In this two-part series, AdaniWatch publishes documents that show how associates of the Adani Group established an intermediary company to overcharge Adani companies in India for machinery required for large power-generating plants. Funds were then allegedly siphoned off to various entities in tax-haven countries that were controlled by Vinod Adani, the elder brother of Group founder, Gautam Adani.
In this first part of the series, AdaniWatch publishes the documents that show how funds from the alleged over-invoicing were sent to entities in the United Arab Emirates and the tax haven of Mauritius.
On 31 August 2023, the Organised Crime and Corruption Reporting Project (OCCRP), a global network of investigative journalists, published a report suggesting that the promoters of the Adani Group used several shell companies in tax havens that were owned by individuals associated with the Group to first, park the proceeds of over-invoicing imports to India in overseas tax havens and, then, invest the funds in the Indian stock market. The disclosures were highlighted in the international media, including in two UK-based publications, the Guardian and the Financial Times, that published detailed articles on the disclosures.
While the Adani Group denied the allegations, the documents that were described by OCCRP journalists Anand Mangnale, Ravi Nair and N B R Arcadio, and which are being published here in AdaniWatch for the first time, tell a different story altogether.
The OCCRP report was in two broad overlapping sections. The first section was on how Adani Group companies over-invoiced power equipment imported for two coal-based power plants in the states of Maharashtra and Rajasthan in western India. The amount allegedly siphoned out of India was around hundreds of millions of US dollars. This money allegedly first went to a company registered in the United Arab Emirates (UAE) and was then transferred to the company’s holding entity in the tax haven of Mauritius.
The second section of the OCCRP report detailed the way Vinod Adani, the older brother of Adani Group Chairman Gautam Adani, invested a part of this money in India’s stock markets. Two of Vinod Adani’s close associates, UAE national, Nasser Ali Shaban Ahli, and Chang Chung-Ling (also known as Lingo Chang) based in Taiwan, formed several shell companies in the UAE, Mauritius and the British Virgin Islands. These entities invested and traded in Adani Group stocks between 2013 and 2018 using funds based in the tax havens of Mauritius and Bermuda.
Vinod Adani (aka Vinod Shantilal Shah)
A key figure in this saga is the older brother of Gautam Adani, Vinod Adani. In some documentation and in certain jurisdictions, he has gone by the name Vinod Shantilal Shah. Document 15 (an affidavit registered in Gujarat, India) shows that Vinod Adani and Vinod Shantilal Shah are the same person. For the sake of simplicity, the name Vinod Adani will be used in this article even when the document concerned refers to Vinod Shantilal Shah.
Nasser Ali Shaban Ahli
Another key figure in part 1 of this series is Nasser Ali Shaban Ahli of the UAE, whose relationship with the Adani Group via various entities goes back to 2004.
The establishment of shell companies in the UAE and Mauritius
The airport of the city of Sharjah in the UAE has a free-trade zone, called the Sharjah Airport International Free Zone (SAIF-Zone), which is aimed at facilitating the free flow of goods and services and the financial transaction associated with them.
A commercial-licence certificate issued by SAIF-Zone to a company called Sichuan Machinery & Equipment (FZE) in 2009 shows Nasser Ali Shaban Ahli was the owner and manager of the company (see figure 1).
On 7 July 2009, an official from Sharjah’s SAIF-Zone wrote to the Indian government-controlled Bank of Baroda’s Sharjah/Dubai branch that SAIF-Zone had given provisional approval for the establishment of FZE, and that Nasser Ali Shaban Ahli held a 100% share of the company (see figure 2).
In 2010, Sichuan Machinery & Equipment (FZE) informed the Bank of Baroda that the company’s name has been changed to Electrogen Infra FZE (EIF) (see figure 3).
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Meanwhile, Nasser Ali Shaban Ahli had been establishing a similarly named entity in Mauritius.
Figures 4 and 5 show that Sichuan Machinery & Equipment Import & Export Co Ltd was incorporated in Mauritius on 16 July 2009 and that Nasser Ali Shaban Ahli was a director. The company’s name was changed on 8 January 2010 to Electrogen Infra Holding Pvt Ltd (EIH).
(Figure 4 is an extract from a ‘show cause’ notice dated 15 May 2014 issued by India’s DRI to the two Adani Power subsidiaries embroiled in the over-invoicing scam.)
The original names of EIH and EIF are significant. They are similar to the name of the Chinese company that was the actual contractor for one of the Adani power companies named in the over-invoicing allegations. This company, Sichuan Machinery & Equipment Import & Export Co Ltd, provided the ‘engineering, procurement and construction’ (EPC) contract for a subsidiary of Adani Power Limited (Adani Maharashtra). (See figure 6 and the web link above). Nasser Ahli Shaban Ahli clearly chose a similar name for his companies in UAE and Mauritius.
