The Adjudicating Authority under Foreign Exchange Management Act has slapped a fine of Rs 100 crore on Standard Chartered Bank (SCB), Rs 17 crore on Tamil Nadu Mercantile Bank Ltd and Rs 35 crore on former chairman and director of TMBL, MGM Maran for contravention of FEMA in a case relating to unauthorised allocation of shares.
Investigation under FEMA was taken up by the Enforcement Directorate (ED) on a reference from the Reserve Bank of India (RBI) to investigate advance remittances received by certain entities for purchase of the shares of Tuticorin-headquartered TMBL through an escrow mechanism maintained with SCB, Mumbai.
The ED probe led to show cause notice being issued to TMBL, its directors, SCB and an official of the SCB for various contraventions of the provisions of 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 TMBL for recording in its books the transfer of 46,862 shares of TMBL in the names of seven foreign entities----RST Ltd. (wholly owned by Ravi S Trehan), Katra Holdings Ltd. (wholly owned by Ramesh Vangal), GHI I Ltd. (wholly owned by Rajat Gupta), Kamehameha (Mauritius) Ltd., FI Investments (Mauritius) Ltd., Cuna Group (Mauritius) Ltd., and Swiss Re Investors (Mauritius) Ltd., which were not approved by the RBI for acquiring the shares of TMBL, the ED said in a statement.
A further penalty of Rs 5.66 crore was imposed on TMBL for its act of 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---Sub-Continental Equities Ltd, Mauritius and Robert & Adris James Company Ltd., Mauritius, without the permission of the RBI. Penalty has also been imposed on the directors of the Board of TMBL, who approved the recording of the transfer of shares of TMBL, it said.
“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 RBI and for having allowed deposits totalling to Rs 113 crore in the said account and for having held 1,12,151 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,” the ED said in its statement.