Final Order in the matter of Teledata Technology Solutions Ltd

SECURITIES AND EXCHANGE BOARD OF INDIA FINAL ORDER UNDER SECTIONS 11 (1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

In respect of: Noticee Name of the Noticee PAN no. 1. Teledata Technology Solutions Ltd. AACCT5488Q 2. Mr. Arun Panchariya AEVPP6125N 3. Vintage FZE ---------------------------- (now known as Alta Vista International FZE) 4. India Focus Cardinal Fund AABCI9518D

5. Mr. K. Balasubramanian AAFPB9215K 6. Mr. N. Sakthivel BCMPS6376L 7. Mr. M. S. Ramakrishnan AACPR6473J 8. Mr. R. Ravichandran AHJPR6079C 9. Mr. G. Jagadish AALPG8002H 10. Mr. K. Padmanabhan AAGPP9840B 11. Mr. Mukesh Chauradiya AAVPC0966A

12. Cardinal Capital Partners FII Registration No. INMUFD263211 13. European American Investment Bank AG FII Registration No. INASFD211608 (The aforesaid entities are hereinafter referred to individually, by their respective names/ Noticee numbers and collectively as “the Noticees”)

In the matter of Teledata Technology Solutions Ltd.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted an investigation into the GDR issue made by M/s. Teledata Technology Solutions Ltd. (hereinafter also referred to as “the Company”/ “Teledata”).

Pursuant to the investigation, a show cause notice dated June 27, 2019 (hereinafter referred to as “the SCN”) came to be issued to the Noticees, alleging violation of Sections 12A(a), (b), (c) of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act, 1992”) read with Regulation 3(a), (b), (c) & (d) and Regulation 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”).

2. The key findings of the investigation, as stated in the SCN, were as follows:

a) Teledata issued 3.5 million GDRs amounting to US $ 36.96 million, on March 12, 2010. Summary of the information, received from local custodian i.e. HSBC Bank about GDR issues of Teledata, is tabulated below: Table 1 GDR No. of GDRs Capital Local No. of Global Lead Bank where GDRs listed issue issued (mn.) raised custodian equity Depository Manager GDR on date (USD shares Bank proceeds mn.) underlying deposited GDRs 12- 35,37,505 36.96 HSBC 35,37,50,5 The Bank of Ikon EURAM Luxembour March- (at USD Bank 00 New York Capital Bank, g Stock 2010 10.45 each Mellon, Ltd. Austria Exchange GDR) USA b) Vide letter dated March 16, 2010, Teledata provided the list of the GDR allottees to BSE which is tabulated below: Table 2 Sl. No. Name of the No. of GDRs No of shares subscriber allotte underlying d 1 Axinite Capital Inc. 2,72,727.27 2,72,72,727 2 Cruise Waterford 344497.61 3,44,49,761 Investments Ltd. 3 Creative Stone 302574.16 3,02,57,416 Holdings Ltd. 4 Tieze Group 296650.72 2,96,65,072 Holdings Ltd. 5 Trapezius Capital 306465.07 3,06,46,507 Ltd. 6 Imagination Group 282296.65 2,82,29,665 Holdings Ltd. 7 Trendsetter Capital 315789.47 3,15,78,947 Inc. 8 Flamboyant 263200.00 2,63,20,000 International Ltd.

9 Knightsbridge 293485.86 2,93,48,586 Management Inc. 10 Flagstaff 296650.72 2,96,65,072 Investments Ltd. 11 Echelon India 282009.57 2,82,00,957 Investments Ltd. 12 Dynamic Holdings 236157.89 2,36,15,789 Investment Corp 3537505.00 35,37,50,500 c) On perusal of corporate announcements made by Teledata to BSE and NSE, from April 2009 till date, it was observed that Teledata disclosed to BSE and NSE on August 31, 2009 that: “a meeting of the Board of Directors of the Company will be held on September 03, 2009, inter alia, …to consider raising of funds by way of issue of equity shares through Foreign Currency Convertible Bonds and / or Global Depository Receipts and / or American Depository Receipts and / or Qualified Institutions Placement (QIP) and / or any other securities convertible into equity shares.”

Further, the Company reported the following in its annual report for FY 2009-10: “…TTSL has issued 35,37,505 GDRs representing 35,37,50,500 underlying Equity Shares of nominal value of Rs.2.00 each (offered at Rs.4.85 each) at USD 10.45 each GDR. Each GDR represents 100 equity shares in the capital of the company. The equity shares represented by the GDRs will represent approximately 242.58% of the company outstanding share capital before issue. The Proceeds amounting to USD 3,69,66,927.25 (INR 17,15,689.93 thousand) from the said GDRs were received on 11/03/2010 and credited to EURAM Bank (European American Investment Bank) whose registered office is at Wallnerstrassee 4, A-1010, Vienna, Austria...”

d) Ikon Capital Ltd. a UK based entity was the Lead Manager of GDR issue of Teledata. e) Teledata, Ikon Capital Ltd. and European American Investment Bank AG (hereinafter referred to as “EURAM Bank”) entered into an Escrow Agreement dated February 26, 2010 (hereinafter referred to as “Escrow Agreement”). It was further observed during the investigation that Vintage FZE (now known as Alta Vista International FZE) (hereinafter referred to as “Vintage”) had signed loan agreement with EURAM Bank and Noticee No.1 signed pledge agreement with EURAM Bank. The details of said agreements are given in subsequent paras.

Loan Agreement:- f) Vintage had entered into a Loan Agreement dated February 26, 2010 (hereinafter referred to as “Loan Agreement”) with EURAM Bank relating to a dollar term loan facility of USD 36.96 million for the purpose of subscribing to the GDR issue of Teledata. The Loan Agreement was signed by Mr. Arun Panchariya (Noticee No. 2) in the capacity of Managing Director of Vintage. Further, Vintage opened a loan account (a/c no. 540012-027-1) with EURAM Bank and Teledata opened a retail account (a/c no. 580016) with EURAM Bank.

g) The following was, inter-alia, mentioned in the Loan agreement: 2 Nature and purpose of facility: Nature and purpose of facility” is “To provide funding enabling Vintage FZE to take down GDR issue of 35,37,505 Luxembourg public offering and may only be transferred to EURAM account nr. 580 016, Teledata Technology Solutions Ltd.” Security it is hereby irrevocably agreed that the following securities and any other securities which may be required by the Bank from time to time shall be given to the Bank as provided herein or in any other form or manner as may be demanded by the Bank: 1) Pledge of certain securities held from time to time in the Borrower’s a/c no. 540012 at the Bank as set out in a separate pledge agreement which is attached hereto as Annex 2 and which forms an integral part of this Loan Agreement. 2) Pledge of the account no. 580016 held with the Bank as set out in a separate pledge agreement which is attached hereto as Annex 2 and which forms an integral part of this Loan Agreement.” h) On perusal of copy of the Know Your Customer documents of Vintage for opening an account with EURAM Bank, it was observed that Mr. Arun Panchariya was the beneficial owner and Managing Director of Vintage as on June 06, 2007. It was further observed that Alkarni Holding Ltd. was the shareholder of Vintage and Mr. Arun Panchariya was the sole shareholder of Alkarni Holding Ltd. i) From the examination of the above Loan Agreement, it was observed that Vintage had availed of loan facility to the extent of USD 36.96 million from EURAM Bank to subscribe to the GDRs of Teledata.

j) As per the documents provided by EURAM Bank, the Board of Directors of Teledata passed a resolution dated January 30, 2010. The relevant extracts of the said resolution are as under:-

