Sebi slaps Rs 15 lakh fine on individual for GDR issue manipulation

In a 25-page order, Sebi said that at the time of signing of the pledge agreement, the company was clearly aware that Vintage had acquired a loan only to subscribe to the GDR issue. It was also found that the GDRs were converted into equity shares and were sold in the Indian capital market.

Sebi on Tuesday imposed a fine of Rs 15 lakh on an individual for fraudulent activities with respect to issuance of Global Depository Receipts (GDRs) by Beckons Industries Ltd back in 2010. Chandra Prakash (noticee) has been penalised by the watchdog.

The company had come out with its GDR issue in June 2010 for an amount of USD 10.54 million. With respect to the issue, Vintage had signed a loan agreement with EURAM Bank for payment of USD 10.54 million. At the same time, Beckons opened its account with the bank for the purpose of credit of proceeds of the GDR issue.

Beckons also entered into a pledge agreement with the bank while the GDR subscription money was received only from Vintage. In a 25-page order, Sebi said that at the time of signing of the pledge agreement, the company was clearly aware that Vintage had acquired a loan only to subscribe to the GDR issue.

It was also found that the GDRs were converted into equity shares and were sold in the Indian capital market. Cancellation of GDRs started from September 17, 2010 and continued till March 7, 2011 and all the GDRs were converted, as per the order. According to the regulator, the noticee was associated with Beckons as a non-executive independent director and was present during the board meeting in February. At the meeting, a unanimous resolution was passed to open account with EURAM Bank for receiving subscription money in respect of the GDRs, proposed to be issued by the company.

"It is particularly evident from the established facts that the entire proceedings of GDR which was transferred in the EURAM's account of Beckons served as collateral to the loan taken by Vintage in subscribing GDR and such amount was ultimately transferred to the Beckons' Indian bank account, only as and when Vintage repaid the loan to EURAM," the order said. According to the regulator, the manner in which the entire scheme of fraudulent and deceptive scheme was planned and executed demonstrates beyond reasonable doubt the manipulative intent to deliberately withhold critical information from investors.

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