INX Media nod puts Karti Chidambaram in trouble with CBI

The Central Bureau of Investigation (CBI), on Monday, registered a case against Karti P Chidambaram, son of former finance minister 

P Chidambaram, for allegedly interfering and influencing the manner in which the Foreign Investment Promotion Board (FIPB) treated INX Media Pvt Ltd — a company whose directors were Indrani Mukherjea and Pritam 'Peter' Mukherjea.

The FIR (first information report) that was registered also fingers the Mukherjea couple, a company called Advantage Strategic Consulting (represented through its director Padma Viswanathan) and “unknown officers/officials of ministry of finance, Government of India”.

In the early hours of Tuesday, the CBI’s special teams conducted searches on the premises of the accused in Delhi, Mumbai, Hyderabad and Chennai over alleged irregularities in the manner in which INX Media received foreign direct investments (FDI) worth Rs 305 crore.

What is the case against the Mukherjeas?

In early 2007, INX Media, which was co-founded by Indrani and Peter Mukherjea, approached FIPB for issuing equity shares to three non-resident investors under the FDI route. This money, according to the FIR, was sought to create and operate a number of television channels. In its application to the FIPB, INX also announced its intention to “make a downstream financial investment to the extent of 26 per cent of the issued and outstanding equity share capital of INX News Pvt Ltd”.

In July 2007, FIPB’s board approved INX’s proposal, specifically an FDI/NRI inflow of Rs 4.62 crore, but did not approve the proposed downstream investment. In fact, its note to the board, the FIPB unit of the finance ministry noted the “downstream investment in INX News” would require separate approval.

This is where things went wrong. The FIR primarily alleges that “INX Media deliberately and in violations of the conditions and approval: made a downstream investment and generated more than Rs 305 crore FDI in INX Media 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.”

In other words, while the Mukherjeas’ company had officially received permission to raise Rs 4.62 crore in FDI, they actually raised over Rs 300 crore. It also allegedly went ahead with the downstream investment despite not having received an approval.

When these violations came to light in early 2008, the “FIPB unit” informed income tax authorities that it was looking into the matter and shot off a letter to INX Media.

Karti Chidambaram role

The CBI, in its FIR, alleges that INX Media then turned to Karti Chidambaram “to wriggle out of the situation without any punitive action”. “Upon receipt of this letter from the unit, INX Media Ltd … entered into a criminal conspiracy with Karthi P



Chidambaram, son of P Chidambaram, the-then finance minister”.

INX Media reached out to Karti Chidambaram, the CBI said, to specifically get this issue resolved by “influencing the public servants of the FIPB unit of the ministry of finance by virtue of his relationship with the finance minister”.

Karti Chidambaram’s role, the FIR noted, played out primarily through a company called Chess Management Services Ltd; a company in which the junior Chidambaram was a director. On the basis of “clarifications suggested by Chess Management Services”, INX Media then replied to the FIPB unit with a number of justifications.

Police officers outside former finance minister P Chidambaram's house in Jor Bagh, New Delhi, on Tuesday. Photo: Dalip Kumar Police officers outside former finance minister P Chidambaram’s house in Jor Bagh, New Delhi, on Tuesday. Photo: Dalip Kumar The FIR noted because of Karti Chidambaram’s influence, officers within the finance ministry “ignored the serious illegality on the part of INX Media” and also continued to show “undue favour to the INX Group” by advising them to apply for fresh FIPB approval for the downstream investment even though it had already been made.

“In their endeavour to show undue favour, the officers/officials of the FIPB unit also ignored the request of the department of revenue to investigate the matter as to how downstream investment in INX News was made by the company without FIPB's approval,” the FIR alleged.

The investigation agency further pointed out after deliberately concealing that a downstream investment had been made, INX Media again approached the FIPB unit for approval which was then approved.

“The concurrence to the proposed investment which had already been made without the approval of the finance ministry showed the mala fide and dishonest intention on parts of the officials of the ministry,” the FIR stated.

Surreptitious payments?

The FIR registered by the CBI quoted sources to show how Karti Chidambaram was allegedly paid for his role in influencing the investigation against INX Media. According to the CBI, "For the services rendered by Karthi P Chidambaram to INX Group through Chess Managament Services … considerations in the form of payment were received against an invoice raised on INX Media by one Advantage Strategic Consulting (P) Limited (ASCPL)."

The CBI pointed out that the "very reason for getting the invoice raised in the name of ASCPL for the services rendered by Chess Management Services was to conceal the identity of Shri Karti P Chidambaram, whereas ASCPL was being controlled by him indirectly".

The FIR also noted that invoices for about Rs 3.5 crore were also raised in favour of INX Group "in the name of other companies in which Karti P Chidambaram was having sustainable interests either directly or indirectly".