Global Depository Receipts manipulation case: SEBI issues Rs 14-crore demand notice to Jindal Cotex

The Securities and Exchange Board of India (SEBI) on Monday sent a notice to Jindal Cotex Ltd and asked the firm to pay over Rs 14 crore in a matter related to manipulation in issuance of global depository receipts (GDR).

The regulator directed Jindal Cotex Ltd (JCL) to pay over Rs 14 crore, which includes interest and recovery costs, within 15 days.

In the event of non-payment, it will recover the amount by attaching and selling the movable and immovable properties of the firm. The firm will also face attachment of assets and bank accounts and further arrest of its directors, Sebi said.

The notice came after JCL failed to pay the fine imposed on it by the Securities and Exchange Board of India (Sebi).

The regulator in its order in January, 2020, levied a total fine of Rs 10.3 crore on JCL, while its directors and chairman Sandeep Jindal faces a fine of Rs 20 lakh, Rajinder Jindal and Yash Paul Jindal face a fine of Rs 10 lakh each.

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The order came after Sebi conducted an investigation between June and July 2010, and found that the firm had issued 5 million GDRs amounting to USD 38.75 million in June, 2010.

During the probe, Sebi observed that the entire GDRs were subscribed by only one entity, Vintage FZE (now known as Alta Vista International FZE).

The subscription amount for GDR was paid by Vintage after obtaining loan from European American Investment Bank (EURAM).

The regulator found that the loan paid by Vintage was secured by pledge agreement between JCL and EURAM Bank.

Jindal was found to have made false and misleading corporate announcements.

JCL did not inform stock exchanges with regard to pledge agreement entered into with EURAM Bank for subscription of GDRs, delisting of GDRs on Luxembourg Stock Exchange, and termination of GDR programme, which were price-sensitive information and could have impacted the price of the scrip.

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The regulator said that "the GDRs were not issued in a genuine manner, but rather through a fraudulent arrangement".

With this fraudulent arrangement, the firm violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, and by not making requisite disclosures to the exchanges, it violated listing agreements rules, Sebi said.