The regulator levied a fine of Rs 12.1 crore on K Sera Sera Ltd now known as KSS Ltd, and Rs 1 crore each has been imposed on — Hussain Sattaf and Rajesh Pavithran.
Sebi upon receipt of alerts in its surveillance system started an investigation in certain companies that had come out with their respective issues of Global Depository Receipts (GDRs).
During the investigation period, the watchdog noted that KSS had come up with its GDR issue on two separate occasions and the company decided to raise funds from investors outside India through the issuance of GDRs by appointing Pan Asia as its lead manager.
Pan Asia is an entity controlled by Arun Panchariya.
The entire GDR issue was subscribed by only one entity — Vintage on both the occasions, Sebi noted.
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 order noted.
While signing the pledge agreement, KSS was clearly aware that Vintage had acquired a loan and the same was being secured by way of money deposited by KSS in its bank account with Euram, Sebi said.
Thereafter, the major portion of GDR proceeds was not received by KSS in India and funds were transferred directly to either subsidiary in UAE or to other foreign-based entities linked with Panchariya’s GDR Scheme, it added.
The regulator also noted that the summons were sent to KSS seeking details regarding utilisation of GDR proceeds by the company, but it had failed to provide critical information like the particulars of the end-use of GDR proceeds by its foreign subsidiaries.
Thus, due to the deliberate non-submission of the information by KSS, the regulator could not investigate from the angle of the utilisation of GDR issue proceeds and the same has hampered a very crucial aspect of the investigation.
The individuals were the directors of KSS when the fraudulent scheme was executed and had been vested with substantial powers in connection with the issue of GDRs, the regulator said.
Besides, they were the authorised signatory on behalf of KSS to execute the fraudulent schemes.
Accordingly, they have been penalised for violating the norms of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP).
While imposing the fine Sebi said the violation of PFUTP norms was a repeated violation as the same modus operandi was employed by KSS in the both GDR issues, leading to defrauding Indian investors on two different occasions.
Sebi in September 2017 had imposed a market ban on KSS, Sattaf and Pavithran for a period of ten years.