Reliance Power Ltd. has received a seizure order from the Enforcement Directorate (ED) covering shares worth Rs 2,026.65 crore in its wholly owned subsidiary, Sasan Power Ltd., and bank balances amounting to Rs 6.16 crore. The order relates to alleged violations of foreign exchange regulations concerning transactions dating back nearly two decades.
In a regulatory filing dated October 13, Reliance Power said the ED order was issued under Section 37A(1) of the Foreign Exchange Management Act (FEMA). The company received the seizure order on October 12, according to its disclosure to the stock exchanges.
The company said the order relates to foreign currency convertible bonds (FCCBs) issued in 2006 and overseas investments made in 2008 in a subsidiary based in Singapore. Reliance Power stated that these transactions were undertaken with all applicable approvals.
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The company also highlighted that the shares of Sasan Power covered by the order have already been pledged in favour of state-run Power Finance Corporation (PFC) under security arrangements that have been in place for more than 10 years.
The ED's order alleges a contravention of Section 4 of FEMA, 1999. However, Reliance Power has disputed the allegations and said the seizure is provisional and subject to confirmation by the competent authority under Section 37A of the Act. No penalty has been imposed on the company as part of the order, it said.
The seizure order also places restrictions on the transfer, sale, pledge, encumbrance or any other dealing with the assets covered by the action.
Reliance Power said it is assessing the implications of the order and will take appropriate steps to safeguard the interests of the company, its shareholders and other stakeholders, as may be legally advised.
On Tuesday, Reliance Power share price ended 0.86% higher at Rs 20.05 apiece on the BSE.
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