Bengaluru-based firm Pigeon Education Technology Pvt. Ltd has recently come under the radar of the Enforcement Directorate and the funds of the firm were seized under section 37A of the Foreign Exchange Management Act.
Image: Enforcement Directorate of India, Department of Revenue
Source: https://enforcementdirectorate.gov.in/
On Friday, the Enforcement Directorate said in a statement released that it seized Rs 8.26 crore from a firm in Bengaluru named Pigeon Education Technology Private Limited which, as concluded with the help of investigation, has ownership and control by Chinese national to full 100% extent; the seizing was done as part of allegedly contravening the foreign exchange act. The searches were conducted in two locations against the alleged online education racket.
Pigeon Education Private Limited provided online education in India under the name of “Odaclass” as mentioned by ED in the statement. It also has an app named as OdaClass for online learning services.
The funds were seized as a part of the applicability of section 37A of the Foreign Exchange Management Act which grants power to the Central Government to seize the value equivalent situated in India of any foreign exchange, securities, or immovable property outside India which is suspected to be in Contravention of section 4 of FEMA.
Multiple searches were conducted by the Enforcement Directorate against the firm in April and it found evidence that Chinese nationals are having a 100% stake in the company. All the affairs, decisions, and management of the company were handled and controlled by the management present in China. The Indian Director of the company is a mere face and in reality, holds little to no power in decision-making and the operation of the company and has to follow all the instructions from Chinese decision-makers.
The agency reported that the company belongs to a group that comprises a web of different firms being controlled by one company located in Cayman Island. The virtual control of the firm is done from across borders and the Chinese director is the Authorised Signatory in all the bank accounts held by Pigeon Education in India.
The company allegedly siphoned off 82.27 crores to China and Hong Kong from India and labeled the transferred amount as the expenses incurred for advertising and marketing. As the agency reported, the Indian director of the company, Vedanta Hamirwasia, admitted that the remittance was done on the instructions given by Liu Chan, the Chinese director of the company.
However, on the demand of the receipts of the said advertisement and marketing expenses incurred, the company was not able to produce any evidence or proof of service to establish the legitimacy of the transactions. The transactions were reportedly published via Google and Facebook platforms as the Chinese director informed but there was invoice or confirmation from these platforms that were submitted.
In April, as a part of the raid and investigation, the agency claimed to seize multiple documents which revealed the wrongdoings of the firm and forensic back-ups from devices that would be used for probe under the FEMA.
The roles and involvement of the previous Indian directors of the firm, Sushant Srivastava, Priyanka Khandelwal, and Himanshu Garg(who resigned last year), were also taken under inspection.
Further investigation is going on in the matter.
