sebi:WTM/SM/IVD/ID4/11259/2020-21

SEBI · SEBI · 2010-05-12 · S. K. Mohanty, Whole Time Member

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Facts / Headnote

Directions issued under Sections 11, 11B and 11(4) of the SEBI Act, 1992: (i) disgorgement of ₹59.06 Crores jointly and severally from certain Noticees, with interest, (ii) restraint/debarment from accessing the securities market for varying periods (1–3 years) for listed Noticees, (iii) existing holdings frozen during restraint, (iv) Noticee no. 13 (Euram Bank) warned to ensure future dealings comply with law.

Provisions invoked

• s. 11
• s. 19
• s. 11(1)
• s. 12A
• s. 24
• s. 65
• s. 77(2)
• s. 73(2)
• s. 376
• s. 63
• s. 56(4)

Regulations

• Reg. 3
• Reg. 2
• Reg. 3(a)

Holding

The Noticees were held liable for fraudulent and unfair trade practices in connection with Zenith Birla's GDR issue, whereby GDR proceeds worth USD 14.50 million were pledged to secure a loan taken by the sole subscriber (Vintage) and subsequently adjusted against its loan default, effectively issuing GDRs without consideration. Directions including disgorgement of ₹59.06 Crores and market debarment were issued against the Noticees.

Full text

Order in the matter of Zenith Birla (India) Ltd. Page 1 of 92 WTM/SM/IVD/ID4/11259/2020-21 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: S. K. MOHANTY, WHOLE TIME MEMBER

Order in the matter of Zenith Birla (India) Ltd. Page 2 of 92 14. Golden Cliff Not Available (The aforesaid entities are hereinafter individually referred to by their respective names/Noticee nos. and collectively as “Noticees”, unless the context specifies otherwise)

Order in the matter of Zenith Birla (India) Ltd. Page 3 of 92 Panchariya (Noticee no. 6) (for convenience “AP”) signed the Loan Agreement on behalf of Vintage as Managing Director. It was also revealed that Mr. Mukesh Chauradiya (Noticee no. 11) (for convenience “Mukesh”) served as Managing Director, Authorized Signatory and Director of Vintage. (ii) Investigation further revealed that the Company pledged its entire GDR proceeds with Euram Bank as a security against the aforesaid loan availed by Vintage from Euram Bank for subscribing to the GDRs of Zenith. For this purpose, the Company entered into a Pledge Agreement dated May 12, 2010 (hereinafter referred to as the “Pledge Agreement”) with Euram Bank and the said agreement was signed by Noticee no. 2 on behalf of Zenith. Investigation also found that Noticees nos. 2, 3, 4 and 5 were not only signatories to the Board Resolution authorising the Company to enter into a Pledge Agreement, but also were Directors of Zenith during the relevant time of signing of the said Pledge Agreement. It has been noticed that Noticee nos. 2 to 5 participated in the meeting of the Board of Directors (hereinafter referred to as “Board”) of the Company dated March 03, 2010 in which a resolution was passed for opening an account with Euram Bank wherein, the GDR proceeds were proposed to be deposited. The Board further authorised Euram Bank to use the GDR proceeds of the Company as security against loans if any. Default in Loan by Vintage (iii) In

Source: SecMarx — sebi:WTM/SM/IVD/ID4/11259/2020-21. 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.