Sebi levies Rs 1 cr fine on GV Films, officials in GDR manipulation case

Market regulator Sebi on Wednesday imposed a total penalty of Rs 1 crore on GV Films Ltd and its five senior officials for manipulating issuance of global depository receipts (GDRs). In an order, the regulator said it has levied a fine of Rs 25 lakh on GV Films and Rs 15 lakh each on company's directors -- P Raghuraman, Mahadevan Ganesh, A Venkatramani and R Gopalan -- as well as president-corporate affairs V Subramonian.

The officials held these positions in the firm at the time of violation of norms. Sebi, which conducted an investigation during March-April, 2007 to ascertain norms violation, found that GV Films issued 6.4 million GDRs for USD 40 million in April 2007 and all the GDRs were subscribed by only one entity, Whiteview Trading Corporation.

The subscription amount for GDRs was paid by Whiteview after securing a loan from bank Banco Efisa S.A. However, GV Films had pledged GDR proceeds to Banco bank against the loan given to Whiteview for subscribing GDRs, Sebi said.

The GDR issue would not have been subscribed if GV had not given such a security against the loan taken by Whiteview. Sebi said the company did not make requisite disclosures to the exchange with regards to obtaining necessary approval of the shareholders for its proposed GDR issue and the related activities including providing security to Whiteview against the loan obtained by it from Banco Bank.

By entering into such an arrangement, the entities led the investors in India to believe that the issuer company, GV Films, had got a good reputation in terms of investment potential because of which foreign investors successfully subscribed to its GDR, whereas in reality, the GDRs were subscribed by Whiteview with the help of the GV itself, Sebi noted. Regarding the officials, the regulator said that they facilitated the execution of such arrangement by passing a suitable board resolution and thus were liable for the act.

By indulging in such activities, the company violated norms pertaining to the Securities Contract Regulation Act (SCRA), provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFTUP) as well as Listing Agreement and the officials violated PFTUP norms. Earlier, in June 2019, the regulator had barred the company and Raghuraman from the markets for five years and other four officials for two years in the same case.

In a separate order passed on Tuesday, Sebi levied a penalty of Rs 25 lakh on Sunshine India Land Developers and its four directors for raising Rs 30 crore from investors without complying with "public issue" norms. The directors facing penalty are -- Rajesh Kumar Dixit, Rabindra Kumar Gupta, Babu Lal Gupta and Santosh Kumar Sahu.

During the investigation, Sebi observed that Sunshine India, which is an unlisted company, issued so called Optional Fully Convertible Debentures (OFCDs) and raised a total amount of Rs 29.29 crore from 23,757 persons during 2010-11. It was further observed that as the number of persons from whom funds were raised by the company through issuance of OFCDs is more than 49 persons, the issuance qualifies as a public issue and requires the company to comply with certain requirements under Issue of Capital and Disclosure Requirement (ICDR) Regulations.

Under the ICDR norms, an issuer of securities is required to ensure that the offer document contains all material disclosures. "In the instant matter as offer document was not filed with Sebi, the issue of disclosing all material information in the offer document does not arise," the regulator said in its order.

Sebi also observed that the the company has refunded the entire amount raised through OFCDs to the original investors in cash or through bank payments.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)