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ED initiates probe in BBC India’s alleged foreign exchange violations

Published: 20th Apr, 2023

Context

The Enforcement Directorate has initiated an inquiry into the British Broadcasting Corporation (BBC) India under the Foreign Exchange Management Act (FEMA) for suspected violations.

Background

  • February 2023: The move came about two months after the Income-Tax Department had surveyed the Delhi and Mumbai office of the BBC, which allegedly revealed multiple irregularities, including non-payment of tax on certain remittances that were not disclosed to the authorities as income in India.
    • The Income-Tax Department had then said that the income/profits shown by various group entities were not commensurate with the scale of operations in India.
  • January 2023: The tax surveys came after the BBC had released a controversial documentaryon the 2002 Gujarat riots titled India: The Modi Question.

Where has BBC India faltered?

  • Violation of FDI rules: In September 2019, the Indian government capped FDI in digital media at 26 percent and issued a clarification the next October, which specified which entities were required to comply.
    • The Information and Broadcasting Ministry reinforced this in November 2020 asking “entities involved in uploading/streaming of news and current affairs through digital media” to comply with the decision.
    • This means that a foreign investor cannot have more than a 26 per cent stake in a digital media entity.

Primary legislation governing the foreign exchange regime in India

  • Foreign Exchange Management Act, 1999 (as amended from time to time) (FEMA)
  • Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules)
  • Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019
  • Consolidated Foreign Direct Investment Policy, 2020

Reason behind the move

  • So that, foreign companies do not “control” news organisations in the country.

The British Broadcasting Corporation (BBC):

  • The BBC World Service India Private Limited is the subsidiary of the British broadcaster in the country. The parent company is called BBC World Service.
  • British Broadcasting Corporation (BBC), the publicly financed broadcasting system in Great Britain, operates under royal charter.
  • The Indian subsidiary is reportedly 100 per cent owned by the parent firm with no other investor. 

The British monarch appoints the members of the BBC Trust, an independent 12-member panel, governed by a chairman that oversees day-to-day operations.

Role of Enforcement Directorate (ED):

  • The Enforcement Directorate (ED) is the agency responsible for probing money laundering and violations of foreign exchange rules in India.
  • Functions:-
    • To collect, develop and disseminate intelligence relating to violations of FEMA, 1999, the intelligence inputs are received from various sources such as Central and State Intelligence agencies, complaints etc.
    • To investigate suspected violations of the provisions of the FEMA, 1999 relating to activities such as “hawala” foreign exchange racketeering, non-realization of export proceeds, non-repatriation of foreign exchange and other forms of violations under FEMA, 1999.
    • To adjudicate cases of violations of the erstwhile FERA, 1973 and FEMA, 1999.
    • To realize penalties imposed on conclusion of adjudication proceedings.
    • To handle adjudication, appeals and prosecution cases under the erstwhile FERA, 1973
    • To process and recommend cases for preventive detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA)
    • To undertake survey, search, seizure, arrest, prosecution action etc. against offender of PMLA offence.
    • To provide and seek mutual legal assistance to/from contracting states in respect of attachment/confiscation of proceeds of crime as well as in respect of transfer of accused persons under PMLA.

Legal Backing:

  • As per the Prevention of Money Laundering Act, the ED got its power to investigate under Sections 48 (authorities under act) and Section 49 (appointment and powers of authorities and other officers).
  • If money has been laundered abroad, the PMLA court (constituted as per the Act) has the right to send a letter of rogatory under Section 105 (reciprocal arrangements regarding processes) of the Code of Criminal Procedure.

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