Capital markets regulator Sebi on Wednesday imposed a penalty of Rs 20 lakh on an individual for indulging in a fraudulent scheme for the subscription of global depository receipts issued by MPS Infotecnics Ltd. The penalty was imposed on Rajinder Singh after Sebi had conducted an investigation with respect to the issuance of GDRs (Global Depository Receipts) by MPS during November-December 2007.

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The regulator, in its investigation, found that MPS had issued GDRs amounting to Rs 39.45 crore and the entire GDR proceeds were subscribed by one entity -- Clifford Capital Partners A.G.S.A. It was observed that the subscription amount was paid by Clifford through a loan from Lisbon-based Banco Efisa S.A Bank.

As per the order, MPS had pledged the entire GDR proceeds as collateral against the loan availed by Clifford from Banco Efisa Bank. The same was carried out through a loan agreement entered between Clifford and Banco Bank, the order noted.

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Rajinder Singh had signed the pledge agreement on behalf of MPS in his capacity as the non-executive independent director of the company, which acted as the security for the loan taken by Clifford from Banco Bank for subscribing to GDRs of MPS. The GDR issue would not have been subscribed, had MPS not given such security towards the loan taken by Clifford through the pledge agreement executed by Singh, Sebi said.

The GDRs were not issued in a genuine manner, but rather through a fraudulent arrangement, and such facilitation of the GDR issue and its subscription was not known to its public and investors, it added. Therefore, Singh, who was the non-executive independent director of MPS Infotecnics at the relevant point of time when the fraudulent scheme was executed, deemed to be an 'officer who is in default', and is responsible for the fraud committed by MPS, the regulator said.

He violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, Sebi said while imposing a fine of Rs 20 lakh on Singh.

First Published:May 4, 2022 9:47 PM IST