New Delhi: Karti Chidambaram, son of former finance minister and senior Congress leader P. Chidambaram, has been issued a showcause notice by the Enforcement Directorate (ED) in connection with allegedly violating Fema norms to the extent of Rs 45 crore. In addition, the agency’s zonal office at Chennai has also issued the notice to a company, Ms Advantage Strategic Consulting Private Limited, which is reportedly linked to Karti Chidambaram for alleged foreign exchange violations.
The investigating agency said in a statement that violations on different occasions have been found to be committed by the company (Ms Advantage Strategic Consulting Private Limited) in the process of selling shares worth Rs 45 crore of Vasan Health Care Private Limited to overseas investors. Notices were issued, the ED claimed, to Ms Advantage Strategic Consulting Private Limited and Karti Chidambaram as they seemed to have benefited by this sale of shares.
The ED is now investigating financial transactions worth Rs 2,262 crore between the overseas investor and Vasan Health Care that took place many times.
Investigations into the case were conducted over a period of two years regarding foreign investments received by Vasan Health Care from two Mauritius-based funds, Sequoia and WestBridge, as well as MS GIC, Singapore, and the irregularities committed in the process of issuing shares to them.
The probe revealed that Vasan Health Care as well as its promoters, sellers of shares and investors entered into different agreements on a regular basis. It was also learnt that the price and conversion formula for shares was not finalised upfront right at the time of issuing them. Similarly, the agreement revealed that the overseas investors were given assurance of returns in one form or another.
ED official claimed that as per provisions of FEMA the assurance of returns of not finalising the price and conversion formula upfront is not allowed. The agency also claimed that no approval was received from RBI by these notices for determining the formula of profit sharing.
The company, Vasan Health Care and the overseas investors, allegedly committed FEMA violations on different occasions worth Rs 2,100 crore and subsequently through creating a wholly owned subsidiary at Singapore by the firm which led to a further of Rs 162 crore.
The overseas investors procured shares of Vasan Health Care with an investment of Rs 432 crore on different occasion between February 2009 and November 2014. ``These shares were procured by the overseas investors on the face value of Rs 100 each. These investors then did not acquire the equity shares directly from Vasan Health Care but instead did so from the secondary market, from the existing share holders of the company,’’ ED said.
These share holders have been identified as AM Arun (promoter of Vasan Health Care) and Ms Advantage Strategic Consulting Private Limited, which has been found to be in control of Karti Chidambaram.
ED normally issues the FEMA show cause notice after investigations prima facie establish that the company or individual have committed the violations and they can be slapped with a fine to the tune of upto 300 per cent of the contravened amount.