The Enforcement Directorate (ED) on Tuesday said it has seized assets worth Rs293.91 crore belonging to Tamilnad Mercantile Bank's (TMB) former chairman Nesamanimaran Muthu alias MGM Maran under the Foreign Exchange Management Act (FEMA).
According to the ED, the seized assets are in the form of shareholdings in four Indian companies, namely, the Southern Agrifurane Industries Private Ltd, Anand Transport Private Ltd, MGM Entertainment Private Ltd, and MGM Diamond Beach Resorts Private Ltd.
Incidentally, the three of the companies are unlisted entitites.
The ED said Mr Maran had incorporated two companies in Singapore during 2005-06 and 2006-07 and invested Singapore $5,29,86,250 equivalent to Indian Rs293.91 crore; but the investment was made without Reserve Bank of India's (RBI) permission and non-disclosure to Indian regulators.
According to the agency, the provisions of Section 37A(1) empowers it to seize Indian asset of a person who has acquired assets in foreign country or made investment outside India without the approval of RBI while he was a person resident in India.
Since the amount of foreign investment was SGD5,29,86,250, the assets of equivalent value thereof of Rs293.91 crore has been seized, it said.
Last year, the adjudicating authority under the FEMA had levied a penalty of Rs35 crore on Mr Maran for opening a bank account in Singapore and receiving foreign exchange to the tune of US$68,50,000 (equivalent to Rs28.08 crore) in that account from a foreign entity.
The said payment is the consideration for facilitating and assigning the rights towards transfer of shares of the TMB in favour of Katra Holdings Ltd, consequent to a private agreement with that company. The penalty is also for failing to repatriate the said foreign exchange into India, the ED had said then.
The adjudicating authority had also fined Standard Chartered Bank Rs100 crore and the TMB Rs17 crore.
The ED had taken up the probe under FEMA based on reference received from RBI to investigate advance remittances received by certain entities for purchase of the shares of the Tuticorin-headquartered TMB through escrow mechanism maintained with Standard Chartered Bank, Mumbai.
Following the probe, the ED had issued show-cause notice to the TMB, its directors, Standard Chartered Bank and one of its officials for contravening FEMA.
In his adjudication order, the special director, ED, southern region imposed a penalty of Rs11.33 crore on the TMB for recording in its books the transfer of 46,862 shares of the Bank in the names of seven foreign entities, viz., (i) RST Ltd (wholly-owned by Ravi S Trehan), Katra Holdings Ltd (wholly-owned by Ramesh Vangal), GHI I Ltd (wholly-owned by Rajat Gupta), Kamehameha (Mauritius) Ltd, FI Investments (Mauritius) Ltd, Cuna Group (Mauritius) Ltd, and Swiss Re Investors (Mauritius) Ltd.
These seven entitities were not approved by RBI for acquiring the shares of TMB.
A further penalty of Rs5.66 crore was imposed on the TMB 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—Sub-Continental Equities Ltd, Mauritius and Robert & Adris James Company Ltd, Mauritius—without the permission of the RBI.
Penalty has also been imposed on the directors of the Board of the TMB, who approved the recording of the transfer of shares of the bank.
The Standard Chartered Bank was held guilty of contravening FEMA for opening the Standard Chartered Bank Project Windmill (Sale Consideration) Escrow Account, without the RBI's prior permission and for allowing deposits of Rs113 crore and for having held 1,12,151 shares of the TMB in the said escrow account.
A penalty of Rs34 crore was levied on the bank for the above-mentioned contraventions.
Another Rs66 crore penalty was levied on the Standard Chartered Bank for providing collateral/guarantee/taking into custody of TMB 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 Rs221 crore) to three foreign entities viz, Katra Holdings Ltd, Mauritius, RST Ltd, Cayman Islands, and GHI I Ltd, Cayman Islands, without any special permission from RBI.
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