Market regulator Sebi on Friday levied a fine of Rs 10 crore on MPS Infotecnics for violating market norms in a matter pertaining to issuance of global depository receipts (GDRs) by the firm. The order follows an investigation conducted by Sebi between November-December 2007 to ascertain if shares underlying GDRs of the firm were issued with proper consideration and whether appropriate disclosures in compliance with market norms were made.
The probe found that MPS had facilitated subscription of its own GDR issue by entering into an arrangement where subscriber --Clifford Capital Partners A.G.S.A.-- obtained loan from Lisbon based Banco Efisa S.A Bank for subscribing the GDR issue and MPS pledged the GDR proceeds with the bank for securing the loan taken by Clifford. The corporate announcements made by MPS were false and misleading and the material and price sensitive information were also suppressed. It failed to inform BSE of the account charge agreement entered into with Banco Bank, where the proceeds of GDR were deposited.
It also failed to inform about the delisting of GDRs on Singapore stock exchange and about the termination of GDR facility by Bank of New York Mellon. "The arrangement of MPS, in allotting GDR issue to only one entity i.e. Clifford along with the misleading corporate announcements made by MPS on December 05, 2007, lead to conclusion that the same were done in a fraudulent manner which had the potential to mislead or induce the investors to sale or purchase of its scrip," Sebi said.
In addition, it failed to adhere to provisions of accounting standard. It was observed from the annual report of MPS for the financial year ended 2007-08 that the company had not disclosed an amount of USD 8.8 million lying in deposit account with Banco Bank as contingent liability in its financial statements for the financial year 2007-08 till 2015-16.
Consequently, Sebi slapped a fine of Rs 10 crore on MPS Infotecnics Ltd for violation of market norms. Separately, the regulator levied a fine totalling Rs 9 lakh on eight entities for executing off-market transactions in Kailash Auto Finance Ltd's scrip without consideration.
As per market norms, every contract in securities must be executed through the stock exchange mechanism unless it is a spot delivery contract. The entities by entering into a transaction of shares outside a stock exchange and which is not a spot delivery contract have contravened market norms.
Bharat Zeenath Doshi, Kantilal Jitendra Kumar, Kantilal Kamalabai, Kantilal Bharat Doshi, Kantilal Arvind Kumar, Damayanthi Pravin Kumar, and Arvind Kumar Madhu Doshi are facing a fine of Rs 1 lakh each while Everlight Tie Up Pvt Ltd faces a penalty of Rs 2 lakh.