CHENNAI: Standard Chartered Bank and Tamil Nadu Mercantile Bank Limited (TMBL) along with its then chairman and director have been fined after they were found to have violated the Foreign Exchange Management Act in a case relating to unauthorized allocation of shares.
The case, which was adjudicated by the Special Director, Enforcement Directorate Southern Region, has resulted in imposition of penalties of Rs 100 crore on Standard Chartered Bank, Rs 17 crore on Tamil Nadu Mercantile Bank Limited and Rs 35 crore on MGM Maran, then Chairman and Director of TMBL.
The investigation under FEMA was after the Reserve Bank of India asked to probe advance remittances received by certain entities for purchase of shares of TMBL, headquartered in Tuticorin, through an escrow mechanism maintained with Standard Chartered Bank, Mumbai.
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. These entities include 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.
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 --
Sub-Continental Equities Ltd, Mauritius and Robert & Adris James Company Limited, Mauritius, without the permission of the RBI.
Similarly, the directors of the Board of TMBL, who approved the recording of the transfer of shares of TMBL, have also been penalised. Standard Chartered Bank was held guilty of contraventions of the provisions of FEMA for opening the SCB Project Windmill (Sale Consideration) Escrow Account, without prior permission of the RBI. It was also held guilty for having allowed deposits amounting to Rs 113 crore in the 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 was imposed on on Standard Chartered Bank for the contraventions. In addition, a penalty of Rs 66 crore has been imposed on Standard Chartered Bank for providing collateral or guarantee/taking into custody of TMBL shares and original sale deeds of land in lieu of which Standard Chartered Bank, Mauritius granted a loan of US$ 55.40 million (equivalent to Rs 221 crore) to three foreign entities. These include Katra Holdings Limited, Mauritius, RST Limited, Cayman Islands and GHI I Limited, Cayman Islands without any special permission from RBI.
MGM Maran, then Chairman and Director of TMBL, has been penalised Rs 35 crore for having opened a bank account in Singapore without the permission of the RBI and received foreign exchange to the tune of US$ 68,50,000 (equivalent to Rs. 28.08 crore) in the account. The money was paid by a foreign entity as consideration for facilitating and assigning the rights towards transfer of shares of TMBL in favour of Katra Holdings Limited. He has been penalised for having failed to repatriate the foreign exchange of US$68,50,000 to India.