Rs 152 crore fine slapped on banks by ED for violating FEMA provisions

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.

Published: 12th September 2020 03:54 AM  |   Last Updated: 12th September 2020 03:54 AM   |  A+A-

cash, money, investment

For representational purposes. (Express Illustrations)

By Express News Service

CHENNAI: The Special Director, Enforcement Directorate Southern Region, has fined the Standard Chartered Bank, Tamil Nadu Mercantile Bank Limited (TMBL) along with its then chairman and director M G M Maran, Rs 100 crore, Rs 17 crore and Rs 35 crore respectively, after they were found violating Foreign Exchange Management Act (FEMA) in a case relating to unauthorised allocation of shares.

The investigation under FEMA was initiated after the Reserve Bank of India asked to probe advance remittances received by certain entities for purchase of  the shares of TMBL, headquartered in Thoothukudi, through 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 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 RBI. It was also held guilty for having allowed deposits of 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 was imposed 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 crores) to three foreign entities.  MGM Maran, then Chairman and Director of TMBL, has been penalised Rs 35  crore for having opened without the permission of RBI, a bank account in  Singapore and for having received foreign exchange to the tune of US$ 68,50,000 (equivalent to Rs 28.08 crore) in the that account. 

A total of US$ 68,50,000 was paid to MGM Maran as consideration for facilitating the rights towards transfer of shares of TMBL. He has been penalised for having failed to repatriate the amount



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