sebi:EAD-9/VKV/GSS/2020-21/9665

SEBI · SEBI · 2010-05-05 · Vijayant Kumar Verma, Adjudicating Officer

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Noticee held liable for contravention of Sections 12A(a), (b), (c) of SEBI Act, 1992 read with Regulations 3(a), 3(b), 3(c), 3(d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; penalty imposed under Section 15HA

Provisions invoked

• s. 11B
• s. 15
• s. 19
• s. 12A
• s. 15H
• s. 15J
• s. 15F
• s. 28A
• s. 15I(2)

Regulations

• Reg. 4
• Reg. 3
• Reg. 200
• Reg. 3(a)

Parties

• Arun Panchariya

Holding

The Noticee, Arun Panchariya, was found to have violated Sections 12A(a), (b), (c) of the SEBI Act, 1992 read with Regulations 3(a), 3(b), 3(c), 3(d) and 4(1) of the SEBI (PFUTP) Regulations, 2003 by devising a fraudulent GDR issue of Farmax India Ltd. in collusion with connected entities, causing a loss of USD 72.20 million to FIL shareholders. Penalty was imposed under Section 15HA of the SEBI Act.

Full text

Adjudication Order in respect of Arun Panchariya in the matter of GDR issue of Farmax India Ltd. Page 2 of 27 GDR issue date No. of GDRs issued (mn.) Capital raised (USmn.) Local custodia n No. of equity shares underlyi ng GDRs Global Deposit ory Bank Lead Manager Bank where GDR proceed s were deposite d Stock exchang e on which GDRs are listed 29-6- 2010 4.25 59.925 DBS Bank, Mumbai 10,62,50 ,000 The Bank of New York Mellon Prospect Capital Ltd., London EURAM Bank, Austria Luxembo urg Stock Exchang e 14-8-2010 0.85 11.985 2,12,50,000 Total 5.10 71.91 12,75,00,000

Adjudication Order in respect of Arun Panchariya in the matter of GDR issue of Farmax India Ltd. Page 3 of 27 director. Vintage’s letter dated April 27, 2011 and February 23, 2012 also show that Mukesh Chauradiya was Authorized Signatory of Vintage. i) It was further observed that on the same day of the signing of the Loan Agreement, i.e. May 05, 2010, a Pledge Agreement was also signed between Farmax (as Pledgor) and EURAM Bank (as Bank). j) Vintage had entered into Loan agreement with EURAM Bank as per which Vintage would be provided a loan only for the purpose of subscribing to the GDRs of Farmax. The Loan Agreement mentioned that the loan amount “… may only be transferred to EURAM account No.580018 Farmax India Ltd…”.

Adjudication Order in respect of Arun Panchariya in the matter of GDR issue of Farmax India Ltd. Page 4 of 27 n) GDR proceeds were deposited in Farmax’s account no. 580018 held with EURAM Bank. It was observed during investigation that the account no. 580018 was the same where Farmax showed its GDR proceeds had been deposited. Details of receipt of GDR proceeds in the Farmax.’s bank a/c maintained with EURAM Bank in Austria are as given below:- Date of credit of funds Credit amount (USD) June 28, 2010 59,925,000 August 13, 2010 11,985,000 Total 71,910,000

Source: SecMarx — sebi:EAD-9/VKV/GSS/2020-21/9665. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.