Fema breach: ED flags failure to submit papers, delays by Byju’s

The Directorate of Enforcement (ED) has alleged a slew of violations under the foreign exchange law, including failure to submit crucial documents in time as well as realise export proceeds, by Byju’s parent Think & Learn, apart from holding founder Byju Raveendran responsible.

ET on November 21 reported online that ED confirmed issuing showcase notices for alleged violations of the Foreign Exchange Management Act (Fema) amounting to Rs 9,362 crore by Think & Learn and Raveendran.

The alleged violations include failing to submit documents regarding imports as well as not realising proceeds of exports.

Other breaches include alleged delayed filing of documents relating to foreign direct investment (FDI) inflows, failing to file documents relating to remittances by the company outside India and not allotting shares against FDI received.

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The agency also says that since Raveendran was responsible for the conduct of the business as managing director, he appears to be “guilty” of the alleged Fema violations.

Responding to ET’s queries, Byju’s counsel Zulfiquar Memon of MZM Legal, said, “...The company is in the process of internally reconciling its records and will respond to ED’s claims appropriately. Potential delays, if any, are well-justified and are fully within the permissible extensions outlined by the Fema regulations.”

Fema violations are civil offences and the penalty is monetary in nature.

According to the showcause notice issued by adjudicating authority ED special director Prashant Kumar, Think & Learn failed to timely realise export proceeds in respect of 876 export bills, reflecting transaction of Rs 69.88 crore, for April 2020-January 2023.

Full export value of goods or software is required to be repatriated to India within nine months from the date of export under Fema, unless a six-month extension is granted by the central bank.

The notice, dated November 17, also states that the startup failed to submit documents pertaining to 414 export bills for February-October this year, reflecting transactions of Rs 4.54 crore, within the stipulated 21 days from the date of export.

It also flags failure to submit seven bills of entries for the period between January 2018 and November 2021, totalling Rs 18.03 lakh.

ED’s investigation has found that Think & Learn failed to furnish the FCGPR (foreign currency gross provisional return) form — within 30 days from date of issue of equity instruments — against Rs 209.95 crore FDI received in two tranches on October 4, 2021. This is mandatory for domestic companies issuing such instruments to a person outside India, where such issue is reckoned as FDI.

However, Memon said the transactions in question pertain to investments made using purely domestic funds, adding that the company had informed the ministry of corporate affairs and would submit the documentation.

The notice also mentions that the company did not allot within 60 days shares against Rs 807.58 crore FDI received on September 22, 2022. Byju’s counsel countered this, however, saying, it issued/allotted shares within the prescribed time, adding, “This is being clarified to dispel any misgivings about wrongdoing in relation to receipt of FDI or allotment of shares.”

According to the agency, Think & Learn did not put in its annual performance report (APR) by the due date for Rs 8,270 crore of overseas direct investments made by it during 2020-23. This appears to be the largest Fema violation by Byju’s, according to ED.

Terming these queries as technical, Memon said “Delay in filing APRs with respect to duly compliant ODI investments of close to Rs 8,000 crore arose from the delayed statutory audit (FY22).” The startup has declared only part of its results for fiscal year 2022 after a delay of more than a year, and is yet to file the rest. The notice also states that Raveendran, being then managing director, was responsible for the conduct of the business of the company, which is under investigation, and “...hence appears to be guilty in terms of section 42(1) of Fema.”

This section deals with contravention by companies. Pointing out that the agency did not mention Raveendran’s role in alleged contraventions, Memon told ET that he was not involved in day-to-day affairs of the company. “There is no basis for alleging any ‘guilt’ against him,” he said. “We are not in aposition to share detailed responses as the matter is sub-judice.”