OPENING OF CURRENT ACCOUNT- EURAM BANK AUSTRIA FOR GDR ISSUE The Chairman informed the Board of Director that the Company wants to open a “Current Account” for domestic division with Euram Bank Austria for the purpose of GDR issue. After discussions, it was decided to open an account and following resolution was passed. RESOLVED THAT a bank account of the Company be opened with EURAM Bank Austria for GDR issue in the name of “Teledata Technology Solutions Ltd – GDR” and that the said Bank be and is hereby authorized to honour all cheques, Draft, Bils of Exchanges, Promissory notes and other negotiable instruments signed, drawn, accepted or made on behalf of the Company severally by Mr. K. Padmanabhan, Authorized Signatory of the Company and to act on any instructions so given relating to the said Account whether the same to overdrawn or not or relating to any transactions of the Company.”

k) Vide letter dated May 27, 2015, Teledata was, inter-alia, asked to provide copy of the aforesaid board minutes. Since no reply was received, reminder letter dated June 09, 2015 and June 17, 2015 were issued to Teledata. However, letters and reminders sent to Teledata were returned undelivered. Since, the company was in liquidation, similar information was sought from the Official Liquidator. However, the same was not received from the Official Liquidator also.

l) Annual Report of Teledata for FY 2009-10 was perused and it was observed that in total 7 board meetings of Teledata were held in the FY 2009-10 and all five directors, namely, 1) Mr. K. Balasubramanian, 2) Mr. N. Sakthivel, 3) Mr. M. S. Ramakrishnan, 4) Mr. R. Ravichandran and 5) Mr. G. Jagadish attended all the 7 board meetings of Teledata held in FY 2009-10. Therefore, it is concluded that five directors, namely, 1) Mr. K. Balasubramanian (Noticee No. 5), 2) Mr. N. Sakthivel (Noticee No. 6), 3) Mr. M. S. Ramakrishnan (Noticee No. 7), 4) Mr. R. Ravichandran (Noticee No. 8), and 5) Mr. G. Jagadish (Noticee No. 9), had attended the Teledata’s board meeting dated January 30, 2010 which passed the resolution for opening of current account with EURAM Bank for GDR issue and authorized EURAM Bank to honour all cheques, Draft, Bills of Exchanges, Promissory notes and other negotiable instruments signed, drawn, accepted or made on behalf of the Company severally by Mr. K. Padmanabhan (Noticee No. 10), Authorized Signatory of the Company, and to act on any instructions so given relating to the said Account whether the same to be overdrawn or not or relating to any transactions of the Company.

Pledge Agreement:

m) Subsequently, Mr. K. Padmanabhan (Noticee No. 10), in his capacity as Authorized Signatory of Teledata, signed a Pledge Agreement dated February 26, 2010 (hereinafter referred to as “Pledge Agreement”), wherein Teledata pledged the GDR proceeds as collateral against the loan availed by Vintage, for subscribing to the GDR issue of Teledata, from EURAM Bank.

n) From the examination of Loan Agreement, Pledge Agreement, loan account statement of Vintage, Escrow account statement, it was observed that EURAM

Bank granted loan to Vintage specifically for subscription of GDRs of Teledata. The Escrow account statement showed that GDR subscription money was received from only one entity i.e. Vintage. In view of the above, it was observed that GDR issue of Teledata (35.37 million GDRs amounting to USD 36.96 million) was subscribed by only one entity, i.e., Vintage. Therefore, it was observed that Teledata submitted wrong list of GDR subscribers to BSE.

o) Further, on perusal of the Pledge Agreement and Loan Agreement, it was observed that issuance and subscription of GDRs was done through loan availed by Vintage from EURAM Bank. It was also observed from examination of Teledata’s retail bank account statement held with EURAM Bank (where GDR proceeds were deposited) and Vintage’s loan account statement that only after Vintage repaid the loan amount, less/equal amount of money was transferred from Teledata’s EURAM Bank account to Bitech International’s bank account. From the above, it is observed that transfer of funds from Teledata’s EURAM Bank account was dependent on the repayment of the loan by Vintage.

p) Though the GDR proceeds were deposited in the bank account of Teledata, the amount deposited in the account was not at the disposal of the Teledata, as the same was kept as collateral for the loans availed by Vintage even prior to issuance of GDRs.

q) From the examination of corporate announcements made by Teledata from April 2009 till date, it was observed that Teledata did not inform stock exchanges about entering into Pledge Agreement/ collateral security.

r) The SCN alleged that the fraudulent arrangement of Loan Agreement and Pledge Agreement, which resulted in the subscription of GDR issues of the Company was not disclosed to the stock exchange in a true and complete manner but was reported as misleading news which contained information in a distorted manner. The Company reported in its Annual Report for FY 2009-10 that: “…TTSL has issued 35,37,505 GDRs representing 35,37,50,500 underlying Equity Shares of nominal value of Rs.2.00 each(offered at Rs.4.85 each) at USD 10.45 each GDR. Each GDR represents 100 equity shares in the capital of the company. The equity shares represented by the GDRs will represent approximately 242.58% of the company outstanding share capital before issue. The Proceeds amounting to USD 3,69,66,927.25 (INR 17,15,689.93 thousand) from the said GDRs were received on 11/03/2010 and credited to EURAM Bank (European American Investment Bank) whose registered office is at Wallnerstrassee 4, A-1010, Vienna, Austria…..” which might have made investors believe that the said GDR issue was genuinely subscribed.

s) The Loan Agreement was integral part of Pledge Agreement and vice versa and both were executed concurrently. This showed that Mr. K. Padmanabhan (Noticee No.10) Authorized Signatory of the Company, had knowledge about the subscriber to GDR issue, as well as source of the funding, Pledge Agreement and the Loan Agreement and had understanding with Vintage, but the same was not informed to the investors of Teledata. Further, the manner in which the funds were withdrawn from Teledata’s EURAM Bank account and the fact that the transfer of funds was dependent on the loan repayment by Vintage, led investigation to observe that Teledata was aware of the Loan Agreement/ Pledge Agreement.

t) The entire scheme of issuance of GDR involving subscription of the GDR issue by obtaining finance from EURAM Bank by pledging the GDR proceeds, making disclosure that the GDRs were successfully subscribed without disclosing the arrangement to the investors resulted in publication of misleading news in the annual reports which contained information in distorted manner, non-repayment of complete loan availed by Vintage, and monetizing the GDRs through the sale of underlying shares in Indian stock exchanges by converting GDRs was found to be fraudulent. u) Involvement of Teledata in entire fraudulent scheme of GDR issue is primarily observed on the basis of following:

i) As per the information received from EURAM Bank through FMA Austria, it was observed that the issue whether GDR proceeds of Teledata deposited in its EURAM Bank a/c were at the free disposal of Teledata or not was contested in the Commercial Court of Vienna, subsequently, in Higher Regional Court Vienna and finally in Austrian Supreme Court. Austrian Supreme Court vide its judgment dated June 14, 2016 gave final binding decision denying the claims of Teledata. Consequently, GDR proceeds to the extent of USD 32.53 million was adjusted by EURAM Bank against the loan default by Vintage from Teledata’s EURAM Bank account. ii) Mr. K. Padmanabhan, Authorized Signatory of Teledata signed the Pledge Agreement with EURAM Bank for loan availed by Vintage from EURAM Bank for entire subscription of GDRs of Teledata. Mr. Padmanabhan, was the promoter of Teledata as well as MD of Teledata's subsidiary Bitech to which GDR proceeds were transferred by Teledata pursuant to part repayment of loan by Vintage. Mr. K Padmanabhan was also director of Teledata in the past (Period: 27/10/2006 to 10/07/2008). Loan Agreement was integral part of Pledge Agreement and vice versa and both were executed concurrently. These agreements enabled Vintage to avail the loan from EURAM Bank for subscribing GDRs of Teledata. The GDR issue would not have been subscribed, had Teledata not given any such security towards the loan taken by Vintage. iii) Further, in majority of the instances only after Vintage repaid loan instalments, on same day or later, equivalent amount of money was transferred from Teledata’s EURAM Bank a/c to Bitech International’s bank a/c. Thus, the amount transferred from Teledata’s EURAM Bank a/c was dependent on the repayment of the loan by Vintage. From all the above circumstances coupled with modus operandi of Teledata’s GDR issue, SCN alleges that Teledata was aware and involved in the fraudulent scheme of its GDR issue.

