Foreign Exchange Management Act Violations Lead to Massive Asset Freeze on Reliance Power

The Enforcement Directorate has imposed an asset freeze worth ₹2,032.81 crore on Reliance Power Limited (RPL) after finding violations of the Foreign Exchange Management Act (FEMA). The action follows a detailed probe that linked the company's overseas holdings to prohibited foreign exchange transactions.

As per the ED’s statement released on Wednesday, the frozen assets comprise amounts held in RPL’s corporate bank accounts and its shareholding in Sasan Power Ltd. The monetary value aligns with foreign currency that the firm allegedly retained outside India, in contravention of FEMA Section 4.

The investigation was initiated after the Securities and Exchange Board of India (SEBI) supplied information about a suspicious ₹2,101.46 crore entry in RPL’s ledger that appeared to be transferred to a dummy account. The sum was tied to foreign investments and advance payments made to companies registered in the British Virgin Islands and the Cayman Islands.

A search operation conducted between 6 and 8 March resulted in the seizure of incriminating documents and the recording of statements from several individuals. The ED uncovered that Reliance Natural Resources Ltd, which later merged into RPL, had raised US$30 million through foreign currency convertible bonds (FCCBs) in 2006. Of this, US$27.5 million was invested in its wholly‑owned Singapore subsidiary, Reliance Natural Resources (Singapore) Pte Ltd (RNRL‑S).

RNRL‑S deposited the funds with Deutsche Bank in Geneva and used them as collateral for loans extended to BVI‑based entities. The ED’s findings suggest that the control and management of these offshore firms were exercised from India by representatives acting on behalf of the Anil Ambani group. The loan proceeds were then utilized for various purposes, including the temporary routing of money back to India via Mauritian offshore structures, with a portion deliberately kept abroad for the benefit of the group.

When the BVI borrowers failed to repay the Deutsche Bank loan, falsified paperwork was prepared to give the impression that the transactions were legitimate commercial dealings involving RNRL‑S and RPL’s Indonesian subsidiaries. These documents were back‑dated to mask the true nature of the transfers. The investigation remains ongoing.