GDR manipulation: Sebi imposes Rs 1.65 cr fine on Visu International, 3 individuals for GDR manipulation
A fine of Rs 1.25 crore has been imposed on Visu International, Rs 15 lakh each on B Prabhakar Reddy and Mukesh Charuadiya, and Rs 10 lakh on K Viswanath Reddy.
An investigation was conducted by Sebi with respect to GDR (Global Depository Receipt) issuance by the company during April-May 2006. Visu, currently known as Ed&Tech International Ltd, had issued GDRs amounting to USD 9.66 million. The entire GDRs were subscribed by one entity Seazun, as per a Sebi order.
It was observed that
Efisa had granted loan to Seazun by way of a Credit Agreement for subscribing to the GDRs.
Sebi noted that the company had pledged the entire GDR proceeds to Banco as a security against the loan availed by Seazun from Banco Bank for subscribing to GDRs of Visu by entering into an Account Charge Agreement with Banco Bank.
The watchdog found that Seazun signed a credit agreement with Banco for payment of subscription of GDRs and Chauradiya had signed an account charge agreement with Banco on the behalf of Visu for receiving the subscription money.
The fraudulent arrangement of credit agreement and account charge agreement resulted in subscription of GDR issue of the company and the arrangement was not disclosed by Visu to the stock exchanges, the regulator said.
The individuals, who have been fined, were the directors of Visu during the relevant time of signing of account charge agreement.
Also, they had participated in the company’s board meeting in which a resolution was passed for opening an account with Banco wherein the GDR proceeds would be deposited. A resolution was also passed authorising Banco to use the GDR proceeds of Visu as security against loan, as per the order.
It is established that Visu had deliberately and actively concealed the true and material facts and made several false and misleading disclosures. It also made misrepresentation of facts to the stock exchange and investors in its shares and such acts on the part of the listed company cannot be viewed leniently, Sebi’s Adjudicating Officer Prasanta Mahapatra said while passing the order.
The regulator also noted that the GDR issue would not have been subscribed, if Visu had not given such a security against the loan taken by Seazun.
In February last year, the regulator had restrained Visu International and certain individuals from accessing the securities market for a period ranging from 1 to 5 years.
According to a separate order passed on Thursday, the watchdog imposed a total fine of Rs 4 lakh on R Wadiwala Securities Pvt Ltd for its failure to segregate securities and monies of clients’, among other violations.