v) Annual Report of Teledata for FY 2009-10 was perused and it was observed that in total 7 board meetings of Teledata were held in the FY 2009-10 and all five directors, namely, 1) Mr. K. Balasubramanian, 2) Mr. N. Sakthivel, 3) Mr. M. S. Ramakrishnan, 4) Mr. R. Ravichandran and 5) Mr. G. Jagadish attended all the 7 board meetings of Teledata held in FY 2009-10. Therefore, it is observed that five directors, namely, 1) Mr. K. Balasubramanian, 2) Mr. N. Sakthivel, 3) Mr. M. S. Ramakrishnan, 4) Mr. R. Ravichandran and 5) Mr. G. Jagadish had attended the Teledata’s board meeting dated January 30, 2010 which passed the resolution for opening of current account with EURAM Bank for GDR issue and authorized EURAM Bank to honour all cheques, Draft, Bills of Exchanges, Promissory notes and other negotiable instruments signed, drawn, accepted or made on behalf of the Company severally by Mr. K. Padmanabhan, Authorized Signatory of the Company and to act on any instructions so given relating to the said Account whether the same to be overdrawn or not or relating to any transactions of the Company. Therefore, the SCN alleges that the directors Mr. K. Balasubramanian (Noticee No. 5), 2) Mr. N. Sakthivel, (Noticee No. 6) 3) Mr. M. S. Ramakrishnan (Noticee No. 7), 4) Mr. R. Ravichandran (Noticee No. 8) and 5) Mr. G. Jagadis (Noticee No. 9) who approved the board resolution and Mr. K. Padmanabhan (Noticee No. 10), who executed the Pledge Agreement, acted as a party to the fraudulent scheme.

w) Realization of GDR proceeds by Teledata: i. GDR proceeds of USD 36.96 million were deposited in Teledata’s account no. 580016 held with EURAM Bank on March 11, 2010, details of which is given below:- Table 3 Source: TELEDATA’s EURAM Bank a/c statement) Date of credit of funds Credit amount (US$) 11/03/2010 36,966,927.25 ii. Details of transfer of GDR proceeds are tabulated below:- Table 4 Date of Amount of funds Amount of funds transferred transfer of transferred from to other entities (USD) funds Teledata’s EURAM Bank a/c to Bitech International’s a/c (USD) 11/03/2010 205.61 Expenses account Opening Fees 09/04/2010 2,500 Ecsrow Fee GDR Issue 19/04/2010 5,00,000 27/04/2010 5,00,000 07/05/2010 5,00,000 13,570 Al Jabha Legal Consultant FZC UAE Against invoice of legal 10/05/2010 service invoice 18/05/2010 5,00,000 20/05/2010 5,00,000 9396.75 06/07/2010 BNY Mellon Luxemburg 08/07/2010 50,000

Date of Amount of funds Amount of funds transferred transfer of transferred from to other entities (USD) funds Teledata’s EURAM Bank a/c to Bitech International’s a/c (USD) Ikon Capital Ltd. London Payment of Lead Manger Fees 19,960 Ikon Capital Ltd. London 23/07/2010 Refund 15/09/2010 6,25,000 23/09/2010 8,75,000 23/09/2010 5,00,000 3,87,000 Premier Management Consultancy Ltd Seychelles Part Payment against invoice 17/05/2011 of placement fees 09/11/2011 1,30,000 60,000 Dorda Brugger Jordis 08/02/2012 Towards legal expenses 20,000 Dorda Brugger Jordis 18/04/2012 Payment towards legal fees TOTAL 46,30,000 5,62,632.36 iii. It was observed that out of GDR proceeds of USD 36.96 million, Teledata had transferred USD 4.63 million (includes the interest earned on money market instruments) to its subsidiary Bitech International. Further, on June 30, 2016, Euram Bank adjusted GDR proceeds to the extent of USD 32,533,384.23 against the loan account of Vintage, as observed from Teledata’s Euram Bank account and Vintage’s Loan account statement. x) Repayment of loan by Vintage i. Out of the total loan amount of USD 36.96 million, Vintage repaid the loan amount to the extent of USD 4 .60 million in 11 installments from April 19, 2010 to November 18, 2011 and thereafter, defaulted on loan repayment.

ii. Details of repayment of loan by Vintage and transfer of fund by Teledata in its bank account in India, as provided by EURAM Bank are tabulated below:

Table 5 Transfer of funds Date of Loan Date of Transfer Cumulative Transfer from Teledata's Cumulative Loan Amount of funds from of funds from EURAM Bank a/c Loan Amount Amount repaid by Teledata's EURAM Teledata's EURAM to Bitech repaid by repaid by Vintage Bank a/c to Bitech Bank a/c to Bitech International Vintage (USD) Vintage (USD) International International (USD) (USD) 19/04/2010 5,05,000 19/04/2010 5,00,000 5,05,000 500000 27/04/2010 5,00,500 27/04/2010 5,00,000 10,05,500 1000000 07/05/2010 5,00,000 07/05/2010 5,00,000 15,05,500 1500000 10/05/2010 13,600 - - 15,19,100 - 18/05/2010 5,00,000 18/05/2010 5,00,000 20,19,100 2000000 20/05/2010 5,00,000 20/05/2010 5,00,000 25,19,100 2500000 06/07/2010 60,000 - - 25,79,100 - 15/09/2010 6,25,000 15/09/2010 6,25,000 32,04,100 3125000 22/09/2010 13,25,000 23/09/2010 8,75,000 45,29,100 4000000 23/09/2010 29,000 23/09/2010 5,00,000 45,58,100 4500000 18/11/2011 50,000 09/11/2011 1,30,000 46,08,100 46,30,000 46,08,100 46,30,000 iii. It was observed from Teledata’s Euram Bank a/c statement and Vintage’s Loan a/c statement that only after Vintage repaid loan installments, on same day or later, equal/ less amount of money was transferred from Teledata’s EURAM Bank account to its subsidiary Bitech International’s bank account. From the above, it was observed that transfer of funds from Teledata’s EURAM Bank account, was dependent on repayment of the loan by Vintage.

y) Loan default by Vintage i. Vintage repaid loan to the extent of USD 4.60 million and thereafter, defaulted on repayment to the extent of USD 32.35 million which was adjusted by EURAM Bank on June 30, 2016 from Teledata’s GDR proceeds.

ii. In this regard, on June 30, 2016, EURAM Bank informed the following to Teledata:

