On May 26, 2020, markets regulator Securities and Exchange Board of India (SEBI) slapped a fine of over Rs. 11 crore on Asahi Infrastructure and Projects Ltd. and its senior official in a matter related to manipulation in the issuance of global depository receipts (GDR).
A global depositary receipt (GDR) is basically a bank certificate issued in more than one country for shares in a foreign company.
Mr. Laxminarayan Rathi is the managing director of Asahi Infrastructure and Projects Ltd.
SEBI headquartered in Mumbai is the regulator of the Securities and commodity market in India and is owned by the Central Government. It had noted that Asahi had come up with GDR issues in April 2009 and Pan Asia Advisors Ltd. was the book running lead manager for the GDR issue.
It was found that Arun Panchariya arranged the loans for the subscription of the firm's GDRs by Vintage FZE, another company wherein he was the managing director and 100 percent shareholder. As a matter of face, Arun Panchariya is the founder, director, and 100 percent shareholder of Pan Asia.
Asahi Infrastructure has in turn, helped Arun Panchariya in the arrangement of those funds by signing a pledge agreement with Euram Bank, thereby, providing security for such loan taken by Vintage. Using certain foreign institutional investors, he had got the GDRs converted into underlying shares and sold them in the Indian securities market with the help of certain entities connected to him.
The firm had also failed to submit certain information demanded by SEBI and instead submitted false information. Asahi Infrastructure had also failed to disclose details of outstanding GDRs in its quarterly disclosures of shareholding pattern to the BSE.
SEBI has noted that,
"The issuance of GDRs by adopting the explained modus operandi and the consequential misleading and false disclosure renders the whole scheme of things a fraudulent act orchestrated by the Noticees (Asahi Infrastructure and Projects and Laxminarayan Jainarayan Rathi) with the help of AP (Arun Panchariya) and associates."
For violation of various market norms, SEBI was compelled to slap a total fine of Rs. 10.15 crore on the Asahi Infrastructure and Rs. 1 crore on Laxminarayan Jainarayan Rathi.