Sebi slaps Rs 10 lakh fine on individual in GDR manipulation case

Sebi slaps Rs 10 lakh fine on individual in GDR manipulation case

Sebi on Tuesday slapped a fine of Rs 10 lakh on an individual for indulging in fraudulent schemes with respect to subscription of GDRs issued by Farmax India Ltd (FIL).

The fine has been imposed on Mukesh Chauradiya.

FIL issued Global Depository Receipts (GDRs) during June-August 2010 period. It issued GDRs amounting to USD 59.92 million in June 2010 and USD 11.98 million in August 2010 under the green shoe option.

The entire GDR issue was subscribed by one entity Vintage FZE, now known as Alta Vista International. This entity was controlled by Arun Panchariya, Sebi said in an order.

The regulator noted that Vintage subscribed to GDRs by entering into a loan agreement with Euram Bank for which FIL pledged the GDR proceeds as security.

The arrangement allowed FIL to “effectively finance the purchase of its own GDRs since it deposited the GDR proceeds as collateral for the loan extended by EURAM Bank to Vintage which was the sole subscriber to the GDR issue of FIL,” Sebi said in its order.

Such an arrangement was fraudulent in nature and the same was not disclosed to the shareholders and investors, it added.

Sebi also noted that Chauradiya had signed the loan agreement with Euram Bank for subscribing to GDRs of Farmax in the capacity of managing director of Vintage.

By signing the agreement and loan redemption requests in respect of loan for subscribing to the GDR issue, Chauradiya was part of the fraudulent and deceptive scheme devised by Panchariya.

Thus, he violated provisions of Prohibition of Fraudulent and Unfair Trade Practices Regulations, the order said while imposing the fine on Chauradiya.

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