ED imposes Rs 100 crore penalty on Standard Chartered Bank for FEMA violation

According to the ED, an investigation under FEMA was taken up based on a reference received from the Reserve Bank of India (RBI) to check on advance remittances received by certain entities.

Written by September 11, 2020 19:09
Standard Chartered -

New Delhi: The Special Director of Enforcement, Chennai has imposed fine of Rs 100 crore on Standard Chartered Bank, Rs 17 crore on Tamilnad Mercantile Bank Limited (TMBL) and Rs 35 crore on M G M Maran, then Chairman and Director of TMBL over alleged FEMA violation.

Investigation under FEMA was taken up based on reference received from the Reserve Bank of India to investigate advance remittances received by certain entities for purchase of the shares of M/s. Tamil Nadu Mercantile Bank Limited, head quartered in Tuticorin,(TMBL) through escrow mechanism maintained with M/s. Standard Chartered Bank, Mumbai (SCB). Accordingly, the Directorate of Enforcement (ED) conducted investigations which culminated in the issue of show cause notice to TMBL, its directors, SCB and an official of the SCB for various contraventions of the provisions of the Foreign Exchange Management Act, 1999 (FEMA).

The case was adjudicated by the Adjudicating Authority viz., the Special Director, ED Southern Region. In his order, the Adjudicating Authority imposed a penalty of Rs. 11.33 Crores on M/s. Tamil Nadu Mercantile Bank Limited for recording in its books the transfer of 46,862 shares of TMBL in the names of seven foreign entities viz. (i) M/s.RST Limited (wholly owned by Shri Ravi S. Trehan), (ii) M/s. Katra Holdings Limited (wholly owned by Shri Ramesh Vangal), (iii) M/s. GHI I Limited (wholly owned by Shri Rajat Gupta), (iv) M/s. Kamehameha (Mauritius) Limited, (v) M/s. FI Investments (Mauritius) Limited, (vi) M/s. Cuna Group (Mauritius) Limited, and(vii) M/s. Swiss Re Investors (Mauritius) Limited, which were not approved by the Reserve Bank of India for acquiring the shares of TMBL. A further penalty of Rs. 5.66 Crores 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 viz. (i) M/s. Sub-Continental Equities Ltd, Mauritius and (ii) M/s. Robert &Adris James Company Limited, Mauritius, without the permission of the Reserve Bank of India. Penalty has also been imposed on the directors of the Board of TMBL, who approved the recording of the transfer of shares of TMBL.

ED attaches assets worth Rs 5.1 crore in bank fraud case

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 Reserve Bank of India and for having allowed deposits totalling to Rs. 113croresin 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 Croreshas been imposedon M/s. Standard Chartered Bank for the above contraventions. In addition, a penalty of Rs.66 Crores has been imposed on M/s. Standard Chartered Bankfor providing collateral/ guarantee/taking into custody of TMBL shares and original sale deeds of land in lieu of which M/s. Standard Chartered Bank, Mauritius granted a loan of US$ 55.40 million (equivalent to Rs. 221 Crores) to three foreign entitiesviz. (i) M/s. Katra Holdings Limited, Mauritius (ii) M/s. RST Limited, Cayman Islands and (iii) M/s. GHI I Limited, Cayman Islands , without any special permission from the Reserve Bank of India.

Penalty of Rs. 35 Crores was also imposed on Shri M.G.M. Maran, then Chairman and Director of TMBL for having opened,without the permission of the Reserve Bank of India, a bank account in Singapore and for having received foreign exchange to the tune of US$ 68,50,000 (equivalent to Rs. 28.08 crores) in the said account from a foreign entity as consideration for facilitating and assigning the rights towards transfer of shares of TMBL in favour of M/s. Katra Holdings Limited, consequent to a private agreement with M/s. Katra Holdings Limited, and for having failed to repatriate the said foreign exchange of US$68,50,000 into India.