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ED begins prosecution against Global Trust

Sangita Shah

The enforcement directorate has initiated prosecution proceedings under the now-defunct Foreign Exchange Regulation Act against the Global Trust Bank, and its three officers K V Rao, L Amarsingh and Krishna Pai for alleged violations in a case related to an overseas corporate body Brentfield Holdings' investments in Aftek Infosys.

The ED served a showcause notice on May 30, 2002, to the bank for alleged contravention of Section 29 (1)(B) and Section 68 (1) and (2) of Fera to all of them and has given 10 days to reply.

The showcause notice forms the last leg of an ongoing probe into the bank's alleged Fera violations. Earlier, the ED had interrogated the bank and the three officers on separate occasions over the past few months.

ED sources said that since the department is a quasi-judicial body, the process of sending a showcause marks the beginning of prosecution proceedings.

BHL had allegedly purchased 3,03,000 shares of Aftek Infosys on May 30, 2000, taking its holdings in the company to 15.02 per cent, which was 10.02 per cent in excess of the ceiling of 5 per cent in the individual stocks prescribed by investments by OCBs. GTB got implicated in the issue since it was the banker for BHL.

According to the ED notice, "the bank and its officers looking into the day-to-day activities had been found to be regularly aware of the transactions made by BHL.

Hence the bank and its officers are being deemed to have contravened the provisions and directions of both the Foreign Exchange Regulation and Reserve Bank of India in not reporting the gross violation by the OCB".

GTB managing director Sudhakar Gande confirmed to Business Standard in a fax communication that the bank had received the ED notices. However, he declined comments saying the mater was sub-judice.

Gande said:, "We have received the show cause notices from ED with regard to the Aftek shares acquired by Brentfield in May 2000. The issues raised by the ED is on the responsibilities of the Bank, in connection with the purchase of the share by OCBs in excess of the 5 per cent norm etc.

We are sending an appropriate reply to ED, explaining the role of the bank in respect of monitoring such ceilings. Since ED is a quasi-judicial body and the matter is sub-judice, we regret our inability to provide specific details."

ED, in its showcause notice, has said that," BHL, Yashpal Kumar, the power of attorney holder of BHL and Global Trust Bank Ltd, Nariman Point Branch, Mumbai and its officials KV Rao, L Amarsingh and Krishna Pai are hereby required to show cause in writing (in duplicate) within 10 days from the date of receipt of this memorandum, why adjudication proceedings as contemplated in section 51 of the Foreign Exchange Regulation Act, 1973 read with Section 49 (3) and 49 (4) of Foreign Exchange management Act, 1999, should not be held against them for the said contravention."

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