The Enforcement Directorate on Thursday issued show-cause notices to Tamilnad Mercantile Bank (TMB), Standard Chartered Bank and others for FEMA violations to the tune of over Rs. 600 crore, in connection with the transfer of shares by resident Indian shareholders in the bank to certain non-resident investors in 2007.
“The Reserve Bank of India suspected FEMA (Foreign Exchange Management Act) contraventions in these transfer of shares, and referred the issue to the Directorate of Enforcement for necessary action,” the ED said in a statement.
It also said its investigation revealed that TMB’s then Chairman, directors, company secretary have all contravened the provisions of FEMA in transferring 46,862 shares of the bank to foreign entities in May, 2007, without prior approval of the RBI and further allowing similar transfer of shares to foreign entities in December, 2011, and June, 2012, again without the central bank permission. The total amount of contravention was identified as Rs.274.03 crore, the ED said.
The regulatory body also found Standard Chartered Bank (SCB), Mumbai, in contravention of FEMA in operating an escrow account for the purpose of the said transfer to foreign investors. It also said SCB have contravened the provisions of FEMA in taking custody of immovable properties in India and shares of TMB for providing collateral/guarantee to a loan availed of by the foreign investors in the Mauritius branch of Standard Chartered Bank.
“The contravention of SCB was estimated to be Rs.334.32 crore,” the ED said.
The ED also said M. G. M. Maran, the then Chariman of TMB, has facilitated the transfer of shares from Indian investors to foreign investors, and, accordingly, got consideration from the foreign investors to the tune of $6.85 million in his overseas account in Singapore.
“As maintenance of such account and transfer is against the provisions of FEMA, the ED is also proposing action against Mr. Maran,” the statement said.
The ED has given 30 days from the date of receipt of the show-cause notice for the parties to reply to the adjudicating authority under FEMA.
