By Natasha Parekh, CNBC-TV18

Forex derivative products are now under investigation, not from shareholders, but from the enforcement Directorate for possible FEMA violation.

It is not just about losses and legal battles. The tussle between banks and companies over derivative products and the resulting losses has taken a new turn. It is now the fear of Foreign Exchange Management Act or FEMA violation that could be haunting companies.

The Enforcement Directorate has initiated an investigation under Section 37 of the Foreign Exchange Management Act 1999. The Assistant Director of the enforcement directorate's Mumbai office has shot off letters to companies asking them information on Forex transactions.

A copy of that letter which is in possession of CNBC-TV18 clearly states that, "The enforcement directorate is conducting certain investigations under the provisions of the foreign exchange management act, 1999. And for that purpose, you are directed to furnish the following information / documents within 7 days of the receipt of this order.

1. The details of all contracts on currency trades since april 2006, such as date of contract, bankers with addresses, amount involved, premium, nature of contract in brief, with maturity date, details of underlying transactions in brief.

2. Names and addresses of the promoters/directors

3. Details of export outstanding such as date of export, commodity, amount of invoice, amount realised, amount outstanding, name and address of the customer and banker with address. the amount should be mentioned in us dollars.

However the Assistant Director of the Enforcement Directorate is yet to respond to CNBC-TV18’s faxed questionnaire. The names of the companies that have received these letters are not available. It is not clear if the enforcement directorate has sent the notices to banks, but we learn from sources that the companies have furnished the details to the enforcement directorate. The government's next course of action is not known. But what is clear is that the battle between companies and banks has taken a new twist.