sebi:WTM/RKA/ISD/11/2013
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Facts / Headnote
Ad-interim ex-parte order restraining promoters from accessing the securities market pending investigation, and directing the board of ZIL to furnish bank guarantees of USD 33.93 million in favour of SEBI
Provisions invoked
- s. 19
- s. 12A
- s. 21
Regulations
- Reg. 3
- Reg. 2(1)(c)
- Reg. 12
- Reg. 12(2)
Parties
- Zenith Infotech Ltd (ZIL)
- Devita Rajkumar Saraf (Promoter)
- Vijayrani Rajkumar Saraf (Promoter)
- Zenith Technologies Pvt Ltd (Promoter)
- Vu Technologies P Ltd (Promoter)
- Rajkumar Saraf (Promoter and Chairman cum Director)
- Akash Rajkumar Saraf (Promoter and Managing Director)
Holding
SEBI prima facie found that ZIL and its promoters/directors violated Section 12A(b) and (c) of the SEBI Act and Regulations 3(c) and (d) of the PFUTP Regulations by fraudulently diverting sale proceeds of the MSD Division away from FCCB redemption as authorized by shareholders, and by concealing the FCCB default and related litigation from stock exchanges. SEBI issued an ad-interim ex-parte order restraining the promoters from accessing the securities market and directing the ZIL board to furnish bank guarantees of USD 33.93 million.
Full text
Page 2 of 11 5. A resolution was passed by the shareholders of ZIL at its EGM held on January 29, 2011 approving and authorizing its Board of Directors to raise money for repayment/redemption of FCCBs in one or more of the following methods: a) "To borrow moneys from Domestic markets and/or through External Commercial Borrowings up to an amount not exceeding ₹ 1,500 Cr. b) To sell and/or lease the business and/or divisions including the subsidiaries (wholly and partly) of the company and for that purpose to issue debt securities/bonds, etc, in the domestic or international markets, as permitted by law......." ZIL submitted a copy of the approved resolution to the Exchange (NSE) on February 15, 2011.
Page 3 of 11 Price – Volume movement during the period September 23, 2011 to November 30, 2011 9. Vide letter dated December 10, 2011 ZIL submitted to SEBI that the matter of redemption of FCCBs is sub judice in a Suit(L) No. 3091 of 2011 before the Hon'ble High Court of Bombay. It further provided a copy of an affidavit dated November, 28, 2011 filed by Mr. Raj Kumar Saraf in the said Suit. ZIL has also submitted that it was in negotiations with the FCCB holders to make full or part payment or extend the maturity date. Further, ZIL stated that it did not make disclosure of the default as it would have prejudicially affected the interest of the company and its stakeholders. Yet the above price movements reveal that the uncertainty surrounding the event of redemption had, prima facie, substantially harmed the interest of the shareholders by the time of subsequent confirmation at BSE.
Page 4 of 11 ii. 15 % Equity stake in ZRLC, the value of which is approximately US$ 7.4 million (as disclosed by ZIL). d) Out of the cash proceeds of US$48mn; i. ZIL received US$ 21mn. ii. The remaining amount of US$ 27mn was given to a wholly owned subsidiary of ZIL, Zenith Infotech (FZE), based in Dubai, ('Zenith Dubai') as consideration for Software & Intellectual Property Rights of MSD Division held by it. e) The 15% equity stake in ZRLC, i.e. non-monetary part of the deal, was also issued in favor of Zenith Dubai.
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Source: SecMarx — sebi:WTM/RKA/ISD/11/2013. 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.