The Special Director of Enforcement, Chennai has imposed penalties of Rs 100 crore on Standard Chartered Bank, of Rs 17 crore on Tamilnad Mercantile Bank Limited (TMBL) and Rs 35 crore on M G M Maran, then Chairman and Director of TMBL.
According to the ED, an investigation under FEMA was taken up based on a reference received from the Reserve Bank of India (RBI) to check on advance remittances received by certain entities for purchase of TMBL shares through escrow mechanism maintained with Standard Chartered Bank, Mumbai (SCB).
Accordingly, the Directorate of Enforcement (ED) conducted investigations which culminated in the issue of show-cause noticeS to TMBL, its directors, SCB and an official of the SCB for contraventions of the provisions of the Foreign Exchange Management Act, 1999 (FEMA).
The case was adjudicated by the Adjudicating Authority--the Special Director, ED Southern Region. In his order, the Adjudicating Authority imposed a penalty of Rs 11.33 crore on TMB for recording in its books the transfer of 46,862 shares of TMBL in the names of seven foreign entities--RST Limited (wholly-owned by Ravi S Trehan), Katra Holdings Limited (wholly-owned by Ramesh Vangal), GHI I Limited (wholly-owned by Rajat Gupta), Kamehameha (Mauritius) Limited, FI Investments (Mauritius) Limited, Cuna Group (Mauritius) Limited, and Swiss Re Investors (Mauritius) Limited, which were not approved by the Reserve Bank of India for acquiring the shares of TMBL.
A further penalty of Rs 5.66 crore was imposed on TMBL for recording in its books, the subsequent transfer of 27,289 shares out of the above 46,862 shares in the names of two foreign entities viz. Sub-Continental Equities Ltd, Mauritius and Robert &Adris James Company Limited, Mauritius, without the permission of the Reserve Bank of India. Penalty has also been imposed on the directors of the Board of TMBL, who approved the recording of the transfer of shares of TMBL.
The Adjudicating Authority has held SCB guilty of contraventions of the provisions of FEMA for opening the SCB Project Windmill (Sale Consideration) Escrow Account, without prior permission of the Reserve Bank of India and for having allowed deposits totalling to Rs 113 crore in the said account and for having held 112,151 shares of TMBL in SCB Project Windmill (Shares) Escrow Account. Accordingly, a penalty of Rs 34 crore has been imposed on Standard Chartered Bank for the above contraventions. In addition, a penalty of Rs 66 crore has been imposed on Standard Chartered Bank for providing collateral/ guarantee/taking into custody of TMBL shares and original sale deeds of land in lieu of which M/s. Standard Chartered Bank, Mauritius granted a loan of $55.40 million (equivalent to Rs 221 Crore) to three foreign entities including Katra Holdings Limited, Mauritius RST Limited, Cayman Islands and (iii) GHI I Limited, Cayman Islands, without any special permission from the Reserve Bank of India.
ED stated that penalty of Rs 35 crore was also imposed on Maran for having opened, without the permission of the RBI, a bank account in Singapore and for having received foreign exchange to the tune of $6,850,000 (equivalent to Rs 28.08 crore) in the said account from a foreign entity as consideration for facilitating and assigning the rights towards transfer of shares of TMBL in favour of Katra Holdings Limited, consequent to a private agreement with Katra Holdings Limited, and for having failed to repatriate the said foreign exchange of $6,850,000 into India.