“…As you probably will have learned from your external Austrian legal advisors, the Austrian Supreme Court ("OGH") has rendered a - final and legally binding - decision in favor of Euram Bank AG in this matter on 14 June 2016, delivered to us on 24 June 2016. We, therefore, kindly inform you that we have realized the balances of your pledged time deposit account held under customer number 580016 with Euram Bank AG, in conformity with the pledge agreement dated 26 February 2010 in the total amount of USD 32,533.384,23 (Thirty Two Million, Five Hundred Thirty Three Thousand, Three Hundred Eighty Four United States Dollars and Twenty Three Cents) in order to repay part of the outstanding loan K260210-007 of Alta Vista International FZE. Please find attached copies of account statements. After realization of the pledged time deposit account all accounts held under customer number 580016 were closed. Furthermore be informed that in case your pledge agreement at hand regarding the time deposit account had been adjudicated invalid (which is, however, anyway not the case)

the related loan agreement with Alta Vista would have become invalid as well as a consequence (lacking condition precedent) and the respective amounts would have been re-booked/retracted by Euram Bank AG in conformity with Austrian law as well due to back settlement of all related agreements (Riickabwicklung). However, pursuant to the realization of the pledged time deposit account held under customer number 580016 and Section 1358 of the Austrian Civil Code ("ABGB") Teledata Technlology Solutions Ltd. automatically takes the Bank's position as pledgee regarding 1217505 GDRs of Teledata Technology Solutions Ltd. (ISIN US87931R1014). Please be aware that from now on Teledata Technology Solutions Ltd. is the pledgee of the GDRs…”

iii. In line with the above, Euram Bank adjusted USD 32.53 million on June 30, 2016 against the loan default by Vintage. Hence, it was observed that GDRs to the tune of US D 32.53 million was issued by Teledata to Vintage without any consideration.

z) C ancellation of GDRs and sale of converted equity shares i. On perusal of the Loan Agreement, Pledge Agreement and Escrow account statement, investigation revealed that Vintage was sole subscriber to 35,37,505 GDRs of Teledata. ii. Conversion of GDRs into equity shares is termed as cancellation of GDRs. GDRs were converted into equity shares and these shares were sold in the Indian Securities Market. On perusal of details of cancellation of GDRs provided by custodian HSBC Bank, it was observed that cancellation of GDRs started from April 08, 2010 and as on May 12, 2011, 23,20,000 GDRs were cancelled and converted into equity shares of Teledata. iii. Post cancellation of GDRs, FII-sub-accounts namely India Focus Cardinal Fund (Noticee no. 4) received total 23,20,00,000 shares on conversion of 23,20,000 GDRs. aa) S ale of converted equity shares in India: Vide email dated January 24, 2019, NSDL and vide email January 24, 2019, ICICI Bank (custodian of Noticee no. 4) provided transaction details of entities which sold converted equity shares of Teledata’s GDRs i.e. FII-sub account Noticee no. 4. Summary of the sales is given below:- i. Sale of equity shares by Noticee No.4:

A summary of sale of shares received pursuant to cancellation of GDRs is tabulated as follows: Table 6 No. of shares sold Total no. of Trade value (`) Total trade Name of entity BSE NSE shares sold BSE NSE value (Rs,`) India Focus Cardinal Fund 11,72,48,369 11,47,51,631 23,20,00,000 12,80,78,789 18,77,02,011 31,57,80,800 11,72,48,369 23,20,00,000 12,8078,789 18,77,02,011 31,57,80,800 Total 11,47,51,631

It is seen from above that Noticee no. 4 sold entire 23,20,00,000 shares allotted to it for a value of Rs. 31.57 Crores.

bb) Registration details of FII-sub-accounts: Summary of the registration of FII-sub-account India Focus Cardinal Fund is placed below: Table 7 Name of sub a/c Period of registration Name of FII under which Period of sub a/c is registered registration with FII European American 21/11/2008 to 12/12/2008 to 19/07/2011 India Focus Investment Bank 20/11/2011 Cardinal Fund 20/06/2011 to 20/07/2011 to 19/06/2017 Cardinal Capital Partners 19/06/2017 i. Noticee no. 4 was incorporated on August 22, 2008 in Mauritius and was registered as sub-account of FII - EURAM Bank from December 12, 2008 to July 19, 2011. Noticee no. 4 was granted transfer from EURAM Bank to Cardinal Capital Partners (Noticee no. 12) on July 20, 2011 and was registered as sub-account of Noticee no. 12 for the period July 20, 2011 to June 19, 2017. It is observed that Noticee no. 4 and 12 were incorporated on August 22, 2008 in Mauritius. ii. Noticee no. 4 was registered as sub-account under FII- EURAM Bank and FII-Cardinal Capital Partners. It is observed that no other sub-account was registered with EURAM Bank except Noticee no. 4. As FIIs, both EURAM Bank and Cardinal Capital Partners did not make investment in India except their sub-account of Noticee no. 4 which sold shares of Teledata in the market. cc) Connection amongst various entities and Arun Panchariya/ his connected entities

According to an Administrative Fine Statement available on Dubai Financial Services Authority website, Noticee no. 2 held positions with Pan Asia Advisors Ltd. (now known as Global Finance and Capital Ltd.), Vintage and Noticee no. 4 (Mauritius). Summary of the connection/ association of Noticee no. 2 with various entities related to present investigation matter is tabulated below: Table 8 Sl. Name of entity Connection/association of AP with entity No. 1 Vintage FZE Noticee no. 2 was beneficial owner (as on June 06, 2007) and Managing (now known as Alta Director (as on June 06, 2007 and May 12, 2010). Alkarni Holdings Ltd. Vista International FZE) was sole shareholder of Vintage as on December 28, 2010 and Noticee no. 2 was sole director of Alkarni as on April 21, 2014. 2 India Focus Cardinal Noticee no. 2 was director from August 22, 2008 to October 28, 2010, Fund (Noticee no. 4) Investment Manager (as on July 12, 2010) and 100% shareholder (January 01, 2009 to May 31, 2010) and beneficial owner since August 22, 2008 3 Cardinal Capital Noticee no. 2 was 100% shareholder and Chief Investment Officer (as on Partners (Noticee no. July 12, 2010).

Noticee no. 12 held 100% shares of Noticee no. 4. 12) 4 EURAM Bank, Austria Noticee no. 2 connected Pan Asia Advisors Ltd. had joint venture with (Noticee no. 13) EURAM Bank namely EURAM Bank Asia Ltd. (incorporated on August 23, 2009, dissolved in December 30, 2013). 5 EURAM Bank Asia Ltd. Noticee no. 2 was director and president. Noticee no. 2 resigned as president and member of board of the EURAM Bank Asia Ltd. on September 22, 2011. 6 Mr. Mukesh Chauradiya Noticee no. 2 was beneficial owner of Vintage FZE in which Mr. Mukesh (Noticee no. 11) Chauradiya served as Managing Director, Authorized Signatory and director. In Ramsai Investment Holdings Pvt. Ltd., Vintage was holding around 99.98% shares through its director Noticee no. 2 (for the period 2009- 2013). Noticee no. 2 was director of Ramsai Investment Holdings Pvt. Ltd. for the period from February 04, 2008 to August 18, 2010. Mr. Mukesh Chauradiya was director of Ramsai Investment Holdings Pvt. Ltd. (first appointment from February 04, 2008 and latest appointment from August 17, 2010 till March 17, 2016). Noticee no. 2 was one of the promoters of Alka India Ltd. from the quarter ended December 2005 to March 2018 (as observed from shareholding pattern of Alka India Ltd. available on BSE website).

