Shriram Transport Finance Slapped with Rs 5 Crore Penalty by ED

New Delhi: Shriram Transport Finance Company (STFC) on Tuesday said a penalty of Rs 5 crore has been imposed on the company through an Enforcement Directorate order in relation to an old case of issuing warrants.

The company said it had received a show-cause notice (SCN) from the Enforcement Directorate (ED) in relation to issue of warrants by erstwhile Shriram Holdings (Madras) Pvt Ltd (SHMPL), which was amalgamated with STFC in April 2012, to a person resident outside India in 2006.

The company represented itself with relevant information and facts that it was of the bona fide view that it had not contravened any of the provisions of the Foreign Exchange Management Act (FEMA).

"However, the company received an order dated March 4, 2020, from ED yesterday (March 9, 2020). The order imposes on the company a penalty of Rs 5 crore in connection with the matter citing contravention of provisions of Section 6(3)(b) of FEMA, 1999, read with Regulation 4 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000," it said in a regulatory filing.

In this regard, the ED has also levied the penalty of Rs 50 lakh each on three persons, the then directors of the erstwhile SHMPL, it added.

STFC said the company continues to believe and hold the view that SHMPL had the relevant approval for foreign equity participation of up to 74 per cent by way of investment through subscription and/or subsequent acquisition of up to 74 per cent of the equity shares of SHMPL.

SHMPL had issued warrants to the extent of Rs 243.60 crore in 2006 which were converted into equity shares within the stipulated limit.

"The company's view was further strengthened based on the clarifications obtained from the Department of Economic Affairs.

"The company is currently examining the order and examining all options to take the matter to closure, including the option to contest the same with the relevant authorities," it said further.

On Monday, STFC had clarified that it does not hold any additional tier-I bonds of cash-strapped Yes Bank.

Clarifying to a media report, Shriram Transport Finance in a regulatory filing said that the "company does not hold any additional tier I bonds of Yes Bank Ltd".

"The company had invested in Upper Tier II Bonds of Yes Bank Ltd of Rs 50 crore in the year 2010 and the same are outstanding as on date," it said on Monday.

One of the biggest losers in case the RBI's restructuring scheme for Yes Bank goes through will be the additional tier-I bondholders who have bets totalling to Rs 10,800 crore on the lender.

The Reserve Bank of India on Thursday imposed a moratorium on Yes Bank, capping withdrawals at Rs 50,000 per account, and superseded the private sector lender's board with immediate effect.

Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.