Modani Files: Adani Group’s dark history hidden under diamonds and inflated bills

The Adani Group’s rise to become one of the top business empires in the world might have seen an unprecedented surge in the last nine years

The Adani Group’s rise to become one of the top business empires in the world might have seen an unprecedented surge in the last nine years. But fraud, right from siphoning funds offshore and market manipulation of share prices of the group in India, are nothing new to the group.

In fact, the Adani Group’s shady affairs were revealed as early as in 1999, when the Directorate of Revenue Intelligence arrested Rajesh Adani, a younger brother of Gautam Adani and currently the managing director of the Adani Group, on charges of evading customs duties. He was arrested several times again, on charges of customs fraud too, most recently in 2013.

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The DRI also investigated the 2004-06 diamond scam, in which Rajesh Adani and Gautam Adani’s brother-in-law Samir Vora were accused of circular trading of diamonds and over-invoicing so as to siphon funds to tax havens like Dubai and Singapore, and also of fraudulently claiming export subsidies.

In 2013, the Commissioner of Customs imposed fines on Rajesh Adani, Samir Vora, Adani Enterprises and five diamond trading companies linked to the Adani Group.

However, in 2015, soon after the Modi government came to power, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) dismissed the findings of investigations that spanned several years.

Much before that, in 2007, the Adani Group was banned by the Securities and Exchange Board of India (SEBI) from participation in the securities market for two years.

The SEBI passed the order after it found the involvement of promoters of Adani — along with controversial stock broker Ketan Parekh and his associates — in the price rigging of Adani stocks between October 1999 and March 2001.

DRI investigation still pending before SC

In 2013-14, intelligence was gathered by the DRI that certain power sector companies were involved in over-invoicing of coal and power generation equipment imported from abroad.

It was detected that Indonesian coal was shipped directly to India but the import invoices were routed by the companies through one or more intermediaries based in countries such as Singapore, Dubai, Hong Kong etc., for the artificial inflation of value, which ultimately impacted the power bills of end users through passing on of costs.

The coal import scam was estimated to be at around Rs.29,000 crore. The objective of over-valuation appeared to have been to siphon off money abroad and to avail higher power tariff compensation based on the artificially-inflated cost of the imported coal.

A general alert circular was issued in March 2016 about the modus operandi of over-invoicing of Indonesian coal indulged in by some 40 companies. The circular listed names of 40 companies, out of which 10 entities (including suppliers), were directly related to Adani.

As the next step, the DRI in 2016 obtained a Letters Rogatory (LR), which is sent by a country under the Mutual Legal Assistance Treaty (MLAT) for the assistance of foreign judicial authorities in probing an offshore entity.

Accordingly, the DRI petitioned the governments of Singapore, Dubai and Hong Kong for assistance in gaining access to the overseas bank records of state-owned Indian banks whose accounts were used to facilitate the scam.

Almost 85 percent of the fraudulent over-invoicing done by these companies took place through SBI’s Singapore branch, according to the DRI.

Despite having clinching evidence in hand, the DRI’s probe reached a dead end due to the non-cooperation of banks, citing reasons of international legal agreements with the countries concerned.

“It looks like an ‘invisible outside hand’ is stopping it from happening,” one of the officials was quoted as saying by India Today.

Adani challenged the LR request in one of his group firms, Adani Enterprises Ltd, in the Singapore lower court, which disagreed and ordered the company to turn over its records. Adani appealed against the order in the Singapore High Court and failed there as well.

However, where he succeeded was at the Bombay High Court, where he challenged the issuance of the LR itself, following which the HC quashed all LR proceedings citing technicalities. The Supreme Court stayed the order of the Bombay High Court in 2020.

Earlier, two firms of the Adani Group, allegedly involved in over-valuation of imported power equipment, were served show cause notices on May 15, 2014.

The DRI stated that the goods — power generation and transmission equipment — imported by the firms (APML and APRL) in 2009 and 2010, were shipped directly to India by original equipment manufacturers based in China and South Korea, while the documents were routed through an intermediary entity, Electrogen Infra FZE, UAE (EIF), created in Dubai.

The value of the equipment was inflated by nearly 400 percent ie, Rs.4,000 cr. According to the DRI, EIF was owned and controlled by Vinod Shantilal Adani, the eldest of the Adani brothers.

The DRI alleged that the Adani firms transacted with EIF, a related party, to siphon off Rs.4000 crore abroad.

However, at the first appellate level, the Commissioner disposed of the case in 2017 in favour of Adani. The second appellate CESTAT also decided in favour of Adani.

The appeals are still pending in the Supreme Court.