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Sebi slaps Rs 45 lakh fine on three individuals for IPO fund diversion

Mini

Sebi on Friday imposed a total fine of Rs 45 lakh on three individuals for diverting proceeds from the initial public offer of Paramount Printpackaging Ltd (PPL) and making wrong disclosures. A fine of Rs 15 lakh each has been imposed on Divyesh Ashwin Sukhadia, Dharmesh Ashwin Sukhadia and Anuj Vipin Sukhadia, the regulator said in a 50-page order.

Sebi slaps Rs 45 lakh fine on three individuals for IPO fund diversion
Sebi on Friday imposed a total fine of Rs 45 lakh on three individuals for diverting proceeds from the initial public offer of Paramount Printpackaging Ltd (PPL) and making wrong disclosures. A fine of Rs 15 lakh each has been imposed on Divyesh Ashwin Sukhadia, Dharmesh Ashwin Sukhadia and Anuj Vipin Sukhadia, the regulator said in a 50-page order.
The watchdog investigated to check about the utilisation of IPO proceeds of PPL. The IPO was done in April 2011 and the shares were listed in May that year. It was observed that PPL first raised money through the IPO route by concealing material information, making false/ wrong and inadequate disclosures regarding vendors. Later, the money was transferred to pre-decided vendors within a few days and thereby mis-utilised and diverted the IPO proceeds, as per the order.
According to the order, PPL as a company had mis-utilised Rs 35 crore and diverted Rs 34 crore to nine vendors. The three individuals provided wrong disclosures in the prospectus, as they never intended to utilise the IPO proceeds for the objects stated in the prospectus, as per the order.
Further, the watchdog noted that the account of PPL became a non-performing asset by the end of 2013. In 2018, the Bombay High Court ordered winding up of the company. Noting that PPL was owned by Sukhadia family, the regulator said the three individuals were in charge of the affairs of the company before and after listing of its shares.
"I find that by making reckless and careless representation and by making false, misleading, deceptive and manipulative disclosures in the prospectus, the noticees misled the investors and induced them to subscribe to the shares in the IPO of PPL," Sebi's Adjudicating officer Prasanta Mahapatra said in the order. Also, the order said the three individuals had provided false information regarding utilisation of the IPO proceeds.
In two separate orders passed on Friday, Sebi imposed a fine of Rs 5 lakh each on two individuals for indulging in fraudulent trading activities in the scrip of Hasti Finance Ltd. As per the orders, they had manipulated the price of the scrip and created a misleading appearance of trading.

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