sebi:Order/KS/AE/2021-22/14578-14585

SEBI · SEBI · 2007-12-12 · K Saravanan, Adjudicating Officer

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Facts / Headnote

Penalty imposed on Noticees 1 and 2 under Section 15HA of SEBI Act for fraudulent and unfair trade practices; Noticees 2 to 8 also held liable under Section 15HA for violations of Section 12A(a),(b),(c) read with PFUTP Regulations

Provisions invoked

• s. 11B
• s. 11
• s. 15A
• s. 15
• s. 19
• s. 12A
• s. 12
• s. 15H
• s. 27
• s. 15J
• s. 11C(6)
• s. 11C(3)
• s. 28A
• s. 21
• s. 23J
• s. 27(1)
• s. 23
• s. 23E
• s. 138
• s. 77(2)

Regulations

• Reg. 3
• Reg. 4(2)(f)
• Reg. 3(c)
• Reg. 15
• Reg. 3(b)
• Reg. 12
• Reg. 4(2)(c)

Parties

• Cals Refineries Ltd (Noticee 1)
• Devanathan Sundararajan (Noticee 2)
• Asia Texx Enterprises Limited (Noticee 3)
• Gagan Rastogi (Noticee 4)
• Deep Kumar Rastogi (Noticee 5)
• Sanjay Rai Malhotra (Noticee 8)
• Ravi Chilukuri (Noticee 7)
• Sarvesh Goorha

Holding

Noticee 1 (Cals Refineries Ltd) and Noticee 2 (Sundararajan) were found to have violated Section 12A(a),(b),(c) of the SEBI Act read with Regulations 3(b),(c),(d) and 4(2)(c),(f),(k),(r) of the PFUTP Regulations, and Noticees 2 through 8 were found to have violated Section 12A(a),(b),(c) read with Regulations 3(b),(c),(d) and 4(2)(c),(f),(k) of the PFUTP Regulations, making them liable for penalty under Section 15HA of the SEBI Act.

Full text

Page 2 of 148 Refineries Ltd (hereinafter referred to as “Cals” / “Noticee 1”). During the course of investigation, it was observed that Cals issued 78,80,000 GDRs (amounting to USD 200 million) and issue closed on December 12, 2007. It is alleged in the Investigation Report (IR) that as the authorised signatory of Cals, Sarvesh Goorha (Promoter and Director of Cals) (hereinafter referred to as "Goorha") signed an Account Charge Agreement with Banco Efisa, a Portugal based bank (hereinafter referred to as "Banco"). The aforesaid Account Charge Agreement was an integral part of another agreement viz. Credit Agreement signed between Honor Finance Limited (hereinafter referred to as "Honor") and Banco. Honor was beneficially owned by Sanjay Rai Malhotra (hereinafter referred to as "Sanjay Malhotra"). These agreements enabled Honor to avail a loan of US $200 million from Banco for subscribing to the GDR issue of Cals. In terms of the Account Charge Agreement, Cals deposited the GDR subscription proceeds received from the subscriber i.e. Honor, as security for the loan availed by Honor from Banco. The Account Charge Agreement contained a clause to the effect that all communications to be given under the Agreement were to be addressed to either Goorha or Devanathan Sundararajan (Director of Cals) (hereinafter referred to as "Sundararajan"). Goorha and Sundararajan were also authorised signatories for Cals. As the Account Charge Agreement was expiring, an Extension Agreement was sig

Page 3 of 148 subscribed. It was observed that the names of initial investors provided by Cals to BSE and SEBI were false and misleading as the only subscriber to the GDRs issue was Honor. It was further observed that Cals paid USD 92 million to a promoter controlled entity viz. Asia Texx Enterprises Limited, Hong Kong (hereinafter referred to as "Asia Texx"). The beneficial owner of Asia Texx was Gagan Rastogi (hereinafter referred to as "Gagan"), who was one of the Promoters of Cals. Gagan is also the son of Deep Kumar Rastogi (hereinafter referred to as "Deep Kumar"), who was a Director of Cals. It was alleged that the above transaction between Cals and Asia Texx was fraudulent as the transaction was structured to settle the outstanding liability of Honor to Banco using the funds of Cals. Gagan obtained 25 million GDRs of Cals by using the funds of Cals. No refinery equipments have been received from Asia Texx. The money was ultimately used by Honor (owned by Sanjay Malhotra- promoter of Cals) to repay the outstanding loan to Banco. Cals had furnished misleading submissions to SEBI and also concealed material information from SEBI.

Page 4 of 148 Act’) read with Regulations 3(b), (c), (d), 4(2)(c), (f), (k) & (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’). Further, it is also alleged that Noticee 1 and Noticee 2 had failed to submit certain information demanded by SEBI and also submitted false information and, by doing so, have violated the provisions of Section 11C(3) read with 11C(6) of SEBI Act. Further, it is also alleged that Noticee 1 has violated Clause 35 of Listing Agreement read with Section 23E of Securities Contracts Regulations Act, 1956 (hereinafter referred to as “SCRA”). Accordingly, adjudication proceedings was initiated against the Noticees and Honor under Section 15HA of SEBI Act, Section 15A(a) of SEBI Act, and Section 23E of SCRA, as applicable. Subsequently, vide adjudication order dated January 15, 2021, the adjudication proceedings against Honor was disposed of. APPOINTMENT OF ADJUDICATING OFFICER

Source: SecMarx — sebi:Order/KS/AE/2021-22/14578-14585. 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.