The Enforcement Directorate (ED) said on Friday that the Standard Chartered Bank has been fined Rs 100 crore by its Adjudicating Authority under the Foreign Exchange Management Act, 1999 (FEMA).
The Adjudicating Authority has also fined Tamilnad Mercantile Bank (TMB) Rs 17 crore and its then Chairman and Director M.G.M. Maran Rs.35 crore.
According to the ED, a probe under FEMA was taken up based on reference received from the Reserve Bank of India (RBI) to investigate advance remittances received by certain entities for purchase of the shares of Tuticorin headquartered TMB through the escrow mechanism maintained with Standard Chartered Bank, Mumbai.
Following the probe, the ED had issued a showcause notice to 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 Rs 11.33 crore on TMB for recording in its books the transfer of 46,862 shares of the bank in the names of seven foreign entities -- 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.
The above seven entities were not approved by the RBI for acquiring the shares of TMB.
A further penalty of Rs 5.66 crore was imposed on 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 Limited, Mauritius, without the permission of the Reserve Bank of India.
Penalty has also been imposed on the directors of the Board of 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 RBI's prior permission and for allowing deposits of Rs 113 crore and for having held 1,12,151 shares of TMB in the said escrow account.
The Standard Chartered Bank was levied a penalty of Rs 34 crore for the above contraventions.
Another Rs 66 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 $55.40 million (equivalent to Rs 221 crore) to three foreign entities -- Katra Holdings Limited, Mauritius, RST Limited, Cayman Islands, and GHI I Limited, Cayman Islands, without any special permission from the RBI.
According to the ED, a penalty of Rs 35 crore was also imposed on Maran, then Chairman and Director of TMB, for opening a bank account in Singapore and receiving foreign exchange to the tune of $68,50,000 (equivalent to Rs 28.08 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 TMB in favour of Katra Holdings Limited, consequent to a private agreement with that company. The penalty is also for failing to repatriate the said foreign exchange of $68,50,000 into India.