Then, through a series of transactions in 2010, Electrogen Infra Holding Pvt Ltd (EIH) became the effective owner of Electrogen Infra FZE (EIF) (see figures 7 and 8). The register of EIH’s members shows that Nasser Ali Shaban Ahli was the first owner of the company but that on 1 October 2009, Ahli transferred the ownership to Chang Chung-Ling, and on 12 January 2010, Chang Chung-Ling transferred the ownership of EIH to Vinod Adani (figure 9).
On 26 April 2012, EIF informed India’s ICICI Bank’s Dubai branch that, through a chain of trusts (registered in the British Virgin Islands), Vinod Adani was the ultimate beneficial owner of both EIF and its holding company EIH (see figure 10).
The allegations of the Directorate of Revenue Intelligence (DRI)
The DRI found that Adani Power Maharashtra Ltd (‘Adani Maharashtra’) and Adani Power Rajasthan Ltd (‘Adani Rajasthan’) directly imported the actual power equipment from ‘original equipment manufacturers’ (OEMs) in China and other countries for the then-upcoming coal-power plants in the two states. However, the DRI alleged that EIF acted as an 'invoicing agent' and marked up the prices, then sending the higher-value invoices to the two Adani power companies above.
According to the submission made by the Adani Group to the DRI's adjudicating authority, and later to the Customs, Excise and Sales Tax Appellate Tribunal (CESTAT), Adani Maharashtra floated global tenders for the procurement of equipment on 7 September 2009. EIF (then named Sichuan Machinery & Equipment (FZE)) won the bids on 21 October that year. Adani Rajasthan floated its tender two days earlier on 5 September. EIF was selected as the lowest bidder on 11 November. The documents described above (figures 1-3) show that EIF was incorporated on 7 July 2009, only three months before the tenders were floated.
The DRI’s investigators obtained the actual invoices from the original equipment manufacturers in China and elsewhere and compared the prices given therein with the prices in the invoices raised by EIF to Adani Maharashtra and Adani Rajasthan respectively. What they found was startling. For certain items which had 0% import duty, the prices had been artificially jacked up more than two-fold (see figure 11).
Two questions arise in this context: Did the members of the DRI adjudicating authority and CESTAT apply their minds as to how a three-month-old company that existed only on paper at that time was awarded a contract by Adani Maharashtra to supply equipment worth $730 million and then, six months later, awarded another contract worth $790 million by Adani Rajasthan? Is it standard practice for companies setting up coal-power projects to select vendors with no proven track record?
The DRI said that the allegedly siphoned-off funds ended up in Mauritius, providing documentary evidence of this. The documents obtained by the OCCRP show that Vinod Adani used a fund which had no investor other than himself to invest $100 million in Indian stock markets through a Bermuda-based feeder fund and another fund in Mauritius. Here are the details.
On 4 October 2010, Assent Trade and Investment Private Limited (ATIL) was incorporated in Mauritius (figure 12), with Vinod Adani holding 100% of the shares (figure 16).
To register the company, Vinod submitted copies of his own and his wife’s Indian passports issued from Ahmedabad in Gujarat, India, in 2007 and 2008. Vinod Adani’s passport stated his name as Vinod Shantilal Shah. A photocopy of his resident visa for the UAE stamped on his passport (figure 13) and photocopies of electricity and water bills for his residence issued by the government of Dubai on 28 February 2011 also contained the name Vinod Shantilal Shah (figure 14).
In order to show relevant authorities that Vinod Shantilal Shah and Vinod Shantilal Adani were the same person (despite the different names appearing on official documents), Vinod Adani prepared a notarised affidavit stamped by the Executive Magistrate, Ahmedabad Metropolitan Area, dated 23 March 2011, stating that both names applied to him (figure 15).
Three months after the incorporation of ATIL, Vinod Adani transferred his shares in it to Electrogen Infra Holding Pvt Ltd, making ATIL a wholly-owned subsidiary of EIH (figure 16).
In the financial year 2009-10 (the 12 months that ended on 31 March 2010), EIH had no income and booked a loss of $9901 on account of administrative expenses (figure 17). In the following financial year, on 19 May 2011, the company received $53.95 million by way of dividend income from EIF (figure 18). After adjusting for the previous year’s loss, administrative expenses, and costs of finance, EIH declared a profit of $53.923 million. Except for this dividend from EIF, EIH had no other income.