Noticee no. 2’s brother Mr. Satish Ramswaroop Panchariya is director (first appointment on February 01, 2000 and latest appointment as Managing Director since May 11, 2018 till date). Noticee no. 2’s brother Mr. Ashok Ramswaroop Panchariya is director in Alka India Ltd. since April 29, 2005 till date. Mr. Mukesh Chauradiya was director of Alka India Ltd. from January 31, 2006 to June 01, 2010. The following were observed from the above:- i. Cardinal Capital Partners (Noticee no. 10) held 100% shares of Noticee no. 4 during the period January 2009 to May 31, 2010. Noticee no. 2 held 100% shares of Noticee no. 10. Thus, Noticee no. 2 was 100% shareholder of Noticee no. 4. Noticee no. 2 also served as Chief Investment Officer of Noticee no. 10 in the year 2010.

ii. Noticee no. 2 was the beneficial owner and controlled UK based entity namely M/s Pan Asia Advisors Ltd. (now known as Global Finance and Capital Ltd.), which was Lead Manager for about 14 GDR issues during the years 2006-11. Pan Asia Advisors Ltd. had a joint venture with the EURAM Bank namely “Euram Bank Asia Ltd.” (Incorporated on August 23, 2009, dissolved in December 30, 2013) in which Noticee no. 2 was director and president. Noticee no. 2 resigned as president and member of board of the Euram Bank Asia Ltd. on September 22, 2011. iii. Vintage’s securities trade a/c held with EURAM Bank was perused and it was observed that for several GDR issues which are/were under investigations, Noticee no. 4 received GDRs from sole subscriber Vintage and sold converted shares on BSE/ NSE. It clearly depicts that Noticee no. 4 acted as conduit to Noticee no. 2 in selling converted shares of GDR issuer companies. iv. Noticee no. 2 was one of the promoters of Alka India Ltd. from quarter ended December 2005 to quarter ended March 2018. Mr. Mukesh Chauradiya served as director of Alka India Ltd. from January 31, 2006 till June 01, 2010. Further, in Ramsai Investment Holdings Pvt. Ltd., Mr. Mukesh Chauradiya served as director during (first appointment from February 04, 2008 and latest appointment from August 17, 2010 till March 17, 2016). Noticee no. 2 was director of Ramsai Investment Holdings Pvt. Ltd. for the period from February 04, 2008 to August 18, 2010. Vintage was shareholder in Ramsai Investment Holdings Pvt. Ltd. through its director Noticee no. 2.

dd) Role of Mr. Arun Panchariya and other entities i. Arun Panchariya (Noticee No.2) a) Mr. Arun Panchariya is key person in structuring the GDR issue of Teledata who devised and structured the GDR issue in connivance Teledata. Noticee no. 2 connected entities are involved at majority of stages of GDR issue. Noticee no. 2 connected Vintage subscribed to GDR issue by entering into Loan Agreement with EURAM Bank for which Teledata pledged its GDR proceeds as security. Noticee no. 2 connected FIIs namely EURAM Bank and Cardinal Capital Partners made Noticee no. 2 controlled Noticee no. 4 their sub-account to facilitate it in selling converted equity shares of Teledata. Noticee no. 2 connected FII sub-account Noticee no. 4 cancelled GDRs and sold converted equity shares. Noticee no. 2 controlled Vintage defaulted on loan payment of USD 32.53 million and same amount was adjusted by EURAM Bank from the GDR proceeds of Teledata as Teledata had pledged GDR proceeds against this loan. Thus, Noticee no. 2 devised GDR scheme along with Teledata wherein Teledata misled the Indian investors by concealing the information of entering into Pledge Agreement and by informing GDR related news in a distorted manner to stock exchanges which made investors believe that GDRs were genuinely subscribed and caused loss to the shareholders to the tune of USD 32.53 million.

b) On account of loan default by Noticee no. 2 controlled Vintage, USD 32.53 million were adjusted by EURAM Bank from the GDR proceeds of Teledata. Noticee no. 2 controlled Noticee no. 4 received GDRs, converted them and sold converted shares worth Rs.31.57 crore. Hence, SCN alleges that Noticee no. 2 along with Vintage and Noticee no. 4 were responsible for the loss of Rs. 31.57 crore inflicted on the shareholders of Teledata jointly and severally.

ii. Vintage (Noticee No.3)

Noticee no. 2 is beneficial owner of Vintage which was the sole subscriber of GDR issue of Teledata and subscription was arranged through a loan availed from EURAM Bank to the extent of USD 36.96 million. Teledata pledged its GDR proceeds as security against the loan availed by Vintage. Vintage repaid loan to the tune of USD 4.60 million and defaulted on the loan repayment thereafter. Outstanding loan amount of USD 32.35 million was adjusted by EURAM Bank from Teledata’s GDR proceeds deposited in its EURAM Bank account. India Focus Cardinal Fund received GDRs from VIntage converted them and sold converted shares worth Rs.31.57 crore. Hence, Vintage along with Noticee no. 2, Noticee no. 4 is responsible for the loss of Rs.31.57 Crore inflicted on the shareholders of Teledata, jointly and severally. Such act of Vintage in connivance with Noticee no. 2 and its connected entities resulted in a fraudulent scheme on the other investors in the securities market and thereby, SCN alleges that Vintage acted as party to the fraudulent scheme. Further, GDRs to the extent of USD 32.35 million were received by Vintage without any consideration.

iii. India Focus Cardinal Fund (Noticee No.4) Noticee no. 2 is beneficial owner of Noticee no. 4. On account of loan default by Vintage, USD 32.35 million were adjusted by EURAM Bank from the GDR proceeds of Teledata. Noticee no. 4 received GDRs from Vintage, converted them and sold converted shares worth Rs.31.57 crore. Hence, Noticee no. 4 along with Noticee no. 2 and Vintage are responsible for the loss of Rs.31.57 crore inflicted on the shareholders of Teledata, jointly and severally. Such act of Noticee no. 4 in connivance with Noticee no. 2 and its connected entities resulted in a fraudulent scheme on the other investors in the securities market and thereby, the SCN alleges that Noticee no. 4 acted as party to the fraudulent scheme.

iv. Mr. Mukesh Chauradiya (Noticee No.11)

a) It was observed in the investigation that Noticee no. 11 was a long term associate of Mr. Arun Panchariya.

b) Noticee no. 11 acted as aide to Noticee no. 2 and facilitated Noticee no. 2’s scheme by executing Vintage’s redemption of loan amount requests for repayment of Vintage’s loan in capacity of the Authorized Signatory of Vintage. He also worked in the capacity of Managing Director of Vintage when Vintage stopped repaying the loan and defaulted on loan of USD 32.53 million when he was the authorized signatory of Vintage. He collaborated with Noticee no. 2, Vintage and Teledata and such act of Noticee no. 11 in connivance with Noticee no. 2/ Noticee no. 2’s connected entities is alleged by the SCN to have resulted in a fraudulent scheme on the other investors in the securities market and the SCN alleges that Noticee no. 11 acted as party to fraudulent scheme. v. Cardinal Capital Partners (Noticee No.12) (CCP) Noticee no. 2 is beneficial owner of Noticee no. 12. As an FII, Noticee no. 12 did not make investment and registered as FII only to facilitate the Noticee no. 2 connected FII sub-account India Focus Cardinal Fund in selling the converted equity shares of Teledata. Such act of Noticee no. 12 in connivance with Noticee no. 2/ Noticee no. 2 connected entities resulted in a fraudulent scheme on the other investors in the securities market and thus, the SCN alleges that Noticee no. 12 acted as party to the fraudulent scheme. vi. European American Investment Bank (Noticee No.13) (EURAM Bank) EURAM Bank is connected to Noticee no. 2. As an FII, EURAM Bank did not make investment and registered as FII only to facilitate Noticee no. 2 controlled FII sub-account India Focus Cardinal Fund in selling the converted equity shares of Teledata. Such act of EURAM Bank in connivance with Noticee no. 2/ Noticee no. 2 connected entities resulted in a fraudulent scheme on the other investors in the securities market and thus, the SCN alleges that Noticee no. 13 acted as party to the fraudulent scheme.

