Sebi imposes Rs 25 cr fine on an individual in Winsome Yarns GDR issue matter

New Delhi: Markets regulator Sebi on Thursday imposed a penalty of Rs 25 crore on an individual in a matter pertaining to issuance of global depository receipts (GDR) by Winsome Yarns Ltd. The individual-- Arun Panchariya-- is facing fine for violating Prohibition of Fraudulent and Unfair Trade Practices norms.

Winsome had issued GDRs amounting to USD 13.24 million in March 2011.

Investigation revealed that Vintage FZE (now known as Alta Vista International FZE), an entity controlled by Panchariya, was the sole subscriber of the GDR issue.

Vintage availed loan from EURAM Bank in order to subscribe to the issue.

For the loan,Winsome had pledged the GDR proceeds as collateral.

Pan Asia Advisors (now known as Global Finance and Capital Ltd) was the lead manager for the GDR issue of Winsome and Panchariya was Pan Asia's director.

Further, FII-sub-accounts connected to Panchariya converted the GDRs and sold 56.36 lakh converted equity shares amounting to Rs 69.21 lakh in the Indian securities market.

Thus, Sebi found that Panchariya, in connivance with the GDR issuer company, devised and structured a fraudulent scheme through his connected entities.

"It is established that the Noticee ( Arun Panchariya) was responsible for the fraudulent scheme and arrangement for subscription of GDRs of Winsome whereby Winsome shareholders were misled and defrauded," Sebi said.

Consequently, Sebi levied a fine of Rs 25 crore.

In another matter pertaining to manipulative issuance of GDR, Sebi levied a fine of Rs 12 crore on Farmax India. Farmax issued GDRs amounting to USD 59.92 million in June 2010 and further issued GDRs amounting to USD 11.98 million in August 2010.

The GDRs were subscribed by Vintage, on obtaining loan from EURAM Bank, for which Farmax provided security.

In this regard, the firm made misleading disclosures and also failed to make material disclosures.

Besides, in its annual report for financial years 2010-12, Farmax did not disclose the contingent liability and thus failed to follow accounting standards, Sebi noted.

Accordingly, for violation of several market norms, Sebi imposed a fine of Rs 12 crore.