SAT sets aside Sebi's order against former Commex Tech dir in GDR manipulation case

Securities Appellate Tribunal (SAT) has set aside Sebi order to ban a former Commex Technology director from securities market for two years in a matter related to manipulation in issuance of global depository receipts.

While setting aside the order passed, the tribunal said, "The finding of the WTM (whole time members) against the appellant Adi Cooper is wholly misconceived, farfetched and cannot be accepted to come to a conclusion that the said appellant was party to a resolution which had an intention to manipulate the market or defeat its mechanism".

The regulator in March banned the firm and its two former directors -- Adi Cooper and Kishore Hegde -- after conducting a probe, which found that Commex had issued 1.91 million GDRs worth USD 9.99 million on May 25, 2009, on the Luxembourg Stock Exchange.

It was observed that the entire 1.91 million GDR were subscribed by only one entity Vintage FZE and the subscription amount was paid by Vintage after obtaining loan from European American Investment Bank (EURAM).

It further noted that the loan paid by Vintage was secured by pledge agreement between Commex and EURAM Bank and that GDR issue would not have been subscribed if Commex had not given such security towards the loan taken by Vintage.

While banning the former directors, Sebi said they were members of board of directors who approved the resolution regarding GDR issue and thereby acted as parties to fraudulent arrangement of subscription of GDR.

However, SAT in its order noted that Cooper had "resigned on October 10, 2008 and thereafter had no connection with the affairs of the company".

The resolution regarding GDR issue cannot be considered the first step or the starting point of a fraudulent arrangement through which the company could facilitate the financing of the GDR subscription by Vintage, the tribunal said.

It held that Cooper was "neither directly or indirectly involved in any fraudulent activity nor employed any scheme to defraud any shareholder or investor.

"We are of the opinion that the order of the WTM debarring the appellant Adi Cooper from accessing the securities market for two years cannot be sustained," it said.

However, regarding Kishore Hegde, SAT said the order debarring him from accessing the securities market "does not suffer from any error of law".

Hegde was an independent director of the firm and Chairman of the audit committee of the company and was involved in day to day affairs of the company cannot be ruled out, it added.