GDR scam: SEBI lets Aptech off the hook

PALAK SHAH Mumbai | Updated on May 13, 2021

SEBI had barred the firm from the stock markets for 6 months   -  AndreyPopov

Spares the company monetary penalty; says law cannot be applied retrospectively

Market regulator SEBI had found Aptech Ltd guilty of fraud in the GDR scam but has let go of the company without any monetary penalty. SEBI’s reasoning is that it got ‘powers to adjudicate’ the matter after the company worked out its scheme and the law cannot be applied retrospectively.

BusinessLine had reported on April 2, 2020 that SEBI had found Aptech guilty in a GDR issue and loan fraud and barred the company from the stock markets for six months. Aptech is a rare instance where SEBI has let go of a company without any penalty in the GDR scam. Earlier, SEBI had slapped a penalty of over ₹61 crore on Hiran Orgochem and its officials, and ₹1.2 crore penalty on two directors of Beckons Industries for GDR manipulation, among several other companies.


SEBI has investigated scores of companies and entities for GDR manipulation where shares were subscribed by dummies and later converted into domestic equity and sold to retail investors. SEBI caught hundreds of such entities under Prevention of Fraudulent Trading Practices (PFUTP) and fined them. However, in its May 12 order on Aptech SEBI said that the issue of GDRs had occurred on November 6, 2003. The transfer of funds from Banco Bank to Aptech was completed by September 22, 2004.

“The ‘power to adjudicate’ under section 23-I of the SCRA, 1956 has not been given any retrospective effect. In the absence of any express provision, the same can only be applied prospectively. Also, the penalties which can be imposed under the section was absent at the relevant point in time when the cause of action in the present case had arose and therefore cannot be applied qua the said violations,” the SEBI order passed by SEBI official G Ramar, said.

“Therefore, I conclude that in view of the aforesaid considerations on the points of law, the present adjudication proceedings are not maintainable and therefore cannot be proceeded with,” the order said. Aptech’s former MD Pramod Khera was barred from markets for five years for violation of PFUTP norms. SEBI found that Aptech and Khera created a complex maze of agreements to show that GDR issues were fully subscribed even though the loan to subscribe went from the company. The entity, which got the loan and bought GDR, later converted it into equity and sold it in the Indian markets. Khera resigned from the Aptech board more than 15 years ago. The company is now run by Rakesh Jhunjhunwala-led management.

During the course of investigation, it was found that the Company had not disclosed to the stock exchange about the interconnecting agreements and also the company reported misleading news to the stock exchange which contained information in a distorted manner, which might have influenced the decision of investors thereby, the scheme of issuance of GDRs by Aptech was fraudulent, SEBI said.

During the investigation, it was noted that Banco had granted loan of upto $20,000,000 to Willow by way of a Credit Agreement dated October 20, 2003 for enabling them to subscribe to the GDR issued by Aptech and it was observed that the entire 38,40,000 GDRs were subscribed by only one entity.

Published on May 13, 2021

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