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New Delhi: Sebi on Tuesday slapped a penalty of Rs 15 crore on Arun Panchariya for alleged fraudulent activities related to the issuance of Global Depository Receipts (GDR) by Winsome Yarns Ltd.
The latest ruling comes less than six months after appellate tribunal SAT, on an appeal filed by Panchariya, asked the watchdog to relook at the matter and also said the Rs 25 crore imposed on him cannot be sustained.
In its order passed in November 2023, the Securities Appellate Tribunal (SAT) affirmed Sebi's findings with respect to the first leg of the transaction about fraudulent activities in the GDR issuance.
However, the SAT had also mentioned that the appellant's connection with the entities concerned in the second leg has not been provided.
"A fraudulent scheme was orchestrated by the noticee (Panchariya), in collaboration with the connected entities and Winsome. Winsome issued a significant number of GDRs, and the noticee, along with his connected entities, played a central role in structuring the GDR issue.
"Panchariya's connected entities were involved in various stages of the issue, including subscribing to GDRs through loans and subsequently selling converted equity shares in the Indian securities market," Sebi's Adjudicating Officer Barnali Mukherjee said in the order on Tuesday.
The noticee and his connected entities acted as conduits in defrauding Indian investors by subscribing to GDRs and selling converted equity shares in the market, the order said.
"It is evident that Arun Panchariya benefitted from the fraudulent scheme," Mukherjee said.
According to Sebi, there are two legs of the convoluted transaction, first is the issuance of GDR and the second leg is the liquidation of the GDRs. It is undeniable that Arun Panchariya had a role in both the legs of transactions.
It is clear that the entities have indulged in issuance of GDRs in a fraudulent scheme, involving misleading investors, concealing crucial information and distorting GDR related information away from the investing public and the same has also been confirmed by SAT in its order.
This itself forms a large part of the manipulative enterprise of convoluted transactions. Whether the noticee has benefited from the device when the GDRs were sold or not is a question of level of evidence available on records.
As per the preponderance of probabilities for which there is enough material on records, the noticee had no other incentive than to enter into such convoluted transactions with the prime objective to cash in on GDRs when they are sold, Sebi said in the order.
However, as now determined by tribunal that the material available for the second leg is required to be beyond reasonable doubt and the trail of the money flow needs to be established to determine the complicity of Panchariya in the second leg of these transactions, it added.