Markets regulator Sebi has slapped a total fine of Rs 30 lakh on three directors of Sybly Industries in a matter related to manipulation in issuance of global depository receipts (GDRs).
The directors -- Satya Prakash Mittal, Mahendra Kumar Gupta and Subodh Kumar Goel -- have been fined for acting as party to the fraudulent scheme, Sebi said in three separate orders on Wednesday.
The orders came following a probe conducted by the regulator to investigate irregularities in the company's allotment of 1.51 million GDR amounting to USD 6.99 million on the Luxembourg Stock Exchange in June 2008.
The entire 1.51 million GDR were subscribed by only one entity, Vintage FZE (now known as Alta Vista International FZE) upon obtaining loan from European American Investment Bank (EURAM).
Sebi noted that the three directors of the firm along with other directors in its board meeting in March 2008 passed a board resolution that authorised EURAM Bank to use Sybly's GDR proceeds as security in connection with the loan.
The board also authorised the firm's managing director and director Umesh Kumar Mittal, to sign any application, agreement, etc., as may be required by EURAM Bank.
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Subsequently, a pledge agreement was signed between Sybly and EURAM Bank whereby Sybly pledged the GDR proceeds against the loan availed by Vintage FZE for subscribing to Sybly's GDR.
Sebi noted that Vintage would not have been able to subscribe the GDR issue had Sybly not given such security towards the loan taken by Vintage.
The orders further note that "the arrangement of loan and pledge agreement, which resulted in the subscription of GDR issue of Sybly was not disclosed to the stock exchange in a true and complete manner but was reported as misleading news to the stock exchange."
In similarly worded separate orders, Sebi said: "the Noticee by approving the aforesaid board resolution in the board meeting held on March 31, 2008, and which subsequently led to execution of the pledge agreement ... has acted as a party to the fraudulent scheme."
Dealings of the directors are in violation of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations.
Consequently, a penalty of Rs 10 lakh each has been slapped on the directors.
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