Economic Fraud
ED fines Chennai’s GI Retail Pvt Ltd Rs 566.5 crore, seizes Rs 195 crore in assets linked to a UAE shell company
The Enforcement Directorate (ED) has imposed a hefty Rs 566.5 crore penalty on Chennai-based GI Retail Pvt Ltd and confiscated assets worth Rs 195 crore. This punitive action stems from violations of the Foreign Exchange Management Act (FEMA) related to the sale of Hermes I Ticket Pvt Ltd, a subsidiary of GI Retail.
The ED’s investigation revealed a complex scheme involving Mauritius-based Emerging Markets Investment Fund (EMIF) and German financial services firm Wirecard. The sale of Hermes I Ticket to EMIF, followed by a subsequent transfer to Wirecard at a significantly inflated price, raised suspicions of fraudulent intent.
The ED concluded that the entire transaction was orchestrated to conceal the actual buyer and the predetermined sale price. The involvement of EMIF was merely a facade to facilitate the transfer of excess funds, approximately Rs 195 crore, to UAE-based entities indirectly controlled by Indian beneficiaries. These funds were disguised as payments for fictitious services.
By circumventing India’s foreign exchange regulations and failing to repatriate the excess funds, the beneficiaries violated FEMA. To rectify this, the ED invoked Section 37A of FEMA, seizing assets equivalent to the undisclosed amount, totaling Rs 195 crore, from the individuals involved.