Facts: Securities and Exchange Board of India passed an order imposing penalty of Rs. 72 crore in the matter of Winsome Textile Industries Ltd (“Winsome”) wherein company was involved in the issuance of Global Depository Receipts (GDR). The directors involved in this matter were Ashish Bagrodia, Manish Bagrodia and Satish Girotra.
Analysis: Company issued 1.29 million GDRs amounting to USD 9.99 million for which Pan Asia Advisors Ltd was appointed as the lead manager for the issue. Mr. Arun Panchariya was the managing director of Pan Asia Advisors Ltd.
Further SEBI conducted investigation in which it was revealed that Vintage FZE (“Vintage”) was the sole subscriber of the GDR issue. Mukesh Chauradiya was Vintage’s managing director and Arun Panchariya was its 100 per cent beneficiary. Vintage FZE availed loan from EURAM Bank in order to subscribe to the issue. To avail the loan, Winsome had pledged the GDR proceeds as collateral security.
Further foreign institutional investor Vintage FZE, connected to Arun Panchariya, converted the GDRs and Aspire Emerging Fund sold converted equity shares of Rs 1.11 crore in the Indian securities market. In addition, the company made misleading corporate announcements and failed to inform the stock exchanges about the delisting of the GDRs from the Luxemburg Stock exchange.
Winsome fraudulently made investors in the securities market in India to believe that the full consideration for GDRs had been received by the company which was not true and thereby, investors in India were induced to deal in securities, and committed fraud on the investors in India,” SEBI said that directors also acted as a party to the fraudulent scheme of GDR issuance.
Judgment: SEBI in his order dated 15th December 2021 barred Winsome, its three directors along with managing director of Vintage FZE, and Arun Panchariya, Mukesh Chauradiya of Pan Asia Advisors from the securities market for differing time periods. Also, Foreign Portfolio investor company, Aspire Emerging Fund has been directed to discharge illegal gains of Rs 1.11 crore made out of equity issue, along with 12 per cent interest from the date of sale of equity shares.
SEBI further levied Rs 4.4 crore fine on the firm, Rs 67 crore fine on Arun Panchariya, Rs 59 lakh fine on the three directors of Winsome and Rs 67 lakh fine on Mukesh Chauradiya managing director of Vintage FZE. Hence, due to the abovementioned reasons SEBI penalized Rs. 72 crore on Winsome Textile Industries.
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