GDR Manipulation: SEBI fines KSS, two of its Directors Rs 14.1 crore [Read Order]

GDR manipulation - SEBI - KSS - Taxscan

The Security Exchange Board of India(SEBI) on Monday imposed a total fine of Rs. 14.1 crore on K Sera Sera Ltd. (KSS) and two others involved for indulging in fraudulent schemes for the subscription of Global Depository Receipts(GDR) issuance.

Upon receipt of alerts in its surveillance system, SEBI had started an investigation in certain companies that had come out with their respective issues of Global Depository Receipts (GDRs). During the course of the investigation, it was observed that KSS had come up with its GDR issues on two different occasions. In this regard, it is observed that one Pan Asia Advisors Ltd was the Book Running Lead Manager for both of these said GDR issues of KSS. One Mr. Arun Panchariya was the founder, director, as well as 100% shareholder of Pan Asia who was alleged in the Investigation Report that the complete process of GDR issuances by KSS was devised and structured by him in connivance with KSS to the detriment of the Indian investors wherein loans, were arranged for the subscription of GDRs of KSS on both these occasions. Thereafter, using certain Foreign Institutional Investors, he got the GDRs converted into underlying shares and sold them in the Indian securities market with the help of certain domestic entities connected to him. SEBI had also noted that the entire GDR issue was subscribed by only one entity, Vintage on both the occasions, which again is alleged has Mr. Arun Panchariya as its Managing Director, 100% shareholder and Authorized Signatory. Further, it was observed that they had pledged the GDR proceeds with EURAM Bank on both the occasions so that Vintage could take a loan for the subscription of GDRs. The same was carried out through a loan agreement entered between Vintage and EURAM Bank and a pledge agreement signed between KSS and EURAM Bank.

The Chief General Manager and Adjudicating Officer in this case K Saravanan while passing the order levying a fine of Rs 12.1 crore on K Sera Sera Ltd and Rs 1 crore each on two of its directors, Hussain Sattaf and Rajesh Pavithran held, “. . . . KSS, Shri Hussain Sattaf and Shri Rajesh Pavithran have violated the provisions of Section 12A(a), (b), (c) of SEBI Act read with Regulations 3(b), (c), (d) and Regulations 4(2)(c), (f), (k) and (r) of PFUTP Regulations. Therefore, KSS, Shri Hussain Sattaf and Shri Rajesh Pavithran are liable for a penalty under Section 15HA of SEBI Act.

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