Payment Banks – From Here to Where?

Market regulator Securities and Exchange Board of India (SEBI), for the second time in a month, has barred industrialist and Page3 regular Yashovardhan (Yash) Birla, chairman of Yash Birla group, from the securities market. 

In a recent order, the market regulator said that it has found violation of securities law in the scrip of Birla Pacific Medspa Ltd (BPML) during 7 to 15 July 2011. Consequently, Yash Birla, along with nine other individuals, has been barred from accessing or transacting in the securities market for two years.

On 29 September 2020, SEBI barred four individuals, including Yash Birla, from the markets in relation to manipulation in issuance of global depository receipts (GDR) by Birla Cotsyn (India) Ltd way back in 2010.

It is alleged that BPML had transferred Rs7 crore each to entities named Sanjukta Vanijya Pvt Ltd and Darshan Tradelink Pvt Ltd on 7 July 2011 as pass-through entities from proceeds from its initial public offering (IPO), which were then advanced to net buyers on listing day, namely, Jalan Cement Works Ltd (Rs3 crore), Marutinandan Infosolutions Pvt Ltd (Rs2.29 crore), Orbit Financial Consultants Pvt Ltd (Rs2 core), Rupak Trading Pvt Ltd (Rs2.29 crore).

Together, these four entities were paid Rs12.52 crore on 7 July 2011 to their broker GRD Securities towards their pay-in obligation against buy trades in the scrip of BPML on listing day.

After receiving funds from the proceeds of the IPO from BPML, these four acquired a net of 67.11 lakh shares (value of around Rs9.29 crore) or 21.56% of the total delivered quantity of 3.11 crore shares on 7 July 2011 and 10.3% of the issue size.

SEBI’s investigation found that in violation of the principles of fair market where the price of a scrip is to be decided on the demand and supply, Jalan Cement, Rupak Trading, Orbit, and Marutinandan were the artificial buyers of shares of BPML, who were financed by the company itself.

“It is alleged that BPML routed the funds of IPO to the above said four entities who eventually traded in the scrip with the help of funds received from BPML for providing buying support in violation of the principles of fair market and thereby the act of BPML and its directors is alleged to be fraudulent which resulted on the fraud on the investors of BPML,” the SEBI order said.

These traders acted as a fraud on the investors by creating a misleading appearance of trading in the securities market and by supporting the demand (buy) and, therefore, the price of the scrip, it noted.

This is the second time in a month that SEBI has come up with an order prohibiting Yash Birla from accessing the securities market.

Last month, SEBI barred four people, including Yash Birla, due to manipulation in the issuance of GDR by Birla Cotsyn. The company is currently undergoing liquidation proceedings under the Insolvency and Bankruptcy Code (IBC).

The other individuals barred from the securities market are PVR Murthy, YP Trivedi and Mohandas Adige.

SEBI had sent a show-cause notice to the four of them and BCIL, alleging that BCIL issued 9.69 million GDRs, amounting to $24.99 million on 15 March 2010, equivalent to 96.89 crore equity shares of Re1 each and Vintag FZE was the only entity to have subscribed to them and the subscription amount was paid by obtaining a loan from EURAM Bank.

Further, the regulator said the pledge agreement was signed by Mr Murthy, then a director of BCIL, who was authorised by a board resolution in December 2009. The company had also approved the  opening of a bank account with EURAM Bank for the purpose of receiving the GDR proceeds.

Mr Birla, Mr Trivedi and Mr Adige had also attended that board meeting, as per the regulator.

Last year, UCO Bank declared Yash Birla, also the director of Birla Surya Ltd, as a wilful defaulter after the company failed to repay loans of Rs67.65 crore. It was a rare incident where a lender has published a…