The Enforcement Directorate (ED) has issued a show cause notice to Karti Chidambaram, son of senior Congress leader P Chidamabarm, and a firm purportedly linked to him for alleged violations of the FEMA laws to the tune of Rs 45 crore.
The Chennai zonal office of the agency also issued a similar notice in the case to Chennai-based Ms Vasan Health Care Private Limited for alleged forex violation of Rs 2,262 crore.
"The total amount of contravention identified on different counts and found to have been committed by Ms Advantage Strategic Consulting Private Limited in the sale transaction of shares of Vasan Health Care to overseas investors is around Rs 45 crore.
"A show cause notice has been issued to Ms Advantage Strategic Consulting Private Limited, its directors and also to Karti P Chidambaram who appears to be the controller and ultimate beneficiary in these transactions," the ED said in a statement.
The total amount of contravention identified by the ED, under the provisions of the Foreign Exchange Management Act (FEMA), by Vasan Healthcare and its overseas investors on different counts in the investments received from overseas investors is Rs 2,262 crore, the central probe agency said.
"A show cause notice has been issued to Ms Vasan Health Care Private Limited, its promoter Director Arun, his wife, Dwarakanathan (the director's father-in-law) and also to the overseas investors for the alleged contraventions," the ED said.
A show cause notice under FEMA is issued after investigation concludes and the person or entity found guilty of the contravention after the due adjudication process of the case can be fined upto 300 per cent of the amount contravened.
The ED probe in this case that went on for over two years, pertains to foreign investments received by Vasan Health Care from the "funds of Sequoia and WestBridge, based at Mauritius and also through investment arms of MS GIC, Singapore" and subsequent alleged irrgularities in the issuance of shares.
During the investigation, the agency said, it was found that various agreements were entered into from time to time between the company (Vasan Health Care), promoters, investors and sellers of shares among others.
"The compulsorily convertible preference shares were issued to the overseas investors wherein the price/conversion formula have not been determined upfront at the time of issuance of the shares.
"Further, as per the agreements, the overseas investors were given assurance of the returns in one form or other," the statement said.
Such assurance of returns and non-determination of the price/conversion formula upfront are "not permitted and are in contravention of FEMA," it added.
The agency alleged that the approval of the RBI was not obtained by the noticees before enabling the profit sharing mechanism done in this case.
"Ms Vasan Health Care has not followed any of the statutory obligations as envisaged under FEMA in the reporting mechanism to the RBI and failure on its part also resulted in contravention of FEMA, 1999," it said.
The total amount of contravention identified to have been committed by Vasan Health Care and its overseas investors on different counts in the investments received from overseas investors is around Rs 2,100 crore and further creation of a wholly owned subsidiary at Singapore by the firm led to a further contravention of Rs 162 crore, it said.
The agency said overseas investors "acquired" the shares of Vasan Health Care by investing a total amount of Rs 432 crore in different rounds of investments between February 2009 and November 2014.
"The shares were acquired by the overseas investors on the face value at the rate of Rs 100 each," it said.
"In addition, the overseas investors instead of acquiring equity shares from the company (Vasan) directly, which would have added more liquidity to the company, chose to acquire the same in the secondary market, from the existing share holders of the company," it said.
The share holders included "its (Vasan) promoter A M Arun, Ms AMA Associates (a partnership firm belonging to the promoter and Dwarakanathan) and Ms Advantage Strategic Consulting Private Limited, a company whose activities are found to be in the control of Karti," it said.
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