CBI arrests Karti Chidambaram: What led to allegations of criminal conspiracy between INX Media, former minister's son

The Central Bureau of Investigation (CBI) on Wednesday arrested Karti Chidambaram, son of former finance minister P Chidambaram, in connection with its probe in the INX media case, officials in New Delhi said.

Here are the details of the case:

The CBI and INX Media Case

File image of Karti Chidambaram. PTI

File image of Karti Chidambaram. PTI

INX Media Private Limited, incorporated on 8 August, 2006 under the provisions of Companies Act, 1956, has its registered office at Phoenix Mills compound, Lower Parel, Mumbai.

The company, through its application dated 13 March, 2007 approached the Chairman, Foreign Investment Promotion Board (FIPB), Department of Economic Affairs in the Ministry of Finance, seeking approval of the FIPB for permission to issue by way of a preferential allotment in one or more tranches: (i) up to 14,98,995 equity shares of Rs 10 each, and (ii) up to 31,22,605 convertible, non-cumulative, redeemable preference shares of Rs 10 each collectively representing approximately 46.21 percent of the issued equity share capital of INX Media Private Limited on an "as converted" basis to three non-resident investors under the foreign direct investment route.

Who were the foreign investors

  1. Dunearn Investment (Mauritius) Pvt Ltd
    Number of equity shares: up to 6,45,447
    Number of preference shares: up to 13,44,553
    Percentage share holding on as converted basis: up to 19.900 percent
  2. NSR-PE Mauritius LLC
    Number of equity shares:up to 6,48,691
    Number of preference shares: up to 13,51,309
    Percentage share holding on as converted basis: up to 20.000 percent
  3. New Vernon Pvt Equity Ltd
    Number of equity shares: up to 2,04,857
    Number of preference shares: up to 4,26,743
    Percentage share holding on as converted basis: up to 6.316 percent
List of accused persons in the case. Image courtesy: Yatish Yadav

List of accused persons in the case. Image courtesy: Yatish Yadav

What happened?

INX Media Private Limited sought this approval for engaging in the business of creating operating, managing and broadcasting a bouquet of TV channels including Hindi entertainment channels and multiple vernacular entertainment channels.

The said company in its application sought permission for issuing the shares at its face value of Rs 10 each. The company, in its application, had also mentioned about its intention, subject to the provisions of applicable laws, to make a down stream financial investment to the extent of 26 percent of the issued and outstanding equity share capital of INX News Private Limited.

On 16 March, 2007, the FIPB unit forwarded the proposal to various departments of the Government of India for forwarding their comments on the same. The FIPB in its meeting held on 18 May, 2007 recommended the proposal of INX Media to effect for consideration and approval of the finance minister. However, in the meeting, the board did not approve the downstream investment by INX Media in INX New (P) Limited. Accordingly, the recommendations were approved by then finance minister P Chidambaram.

Contrary to the approval of FIPB conveyed through a letter dated 31 May, 2007 and conditions mentioned therein, INX Media deliberately and in violation of the conditions of the approval (i) made a downstream investment to the extent of 26 percent in the capital of INX New Private Limited without specific approval of FPB which included indirect foreign investment by the same foreign investors, and (ii) generated more than Rs 305 Crore foreign direct investment in INX Media Private Limited against the approved foreign inflow of Rs 4.62 Crore by issuing shares to foreign investors at a premium of more than Rs 800 per share.

Subsequently, Income Tax in February 2008 sought clarifications on the two issues from FIPB. The board also sought clarification from INX Media through a letter in May 2008.

To wriggle out of the situation, CBI alleged that INX Media entered into a criminal conspiracy with Karthi Chidambaram, son of P Chidambaram, the then finance minister of India and promoter of Chess Management Services Private Limited, Chennai, so as to get the issues resolved amicably by influencing the public servants of the FIPB unit of the Ministry of Finance by virtue of his relationship with the finance minister.

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Updated Date: Feb 28, 2018 11:08 AM

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