Meanwhile, on 13 April 2011, Vinod Adani had signed a resolution on behalf of EIH that two days later, on 15 April, EIH would sign a loan agreement with ATIL to lend $100 million to ATIL (figure 19).
On 15 April 2011, as agreed by Vinod Adani, EIH and ATIL signed a loan agreement in which EIH agreed to lend $100 million to ATIL ‘to invest in Asian equity market’. (Figures 20, 21 and 22)
Curiously, Vinod Adani signed the documents on behalf of both the lender and the borrower!
As proposed and resolved by Vinod Adani on 13 April 2011, Vinod Adani amended the loan agreement on behalf of EIH in order to charge 10% annual interest from Vinod Adani’s ATIL and a 2% penalty interest on delayed payments (figure 23).
On 13 May 2011, six days before EIF transferred the dividend pay-out to EIH, ATIL resolved to invest the $100 million it borrowed from EIH in Bermuda-based investment company Global Opportunities Fund (GOF) (figure 24) – again, this resolution was signed by Vinod Adani.
On 7 June 2011, the chartered accountant of EIH sent a letter to Apex Fund Services Limited, the administrators of GOF in Bermuda, certifying that EIH had a net worth of $54 million as of 31 March 2011 (figure 25). The communications between GOF and the fund managers had started weeks earlier.
On 21 April 2011, ATIL had signed the agreement with GOF and accepted its ‘schedule of charges for investors’ for different categories of shares (figure 26). ATIL first subscribed to the shares of GOF on 29 April by transferring US $100,000. Then, between April 2011 and May 2012, the company moved the entire $100 million to GOF in 38 tranches (sample subscriptions shown in figures 27 and 27A – note that documents pertaining to the full US $100 million come to over 200 pages).
In the financial year 2011-12, GOF invested $65 million of ATIL’s funds in the Mauritius-based Asia Vision Fund (AVF). AVF then invested this money in the shares of various Indian companies. Interestingly, AVF had only one investor, ATIL (via GOF) and, between 2011 and 2019, this entity traded in shares worth hundreds of millions of dollars. (AdaniWatch has seen spreadsheets that confirm some of the above transactions in 2011 and 2012 above that exceed $100 million, but is not able to publish these documents.)
According to the Mauritius government’s Register of Licensees, AVF was incorporated on 4 June 2010. Vinod Adani used AVF until around 2019. AVF’s license lapsed on 1 July 2021, and the fund filed a winding-up application (figure 28).
From Mauritius to Switzerland
Depositories are buildings, offices and warehouses that allow consumers and businesses to deposit money, securities and other valuable assets for safekeeping. A global depository service is a business that owns and/or administers a depository on behalf of clients. Switzerland is well known as a country with numerous businesses that that provide such services.
By March 2012, Vinod Adani was using global depository services. He started with the Swiss depository, Six Sis AG. On 30 March, he wrote to GOF, asking the fund to transfer a part of his investments from a particular account of ATIL to ‘account sub-class A336’, operated by Six Sis AG (figure 29). Once this transaction was concluded, subsequent communications with individuals, funds and banks referred only to Six Sis A336, thereby hiding the name of the real investor or the ultimate beneficial owner (figure 30).
During the eight years in which these transactions were made, Vinod Adani used multiple sub-class series of accounts held in several private banks such as Banque Havilland SA, Banque Cantonale de Vaudoise, Banque De Luxembourg, Banque des Mascareignes and other such banks. He kept changing depository-service providers (such as Clearstream and Citco Global) of the investment. (The depositories disclose the name of the involved bank, not the ultimate beneficial owner of the investment.)
Before proceeding, here’s a description of how the different kinds of entities are used in such complex financial transactions.
An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of their own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise, and lower investment fees than investors might be able to obtain on their own.
A sub-asset class is a sub-segment of a broad asset class that is broken down to provide more identification or more granular detail of its assets. Sub-asset classes are grouped by common characteristics, also displaying characteristics of the broad asset class.
For example, Euroclear is a clearing house that acts as a central securities depository for its clients, many of whom trade on European exchanges. Most of its clients are banks, broker-dealers, and other institutions professionally engaged in managing new issues of securities, market-making, trading, or holding a wide variety of securities.
Euroclear settles domestic and international securities transactions, covering bonds, equities, derivatives, and investment funds. Domestic securities from more than 40 markets are accepted in the system, covering a broad range of internationally-traded fixed- and floating-rate debt instruments, convertibles, warrants and equities.
