sebi:Order/KS/PP/2020-21/10156-10158

SEBI · SEBI · 2016-06-15 · K Saravanan, Chief General Manager and Adjudicating Officer

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Facts / Headnote

Penalties imposed: KSS Rs. 12,00,00,000 under Section 15HA and Rs. 10,00,000 under Section 15A(a); Shri Hussain Sattaf Rs. 1,00,00,000 under Section 15HA; Shri Rajesh Pavithran Rs. 1,00,00,000 under Section 15HA

Provisions invoked

• 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. 27(1)
• s. 376
• s. 29
• s. 2(60)

Regulations

• Reg. 3
• Reg. 4(2)
• Reg. 4(2)(f)
• Reg. 3(c)
• Reg. 3(b)
• Reg. 3(d)
• Reg. 4(2)(r)
• Reg. 4(2)(k)
• Reg. 28(2)
• Reg. 4(2)(c)

Parties

• K Sera Sera Limited
• Shri Hussain Sattaf
• Shri Rajesh Pavithran

Holding

The Adjudicating Officer held KSS liable for fraudulent and unfair trade practices in its GDR issuances (pledging GDR proceeds to secure loans to Vintage for GDR subscription, with subsequent conversion and sale of underlying shares by entities connected to AP), and held directors Shri Hussain Sattaf and Shri Rajesh Pavithran equally liable for their role in executing the relevant documents. KSS was also held liable for non-furnishing and misleading submission of information under Section 11C(3) of the SEBI Act.

Full text

Page 2 of 69 Running Lead Manager for both of these said GDR issues of KSS. Further, it was also observed that one Mr. Arun Panchariya (hereinafter referred to as ‘AP’) was the founder, director as well as 100% shareholder of Pan Asia. It is alleged in the Investigation Report (IR) that the complete process of GDR issuances by KSS was devised and structured by AP in connivance with KSS to the detriment of the Indian investors wherein loans were arranged for the subscription of GDRs of KSS on both these occasions. It is further alleged that AP was Managing Director, 100% shareholder and Authorized Signatory of Vintage. Thereafter, using certain Foreign Institutional Investors (FIIs), AP got the GDRs converted into underlying shares and sold them in the Indian securities market with the help of certain domestic entities connected to him.

Page 3 of 69 APPOINTMENT OF ADJUDICATING OFFICER 3. Shri Suresh Gupta was appointed as the Adjudicating Officer vide Order dated June 15, 2016 under Section 19 read with Section 15-I(1) of the SEBI Act read with Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 (hereinafter referred to as ‘Adjudication Rules’) to inquire into and adjudge under the provisions of Section 15A(a) and Section 15HA of the SEBI Act, the violations of the relevant provisions of SEBI Act and PFUTP Regulations, alleged to be committed by the KSS and its directors. Subsequently, the undersigned was appointed as the Adjudicating Officer vide order dated July 05, 2018.

Page 4 of 69 GDR issue close date No. of GDRs Issued Capital raised (US mn.) No. of equity shares underlying GDRs Lead Manager Bank where GDR proceeds were deposited November 02,2007 47,61,900 25 4,76,19,000 Pan Asia Advisors Ltd EURAM Bank, Austria October16, 2009 44,75,238 29.98 13,42,57,140 Pan Asia Advisors Ltd EURAM Bank, Austria b. The following were the investors in the first GDR issue of K Sera as submitted by K Sera vide its letter dated November 02,2011(Annexure-II). Name of Subscriber GDRs Subscribed Amount Paid (USD) % of total GDR issue Rexflec 5,00,000 26,25,000 10.50 Figura 4,21,900 22,14,975 8.86 Tradetec 9,90,000 51,97,500 20.79 Knightsbridge Management Inc. 10,00,000 52,50,000 21.00 Flamboyant 9,00,000 47,25,000 18.90 Greenwich 9,50,000 49,87,500 19.95 c. Further, following were the investors in the Second GDR issue of K Sera as submitted by K Sera. Name of Subscriber GDRs Subscribed Amount Paid (USD) % of total GDR issue Dynamic holding Investment Corp 5,75,000 38,52,500 12.85 Greenwich 4,75,000 31,82,500 10.61 Ababil 3,25,000 21,77,500 7.26 Figura 5,48,000 36,71,600 12.25 Flagstaff 5,23,000 35,04,100 11.69 Tradetec 4,69,238 31,43,895 10.49 Imagination 5,25,000 35,17,500 11.73 Echelon 5,50,000 36,85,000 12.29 Flamboyant 4,85,000 32,49,500 10.84

Source: SecMarx — sebi:Order/KS/PP/2020-21/10156-10158. 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.