Emaar MGF raided over FDI violation

The offices of real estate giant Emaar MGF, which is developing the Commonwealth Games village for next year's mega sporting event, was raided by the Enforcement Directorate over alleged violation of foreign direct investment (FDI) norms.

The firm is believed to have diverted investments meant for the real estate sector to purchase agricultural land.

Under Emaar MGF's agreement with the Foreign Investment Promotion Board (FIPB), agricultural land is a sector barred for investment.

DNA had broken the story October 8 on how Emaar MGF had violated its commitment to the FIPB that had authorised it to bring FDI worth Rs7,000 crore into India. The alleged diversion of FDI happened in 2005-2008. Thursday's raid by the ED is the culmination of several months of investigation by the directorate against the group, which is alleged to have diverted FDI into purchase of cheap agricultural land in Haryana and Uttar Pradesh.

The ED is reported to have recovered cash of Rs10-15 crore from the offices and residential premises of Emaar-MGF and its key officials.

ED officials have, however, denied reports that the raids against the group are linked to the corruption scam involving former Jharkhand chief minister Madhu Koda.

"About 12 premises in Delhi, Gurgaon and neighbouring cities have been raided today. We had earlier booked the company under Foreign Exchange Management Act. Investigations are on," a senior ED official said.

The total amount of diversion is still under evaluation by the directorate. If charges are proved, the company could be facing a fine that is three times the alleged diversion.
Emaar MGF Land Ltd is a joint venture between Emaar group of Dubai and MGF Development Ltd of India.

The Emaar group claims to have operations in 16 countries. The group started its operations in India in February 2005. The company bagged the contract for constructing the Commonwealth Games Village in Delhi in 2007. The Games Village will be spread across 118 acres and would provide accommodation to over 8,500 participants from across the globe.

Emaar MGF has been embroiled in several controversies in the past few years. In 2007, the income tax department had raided several premises of the company for alleged income tax evasion. The tax sleuths carried out a series of raids in six major cities including, Hyderabad, Chennai, Jaipur, Chandigarh and Delhi.

A concrete case had been built up against the group by the IT department. But a mysterious fire broke out at the tax department's Connaught Place office in the October, 2007 destroying all documents pertaining to Emaar-MGF's case. Delhi Police had even registered a case of sabotage but have not been able to make a breakthrough.
Emaar-MGF had in February, 2008 hit the market with an issue of 10.25 crore shares in a price band of Rs610-690 each to raise Rs7,000 crore.

But it was forced to withdraw the issue after failing to find takers despite extending the closing date from February 6 to February 11 and rolling down the price band from Rs610-690 to Rs530-630. Emaar MGF is again planning to hit the market with a public issue.