ED notices to Vasan Health Care, Karti Chidambaram for FEMA breach

In 2015, IT department and ED officials swooped on many firms owned by Karti

The enforcement directorate (ED) has served notices on Vasan Health Care and Karti Chidambaram, son of former finance minister P Chidambaram, for breach of the Foreign Exchange Management Act (FEMA). 

Vasan and its promoters got a notice for alleged violation of Rs 2,262 crore. Chidambaram and a firm reportedly under his control, Advantage Strategic Consulting, were issued notices for violation of Rs 45 crore. 

ED said it had probed the foreign investments received by Vasan in the primary and secondary markets on the basis of inputs received by them about the suspected FEMA breach. It said Vasan has also not followed statutory obligations while reporting to the Reserve Bank of India (RBI). Promoter A M Arun also did not follow statutory obligations while reporting share transfer to overseas investors, it said. The irregularities committed by Vasan and its overseas investors was around Rs 2,100 crore. 

Vasan had transferred around $6.80 million to set up a wholly owned subsidiary in Singapore. But it did not get share certificates to confirm the investments. Further, the money was transferred from Singapore to Dubai and Sri Lanka for setting up step-down subsidiaries, without informing the regulatory authorities, said the ED. 

The ED probe in this case that went on for over two years pertains to foreign investments received by Vasan from the “funds of Sequoia and WestBridge, based at Mauritius and also through investment arms of MS GIC, Singapore” and subsequent alleged irregularities in the issuance of shares. “Further, as per the agreements, the overseas investors were given assurance of the returns in one form or other,” the statement said. Such assurance of returns and non-determination of the price/conversion formula upfront are “not permitted and are in contravention of FEMA”, it added. The agency said overseas investors “acquired” the shares of Vasan Health Care by investing Rs 432 crore in multiple rounds between February 2009 and November 2014. The shares were acquired on a face value of Rs 100 each. “In addition, the overseas investors, instead of acquiring equity shares from the company (Vasan) directly, which would have added more liquidity to the company, chose to acquire the same in the secondary market, from the existing shareholders of the company,” it said.