ED slaps showcause notice on Thapar

Friday, July 18 1997

ED slaps showcause notice on Thapar

Rupali Mukherjee

NEW DELHI, July 17: The Rs 1,400 crore Ballarpur Industries Ltd and its chairman LM Thapar have been served with showcause notices by the Enforcement Directorate (ED) for alleged contravention of Foreign Exchange Regulation Act, 1973 (Fera).

The alleged violations relate to certain transactions involving BILT, its Thailand-based joint venture company, Phoenix Pulp and Paper, and Alpha Global of British Virgin Islands.

The directorate has charged in its showcause notice that BILT was allotted 3.8 million shares by Phoenix Pulp, for which a payment of Thai Baht 95 million was made by Alpha Global.

By entering into this arrangement with Alpha Global, BILT appeared to have acknowledged a debt of Thai 95 million baht, thereby creating a rights in favour of Alpha Global to receive the amount involved from BILT. This was done without the permission of the Reserve Bank of India, and thus was in violation of Fera.

The showcause notice gives 30 days to BILT and its chairman to reply, after which adjudication proceedings will be initiated. The company and its chairman have been chargesheeted under Sections 9 (1) (c), 68 (1) and 68 (2) of FERA. A company spokesman confirmed that the company had received the showcause notices. "We are planning the future course of action", he said. Section 9 (1) (c) of Fera says, "No person in, or resident in India, shall acknowledge or negotiate any bill of exchange or promissory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person resident outside India." The showcause notice has been issued by the Directorate's headquarters in Delhi.

In 1993, Phoenix Pulp went in for a rights issue, and Ballarpur was offered 3.8 million shares at the rate of 25 baht per share for a total amount of 95 million baht (25 baht is equivalent to $1). BILT did not subscribe to the rights issue.

The notice states that BILT entered into an agreement with Alpha Global, according to which BILT applied for the shares against payment of 95 million baht by Alpha Global. This was done under instructions of BILT chairman LM Thapar, the showcause notice says.