Capital markets regulator Sebi on Wednesday imposed a fine totalling Rs 50 lakh on four individuals, including Yashovardhan Birla, in a case related to irregularities in the Global Depository Receipts (GDRs) issuance by Birla Cotsyn (India) Ltd. In its order, the regulator imposed a fine of Rs 20 lakh on PVR Murthy, Rs 10 lakh each on Yashovardhan Birla, YP Trivedi and Mohandas Adige and asked them to pay the penalty within 45 days.

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These four persons were on the board of directors of Birla Cotsyn (India) Ltd (BCIL) during the entire process of issue of GDRs. They were part of the fraudulent scheme and arrangement of BCIL in facilitating the subscription of its own GDR, as per the order. The order comes after the Securities and Exchange Board of India (Sebi) conducted an investigation into the alleged irregularities in the GDR issue by BCIL during the period from February 2010 to April 2010.

Sebi, in its investigations, found that BCIL had issued 9.69 million GDRs (amounting to USD 24.99 million) in March 2010 and the issue was subscribed by one entity — Vintage FZE (now known as Alta Vista International FZE). It was observed that the subscription amount was paid by Vintage by obtaining a loan from European American Investment Bank AG (EURAM Bank) by entering into a loan agreement in February 2010 with EURAM Bank.

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However, BCIL had pledged the entire GDR proceeds as collateral against the loan availed by Vintage from EURAM Bank, Sebi noted. "It is observed that the GDR issue would not have been subscribed had BCIL not given such security towards the loan taken by Vintage. Such facilitation of the GDR issue and its subscription was not known to the public and investors."

"Therefore, the entire scheme of issuance of GDRs was fraudulent and noticees No. 2 to 5 (the four individuals) have acted as party to the fraud and have violated … PFUTP (Prohibition of Fraudulent and Unfair Trade Practices Regulations," Sebi said.

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(Edited by : Anand Singha)