3. From the above, the SCN inferred that Noticee no. 4, EURAM Bank as an FII, Cardinal Capital Partners, Vintage and Mr. Mukesh Chauradiya, are connected to Noticee no. 2. The SCN alleges that in collusion with these entities and Teledata, Mr. Arun Panchariya devised the GDR issue in fraudulent manner and subsequent sale of shares in Indian market. In view of the above, the SCN alleged following violations against the Noticees:- Table 9 Noticee Name of Noticee Alleged violations No. 1. Teledata Technology Solutions Sections 12A(a), (b), (c) of SEBI Act, 1992 read with Regulations 3(a),(b), (c), Ltd. (d) 4(1), and 4(2)(f), (k), (r) of PFUTP Regulations, 2003

2. Mr. Arun Panchariya Sections 12A(a),(b) and (c) of SEBI Act, 1992 read with Regulations 3(a),(b), (c), 3. Vintage FZE (d) and 4(1) of PFUTP Regulations, 2003. 4. India Focus Cardinal Fund 5. Mr. K. Balasubramanian 6. Mr. N. Sakthivel 7. Mr. M. S. Ramakrishnan 8. Mr. R. Ravichandran 9. Mr. G. Jagadish M10r. K. Mr. Padmanabhan 11. Mr. Mukesh Chauradiya 12. Cardinal Capital Partners 13. European American Investment Bank AG)

4. In view of the above:- i. Noticee No.1 was called upon by the SCN to show cause as to why appropriate directions under Sections 11(1), 11B and 11(4) of the SEBI Act, 1992 including the direction to bring back the money to the extent of loan default, amounting to USD 32.53 million should not be issued against them on account of the alleged violations mentioned in the SCN.

ii. Noticee Nos. 2 to 4 were called upon by the SCN to show cause as to why appropriate directions under Sections 11(1), 11B and 11(4) of the SEBI Act, 1992 including the direction for disgorgement of the amount to the extent of sale proceeds of converted shares of Rs. 31.57 Crores, should not be issued against them on account of the alleged violations mentioned in the SCN.

iii. Noticee Nos. 5 to 13 were called upon by the SCN to show cause as to why appropriate directions under Sections 11(1), 11B and 11(4) of the SEBI Act, 1992 should not be issued against them on account of the alleged violations mentioned in the SCN.

5. Noticee no. 5 and 6 have filed their separate replies dated August 22, 2019. Noticee no. 9 has not filed any reply, but vide his email dated August 28, 2020, he has raised certain contentions to the SCN. Noticee no. 10 has filed his reply dated

August 10, 2020. Noticee no. 11 has filed his reply dated August 16, 2019 and submissions on Affidavit dated September 9, 2020. Noticee no. 13 has filed its reply dated August 6, 2019 and written submissions dated September 14, 2020. I note that Noticee no. 3, 4, 7, 8 and 12 have neither filed any reply, nor did they appear for the personal hearing. I note the service of SCN and hearing notice was done on Noticee no. 7 through Speed Post. From the SEBI Adjudication order bearing no. EAD/AO/BJD/VS/113/2018 dated July 31, 2018, passed against Noticee no. 4, it is learnt that the name of Noticee no. 4 has already been removed from the Register of Companies maintained under Section 11 of (Mauritius) Companies Act ,2001. From the aforesaid Adjudication order, it is also learnt that a winding up order had been issued by the Bankruptcy Division of the Supreme Court of Mauritius against Noticee no. 4 and Joint Liquidators had been appointed to proceed with the dissolution of Noticee no. 4, in terms of the provisions of the (Mauritius) Insolvency Act, 2009. I note that a hearing notice was delivered to Noticee no. 4 by email in the present matter, but none appeared for the personal hearing on behalf of Noticee no. 4 and neither any reply has been filed to the present SCN by Noticee no. 4. I note that Noticee no. 12 was served with the SCN at its overseas address through Speed Post as well as through the Financial Services Commission (Mauritius). The delivery of the SCN as well as the hearing notice was not successful vide Speed Post on both the address of Noticee no. 8 available on record. Therefore, service of hearing notice was made upon Noticee no. 8 through paper publication in the Trichy Edition of the Times of India, Navbharat Times and Dinamalar, on December 22, 2020.

6. I note that vide an email dated August 14, 2020, Noticee no. 2 was informed that the personal hearing has been scheduled in the matter on September 1, 2020. While addressing the said email, he was also served with the hearing notice for Noticee no. 3 and Noticee no. 12, since he was the ultimate beneficial owner of both the entities. I note that vide his letter dated August 18, 2020, Noticee no. 2 submitted that he has not received any SCN and the Annexures thereon and that he was not even aware of the proceedings being initiated in the matter. He also sought for an adjournment of the personal hearing scheduled on September 1, 2020, on the ground that he would require more time to file his reply after the receipt of the SCN. Vide email dated August 20, 2020, Noticee no. 2 was informed that since delivery failed at the Dubai address of the Noticee, hence, a letter dated February 26, 2020 was issued and served upon him. I note that the copy of the SCN and the Annexures thereon were once again delivered to Noticee no, 2 vide email dated August 20, 2020. By another email dated December 2, 2020, Noticee no. 2 was served with the Hearing Notice dated December 1, 2020 for the hearing scheduled on December 24, 2020. Noticee no. 2 was also provided with the option of appearing for the hearing through videoconferencing. Vide email dated December 22, 2020, Noticee no. 2 was sent a reminder and asked to confirm his attendance for the hearing scheduled on December 24, 2020. I note that, Noticee no. 2 has failed to reply to any of the email sent by SEBI namely email dated August 20, 2020, December 2, 2020 and December 22, 2020 and even failed to appear for the personal hearing scheduled on December 24, 2020. He has also failed to file a reply to the SCN till date.

7. I note that the Noticees were granted an opportunity of personal hearing in the matter on September 1, 2020. On the scheduled date, the advocates appearing on behalf of Noticee no. 13 and 11, were heard. None appeared for Noticee no. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 12. Since, the delivery of the hearing notice on Noticee no. 7 and 8 was not found to be satisfactory, hence another opportunity of personal hearing was granted to Noticee no. 7 and 8 on December 24, 2020. Noticee no. 2 was also provided with another opportunity of personal hearing on December 24, 2020, on the basis his request for adjournment. I note that none of the Noticees whose hearing was scheduled on December 24, 2020, appeared on the scheduled date, neither was any request for adjournment received from them.

8. Noticee no. 5 and 6 vide their separate replies dated August 22, 2019 have raised the following contentions:

a. We were the director of Noticee no. 1. We state that Noticee no. 1 is now facing liquidation proceedings before the Hon’ble Madras High Court. We say, we have acted bonafide and approved the decision for raising capital by issuance of GDR. b. Noticee no. 2 and 13 played fraud on Noticee no. 1 and they have misappropriated funds raised from issuance of GDR.

c. When Noticee no. 1 tried to use the funds lying in the account of Noticee no. 13, Noticee no. 1 was prevented which led to the filling of proceedings before Jurisdictional Court in Vienna. By the time proceedings culminated in Vienna due to paucity of funds, Noticee no. 1 was into liquidation before the Hon’ble Madras High Court on a Petition filed by Canara Bank. Thereafter, we have filed proceedings in Hon’ble Madras High Court in C.A. No. 77, 78 and 79 in C.P. 275 of 2010. These proceedings were filed with the bonafide interest to recover GDR funds. d. All legal proceedings shall be continued only with the leave of the Company Court that deals with the winding up of the Company in question. The question involved in the enquiry of the SCN under reply will have a direct bearing on the proceedings already being enquired into by the Hon’ble High Court, Madras. It would be in the interest of justice that leave of High Court, Madras be obtained.

9. Noticee no. 9 vide his email dated August 28, 2020, has contended that he was not a whole time director of Teledata and he has left the Company long back. He has insisted that Teledata is under liquidation and he has no connection with any of the ex-directors of the Company.

