SEBI fines Zenith Steel, others 108 mln rupees for GDR fraud

16 Jun 2022

The Securities and Exchange Board of India today levied penalties aggregating to 108 mln rupees against Zenith Steel Pipes & Industries Ltd and six other entities for fraud committed in the company’s global depository receipt (GDR) issue in May 2010.

Zenith Steel Pipes & Industries was levied a penalty of 100 mln rupees, while its managing director, three other directors, and two other entities were fined a total of 8 mln rupees.

In its investigation, SEBI held that $23-mln-GDR issuance of Zenith Steel Pipes & Industries in 2010 was fraudulent.

The company, its directors and two entities, Arun Panchariya and Mukesh Chauradiya were involved in the dubious issue where the proceeds from the GDR issue were pledged with a foreign bank which then provided a loan to a Panchariya-controlled entity to subscribe fully to the GDR issue.

The company projected misleading information to investors when it notified that its GDR issue was fully subscribed by a set of eight investors. This misled the domestic investors and breached SEBI's listing norms and norms on prohibition of fraud in the market.

The company also did not make any disclosures of the pledge agreement and certain other agreements of credit and account charge which were a part of the fraudulent scheme of things.