British Nationals in Goa

Philip Hollobone Excerpts

Tuesday 27th January 2015 Westminster Hall

[Tim Loughton (East Worthing and Shoreham) (Con)]

I am grateful for the opportunity to raise a slightly obscure and rather distant subject. It is, however, a subject that has the potential to ruin the parents of one of my constituents and apparently affects many hundreds of western expatriates who have also invested in property in Goa. I am delighted that the Minister is responding to the debate in the absence of the Minister of State, my right hon. Friend the Member for East Devon (Mr Swire), who I know is abroad.

Many other Members have been involved in this issue and frustrated at the lack of action by Indian and Goan Government officials when some fairly blatant corrupt practices are at work. That is why I am raising the issue and putting it firmly on the radar. I hope that something will come from it.

I want to give a brief background on this particular case, which came to me from my constituent. Just over 13 years ago, Mr Leslie Medcroft and his wife purchased a hotel in Canacona, Goa. They were at pains to ensure—they had done extensive research—that they complied with all the rules and regulations. They complied with the money laundering laws. The funds came from legitimate sources and banks in the UK. They complied with all the residency conditions, which can be strict, and bought the business through a local company that was properly registered. They were buying an investment in an ongoing hotel business, with appropriate Government of Goa licences. They paid all the taxes due and had all the licences that were needed. Those licences were kept up over many years as they ran that hotel business.

Subsequently, it was claimed that the property had been purchased illegally because, among other things, the area was designated for agricultural usage, but no evidence for that was produced. In contrast, my constituent’s parents produced a forest of documentation to show that everything had been complied with and that the purchase and the running of the business were entirely proper and above board.

A couple of years ago, they became the subject of an investigation by the enforcement directorate. The ruling given on 12 February 2013—almost two years ago—by Mr Lotlikar, the deputy director of the enforcement directorate, was that the property of the Hotel Oceanic should be confiscated. He claimed that it had not been properly acquired, despite all the evidence produced to the contrary. My constituent’s parents understandably appealed the decision, but had a long wait, which caused them huge stress. They had given up their life savings and their jobs in the UK to start the business in India and spend their retirement years there.

Eventually, on 26 August 2014, my constituent’s parents received a letter stating that their appeal hearing was at last to be held on 22 August—four days before they received the letter. Fortunately, the advocate they had retained in Goa saw a copy of the letter in time to attend the appeal hearing. That was quite coincidental; his office happens to be next door to the enforcement directorate. The appeal hearing was further postponed to 4 September 2014.

On 2 September, the company accountant acting for Mr and Mrs Medcroft was approached by the special director of appeals in Mumbai, who said he would make a judgment in their favour if they gave him 10 lakh rupees. That is 1 million rupees, which equates to £10,800. There is a certain irony, not missed here, that the origin of the word “lakh” in the Indian numbering system is the amount of money that can be stuffed into a small suitcase, as no doubt those proceeds would have been, had they been forthcoming. It would appear that the request was made for the money not to be paid to the court, the legal system or a Government department, but directly into the pocket of said official. It was a thinly veiled threat that failure to comply with the demand for a bribe would result in a ruling against Mr and Mrs Medcroft and, ultimately, their property being confiscated.

My constituent’s parents were left in something of a dilemma, as we can imagine. Should they pay up, perhaps then getting recognition that they own the property they knew they already owned and had bought legitimately, and thereby condone corruption? Alternatively, should they pay up and risk the case not actually being resolved? As we know, blackmailers usually come back for more. Would they be charged as participants in corrupt practices for ostensibly bribing an Indian official? Should they not pay up and risk the confiscation that has been looming over them for some years? Whichever way we look at it, it appears that they cannot win.

My constituent’s parents were unable to raise the amount of money in the short term in any case, so they did not really have a choice: they did not pay the money. They were also unable to return to India—they were in the UK at the time, renewing their visas—before 17 September, but the appeal went ahead in their absence. The ruling from that appeal was that the argument they put forward was incomplete, despite their having provided comprehensive documentation in support. A further hearing date was set for 26 September, and they were subsequently told that on top of the bribe, they might have to pay an additional sum of £6,000.

“Where does it end?” you may well ask, Mr Hollobone. The case went to a further hearing and the presiding judge, Ajit Kumar, the additional income tax commissioner, very much expected my constituent’s parents to pay. In the absence of that, he deferred a ruling and apparently threatened to have them arrested in the meantime. Tape recordings of that conversation were taken as evidence. They were advised by their advocate that this process will go on indefinitely until they pay up and that they will have constant doubt and worry overhanging their business.

My constituent’s parents have invested their life savings. They were running a legitimate business that helps the Goan economy—tourism, in particular, on which Goa greatly depends. They have had to spend a lot of their money on lawyers, accountants and other professionals, first to ensure that they acquired the business legitimately and maintained all the licences and secondly to maintain their innocence against corrupt officials. If this case goes against them and their hotel is confiscated, they face ruin and a great deal more stress. They would probably have to return to the UK.

I gather, however, that my constituent’s parents are not an isolated case, and that is why I am raising the issue today. The hon. Member for Birmingham, Edgbaston (Ms Stuart) wanted to be here today, but she is receiving an honorary doctorate from the university of Birmingham—I am delighted to point that out, as she wanted me to. She was approached by some of her constituents who were lecturers. They took early retirement and invested through a direct foreign investment channel in a dilapidated old colonial mansion on the coast in southern Goa in 2005. They spent a fortune renovating it. It was originally set up as a business to cater for convalescing foreigners undergoing medical and dental treatment.

