KEI Industries settles industry manipulation cases by paying Rs 1.78 cr to Sebi

KEI Industries has settled with the Sebi two cases related to alleged manipulation in the issuance of GDRs (global depository receipts) by paying over Rs 1.78 crore towards settlement charges. The regulator had initiated two adjudication proceedings against the firm for alleged violation of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms as well as provisions of Securities Contracts (Regulation) Act.

For violation of PFUTP, the Sebi had issued a notice in June 2017, while for the second violation it is yet to issue a notice, the regulator said. The regulator had conducted an investigation into the GDR issue by the KEI and found that KEI had issued 2.173 million GDRs amounting to USD 10 million in September 2005.

It was alleged that KEI and its board of directors attempted to mislead the investors by deliberately making statements that the GDR issue had been subscribed by several investors, when actually the issue was subscribed by only one entity, Fusion Investments Ltd. Moreover, the subscription amount was paid by Fusion after obtaining loan from Banco Efisa, which was secured by pledge agreement between KEI and Banco, the regulator said.

Further, KEI and the board suppressed the facts that the company had provided financial assistance by means of pledge agreement to Fusion for subscription of GDR issue, it added. While the adjudicating proceedings were pending, KEI filed applications under settlement mechanism without admission or denial of guilt and proposed to pay Rs 1,78,50,000 as settlement charges, the Sebi said in an order dated May 16.

The amount was approved by the panel of whole-time members of the regulator. Accordingly, adjudication proceedings for the alleged default are "settled", the Securities and Exchange Board of India (Sebi) said.

(With inputs from agencies.)