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| Mining giant Adani cleared in second case over allegations of financial fraud | Mining giant Adani cleared in second case over allegations of financial fraud |
| (about 22 hours later) | |
| India’s customs authority dismisses claims of huge sums of money being siphoned out of India | |
| Michael Safi in Delhi | |
| Fri 25 Aug 2017 07.20 BST | |
| Last modified on Fri 25 Aug 2017 10.54 BST | |
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| India’s customs authority has cleared the Adani Group of illegally siphoning money into overseas tax havens, dismissing one of two sets of power equipment fraud allegations known to be facing the mining conglomerate. | India’s customs authority has cleared the Adani Group of illegally siphoning money into overseas tax havens, dismissing one of two sets of power equipment fraud allegations known to be facing the mining conglomerate. |
| The judgment this week involved separate Adani Group subsidiaries to those named in similar allegations reported by the Guardian earlier this month, but employed the same alleged company in Dubai and the same modus operandi. | The judgment this week involved separate Adani Group subsidiaries to those named in similar allegations reported by the Guardian earlier this month, but employed the same alleged company in Dubai and the same modus operandi. |
| In the allegations dismissed this week, Indian customs investigators had accused two subsidiaries of the Adani Group of using the Dubai company, Electrogen Infra FZE (EIF), to inflate the price of machinery and equipment for power plant projects in Maharashtra and Rajasthan states. | In the allegations dismissed this week, Indian customs investigators had accused two subsidiaries of the Adani Group of using the Dubai company, Electrogen Infra FZE (EIF), to inflate the price of machinery and equipment for power plant projects in Maharashtra and Rajasthan states. |
| It had alleged that EIF charged the Adani Group subsidiaries up to 220% more for the equipment. It claimed the extra money was channelled to a holding company in Dubai owned by Vinod Shantilal Adani, the older brother of Adani Group chairman Gautam Adani. | It had alleged that EIF charged the Adani Group subsidiaries up to 220% more for the equipment. It claimed the extra money was channelled to a holding company in Dubai owned by Vinod Shantilal Adani, the older brother of Adani Group chairman Gautam Adani. |
| The effect of the now-dismissed scheme would have been to move vast sums of money from the Adani Group’s domestic accounts into offshore bank accounts where it could no longer be taxed or accounted for. | The effect of the now-dismissed scheme would have been to move vast sums of money from the Adani Group’s domestic accounts into offshore bank accounts where it could no longer be taxed or accounted for. |
| In a judgment dated 22 August, an official from the Directorate of Revenue Intelligence (DRI) appointed to adjudicate the case fully dismissed the allegations. | In a judgment dated 22 August, an official from the Directorate of Revenue Intelligence (DRI) appointed to adjudicate the case fully dismissed the allegations. |
| The official, KVS Singh, found that one of the Adani Group subsidiaries, Adani Power Maharashtra Limited, had signed a contract with EIF to supply equipment more than one month before it had been taken over by Vinod Adani. | The official, KVS Singh, found that one of the Adani Group subsidiaries, Adani Power Maharashtra Limited, had signed a contract with EIF to supply equipment more than one month before it had been taken over by Vinod Adani. |
| Therefore the companies “were not related ... on the date of the signing of the contract”, he concluded. | Therefore the companies “were not related ... on the date of the signing of the contract”, he concluded. |
| He found the other Adani Group subsidiary, Adani Power Maharashtra Limited, had signed the contract with EIF after Vinod Adani had taken control of the company. | He found the other Adani Group subsidiary, Adani Power Maharashtra Limited, had signed the contract with EIF after Vinod Adani had taken control of the company. |
| But Singh said the evidence had led him to conclude “that the same relation has not affected the price [of the equipment] and that the same was at arm’s length”. | But Singh said the evidence had led him to conclude “that the same relation has not affected the price [of the equipment] and that the same was at arm’s length”. |
| “I find that even though I have found that the two entities ... were related, the requirement of relationship influencing the price was not satisfied,” he said. | “I find that even though I have found that the two entities ... were related, the requirement of relationship influencing the price was not satisfied,” he said. |
| “Thus I find that the allegation that the impugned goods were over-valued does not hold water.” | “Thus I find that the allegation that the impugned goods were over-valued does not hold water.” |
