GDR manipulation: Sebi levies Rs 10.7 cr fine on Jindal Cotex, 3 officials

Markets regulator Sebi on Thursday slapped a total fine of Rs 10.7 crore on Jindal Cotex and its three officials in a matter related to manipulation in issuance of global depository receipts (GDR).

Managing director of the firm Sandeep Jindal, whole time director Rajinder Jindal, and chairman Yash Paul Jindal are the officials on whom the regulator has levied fines.

The regulator, during an investigation conducted between June 2010 to July 2010, found that the firm had issued 5 million GDRs amounting to $38.75 million on June 30, 2010, equivalent to 2,00,00,000 equity shares of Rs 10 each.

During the probe, Sebi observed that the entire 1.51 million 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).

Sebi found that the loan paid by Vintage was secured by pledge agreement between Jindal and EURAM Bank.

The firm was found to have made false and misleading corporate announcements.

Jindal 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 program, which was price sensitive information and could have impacted the price of the scrip.

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 Prohibition of Fraudulent and Unfair Trade Practices regulations and by not making requisite disclosures to the exchanges it violated Listing Agreements norms.

Accordingly, a total fine of Rs 10.3 crore has been imposed on the firm, while Sandeep Jindal faces a fine of Rs 20 lakh and Rajinder Jindal and Yash Paul Jindal face a fine of Rs 10 lakh each.