DELHI: The enforcement directorate (ED) has slapped a show-cause notice on Emaar MGF Land, a joint venture between Dubai's Emaar Properties and India's MGF Development, for violation of the Foreign Exchange Management Act to the tune of 8,600 crore.
In an investigation under FEMA, the government department noticed that funds were received by this company and four of its subsidiaries from Dubai, Cyprus, Mauritius and other foreign countries under the foreign direct investment scheme of the Reserve Bank of India since April 2005.
The FDI scheme of RBI has given a facility to Indian companies under the automatic route to receive funds from outside the country for a number of business activities including for construction development projects.
In this facility, the company, Emaar MGF Land Ltd and its subsidiaries, had to disclose the purpose for which foreign direct investment was received, from within the list of permitted activities by the RBI.
While this company and its subsidiaries disclosed the use of foreign direct investment in construction development projects, they later utilised the overseas funds in the purchase of agricultural land in India.
The company has "thus utilised the overseas funds in the business neither disclosed to RBI nor permitted in the FDI scheme of RBI," said a statement by the directorate of enforcement.
Investigation under FEMA, it said, has revealed that foreign investments received by the companies were utilised in the purchase of agricultural land through various methods either directly or through other associated companies by diverting overseas funds to them.
The directorate of enforcement has found Emaar MGF Land Ltd and its four subsidiaries in contravention of section 6(3)(b) of FEMA 99 for the total amount of 8,600 crore and a show cause notice has been issued under FEMA.
A spokesman for Emaar MGF said: "We have not received any communication from government authorities and hence we are not in a position to comment."