A working paper on ‘Beneficial Ownership In the Investment Industry’ by Andres Knobel for the Tax Justice Network says that depositories and such intermediaries create more opacity and hide the ultimate beneficial owner of the investment behind a wall of secrecy.
It notes: ‘The main secrecy problem in the investment industry and securities trading is that no single party has access to a full picture of individual chains of ownership, meaning nobody fully knows who owns what. At best, some parties have access to partial information. Out of the many intermediaries involved in the investment industry and securities trading (eg brokers, custodian banks, central securities depositaries, etc), the only ones most likely to be able to identify an end-investor and check the origins of their money are those that are closest to the end-investor. However, these intermediaries may not necessarily be able to identify which underlying securities (eg shares of Apple or Google, South American junk bonds or interest-rate swaps) the end-investor indirectly owns through intermediary investment vehicles (emphasis ours)’.
From Europe to the Caribbean
The action then moved from Switzerland to Bermuda, a British overseas territory.
On 1 August 2013, ATIL subscribed to another fund registered in Bermuda and administered by Apex Fund Services Limited named Global Dynamic Opportunities Fund (GDOF), a sub-fund of GOF. GDOF invested ATIL’s money in the Mauritius-registered IPE Plus Fund 1 (figure 31). This fund then invested money in Indian stocks and traded in equity shares, derivatives and other financial instruments.
By March 2017, ATIL had a total balance of $40.38 million with GDOF. In May 2017, Vinod Adani started to move his investments in GDOF from ATIL to another Mauritius-registered company, Atlantis Trade and Investment Private Limited (Atlantis). Atlantis had been incorporated on 8 February 2017 (figure 32) with two shareholders, Vinod Adani and his UAE-registered company, Kommerce Trade & Services DMCC (figure 33).
Back to the UAE
Kommerce Trade’s ownership chain provides a deeper insight into the complex web of shell companies controlled by Vinod Adani in infamous tax havens. Anmol Resources Private Limited, a company registered in the Cayman Islands, owns Kommerce Trade. Zedra Holding (Cayman) Limited is the nominee shareholder of Anmol Resources. Anmol Resources Family Trust, a trust registered in the same jurisdiction, owns Anmol Resources Private Limited. Zedra Trust Company (Cayman) Ltd is the owner of Anmol Resources Family Trust. (See figure 34) Vinod Adani is the settlor of the trust, and his family members are the beneficiaries.
By mid-2018, Vinod had started redeeming his investments from these funds and moving them elsewhere. However, while redeeming money from these funds, he did not stop his opaque operations from using shell companies. The trajectory and destinations of some of the transactions by and from entities controlled by Vinod Adani are yet to be traced.
The Adani Group’s denial
The day the OCCRP report was published, the Adani Group issued a media statement that read: ‘These claims [by the OCCRP] are based on closed cases from a decade ago when the Directorate of Revenue Intelligence (the DRI is the customs intelligence wing in the Government of India’s Ministry of Finance) probed allegations of over invoicing, transfer of funds abroad, related-party transactions and investments through FPIs (or foreign portfolio investors).
‘An independent adjudicating authority and an appellate tribunal had both confirmed that there was no over-valuation and that the transactions were in accordance with applicable law. The matter attained finality in March 2023 when the Hon’ble Supreme Court of India ruled in our favour. Clearly, since there was no over-valuation, there is no relevance or foundation for these allegations on the transfer of funds.’
The above-mentioned orders of the ‘independent adjudicating authority and appellate tribunal’ concluded that though the UAE company, EIF, and its holding company in Mauritius, EIH, were related to Vinod Adani, the transactions between them and subsidiary companies of Adani Power Limited (‘Adani Power’) were at ‘arm’s length’.
However, the 2009-10 and 2010-11 annual reports of APL list Vinod Adani, the Vinod Adani Family Trust and Vinod Adani HUF as part of the promoter group. An HUF is a Hindu Undivided Family, a uniquely Indian legal entity. The question arises as to whether transactions between an entity controlled by Vinod Adani and subsidiaries of Adani Power can be considered ‘arm’s-length’ transactions.
When the DRI challenged the order of CESTAT in the Supreme Court of India, the court said: ‘We are of the considered opinion that the matters are concluded by the findings of fact recorded by the authorities below, and the impugned order(s) does not require any interference at our behest.’ In other words, the country’s apex court did not want to examine the merits of the case as the adjudication authority and CESTAT had already decided there was no over-invoicing and the transactions were conducted at ‘arm’s length’.
End of Part 1
The second of this two-part series of articles will indicate how the Adani Group’s associates invested in the group’s own stocks.
The writer is a journalist based in India who chooses to be anonymous.