Sebi has imposed a total fine of Rs 1.75 crore on Resurgere Mines and Minerals India and three individuals for indulging in fraudulent schemes for the subscription of GDR (Global Depository Receipt) issued by the company.
An investigation was conducted by Sebi concerning GDR issuance by the company from June to July 2010.
During the probe, it was found that the company had issued $5.21 million GDRs in June 2010 for raising $53.75 million.
Sebi observed that all the GDRs were subscribed by only one entity, Vintage FZE, on obtaining a loan from European American Investment Bank AG (EURAM).
As per the order, the company had pledged the entire GDR proceeds with EURAM as a security against the loan availed by Vintage from EURAM for subscribing to GDRs of Resurgere by entering into a Pledge Agreement.
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However, the regulator observed that the loan agreement was inseparably linked to the pledge agreement and vice versa, and both were executed consecutively.
"By entering into such an arrangement, the Noticees 2, 3 and 6, Subhash Sharma, Amit Sharma, and Nitin Sethi, respectively, have led the investors in India to believe that the issuer company i.e. Resurgere has got a good reputation in terms of investment potential because of which, foreign investors have enthusiastically subscribed to its GDR, whereas in reality, the GDRs were subscribed by Vintage with the help of the company itself," Sebi said.
The company had facilitated the subscription of GDR by Vintage on the strength of a loan obtained by it from EURAM Bank against which the GDR proceeds were kept as security, Sebi said.
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Further, the regulator said the pre-determined fraudulent and manipulative acts of a few entities damage the integrity of the market and the genuine investors are put at risk.
A fine of Rs 1.25 crore has been imposed on Resurgere.
Besides, Subhash Sharma, Amit Sharma, and Nitin Sethi are facing a fine of Rs 25 lakh, Rs 15 lakh, and Rs 10 lakh, respectively.
According to another order passed on Thursday, the watchdog imposed a fine of Rs 9 lakh on Rahul Chokhany for violating the provisions of the Securities Contracts (Regulation) Act.
It was found that Chokhany (stock broker) had misused the credit balance clients' funds for meeting settlement obligations of debit balance clients and own purposes, among other violations.
Separately, an entity -- Creative Vision Industries Pvt Ltd -- has been slapped with a Rs 5 lakh fine for its failure to comply with the summons issued by the regulator in the matter of Supreme Tex Mart.
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