GDR manipulation: Sebi slaps Rs 20.65 cr fine on Aqua Logistics, its directors, 3 others

Markets regulator Sebi on Tuesday slapped a fine totaling Rs 20.65 crore on Aqua Logistics Ltd, its directors, and three other individuals for manipulation in the issuance of global depository receipts (GDR).

The order follows an investigation conducted by Sebi between January 2011 and February 2011 into irregularities in the issuance of GDR by the firm.

Aqua had issued 4.112 million GDRs, amounting to nearly USD 62.38 million, in February 2011.

The entire issue was subscribed by one entity, Vintage FZE (now known as Alta Vista International FZE), on obtaining a loan from European American Investment Bank AG (EURAM Bank).

It was found that the loan was secured by Aqua by pledging the GDR proceeds against the loan availed by Vintage FZE.

Thus, the GDR issuance was done through a fraudulent arrangement, Sebi found in its probe.

Mukesh Chauradia and Arun Panchariya are the key managerial personnel/owner of Vintage, Sebi noted.

Also, Sanjay Aggarwal, the beneficial owner of Sea Dragons Worldwide Ltd, had acted as a conduit of Panchariya and Vintage, through whom money was routed to Vintage.

They also acted as a party to the fraudulent arrangement.

GDRs to the extent of USD 47.42 million were issued by Aqua free of cost to Vintage, and this had caused a loss to shareholders to the tune of USD 47.42 million.

"Aqua had misled the Indian investors by concealing the information of entering into pledge agreement and informing GDR related news in a distorted manner to stock exchange which made investors believe that GDRs were genuinely subscribed," Sebi said in an order.

Moreover, Aqua had provided incorrect information to BSE wherein it had stated that 10 investors subscribed the GDR issue. However, from the documents available on record, it was subscribed by only one entity, Vintage, the regulator said.

The firm made false and misleading corporate announcements and suppressed the material and price sensitive information.

It further violated the accounting standard by not disclosing a contingent liability to the extent of Rs 270.14 crore and Rs 106.08 crore in its financial statements for the financial years 2010-11 and 2011-12, respectively.

Therefore, Sebi levied a fine of Rs 10 crore on Aqua Logistics for flouting several market norms.

In a separate order, Sebi held the directors of the firm -- Rajesh G Uchil, Harish G Uchil and M S Sayad -- liable for fraudulent issuance of GDR and levied a fine of Rs 10 lakh each on Rajesh G Uchil and Harish G Uchil, and Rs 20 lakh on Sayad.

Sayad was authorised to use the funds in the EURAM Bank account of Aqua and with such authorisation he had entered into the pledge agreement with the bank, providing securities for the loan obtained by Vintage, it said.

Besides, Rajesh G Uchil and Harish G Uchil were also part of the board meeting where the resolution was taken to authorise Sayad with broad powers.

"The Noticees being the Directors of Aqua and in charge of the day to affairs of the company at the relevant point in time, are also liable for this fraud committed by the company under their watch," Sebi said.

Noticees refers to the directors.

Panchariya is facing a fine of Rs 10 crore, while Aggarwal and Chauradia are liable to pay a fine of Rs 15 lakh and Rs 10 lakh each, respectively, as per a separate order issued by Sebi.

Numerous other orders of penalty have also been passed in similar cases of manipulation in GDR issues against Chauradia and Panchariya, it added.

The three individuals -- Pachariya, Aggarwal and Chauradia -- have also been barred from accessing securities market for violating market norms in different cases.

In another order issued on Monday, Sebi slapped a fine of Rs 10 lakh on Lyka Labs Ltd for disclosure lapses and violation of market norms with regard to GDR issuance.