sebi:WTM/SM/IVD/ID4/6667/2019-20
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Facts / Headnote
Violations established; directions issued including bringing back USD 2.27 million diverted to Seazun within three months, compliance certification by Chartered Accountant, and market access restraints on Noticees 2-7 for periods of one to three years
Provisions invoked
- s. 11B
- s. 11
- s. 19
- s. 11(1)
- s. 12A
Regulations
- Reg. 3
- Reg. 4(1)
- Reg. 3(a)
Parties
- M/s. Rana Sugars Ltd. (Noticee no. 1)
- Mr. Rana Ranjit Singh (Noticee no. 2)
- Mr. Rana Inder Pratap Singh (Noticee no. 3)
- Mr. A. S. Sodhi (Noticee no. 4)
- Mr. S. A. S. Bajwa (Noticee no. 5)
- Mr. Rana Veer Pratap Singh (Noticee no. 6)
- Mr. Baljit Singh (Noticee no. 7)
Holding
The Company (Noticee no. 1) and its directors (Noticees 2-7) were found to have violated Section 12A(a),(b),(c) of the SEBI Act read with Regulations 3(a)-(d) and 4(1), 4(2)(f),(k),(r) of the PFUTP Regulations by concealing the Account Charge Agreement and Credit Agreement arrangement that facilitated fraudulent GDR subscription and misleading disclosures to investors.
Full text
Order in the matter of M/s. Rana Sugars Ltd. Page 2 of 52 BACKGROUND 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted an investigation into the issue of Global Depository Receipts (hereinafter referred to as “GDR”) by M/s. Rana Sugars Limited (hereinafter referred to as “Rana Sugars/Company/Noticee no. 1”). The investigation pertains to the period April 1, 2006 to May 31, 2006.
Order in the matter of M/s. Rana Sugars Ltd. Page 3 of 52 4. Investigation further revealed that the Company stood guarantor and deposited the entire GDR proceeds received from Seazun with Banco Bank as a security against the loan that was availed by Seazun from Banco Bank for subscribing to the GDRs issued by the Company, in terms of an Account Charge Agreement dated May 15, 2006 signed by the Company with Banco Bank (hereinafter referred to as the “Account Charge Agreement/Pledge Agreement”). It was further observed that the GDRs were subsequently converted into equity shares and were sold in the Indian Securities Market. During the course of investigation, it was noticed that the Company had not disclosed to the investors about the aforesaid arrangement so made by it with Banco Bank so as to ensure a successful issuance/subscription/allotment of GDRs by way of facilitating Seazun to avail a loan from Banco Bank. It was further concealed from the public that the proceeds of GDRs would be kept as security with the Banco Bank and would not be available to it for utilization, and thereby, the Company misled the Shareholders/investors at large, by providing partial and distorted information about its GDR issue in overseas market. It was also revealed in the investigation that out of the total GDR proceeds, an amount of US $2.27 million had been diverted by the Company to Seazun without any justification for such transfers.
Order in the matter of M/s. Rana Sugars Ltd. Page 4 of 52 SHOW CAUSE NOTICE, REPLY AND HEARING 6. In view of the aforesaid facts and circumstances, a common Show Cause Notice (hereinafter referred to as “SCN”) dated June 23, 2017 was issued to all the Noticees, calling upon them to show cause as to why suitable directions shall not be issued against them under Sections 11, 11B and 11(4) of the SEBI Act. Subsequently, a supplementary SCN dated June 12, 2018 was issued to the Company (Rana Sugars) asking the Company to show cause as to why a further direction for bringing back the money diverted to Seazun should not be issued. The Noticees initially sought time to file its reply to the SCNs, however, did not submit any reply. Thereafter, in the interest of principles of natural justice, Noticees were provided with an opportunity of personal hearing on November 22, 2018, which was subsequently rescheduled to February 12,
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Source: SecMarx — sebi:WTM/SM/IVD/ID4/6667/2019-20. 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.