ED sends Emaar notice for FEMA violation

The enforcement directorate (ED),earlier this week,sent a notice to Dubai-based real estate company Emaar for an alleged foreign exchange violation of approximately Rs 8,600 crore in its investments in MGF Development Ltd in India. The ED probe points out that Emaar’s investments in India were done through routing foreign direct investment (FDI) money into buying of agricultural land. This is not permitted under the FDI rules. The rules say,the adjudicating officer of ED could slap a penalty of up to three times the violation. Emaar MGF Land Ltd is a joint venture between Emaar and MGF Development Ltd.

The investments had,however,been declared by

Emaar MGF in its red herring prospectus while filing for its public issue in 2010. Since the investments were brought in through the automatic route of the Reserve Bank of India,which means the company could bring in the money by merely disclosing its purpose. Emaar said the money was brought in for construction purposes,allowed under automatic route. However,the ED found that the firm used the funds to buy agricultural land too. This,the ED says,is a violation of RBI norms and foreign exchange rules.

When contacted,a spokesperson for Emaar MGF said the company is yet to receive the notice. “We are yet to receive any communication from the ED and hence are unable to comment on the specifics.The figure of Rs 8,600 crore being reported in the media,relates to the investments made in the company and is neither a demand nor a fine.We have all the necessary approvals from the appropriate government agencies,and we are conducting our business in compliance with the regulations.”