| Income tax officials who had scrutinised the transactions had also concluded that the transactions between EIF and the Adani Group subsidiaries had been conducted at arm’s length, he added. | Income tax officials who had scrutinised the transactions had also concluded that the transactions between EIF and the Adani Group subsidiaries had been conducted at arm’s length, he added. |
| Singh concluded the increased price that EIF charged the Adani Group subsidiaries could be justified on the grounds the company had provided extended warranties on the equipment it purchased, and had signed stringent supply contracts. | Singh concluded the increased price that EIF charged the Adani Group subsidiaries could be justified on the grounds the company had provided extended warranties on the equipment it purchased, and had signed stringent supply contracts. |
| “EIF had undertaken the risk and financial burden to provide extended warranty over what the [suppliers] had added substantially to the said goods,” Singh said. | “EIF had undertaken the risk and financial burden to provide extended warranty over what the [suppliers] had added substantially to the said goods,” Singh said. |
| “This additional risk spread over an extended period of time was bound to add a cost premium to the value of the imported goods.” | “This additional risk spread over an extended period of time was bound to add a cost premium to the value of the imported goods.” |
| The judgment said the Adani Group subsidiaries had chosen to employ EIF to source the equipment based on a competitive evaluation process in which EIF’s bid had been the lowest in price. | The judgment said the Adani Group subsidiaries had chosen to employ EIF to source the equipment based on a competitive evaluation process in which EIF’s bid had been the lowest in price. |
| “I find that the [Adani Group] has arrived at the price transparently and independently where the price has been finalised based on global tender following international competitive bidding process as prescribed by the Government of India,” he said. | “I find that the [Adani Group] has arrived at the price transparently and independently where the price has been finalised based on global tender following international competitive bidding process as prescribed by the Government of India,” he said. |
| A second set of fraud allegations, detailed by the Guardian earlier in August and valued around 15bn rupees, are still pending adjudication, according to the Times of India. | A second set of fraud allegations, detailed by the Guardian earlier in August and valued around 15bn rupees, are still pending adjudication, according to the Times of India. |
| The DRI had been contacted to provide an update on the current status of both cases. | The DRI had been contacted to provide an update on the current status of both cases. |
| The Adani Group could not be reached for comment, but said in an earlier statement on behalf of itself, its subsidiaries, and Vinod Adani that it “strongly denies the allegations of overvaluation”. | The Adani Group could not be reached for comment, but said in an earlier statement on behalf of itself, its subsidiaries, and Vinod Adani that it “strongly denies the allegations of overvaluation”. |
| “It is a standard procedure for the group to follow international competitive bidding route for major capital expenditures to ensure transparency and competitiveness in the process. All our transactions are always conducted within the framework of extant regulatory guidelines and provisions,” it has said. | “It is a standard procedure for the group to follow international competitive bidding route for major capital expenditures to ensure transparency and competitiveness in the process. All our transactions are always conducted within the framework of extant regulatory guidelines and provisions,” it has said. |
| “The fact that our projects have incurred the lowest cost across central, state and private utility players has gone to establish the robustness of the processes followed by our group. | “The fact that our projects have incurred the lowest cost across central, state and private utility players has gone to establish the robustness of the processes followed by our group. |
| “It may be noted that Mr Vinod Adani who is the elder brother of Mr Gautam Adani has been a non-resident Indian for about 30 years and has his own established business interests outside India,” its statement said. | “It may be noted that Mr Vinod Adani who is the elder brother of Mr Gautam Adani has been a non-resident Indian for about 30 years and has his own established business interests outside India,” its statement said. |
| “Adani Group is aware of the investigations being conducted by the DRI, and has fully cooperated, and shall continue to cooperate with the investigating agencies.” | “Adani Group is aware of the investigations being conducted by the DRI, and has fully cooperated, and shall continue to cooperate with the investigating agencies.” |
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