Capital markets regulator Sebi on Tuesday slapped a total fine of Rs 15.4 crore on Chromatic India Ltd and its senior officials in a matter related to manipulation in issuance of global depository receipts (GDR).
The officials who have been fined are firm's directors Vinod Kumar Kaushik and Ajay Sethi.
Sebi had conducted an investigation of several Indian companies that had issued GDRs in overseas market with the intention of defrauding Indian investors. Chromatic India was among the companies investigated by Sebi in connection with GDR issue.
Chromatic India had issued 4.2 million GDRs amounting to USD 35.78 million in October 2010. The entire GDRs were subscribed by only one entity, Vintage FZE
"The company by entering into a pledge agreement with the Euram Bank and having a loan agreement signed between Euram Bank and Vintage FZE ...,wherein Vintage was the only entity to have subscribed the aforementioned GDR issue of the company, fraudulently issued GDRs," Sebi noted.
The firm made false and misleading corporate announcements and also suppressed material and price sensitive information pertaining to execution of pledge agreement by the firm in favour of Euram Bank, pledging the GDR proceeds for providing security to the loan taken by Vintage.
In addition, the firm also failed to follow accounting standards by failing to disclose and make provisions for potential liability arising out of pledging of GDR proceeds.
Accordingly, Sebi levied a total fine of Rs 10.2 crore on the firm, while the officials -- Kaushik and Sethi -- face fines of Rs 5 crore and Rs 20 lakh, respectively.
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