Securities & Exchange Board Of India Bars Chromatic India From Capital Markets For Five Years For Fixing Its GDR Issue

The Securities & Exchange Board of India (SEBI) has barred Chromatic India Limited from the capital markets for five years for manipulation its global depository receipts (GDR) issue.

Effectively, the company's whole time director Vinod Kumar Kaushik has been stopped from accessing the capital market for three years while its non-executive independent directors Vipin Sharma and Ajay Sethi cannot do so for an year.

It may be recalled that a SEBI probe into the firm’s GDR issue in October 2010 revealed that it misinformed investors into believing that the USD 4.2 million GDR issue was successful, though there was only one subscriber called Vintage FZE.

The SEBI probe revealed that the GDRs were subscribed by Vintage with the help of the Chromatic India itself.

The SEBI stated that by entering into a deal to facilitate the subscription of its own GDRs, Chromatic has played a fraud on the securities market, misled investors and created a false impression about the company in the securities market.

The SEBI probe also revealed that European American Investment Bank AG (Euram Bank) had granted a loan to Vintage through a loan agreement to pay subscription to Chromatic's GDR issue.

Besides, this act, Chromatic also pledged its entire GDR proceeds as security by entering into a pledge agreement with Euram Bank, the SEBI probe revealed.

The three directors of the company who approved the board resolution acted as parties to the fraudulent arrangement for subscription of GDR by only Vintage, as per the SEBI probe, thus violating Prohibition of Fraudulent and Unfair Trade Practices regulations.