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TMI Blog2020 (2) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... cted therein were different. The contention that Pledge Agreement was not required to be disclosed under the Listing Agreement is not correct as the Listing Agreement, which forms the very basis of a disclosure based regulatory regime, requires every material information to be disclosed to the Stock Exchange at the earliest, sometime in a matter of minutes and others in a matter of days. When the company has lent the entire proceeds of the GDR issue to the tune of US$ 38.75 million as security for a third party abroad to avail a loan on the basis of that security and thereby potentially jeopardizing the entire proceeds is not a non-event but an important material information affecting all the stakeholders. We would hold that such events have to be disclosed in bold letters so that the investors of the company as well as those who are subscribing to its GDR issue etc. should be fully aware of those highly material facts. Arguments on delay in investigation and consequently affecting natural justice are also devoid of any merit in the matter since this Tribunal is aware of the complexity involved in the entire manipulative GDR issue. We also do not find any deficiency in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to issuance of 5 million GDRs valued at US$ 38.75 million by JCL on June 30, 2010. The said GDRs were listed on the Luxembourg Stock Exchange and the proceeds from the issue were deposited with European American Investment Bank ( EURAM Bank ). (b) During the investigation it was revealed that Vintage FZE ( Vintage ) was the only entity that subscribed the entire issue of 5 million GDR and the subscription amount was paid by obtaining a loan from EURAM Bank. (c) On June 11, 2010 JCL provided security in the form of a Pledge Agreement between JCL and EURAM Bank for the loan obtained by Vintage from EURAM Bank. By this Pledge Agreement JCL pledged the proceeds from the GDR issue against the loan availed by Vintage. (d) Appellant No. 2, the Managing Director of JCL, executed the said Pledge Agreement with EURAM Bank. Further this Pledge Agreement was also an integral part of the Loan Agreement entered into between Vintage and EURAM Bank on the same date of the Pledge Agreement i.e. on June 11, 2010. (e) Accordingly, these two agreements Pledge Agreement and the Loan Agreement enabled Vintage to obtain the loan and to use that loan amount to fully subscribe the 5 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the rails after several years of concerted efforts. 6. As regards the contention that the submissions made by the appellants have not been considered in the impugned order, the learned counsel for the appellants submitted that unlike the issue of GDRs in a manipulative manner by certain other entities, JCL had done a genuine GDR issue. No GDRs were sold in the domestic market before the entire money was withdrawn by the appellant-company from its account with EURAM Bank. Similarly, the entire issue proceeds were received by the appellant-company and utilized for the purpose for which the GDR issue was made. The only allegation, according to the learned counsel for the appellants, that could be pressed is that the Pledge Agreement was not disclosed to the Stock Exchange (BSE). This was, it was contended, because there was no requirement for disclosing the Pledge Agreement under the Listing Agreement. As regards the list of subscribers of GDRs it was contended that the appellant(s) submitted the list as received from the Lead Manager and, therefore, they were not privy to the fact that the subscription was made fully by Vintage. Given these facts, the learned counsel for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re subscribed to in a normal course of business by normal investors in the foreign jurisdiction. 9. We do not agree with the submissions made by the learned counsel for the appellants. This Tribunal had passed a number of orders relating to manipulations and fraudulent behavior from the part of a few companies and several connected entities including Vintage. EURAM Bank has also been one of the entities found to be part of those transactions. Such judgements include PAN Asia Advisors Limited and Anr. v. SEBI (Appeal No. 126 of 2013 decided on 25.10.2016) and Cals Refineries Limited v. SEBI (Appeal No. 04 of 2014 decided on 12.10.2017). The modus operandi adopted in all such cases have been similar i.e. the subscriber to the GDR issue (Vintage here) taking a loan from a foreign bank/ investment bank (EURAM Bank here) enabled by a Pledge Agreement signed between the issuer company (JCL here) and the loaner bank. This arrangement itself vitiates the entire issue of GDR as it is through an artificial arrangement supported by the company itself which enables the subscription to the GDR. Therefore, the contention in the order that it is a fraudulent scheme created by the appellants al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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