The ED said it had served notice to Vasan Health Care Pvt. Ltd, its promoters and their relatives for violations of the Foreign Exchange Management Act (FEMA) to the tune of Rs 2,262 crore.
Advantage Strategic Consulting was served notice for Rs 45 crore for sale of Vasan Health Care's shares to overseas investors.
The ED also added that further investigations under the Prevention of Money Laundering Act (PMLA) are going on in respect of Foreign Investment Promotion Board (FIPB) approval given to Aircel-Maxis by the then Finance Minister Chidambaram wherein foreign inflow was Rs 3,500 crore (appx.).
As per the government policy and FIPB guidelines, the competent authority for any inflow above Rs 600 crore was the Cabinet Committee of Economic Affairs.
According to ED, preliminary investigations into the foreign investments received by Vasan Health Care, both in the primary market as well as secondary, revealed that the company had received investments from the Mauritius-based Sequoia and WestBridge and also through the investment arm of GIC, Singapore.
The overseas investors acquired shares of Vasan Health Care by acquiring Compulsorily Convertible Preference Shares (CCPS) directly from the company by investing a total amount of Rs 432 crore in different rounds of investments from February 2009 to November 2014.
The shares were acquired by the overseas investors on the face value of Rs 100 each.
In addition, investors acquired equity shares of Vasan Health Care from its promoter A.M. Arun of MA Associates - a partnership firm belonging to Arun and his father-in-law Dwarakanathan and Advantage Strategic Consulting, which, the ED said, was found to be in the control of Karti Chidambaram.
"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 Rs 5,242 per share," the ED said.
The total amount invested by the overseas investors, which ultimately benefited the above mentioned existing shareholders, is Rs 357.72 crore.
Meanwhile Arun's wife transferred 300,000 shares to her father without receiving any consideration, while Arun organised the transfer of 150,000 shares from Dwarakanathan to Advantage Strategic Consulting for just Rs 50,00,000 which was paid a year later - the latter was never connected to the activities of Vasan Health Care till that date.
Arun also facilitated and ensured sale of shares held by Advantage Strategic Consulting, which sold 30,000 shares out of 150,000 shares it got to Sequoia group for Rs 22.5 crore.
The investigating agency said the CCPS were issued to the overseas investors without determining upfront the price/conversion formula.
"Further, as per the Agreements, the Overseas Investors were given assurance of the Returns in one form or other. Such assurance of Returns and non determination of the Price/conversion formula upfront are not permitted and are in contravention of FEMA," the ED said.
The ED also found that the parties had agreed on profit sharing mechanism whereby the transferee agrees to pay the transferor, a sale profit derived when they exit Vasan Health Care.
"Such clauses are akin to 'deferment of payment' and are not permitted without the approval of the Reserve Bank," the ED said.
The ED also said Vasan Health Care had not followed any of their statutory obligations as envisaged under FEMA in their reporting mechanism to Reserve Bank of India and failure on their part also resulted in contravention of FEMA.
Similarly, Arun didn't followed the statutory obligations of reporting the shares transferred by him to the overseas investors.
During the investigation, the ED also noticed that Vasan Health Care had transferred around $ 6.8 million with intimation of setting up a wholly owned subsidiary at Singapore but had not received the mandatory share certificates to confirm the investments made abroad.
The ED nalso oticed that subsequent to the transfer of amount from India to Singapore, further onward transfers were made to Dubai and Sri Lanka and setting up of step down subsidiaries by the company, without informing the regulatory authorities, leading to contravention of Overseas Direct Investment regulations to the extent of Rs 162 crore.