Poison Arrow Trajectory
- In UPA II days, ED probe into ‘colourable transaction’ of NDTV with NBC, to whom it had sold ‘Imagine’
- In March this year, Gurumurthy tweets of tax officer tumbling on PC-NDTV nexus
- Eight months later, ED slaps Rs 2,030 cr notice on NDTV for violation of FEMA and RBI rules
At 12.26 pm on November 24, in a beautiful little room in India’s biggest house, at an event to unveil the autobiography of Malayala Manorama legend K.M. Mathew, one of India’s most recognisable faces rose when his name was called.
By now, Mammen Mathew, the chief editor of the Kottayam-based newspaper, had already told those assembled what the group’s English weekly had said when this man had launched his TV station. “A star is born,” The Week had declared when NDTV 24x7 had gone live.
This day, as Prannoy Roy walked to the podium after being felicitated in the presence of the President of India, the mood was proper—but sombre. The star had waned and greyed more than a wee bit. But, when he took the mike and fleetingly mentioned the witchhunt against journalists and the media in post-war America by Joseph McCarthy, a few in the audience would have been tempted to read newspaper headlines from earlier in the week—‘ED slaps Rs 2,030 crore notice to NDTV for FEMA breach’—in conjunction.
For months, actually for a couple of years dating back to UPA-II, the grapevine had been fed rumours of NDTV being caught on the wrong foot by an Enforcement Directorate investigation into a “colourable transaction” with NBC, to whom it had sold its entertainment channel ‘Imagine’. The eternal gadfly Ram Jethmalani even shot off a letter to P. Chidambaram, which the then finance minister magisterially forwarded to the prime minister unopened, asking Manmohan Singh to order whatever probe he deemed fit.
Nothing came of it. In March this year, 10 months after the BJP had come to power, the Chennai-based chartered accountant S. Gurumurthy, known to be close to the RSS, tweeted: “NDTV prosperity rose with UPA advent in power on 2004. Srivastava (a tax officer) accidentally tumbled on PC-NDTV nexus after he began investigating NDTV.” Also: “Srivastava single handedly fights the might of NDTV, which has friends in this government.” And: “Srivastava has fixed NDTV in a Rs 900 cr tax fraud and has materials which will prove their money laundering.”
It would take eight more months before an official stamp could be placed on the charges of M/s Srivastava, Gurumurthy and Jethmalani, which have provided plenty of fuel to right-wing trolls to attack the channel, which has made secular-liberal credentials its USP.
For Roy, though, it was a double whammy. Just 16 days earlier, he had had his worst moment in television psephology, when NDTV had uncharacteristically “called” the Bihar election in the BJP’s favour, only to find the verdict go the exact opposite way. The ED notice did everything it was expected to do. It named Roy and his wife Radhika, and the group’s executive vice-chairperson, K.V.L. Narayana Rao. NDTV’s perpetually underperforming stock tanked. And it hit an organisation which long lost out in the ratings race where it hurts most: credibility.
This is what the Enforcement Directorate says:
- NDTV set up subsidiaries in the Netherlands, UK and Mauritius and FDI of Rs 1,113.31 crore was routed through them into NDTV companies in India from December 2006 to October 2010, although FEMA and RBI directives do not allow subsidiary companies of Indian companies to re-invest back into India.
- NDTV Networks Plc obtained FIPB approval in March 2007 to invest in India funds raised through issue and listing of shares at the London Stock Exchange. But it raised funds through loans, bonds and preference shares, which were in the nature of debt, through the FDI route in the guise of share capital in the NDTV group of companies, again in contravention of guidelines.
- NDTV Ltd issued corporate guarantee of $180 million in favour of NDTV Networks Plc to enable it to borrow funds abroad. Corporate guarantee of $100 million was also made out to issue step-up coupon bonds. These funds were invested back by NDTV Networks Plc into NDTV group companies in India in the guise of FDI.
NDTV Networks Plc transferred shares worth Rs 296.74 crore in Indian group companies of NDTV Ltd to its holding companies NDTV Lifestyle Holdings Ltd and NDTV Networks Ltd, which resulted in remittance of Rs 296.74 crore to NDTV Networks Plc, which was not permissible under FEMA and RBI rules.
Shorn of the jargon, ED is essentially accusing NDTV of dodgy business practices to avoid paying taxes. It is not an uncommon sin in India, not even among media houses. Companies usually fight it out with the tax authorities before reaching a settlement, usually a lower tax return. In its defence, NDTV said: “Company has been advised that none of the violations alleged in the show cause notice are legally tenable and the company is in the process of challenging the entire show-cause notice, including the alleged amounts mentioned in the show cause notice.”
“The larger issue is of dissent, whether it is the media or an NGO. Any dissenting voice should be allowed to exist.”
Rajdeep Sardesai, Formerly with NDTV
This is not the first time NDTV has had to face questions over its financials, but these are among the more serious ones. And, by common perception, they come at a time when a government run by a party with which it does not share political or ideological affinity is in power. NDTV has long been accused of leading a campaign against Narendra Modi following the Gujarat 2002 riots. And the question that is being whispered is: is this payback time for the BJP, although the channel has gone out of its way to schmooze the powers that be?
Says senior journalist Paranjoy Guha Thakurta, “I believe that anyone who is seen to be critical of the government will be hounded. Circumstantial evidence in this case is very strong and indicates that the BJP is gunning for them. There is a section within the government, and Modi himself is not favourably inclined towards NDTV.” He says that there are many other media organisations and television firms which have questionable sources of finances which may amount to similar violations but investigations against them have not been opened up or even started.
The ED notice to NDTV also comes at a time when its own finances are not looking good. Says Moneylife editor Debashis Basu, “Financially, NDTV is doing very badly. The value of the stock reflects only the ‘brand’ because there are no profits. Over the past 11 years, NDTV has declared a loss of Rs 300 crore. There could be other, unrecognised, losses.” NDTV’s market capitalisation is over Rs 554 crore.
No one yet is making this out to be a freedom of media issue, but it is a thought buzzing in some minds. Says media expert Sevanti Ninan, who runs the website TheHoot.org, “Modi’s animosity towards NDTV is very old. It is possible that this is vendetta but whether it is totally without reason has to be seen.” Adds television personality Rajdeep Sardesai, a former NDTV staffer himself, “The larger issue is of dissent, whether it is the media or an NGO. Any dissenting voice should be allowed to exist. You cannot use the weapons of the state to crush those voices.”
A top editor says the NDTV case is a classic chapter of what he calls “tax-return pornography”. “Extraordinarily large sums of money are being mentioned. Surely, it should show somewhere on NDTV’s balance sheets? Why doesn’t it?” But in a milieu where hit-and-run is the order of the day, the ED notice has served to put a question mark over a trusted media brand name. It will please some but it will disappoint many more.