Khaitan & Co Mumbai-based partner Haigreve Khaitan has confirmed that while three members of his family, in a personal capacity, had once opened a Swiss HSBC Bank account together, it was set up as a way of legally and transparently diversifying their investments abroad, but was never actually used as intended and closed after only a few years.

The Indian Express had reported exclusively today, in collaboration with the International Consortium of Investigative Journalists (ICIJ) that brought together more than 50 media organisations in 45 countries, that 1,195 Indians held accounts in the Swiss branch of HSBC in 2006-07.

One HSBC account was in the names of Haigreve Khaitan, Pradip ‘Pintu’ Khaitan (Kolkata-based Khaitan partner and Haigreve’s father) and their spouses Tarulika and Prabha Khaitan, according to the Express.

Khaitan & Co managing partner Haigreve Khaitan told Legally India today: “We bank regularly with HSBC [in India] and they had really recommended to us to diversify investments and to start looking at investments abroad.”

Legally India has seen copies of four letters from the Kolkata income tax office to each of the Khaitans, confirming that “the proceeding for assessment year 2005-06” has been dropped.

Each of the four Khaitans remitted $10,000 (nowadays Rs 6.2 lakh) from India for a total of $40,000 in 2004, under the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme, explained Haigreve, which currently residents to remit $250,000 a year out of India to invest abroad, having been recently increased earlier this month.

“That’s how these accounts came to being,” he said. “It was always in our tax returns, so the tax department always knew of these accounts but after the leak they got in touch with us like they would have been with everybody else, which we provided with details and they actually passed closure orders in our case and did nothing further.”

He said that the account was closed in July 2004, even before the leak, because “we did not see much return on the investments”. The “amount was too little to be actively managed” and interests rates on the account were only nominal.

“The idea really was to look at really start having a portfolio of investments over time outside India, but with all of this controversy we just decided it’s not worth continuing,” he said.

Clarification: An earlier version of this article stated that the account was closed after a few years. After checking the records, Haigreve Khaitan confirmed that the account was actually closed in July 2004.

Leak: Perspectives

The list of 106,458 HSBC Swiss account holders was allegedly stolen by a self-described HSBC whistleblower in 2007, who escaped to France but was not extradited to Switzerland after the French used his records to identify French tax evaders.

In 2010, Frances’ finance minister Christine Lagarde shared the lists with several other countries in order to trace tax evaders using the jurisdiction that is globally renowned for its banking secrecy laws.

The government and other political parties have been selectively leaking several names from the list, after the Supreme Court began looking into the issue of black money allegedly stashed by Indians abroad in Swiss bank accounts, in a petition started by senior counsel Ram Jethmalani and others.

Globally, the scoop has in particular raised red flags about the lack of internal compliance procedures followed by HSBC and its apparent complicity in clients’ money laundering activities, collusion in hiding black money and providing accounts to criminals, corrupt businessmen and “other high-risk” individuals, The Guardian reported in the UK.

HSBC told the ICIJ: “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.”

The Express report had listed dozens of names on the list, which included prominent industrialists such as both Ambani brothers who each held $26.6m in HSBC Switzerland (with a statement for Mukesh denying he had “any illegitimate bank accounts anywhere in the world”, and a spokesperson for Anil saying that he did not have any HSBC overseas account).

The list also included hundreds of non-resident Indians (NRIs), who are legally also allowed to open up foreign bank accounts, which they can continue to operate even after they return to India.

The Express reported that according to sources in the Central Board of Direct Taxes (CBDT) undisclosed income of Rs 3,150 crore ($508m) had been taxed after the HSCB leak, though 200 accounts had no balance and 211 were of NRIs, who would have to prove their NRI status in the relevant period.

Some on the list told the Express that the tax department had been heavy handed in its pursuing of the claims.

The Khaitans’ entry was published in the Express as:

PRADIP KUMAR KHAITAN, HAIGREVE KHAITAN BALANCE: Not mentioned

They are owners of Khaitan and Company, one of the oldest corporate law firms of repute in the country. The law firm has now expanded to cities outside Kolkata, where they started out. It employs over 300 lawyers. In the HSBC list, Pradip Kumar Khaitan and son Haigreve and their spouses Prabha and Tarulika are listed. No balance is shown for the accounts opened in 2004. COMMENT: Pradeep Khaitan said, “The Income Tax department has given us a clean chit since everything was documented and money sent to the HSBC account under the official remittance scheme. The account is in my name as well as other members of the family.”

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