency is likely to issue fresh summons next week, they said.
Shah’s Mumbai-based financial services group is part of a probe involving a Thane-based firm, Capstone Forex, according to officials. The role of a major Indian movie production and distribution company is also under probe, they said without naming the entity.
Edelweiss Group issued a statement on Friday saying none of its companies had any transactions with Capstone Forex.
It also dismissed reports in a section of the media in this regard. “The summons was issued under certain sections of the Foreign Exchange Management Act (FEMA) on January 3 and Rashesh Shah was asked to join the probe on January 9, but he has sought a later date,” an official in the know of the development told ET on condition of anonymity. “We are starting with him to understand why Edelweiss was involved in these transactions. The other firms related to these transactions will also be called in due course.”
Capstone Forex allegedly created bogus tourist lists and illegally remitted foreign exchange overseas, according to officials. “In order to provide credit balance to this company, Edelweiss Group companies and another firm under probe allegedly issued cheques to this Thane-based company for buying dollars and transferring under current account. These dollars were remitted to shell companies, which subsequently withdrew the money mostly through cash,” said a second official.
“There has been fraud at two levels – one, foreign exchange was illegally remitted by creating a bogus list of travellers and, second, a corporate like Edelweiss Group helped in illegal procurement of foreign exchange,” said the official. “While the major player in this looks to be the Edelweiss Group, the other entities which also helped provide credit balance to the Thane-based firm will be called in due course.”
The role of each party in the transaction is being ascertained, as are complex layers of transactions involved, said the official. “We want to probe who is the ultimate beneficiary of these shell entities and who floated them in the first place. Was this done with the dual intention of evading taxes and hoarding funds offshore?” said the official.
In its press statement, Edelweiss Group said, “We have received a communication from the Enforcement Directorate to appear and provide information about Edelweiss Group companies’ dealings with a company called Capstone Forex Pvt Ltd. We would like to state that none of our companies have any transactions with this company….”
“We further deny wild and baseless allegations contained in the news items which are apparently attributed to unidentified sources. We are in fact shocked at the spread of unauthenticated allegations and the inference being drawn from it,” it said.
According to people aware of the matter, Sanjay Nathalal Shah, an independent director in certain entities linked to Edelweiss Group, is alleged to be a close associate of the owners of Capstone Forex. Shah is an independent director in entities including Edelweiss Finvest and Edelweiss Fund Advisors, which was amalgamated in February last year along with four other entities with Edelweiss Agri Value Chain Limited, as per a filing with the stock exchange.
The financial statement and director’s report of Capstone Forex, reviewed by ET, show that the company reported revenue of Rs 314.41crore from operations in March 2018, a whopping increase of nearly 1,800% from Rs 16.69 crore a year earlier. In March 2016, the company had reported a total income of Rs 4.89 crore.
In a statement released by Shah on Sunday, he defended the allegation, calling them baseless, “…You may have seen some media reports relating to Edelweiss.
I am writing to you directly, to assure you that Edelweiss has no relationship with Capstone Forex Pvt. Ltd. and all allegations of FEMA violations are false. We appreciate that regulators and agencies have an obligation to investigate; if any information is sought from us, as a responsible corporate citizen, we will of course provide the same,” the statement said
“…While it is unfortunate that I was unable to go in person to the Directorate of Enforcement (ED), our senior authorised representative did attend in person with the requisite information. Needless to say, if in the future any assistance or support to the investigation is requested from us, we will cooperate fully,” it added.
“ Media reports suggest that Mr. Sanjay Nathalal Shah, Chartered Accountant and an independent director of a few of our group companies, is alleged to be connected to Capstone. Let me reiterate that he has no other association with the Edelweiss Group, nor is he in any way related to me; you will appreciate that Shah is a common name.
The media has sensationally reported false allegations, conjecture and innuendo. Several have done so without following the standard, responsible practice of first speaking with Edelweiss. Had they done so, you would have been presented with both sides of the story, equally and fairly. We are, therefore compelled to take appropriate legal action against the concerned media group, in order to protect and reinforce the reputation of Edelweiss,” it further added.
“Edelweiss is a home-grown professional financial services group built over 25 years by more than 11,000 employees and 2 million customers. We have many large, reputed Indian and foreign customers, investors and partners, such as you, who have endorsed our governance and values, and put your trust in us.I would like to personally reiterate that these allegations are false and we remain committed to the highest governance standards, built on a strong foundation of ethics. We take our responsibilities as good corporate citizens extremely seriously. We find our strength in the unshaken trust reposed by our customers, shareholders, partners and employees,” it concluded
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