NEW DELHI: The Enforcement Directorate on Monday issued a show-cause notice to former finance minister P Chidambaram’s son Karti for allegedly making irregular gains by trading the shares of a Chennai-based company, Vasan Healthcare Pvt Ltd.
The ED claimed that Karti paid Rs 50 lakh to Vasan Healthcare for shares which he, within a year, sold off to a Mauritius-based investor for Rs 22.50 crore through a front entity.
Besides Karti, the ED has slapped show-cause notices on Vasan Healthcare, its promoters A M Arun and others, foreign investors Sequoia and WestBridge of Mauritius and an investment arm of GIC of Singapore, for alleged violation of Foreign Exchange Management Act (FEMA) for transactions of Rs 2,250 crore.
The ED said Karti and the company allegedly controlled by him, Advantage Strategic Consulting Pvt Ltd, have been issued show-cause notices for FEMA violations of Rs 45 crore.
Chidambaram dismissed the charge against his son as “baseless”, and said the ED’s move was meant to stop him from criticizing the government. “The ED has the habit of recycling allegations from time to time. Today’s press release by the ED is another example. The allegations in the press release are baseless, totally false and ridiculous,” the former finance minister said.
“No notice has been served upon Karti Chidambaram so far. If a notice is received, a suitable reply will be sent,” he further said.
Accusing the government of seeking to muzzle him, he added, “By targeting Karti Chidambaram with baseless notices, the government cannot silence my voice or stop my writing.”
Significantly, the ED statement emphasised that it was also probing the former finance minister for bypassing the Cabinet Committee on Economic Affairs to allow mobile service provider Aircel-Maxis to bring in foreign investment worth Rs 3,500 crore.
“The total amount of contravention identified on different counts committed by Advantage Strategic Consulting in the sale transaction of shares of Vasan Healthcare to overseas investors is around Rs 45 crore. Show-cause notice has been issued to Advantage Strategic, its directors and also to Karti P Chidambaram, who appears to be the controller and ultimate beneficiary in these transactions,” the ED said in its press note.
Giving details, the agency claimed its investigation into various transactions of Vasan Healthcare found that Advantage Strategic had first acquired 150,000 shares of Vasan for Rs 50 lakh, though its original book value was estimated to be Rs 3 crore. A part of these shares, about 30,000, were sold within a year to foreign investor Sequoia for Rs 22.50 crore.
The probe into Vasan’s investments revealed that the overseas investors had first acquired the shares of the Chennai healthcare company by investing about Rs 432 crore during different rounds of investments between February 2009 and November 2014. The shares were acquired on the face value of Rs 100 each.
A deeper investigation showed that the same foreign investors later paid promoters of Vasan and Advantage Strategic, controlled by Karti, an additional Rs 357.57 crore where the cost of Rs 100 per share was transacted as high as Rs 7,500 per share, the ED claimed, adding that the transaction raised suspicions of money laundering.
“The first tranche of sale took place in the end of 2010, when the shares were sold at Rs 7,500 per share. The second tranche of sale took place in March and May 2012, when the shares were sold at Rs 5,242 per share,” the ED said.
The overseas investors instead of acquiring equity shares from the company directly, which would have added more liquidity to the company, chose to acquire the same in the secondary market from existing shareholders “which ultimately benefited the above mentioned existing shareholders”.