GDR manipulation case: SEBI slaps Rs 11.45 crore fine on Maars Software, 3 individuals

The company also made false and misleading corporate announcements stating that the GDRs were issued and allotted without disclosing the crucial details.
For representational purposes.
For representational purposes.

NEW DELHI: Capital markets regulator SEBI has imposed penalties totalling Rs 11.45 crore on Maars Software International Ltd (MSIL) and three individuals for fraudulent activities in issuance of global depository receipts.

The watchdog had conducted a probe with respect to Global Depository Receipts (GDR) issuances by certain companies.

MSIL came out out with a GDR issue on August 10, 2007.

A fine of Rs 10.25 crore has been imposed on MSIL and Rs 1 crore on Pravin Champalal Jain who was the company's Managing Director.

Harshawardhan S Rathore and Nikunj Babulal Choradiya have been asked to pay a fine of Rs 10 lakh each.

All the three individuals were the directors of MSIL at the time of violation.

It was found that Pan Asia Advisors Ltd was the book running lead manager for the GDR issue by MSIL.

One Arun Panchariya was the Founder, Director as well as 100 per cent shareholder of Pan Asia, which was the only subscriber to the issue.

According to SEBI, the investigation report said the complete process of the company's GDR issuance was devised and structured by Panchariya in connivance with the company.

This was detriment to Indian investors wherein loans were arranged for the subscription of GDRs of MSIL by Vintage FZE, it added.

Panchariya was also the Managing Director, 100 per cent shareholder and authorised signatory of Vintage, a Dubai-based entity.

"Using the GDR issue, the fraudulent impression, created before the investors in Indian securities market, showed MSIL as a company to be of international reputation and better investment opportunity," the order said.

The GDRs were issued only to Vintage, which subscribed to the issue by obtaining loan from Euram Bank.

The loan was secured by MSIL by pledging its GDR proceeds.

The company also made false and misleading corporate announcements stating that the GDRs were issued and allotted without disclosing the crucial details pertaining to the loan and pledge agreements which were price sensitive information, as per SEBI.

Vintage had availed a loan facility to the extent of USD 17.933 million from Euram Bank solely for the purpose of subscribing to the GDRs of MSIL , SEBI said in the order dated July 28.

The regulator noted that from the beginning, MSIL and Pravin were aware of the fact that Vintage was the only initial subscriber of the GDR issue.

Despite clear knowledge about the subscriber to the GDR issue, MSIL and Pravin disclosed non-factual information which buttresses their malafide intention behind withholding the correct actual information, the regulator said.

Pravin resigned as Managing Director of MSIL in January 2008.

Further, the regulator said that MSIL did not disclose the details of the loan agreement of Vintage and its own pledge agreement with Euram Bank at the time of the GDR issue.

Non-disclosure of loan agreement and pledge agreement was done so as to create a fraudulent impression in the minds of the public investors that the said GDR issue was genuine in nature and the company had received the funds and the same were available for the free use of MSIL, SEBI said.

Harshawardhan S Rathore and Nikunj Babulal Choradiya had failed to provide information to the investigating authority despite issuance of different summons.

In addition,MSIL failed to disclose details of outstanding GDRs in its quarterly disclosures of shareholding pattern to the BSE, SEBI said.

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