Trouble for DMK MP Jagathrakshagan as ED imposes Rs 908 crore penalty in FEMA case

DMK MP Jagathrakshagan (Photo: X/@officeofjagath)

Chennai: A fine of 908 crore rupees was imposed on DMK MP S Jagathrakshagan in a case relating to the law on violations of foreign exchange transactions, Enforcement Directorate (ED) said in a statement. The ED was conducting an investigation against Jagathrakshakan, a five-time MP and businessman, under FEMA. The investigation was also conducted against the MP's family members. As per the order dated September 11, 2020, assets of the MP and his family members worth Rs 89 crore were also seized by the federal agency.

“The Directorate of Enforcement (ED), Chennai has initiated investigation under FEMA against Jagathrakshakan, a businessman from Tamil Nadu and Member of Parliament, his family members and an Indian company associated with them. The investigation resulted in the issuance of a seizure order dated 11.09.2020 under Section 37A of FEMA, effecting seizure of various movable and immovable assets in possession of Jagathrakshakan and his family members aggregating value of around Rs. 8,919 crore,” the ED said in a statement.

“The said seizure order was revoked by the Competent Authority by order dated 03.02.2021. ED is dissatisfied with the said order of the Competent Authority and has filed an appeal before the Court of Appeal where the appeal is still pending,” the federal agency added.

In December 2021, ED filed a FEMA complaint with the Adjudicating Authority against Jagathrakshakan, his family members and an associated company. In the complaint, ED levelled charges of violations of various FEMA provisions. The charges specifically related to their investment of Rs 42 crore in a shell company incorporated in Singapore in 2017, acquisition/possession of foreign shares from Singapore and their subsequent transfer among the family members in violation of the applicable FEMA provisions and also investment of around Rs 9 crore in a Sri Lankan company.

“After examining the complaint, a notice to appear was issued against the respondents on 22.12.2021. The respondents were offered an opportunity of personal hearing on various dates, which was attended by their counsel. The respondents had filed an individual writ petition before the Madras High Court,” ED said.

“After hearing both sides, the Hon'ble Division Bench, by order dated 30.11.2023, held, inter alia, that the order passed by the competent authority for seizure of the assets will not affect the jurisdiction of the deciding authority. Thereafter, the petitioners filed a writ appeal before the Hon'ble High Court of Madras. The Hon'ble Division Bench, after hearing both sides, also dismissed the writ appeal by order dated 23.07.2024,” it said.

According to the investigation conducted by the federal agency, the adjudication proceedings under FEMA were completed after due process of law. “After careful consideration of the alleged violations committed by the defendants against the written responses filed by the defendants, it was found that the alleged violations were clearly established. Finally, the penalty was imposed for each of the alleged violations,” the ED stated.

Notably, the seizure of properties confiscated under Section 37A of FEMA worth Rs 89.19 crore was also ordered and a fine of Rs 908 crore (approximately) was imposed vide an adjudication order dated 28 August 2024.