10. Noticee no. 10 vide his reply dated August 10, 2020, has attached the copy of the judgement dated October 23, 2019 of the Hon’ble Madras High Court in C.A. Nos. 79 of 2017 in CP NO. 275 of 2010. In the said reply, Noticee no. 10 has submitted as follows: “I would like to place on record the Order dated October 23, 2019 passed by the Hon’ble Madras High Court in C.A. no. 79 of 2017 in CP No. 275 of 2010. Our stand has been vindicated and the jurisdictional challenge launched by EURAM Bank has been rejected. The Hon’ble High Court has now decided to enquire into the illegalities and fraud played by Arun Panchariya, EURAM Bank and others against the Company in Liquidation Teledata Technology Solutions Ltd. I have no objection for you to make such enquiry against the perpetrators of the fraud, without prejudice to our rights to claim the monies from these entities that have been arrayed before the Hon’ble Madras High Court.”

11. I note that in his reply dated August 10, 2020, Noticee no. 10 has also made reference to an earlier reply dated August 9, 2019, which purportedly was filed by him. However, no such reply dated August 9, 2019, could be found on record. Accordingly, vide letter dated July 26, 2021, Noticee no. 10 was called upon to provide a copy of the reply dated August 9, 2019, which purportedly was filed by him. However, the letter dated July 26, 2021, which was sent by SEBI through Speed Post as well as hand delivery, to the last known address of Noticee no. 10, could not be delivered. I note that the last known address available on record, of Noticee no. 10, is the same address which was mentioned on the envelope by which Noticee no. 10 had sent his reply dated August 10, 2020. It is also noted that paragraph 38 of the SCN clearly advised the Noticees including Noticee no. 10 to keep SEBI informed about the change in their correspondence address, if any, till the proceedings are complete. It is noted that no change in his correspondence address has been intimated by Noticee no. 10 to SEBI. In view of the above, I note that only the reply dated August 10, 2020 filed by Noticee no. 10 can be considered.

12. Noticee no. 11 vide his reply dated August 16, 2019, submissions on Affidavit dated September 9, 2020 and oral submissions made at the time of personal hearing held on September 1, 2020, has raised the following key contentions to the allegations in the SCN:

a. He was never the director or Managing Director of Vintage as alleged in the SCN. He has tried to collect documents from Jebel Ali Free Zone Authority (‘JAFZA’) UAE to prove that he was never director or MD, however, the authority has denied him the information without a court order. In a letter dated December 28, 2010 addressed to EURAM Bank, JAFZA has stated that Noticee no. 11 was a manager of Vintage. b. He was only an employee of Vintage, the subscriber to the GDR of Teledata. Vintage was fully owned and controlled by Noticee no. 2 which is mentioned in the SCN itself. c. Under the implementing regulations number 1/92 pursuant to Law No. 9 of 1992 of FZE Regulation under which Vintage was registered as a Free Zone Enterprise stipulated that Free Zone Enterprise was to have a single owner, in this case was Noticee no. 2 who was beneficial and legal owner. d. Noticee no. 2 was initially the sole director, later on his brother replaced him. Noticee No. 11 was never a director or MD. Even in his resident permits his designation is always mentioned as General Manager and not as director/ MD. e. Even in letter dated October 1, 2009 written by Vintage to Abu Dhabi Central Bank it can be seen that he was referred as General Manager since September 2005 and the letter was signed by Noticee no. 2 himself. f. Noticee no. 11 has also submitted copy of his employment card issued by JAFZA where he has been mentioned as an employee not a director or MD of Vintage. g. From a copy of the visa issued to Noticee no. 2 by JAFZA valid from January 12, 2010 to January 11, 2013, it can be seen that Noticee no. 2 was the MD of Vintage.

The beneficial ownership of Vintage is also owned by Noticee no. 2 who owned 99.99% of its shares. h. The administrative fine statement passed by DSA imposing a fine of USD 12,000 on Noticee no. 2 also clearly indicates that Noticee no. 2 was the licensed director in relation to Vintage. i. Key decision-making powers in Vintage such as availing loans from banks, subscribing to GDRs or other investments and repayment of loans were with the owner and director of Vintage which was Noticee no. 2 or his brother. j. On the Loan Agreement between EURAM Bank and Vintage as mentioned in the SCN in the GDR issue of Teledata, Noticee no. 2 signed as MD of Vintage. Somewhere in 2010 after Noticee no. 2 set up EBAL in JV with EURAM Bank and got it UAE DIFC license there were concerns with respect to conflict of interest raised by EURAM Bank as Noticee no. 2 was also signing, verifying transaction documents as President of EBAL, post which, Noticee no. 2, while continuing as the sole beneficiary owner of Vintage stepped down as director and was replaced by his brother. Also, on account of the above conflict Noticee no. 11 was instructed by Noticee no. 2 to sign certain documents. k. With regard to the specimen signature format dated June 6, 2007, Noticee no. 2’s name had been mentioned solely as owner in the second and Noticee no. 11’s name appears as one of the persons with signing authority.

l. Noticee no. 11 did not get any other advantage monetary or otherwise from what has been done by him except for salary received as an employee of Vintage. m. Noticee no. 11 signed the redemption requests for loan as and when Noticee no. 2 required liquidity. n. There is a letter that Noticee no. 11 has signed where his designation is wrongly mentioned as MD. o. Noticee no. 11 cannot be blamed for fraud on account of certain corporate noncompliance by Teledata and its officials. As an employee of Vintage, Noticee no. 11 had no connection with Vintage signing a Loan Agreement and loan for subscribing to GDR of Teledata. He had no role to play in the same and was not instrumental in arranging loans. p. Merely by being an employee of Noticee no. 2, Noticee no. 11 cannot be deemed to be managing the affairs of Vintage along with Noticee no. 2. q. Noticee no.11 had never held any beneficial or any other interest with any of the entities such as Noticee no. 4, Cardinal Capital Partners, or the Bank of New York Mellon. r. Noticee no. 11 was holding one or two shares of Vintage FZE Holdings Private Limited which is normal business practice and nothing sinister can be attributed to him on account of the same. Merely by being on the Board as Nominee Director on Ramsai it does not make Noticee no. 11 connected in any sense other than existing relation of employer and employee. He also admits that he was on the board of Alka India Limited as Nominee Director but no adverse inference can be drawn from the same. s. Noticee no. 11 denied that Vintage had committed any fraud on the Indian shareholders. None of the commissions and omissions of Vintage constitute any offense or violation or any of the provisions of the security laws in India. As an employee of Vintage he had no role to play in any of the acts committed by Vintage.

