New Delhi: The Enforcement Directorate (ED) has identified three Indian firms that allegedly received funds to the tune of around Rs 25 crore from the Soros Economic Development Fund (SEDF), an investment arm of the George Soros-founded Open Society Foundations (OSF), ThePrint has learnt.
According to ED sources, the three companies—Rootbridge Services Pvt Ltd (RSPL), Rootbridge Academy Pvt Ltd (RAPL) and ASAR Social Impact Advisors Pvt Ltd (ASAR)—received the funds from 2020-2021 to 2023-2024.
Sources said this was a violation of the Foreign Contribution (Regulation) Act because SEDF is owned by Open Society Foundations, which is under the “prior reference” category and cannot receive funds without the approval of the Ministry of Home Affairs (MHA).
ThePrint has reached the OSF and all three firms via email.
Responding to ThePrint’s questionnaire, ASAR said that the firm operates like any other consulting organisation—through service contracts and that it has been compliant with all “legal requirements, including FEMA”.
“We want to state unequivocally that ASAR has not received any foreign direct investment (FDI) from any entity. Our Indian directors hold 100 percent of the share capital, and we operate like any consulting organisation—through service contracts. We remain fully compliant with all legal requirements, including FEMA. Integrity has always been at the core of ASAR’s work,” ASAR told ThePrint over an email.
Adding, “We are cooperating transparently with the authorities, providing all necessary information to support their inquiry, and remain committed to upholding all legal and regulatory obligations.”
The MHA in May 2016 put the license of US billionaire Soros’s OSF under the Foreign Contribution (Regulation) Act’s “prior reference” category, which requires any fund transfer from these donors to be cleared by the MHA before it reaches any NGO account or consultant.
On Tuesday, the ED raided eight locations linked to these firms as well as premises linked to a fund manager of the OSF. According to sources, SEDF funded more than 12 companies in India to the tune of Rs 300 crore and so far a money trail has been established for three of them.
Sources said that RSPL received Rs 18.64 crore from SEDF by issuing Compulsorily Convertible Preference Shares (CCPS) at a premium of approximately Rs 2.5 lakh to Rs 2.6 lakh per share based on the discounted cash flow (DCF) method.
RAPL, which was incorporated in 2019 and is in the business of providing fundraising services to non-profit organisations, allegedly received Rs 2.70 crore from SEDF as “commission agent services”.
Compulsory Convertible Preference Shares, as the name suggests, are preference shares that have to mandatorily be converted into normal equity shares after a certain period or following a specified event.
The holder of these shares receives a fixed income as long as they are preference shares. Thereafter, they stand to benefit from a rise in the stock price of the company.
ASAR received Rs 2.91 crore from SEDF as service fees, ED sources said. Incorporated in February 2016, ASAR is an advocacy group that conducts research and provides services such as communications strategy development, capacity-building and research to NGOs in India.
Alternative route
According to ED sources, since SEDF could not make foreign donations directly to NGOs in India without the MHA’s approval, it “explored alternative options to bypass the PRC (prior reference category) restrictions”.
ED sources further said that OSF found an alternative way to route funds to India by establishing shell companies and bringing in the money in the name of Foreign Direct Investment (FDI).
They alleged that to bypass the restrictions, OSF had subsidiaries in India and brought in funds as FDI and consultancy fees, which were then used to fund activities of NGOs—a violation of the Foreign Exchange Management Act (FEMA). In most cases, money was sent without any services.
For instance, ED sources claimed that RAPL received money without providing any services to SEDF, indicating that RAPL acted as an agent of SEDF to bypass the FCRA provisions for funding NGOs in India.
Similarly, the Rs 2.91 crore ASAR received from SEDF as service fees were nothing but “donations in disguise to be used for the benefit of NGOs in India without rendering any services to SEDF”, the sources further said.
“As per the information, OSF group set up an investment company Aspada Investment Company (AIC) in Mauritius to channelise funding in India. Further, Aspada Investment Advisors Pvt Ltd (AIAPL) was established in Bangalore on 4 February 2013 to manage and advise,” said an ED insider.
This is an updated version of the report