New Delhi, Mar 23 (PTI) Sebi on Tuesday decided to dispose of proceedings against Birla Power Solutions Ltd (BPSL) since it is under liquidation but said the company will face debarment for securities law violations in case the court order on liquidation is reversed.

The case pertains to fraudulent activities with respect to issuance of GDRs (Global Depository Receipts) twice in 2010.

In a 60-page order, the watchdog said it was dropping proceedings against Yashovardhan Birla, saying there was no evidence to ascertain that he was involved in the GDR issuance.

However, certain directions have been passed against four individuals -- PVR Murthy, Rajesh V Shah, Upkar Singh Kohli and N Nagesh.

The regulator had issued show-cause notices to the firm and certain officials to ascertain whether shares underlying GDRs were issued with proper consideration and whether appropriate disclosures were made.

The company had issued GDRs worth USD 20 million in January 2010 and GDRs worth USD 53.5 million in July 2010.

The GDRs were subscribed by only one entity Vintage FZE, now known as Alta Vista International FZE, on obtaining a loan from EURAM Bank.

The company had provided security for the loan obtained by Vintage from EURAM Bank by pledging the GDR proceeds, through pledge agreements

"The arrangement of BPSL, in allotting GDR issue to only one entity i.e. Vintage which subscribed to the GDR issue of BPSL by obtaining loan from EURAM Bank and the same was secured by BPSL by pledging its GDR proceeds, seen along with the misleading corporate announcements made by BPSL on October 20, 2006, lead to conclusion that the same were done in pursuance of a fraudulent scheme which had the potential to mislead or induce the investors to sale or purchase of its scrip," Sebi said.

In August 2014, the Bombay High Court had directed that the firm should be wound up and appointed an official liquidator. Citing the court decision, Sebi said it was disposing of the proceedings against the company.

"... in the event that the order for winding up passed by the Hon'ble High Court of Bombay is reversed in appeal, if any, the Noticee No. 1 shall be restrained from accessing the securities market ...for a period of 3 years from the date of such reversal of winding up order," the regulator said.

According to the latest order, Murthy, who was a signatory to pledge agreements, has been restrained from accessing the securities market for two years.

A one-year ban has beem imposed on Rajesh V Shah and Upkar Singh Kohli, who were independent directors of the company at that time, as per the order.

Further, the regulator said that N Nagesh, being signatory to the pledge agreements, has been restrained from accessing the securities market for one year.

During the period of restraint, the existing holding of securities, including units of mutual funds of the noticees 1, 2, 3, 4 and 5 woudl remain frozen.

The obligation of the noticees 1, 2, 3, 4 and 5, restrained/ prohibited by this order, in respect of settlement of securities, if any, purchased or sold in the cash segment as existing on the date of the latest order, are allowed to be discharged, Sebi said.

"Further, allnopen positions, if any, of the Noticees no. 1, 2, 3, 4 and 5, restrained/ prohibited in the present order, in the F&O segment of the recognised stock exchange(s), are permitted to be squared off...," it noted.

BPSL is noticee 1, Murthy (noticee 2), Nagesh (noticee 3), Shah (noticee 4) and Kohli (noticee 5).

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)