Karnataka High Court has upheld Enforcement Directorate (ED) order over seizure of property linked to Genpact, according to a note by the agency.
The development comes after ED had issued an order under Foreign Exchange Management Act (FEMA), seizing property valued at Rs 37.15 crore of Genpact India Private Limited, formerly known as Empower Research Knowledge Services Private Limited. Investigation was undertaken by the the based on reference made by the Reserve Bank of India (RBI), stating Genpact had hundreds of crores of realisation towards the exports made by them.
ED alleged that Rs 7,635.9 crore, comprising Rs 4,600 crore in principal and Rs 3,035.90 crore in interest was transferred to Genpact Luxembourg, with FDI round-tripping and the NCD route were used to move funds abroad.
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Investigation and the documents filed by Genpact revealed that the Group has made an "integrated, multilayered fraudulent scheme disguised as internal corporate restructuring and legitimate debt financing to systematically siphon foreign exchange out of India out of the reserves and surplus of the Indian entity," the note said.
According to ED, Empower Research Knowledge Services, an entity with a net valuation of around Rs 66 crore received Rs. 4,528.25 Crore as Foreign Direct Investment (FDI) from Headstrong Consulting Singapore on January 28, 2015, under the declared purpose of market research. On the same day, the company routed the entire proceeds back to overseas entities to acquire a 49% stake in the then Genpact India without obtaining the required approvals from the RBI.
Nearly two months later on March 25, 2015, Empower raised Rs 4,600 Crore from Genpact Luxembourg by issuing 4,600 NCDs of Rs 1 Crore each. These funds were remitted on the same day by the company abroad to Headstrong Singapore to acquire the remaining 51% shares of the operating Indian company Genpact India. Empower allegedly violated borrowing end-use restrictions governing NCDs and executed unauthorized share acquisitions without RBI approval, enabling an enity worth Rs 66 crore to absorb an operating enterprise valued at over Rs 9,000 Crore, the agency said.
It further added that these funds were originally borrowed overseas from Morgan Stanley Senior Funding Inc., USA. The capital was moved through offshore group entities and returned to settle the Morgan Stanley loan within three days of disbursement. The offshore loan was closed immediately, while the Indian operating business had an artificial NCD liability of Rs 4,600 crore and interest obligations serviced.
In order to accomodate this, Genpact India's internal share valuation was allegedly artificially inflated from Rs 26,250 to Rs 58,230 per share, ED said.
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