Chennai/New Delhi: Enforcement Directorate (ED) has issued an over Rs 608 crore showcause notice to a Tamil Nadu based Mercantile bank and leading foreign bank Standard Chartered for alleged foreign exchange violations in an illegal transfer of shares case of 2007.
The agency's Chennai office today issued a Rs 334.32 crore notice to Standard Chartered bank Mumbai while it slapped a Rs 274.03 crore notice to the Tamilnad Mercantile Bank Limited (TMBL) under the provisions of the Foreign Exchange Management Act (FEMA).
The case dates back to 2007 when the RBI detected that certain non-resident investors had acquired shares of TMBL from resident Indian shareholders in violation of set guidelines and subsequently asked the ED to probe the deal under FEMA laws.
”The ED conducted investigations and identified that Tamilnad Mercantile Bank, its the then Chairman, Directors, Company Secretary have all contravened the provisions of FEMA in transferring 46,862 shares of their bank to foreign entities in May 2007 without the prior approval of RBI and further allowing similar transfer of shares to foreign entities in December 2011 and June 2012 without the permission of RBI.
”The total amount of contravention (by TMBL) was identified as Rs 274.03 crore,” ED's Special Director (South) K R Uday Bhaskar said in his order.
The order further said the probe also “identified contravention of FEMA by Ms Standard Chartered bank Mumbai in the opening and operation of an escrow account for the purpose of the said transfer to foreign investors.
”Standard Chartered bank was also found to have contravened the provisions of FEMA in taking custody of immovable properties in India and shares of TMBL for providing collateral/guarantee to a loan availed by the foreign investors in the Mauritius branch of Standard Chartered bank.
”The contravention of Standard Chartered bank was identified to be Rs 334.32 crore,” the order said. The order said the agency is also “proposing” action
against the then Chairman of TMBL, MGM Maran as he had ”facilitated the transfer from Indian investors to foreign investors and accordingly received consideration from the foreign investors to the tune of USD 6.85 million in his overseas account at Singapore” which is against FEMA laws.
All the parties have been asked to respond to the agency's notice within 30 days following which legal action would be initiated against them.
