CBI Closes Preliminary Enquiry Against Adani Group In The Over-Invoicing Case Citing Jurisdictional Issues

The Central Bureau of Investigation on May 1, 2018 informed the Delhi High Court that it has closed its preliminary enquiry (PE) against Adani Enterprises Ltd, Maharashtra Eastern Grid Power Transmission Company Ltd (MEGPTCL) and various PSU banks over allegations of over-invoicing and over-valuation of import of raw material and equipment relating to power projects in India in July 2015 citing “jurisdictional issue”, since the project was under the Maharashtra government.

CBI presented an affidavit before the bench of Justices S Ravindra Bhat and A K Chawla, which said, “not much progress could be made in the enquiry and the PE was closed on 15.07.2015 on jurisdictional issue” since the project was under the Maharashtra government.

The affidavit also stated, “…on the basis of Source Information Report, Preliminary Enquiry… was registered on 12.06.2014… against M/s Maharashtra Eastern Grid Power Transmission Company Ltd (MEGPTCL), M/s PMC Projects India Pvt Ltd, M/s Adani Enterprises Ltd (AEL), M/s Maharashtra State Electricity Transmission Co Ltd (MSETCL) and unknown officials of Public Sector Banks (SBI, PNB, Vijaya Bank, OBC, SBM & Canara Bank).”

The petitions were filed by NGOs, Centre for Public Interest Litigation and Common Cause, and former bureaucrat and social activist Harsh Mander. They have sought a court-appointed SIT probe. The matter has now been fixed for further hearing on July 14.

Over-invoicing of import of raw material

In May 2014, the Directorate of Revenue Intelligence (DRI) slapped a show-cause notice of Rs 5,500 crore on Adani group over alleged over-valuation of the capital equipment imports. The 97-page file can be read here.

Reportedly, after a month, the CBI registered a PE, it was found that three firms, Adani Power Maharashtra, Adani Power Rajasthan and the Maharashtra Eastern Grid Power Transmission Company, had allegedly imported the power equipment from South Korea and China worth Rs 3,580 crore for an inflated sum of Rs 9,048 crore and the DRI has alleged that difference of Rs 5,468 crore was directed to a UAE-based firm connected to the group, named Electrogen Infra. It is alleged that Electrogen Infra is owned by a trust based in Mauritius which is headed by Vinod Adani, the elder brother of Gautam Adani.

The inquiry also included the impact of the over-valuation of the project on the tariff fixation and also the provision of excess finance by banks to fill the money gap without receiving any capital by the Adani group.

Case closed due to jurisdictional issues

The CBI told the court that it has closed the PE since the core issue pertained to intra-state transmission network within Maharashtra i.e. the Intra-State Transmission System, and thus, it was a project under the Maharashtra government.

Appearing for the NGO, lawyers Prashant Bhushan and Pranav Sachdeva alleged that the over-valuation is also the reason behind the rising number of non-performing assets (NPA).

This closure of PE by the CBI has come under criticism from lawyer Prashant Bhushan, calling it an “abuse of power by the government”.

Bhushan said that the CBI PE also includes the extension of credit facilities which is against the Public Sector Banks (PSBs) and that the banks fell under the jurisdiction of the agency. Bhushan said CBI does not need any sanction for inquiring into PSBs.