The project was successful and has become a general guesthouse business. In 2009, on having acquired the business, the hon. Lady’s constituents were summoned to Panjim to give assurances, initially on money laundering. In 2011, they received notices from the enforcement directorate claiming that they had illegally purchased agricultural land and that their business was illegitimate—similar circumstances to the case against my constituent’s parents. Yet they had documents to prove categorically that the land they had acquired was in a settlement zone, was listed in the Portuguese book of descriptions in 1905 as an urban dwelling and has absolutely no history of crop growth. Clearly, the charge of agricultural usage is entirely bogus. The business is properly owned by an Indian private limited company, regarded as resident in India for the purposes of FEMA, the Foreign Exchange Management Act 1999. It complies with all the regulations, but the parents of my constituent are facing a lengthy and costly court action and the threat of confiscation.

Only today, I received an e-mail from a member of the British nationals’ working party in Goa, who has been dealing with a number of other expats in similar situations. She told me that in the past two years she has been working on a number of cases and has knowledge of four in which confiscation orders have already been served on people. In one case, a confiscation order has been issued against a British couple aged 80 and 77 in relation to their studio flat. Another confiscation order was issued two years ago against a single British woman in her 70s who owns a small flat in a purpose-built complex in north Goa.

In addition, hundreds of British subjects have been prevented from registering their properties in Goa, having previously fulfilled the requisite legal processes, primarily because of restrictions on visas. In some cases, that has led to criminality and harm against foreigners when they have tried to obtain the properties, causing loss of investment. Some cases have involved extreme violence. Other people affected include those who came together to invest in Indian tourism and who have been prevented from trading due to altered interpretations of the law and, in tandem, prevented from registering their properties.

The problem seems to be quite widespread, with a number of British expats suffering such consequences. It has been suggested that there are in excess of 300 similar cases that we know about. Huge stress is being caused to people who legitimately went out to invest in businesses in Goa. In most cases, they are not wealthy, but have invested their life savings. The situation is proving to be a nice little earner for the Government in Goa, and various Government officials are pretty brazen in demanding money to make the problem, which is of their making, supposedly go away. We seem to have the Goan equivalent of the mafia.

It is surely entirely inappropriate for a fast-growing democracy such as India, which attracts, and needs to attract, large amounts of foreign investment as an important UK trading partner, to allow such practices to go on under its nose. The Indian Government should be keen to find out what is going on and to intervene. In the past few months, however, I have written to the Indian law Minister, Shri Ravi Shankar Prasad, and to the Chief Minister of Goa, Shri Manohar Parrikar. The latter responded and diverted my attention instead to Dr Rajan Katoch, the director of the enforcement directorate, who has also not responded. I have written to the Minister of Finance, Arun Jaitley, who is responsible for the tax commissioners, including the judge Ajit Kumar who I mentioned earlier.

I also wrote to the high commissioner in London, His Excellency Ranjan Mathai, no fewer than three times, and chased up with several calls and e-mails. I had no reply until yesterday—after I had secured this debate, coincidentally. The response came from the first consular secretary to the high commissioner, Mr P. K. Patel, and merely stated:

“You will appreciate that the High Commission cannot intervene in administrative judicial proceedings in India. If your constituent’s parents are aggrieved by Directorate of Enforcement actions, they may seek appropriate legal redressal of their grievances.”

They have been trying that, and they have not been getting anywhere. Clearly, they will not get anywhere with the high commission in London either, which is a great pity.

The British high commission in Delhi is aware of the problem and the Business Secretary, on a visit to the Indian subcontinent, raised it with Ministers. A high commission official has been dealing with British cases, but cannot get individually involved in them. I was also able to collar the British high commissioner James Bevan when he was about to appear before the Foreign Affairs Committee on 15 October. He has been helpful and entirely sympathetic, saying that the high commission is aware of the problem. Action needs to happen, however, and things cannot be allowed to go on unchecked.

The Government need to use their good offices to impress on their Indian counterparts that that sort of practice does the reputation of Goa and India at large no service at all. It stands in the way of legitimate investment. It would be a great problem if that investment were deterred by obviously corrupt practices.

I hope that the Minister will be able to give assurances today, to my constituent’s parents and to the affected constituents of other hon. Members, that this matter will be looked into properly and further pressure will be brought to bear on the Indian Government. I also hope that His Excellency the high commissioner to London is listening intently; I am sure he would not want such practices to besmirch the reputation of the Indian Government. They are clearly doing so at the moment.

[Mr Philip Hollobone (in the Chair)]

I commend the hon. Gentleman on the interesting way in which he has presented this complex and important case. To respond, we have a Minister who is responsible for about half the world, I think.

--- Later in debate ---

[Mr Ellwood]

I will certainly relay that to the Minister of State. Perhaps I can put him on the spot in his absence and suggest that he and my hon. Friend meet so that, rather than the issue lying dormant after the debate, we can move the process forward.

Consular staff are dealing with the property issue at a wider policy level, engaging with the Goa Government and local authorities directly, and that must fit in with what my hon. Friend said about the difference between taking a systemic approach and looking at individual cases. That approach, which I hope will be joined up, has been effective, with approximately 40 cases being cleared of investigation over the last year. However, as has been reiterated today, many more outstanding cases need to be looked at.

We are aware of corruption allegations against local authorities in Goa. However, the matter must be dealt with by the Indian authorities. We have always advised British nationals to report corruption complaints to the Indian law enforcement system.

Although there has been some progress, I recognise that the issue continues to cause distress to British nationals. We will continue to lobby the Goa Government and local authorities on systemic issues relating to expatriate property disputes and to work with those who have been affected to find an appropriate solution.

[Mr Philip Hollobone (in the Chair)]

I shall now suspend the sitting until 4.30 pm or until the next Minister arrives. I thank all those who took part in this important debate.