India’s customs department has revived allegations of a US$600m financial fraud against the Adani Group, challenging an order clearing the mining giant last year as “erroneous, illegal and improper”.
Adani has been fighting allegations for the past four years that it used a shell company in Dubai to siphon hundreds of millions of dollars from the company’s books into Adani family tax havens overseas.
The Indian conglomerate is preparing to build one of the world’s largest coal mines in Australia and has had to pass several Australian state and federal government probity tests to secure licences to mine.
In August last year the Guardian published extensive details of the financial fraud allegations collected by the Directorate of Revenue Intelligence (DRI), India’s customs intelligence agency. Shortly after the publication of the evidence, an Indian official appointed to review the case dismissed the accusations.
India’s customs department is now appealing against that judgment, arguing the order clearing Adani was biased towards the company and poorly reasoned, according to a submission obtained by the Indian Express.
“[It] suffers from several contradictions which indicate either total non-application of mind or recklessness in passing of the order,” the customs department told the customs, excise and service tax appellate tribunal.
According to three sets of Indian customs intelligence documents from 2014, Adani was accused of inflating the cost of electricity equipment for power projects in Maharashtra and Rajasthan states using fraudulent invoices.
In some instances it was said to have paid a company controlled by an Adani family member 13 times the cost price for the equipment.
The extra money allegedly paid by the company was channelled into offshore bank accounts linked to the Adani family, and out of the reach of Indian regulators or tax authorities, according to the DRI.
Adani has consistently denied the accusations. The Indian official appointed to assess the case, KVS Singh, said he believed the transactions were all conducted at arm’s length and in line with corporate best practice.
The customs department strongly criticised Singh’s order in its submission. “The manner in which the adjudicating authority has gone on to describe an otherwise dubious contract process in glowing terms as transparent, independent and good corporate governance practice … only points at eagerness and bias on the part of the adjudicating authority to justify overvaluation, ignoring facts to the contrary,” it said.
The starting date for hearings in the case is yet to be decided.
Adani has also been named in an ongoing public-interest lawsuit filed in the Indian supreme court calling for an independent investigation into the fraud accusations and others levelled against Indian energy companies.
Indian opposition groups have said if the allegations are true the fraud could have pushed up power prices for local consumers.
Adani’s Australian subsidiary is currently trying to raise funds to build the mine and overcome final regulatory hurdles. It recently abandoned a bid for a US$700m government loan to construct a rail line to service the mine after Queensland’s Labor party indicated it would veto the bid.
Adani has been contacted for comment. It told the Indian Express that Singh’s original decision “demonstrates that we have complied with the applicable laws and the transactions are conducted within the framework of law”.
“Since the matter is currently sub judice before the Honourable Appellate Tribunal, Mumbai, we cannot offer any detailed explanation at this point of time,” it said.