13. Noticee no. 13 vide its reply dated August 6, 2019 and vide its written submissions dated September 14, 2020, and vide its submissions made at the time of personal hearing held on September 1, 2020, has raised the following key contentions to the allegations made in the SCN:

a. There is not a single finding against EURAM Bank as an FII (which is the jurisdictional scope of the investigation and the resultant SCN) in either the SCN, or otherwise, that it has itself violated any provision of the SEBI Act, 1992 and the PFUTP Regulations, 2003; more so, there is not even any allegation of breach of the extant FII Regulations by EURAM Bank. The SCN is predicated entirely and seeks to fasten liability on EURAM Bank on the averment that EURAM Bank is connected with Noticee no. 2 and on the fact that EURAM Bank was the FII to a subaccount, India Focus Cardinal Fund, that admittedly SEBI granted registration to on the basis of its independent scrutiny, and which in turn may have been part of a scheme and be related or connected to persons that violated provisions of the SEBI Act, 1992 and the PFUTP Regulations, 2003 b. EURAM Bank is no longer registered with SEBI as an FII, and has not been so since 2011. In fact, EURAM Bank had stopped all trading activities as FII and the relevant sub-account has been allowed to be transferred by SEBI itself by its letter dated July 20, 2011. Therefore, it would be wholly unfair and unjust to penalize it for alleged infractions of a sub-account and persons that traded before EURAM Bank ever got registered as an FII and continued to trade independently and with other persons well after the sub-account had been transferred.

c. From its inception, EURAM Bank has been owned privately and at no point has Noticee no. 2, who is the primary suspect in the alleged wrongdoing, owned any shares in EURAM Bank.

d. With an objective of providing additional investment opportunities to its clientele in Asia, EURAM Bank registered with SEBI as an FII (registration no. INASFD21 1606) in the year 2008. In the same year, Noticee no. 4 was registered with SEBI as a sub-account after due scrutiny of its background and having found Noticee no. 4 to have satisfied its selection criteria. Before forwarding Noticee no. 4’s application to SEBI, EURAM Bank, as an FII, undertook the Know Your Customer check on Noticee no. 4 as prescribed by SEBI and on such basis, forwarded Noticee no. 4’s application to SEBI, as required under the FII Regulations. Noticee no. 4 was granted permission to register and trade in Indian securities market by SEBI after an independent assessment of its background and qualification by SEBI. All transactions undertaken by Noticee no. 4 in the Indian securities market were undertaken by Noticee no. 4 on its own volition, without any assistance or advice from EURAM Bank. The GDRs and the underlying equity shares that were the subject matter of SEBI’s investigation were acquired by Noticee no. 4 independently with funds raised by it on its own (not through EURAM as a bank), and not in its capacity as a sub-account, and it is only the sale orders in respect of such underlying equity shares that were undertaken by Noticee no. 4 through EURAM Bank.

e. In the year 2009, EURAM entered into a business relationship with Noticee no. 2, based on Noticee no. 2’s assurances that he will be able to generate business opportunities for EURAM Bank in the Middle East by introducing high net worth individuals in the region to EURAM Bank for its private banking business. EURAM Bank, which had been active in the service, relying upon such assurances, formed a joint venture with Noticee no. 2 in Dubai in order to grow its client base in the region. The joint venture was proposed to be named, Euram Bank Asia Limited (‘EBAL’). EURAM Bank was to own the majority interest in EBAL, and EBAL was registered with the Dubai Financial Authority under the Category-3 license, which did not allow it to undertake any credit or investment business directly. EBAL thus entered into a referral arrangement with EURAM Bank pursuant to which, EBAL, which was being operated by Noticee no. 2 on a day to day basis was to refer clients to EURAM Bank and in exchange, was to be paid a fee. Noticee no. 2 was the president of EBAL and also its director. Unfortunately, the operations did not materialize as expected, and EURAM Bank wound down the joint venture and before doing so, alerted the Austrian authorities of suspected money laundering activities by Noticee no. 2 and entities and persons connected with him. At no time did EBAL deal in or provide any assistance in connection with any transaction related to the Indian securities market. In June 2011, EURAM decided to stop operating as an FII since the business opportunities it had anticipated did not materialize. On July 20, 2011, Noticee no. 4 was granted permission by SEBI to transfer the sub-account to Cardinal Capital Partners.

f. As a result of the investigation into Noticee no. 2’s dealings in GDRs under a previous Show Cause Notice dated September 19, 2014, the Austrian Financial Authority and the White-Collar Crime and Corruption Authority (‘WkStA’) initiated both, civil and criminal proceedings against EURAM Bank and its management. The office of WkStA also instructed a business expert to examine and report on the business model of providing loans to Vintage for the purchase of the GDRs. All these investigations and reviews have since been concluded, and EURAM Bank has been cleared of all charges and allegations and the loans granted to Vintage have been found to be commercially sound and compliant with all laws. The Dubai Financial Authority also undertook an investigation of EBAL’s role and activities in Noticee no. 2’s alleged wrongdoing and closed the investigation on August 8, 2012 having concluded that EBAL had not committed any wrongdoing.

g. Per SEBI’s own finding, the only link between the two, EURAM Bank and Noticee no. 2, is restricted to the setting up of the joint venture entity, EBAL, which has in any case been wound up, and even before it was shut, it had no business or operations relating to the Indian securities markets. In any event, as had been stated earlier, far from having any links with Noticee no. 2, EURAM Bank complained to regulators against Noticee no. 2 for suspected money laundering. Thus, EURAM Bank has always acted in a bonafide manner and has been responsible in its reporting obligations.

h. It may be noted that unlike Cardinal Capital Partners - the other accused FII- Noticee no. 2 does not hold a single share in EURAM Bank. In light of the above, it is humbly submitted that the allegation that EURAM Bank is “connected to Noticee no. 2” is tenuous and wholly unsubstantiated by any facts or findings.

i. EURAM Bank’s only pecuniary interest in the entire scheme of things was restricted to just the interest it would get from the loan made available to Vintage; After repaying only USD 4.6 million of the total 36.96 million in 11 installments, Vintage defaulted on the remainder of the loan with the last installment paid in November 2011. Subsequent to the default of Vintage, Teledata instituted a Civil Suit before the Commercial Court of Vienna, to restrain EURAM Bank from invoking the Pledge Agreement. The issue of EURAM Bank adjusting the outstanding loan amount of USD 32.53 million following Vintage’s default, against the security put up by Vintage, was decided ultimately by the Austrian Supreme Court in favour of EURAM Bank vide judgement dated June 14, 2016.

j. EURAM Bank was the FII for Noticee no. 4 only for a limited period of time-up till July 20, 2011 after which Cardinal Capital Partners became the FII for Noticee no. 4. As per details from NSE and BSE, a large chunk of the trade activities by Noticee no. 4 happened after such transfer of account. It may be appreciated that even prior to any adverse finding against Noticee no. 4, EURAM Bank had suspended acting as an FII for Noticee no. 4.

k. The allegations of a) fraudulent or manipulative conduct; b) creation of false market; c) engaging in unfair trade practice is wholly unsubstantiated and unwarranted. There is no evidence against EURAM Bank in the investigation to sustain such serious allegation. These are serious Charges that have independent elements and require a detailed investigation, substantiation by evidence and specific finding before a charge can be made out. In the present case, there is absolutely no finding or record against EURAM Bank for leaving itself engaged in any fraudulent or manipulative conduct or for that matter, deployed an unfair trade practice.

l. As pointed to earlier, SEBI has already investigated a similar matter and the Hon’ble Member had addressed such issues in his order dated September 5, 2017, ruling in favour of EURAM Bank. Placing reliance on the doctrine of res judicata, it is submitted that, in light of the previous decision of the Hon’ble

Whole Time Member, covering essentially the same facts and addressing the same issues, here to EURAM Bank must be granted similar relief and the charges against it be dropped.

m. In the present case, the period under investigation, as stated in the preliminary paragraph of the SCN, was February 01, 2010 to March 31, 2010. The SCN in the matter was issued only on June 27, 2019 after a period of almost nine years. The present hearing is happening almost a decade after the investigation period. lt is submitted that, this, by no stretch, could be construed as a reasonable period of time. As such, in view of the enormous delay, and in the interest of justice, the proceedings ought to be dismissed on the ground of laches.

14. I note that SEBI investigated issue of GDRs in the overseas markets by the Indian companies on receipt of a complaint, in the year 2009, regarding misuse of GDR route by few companies. The investigation prima facie revealed that in many of the GDR issues, money for subscribing to GDR was availed as a loan by the subscribers, from an overseas Bank wherein the issuer company gave security for such loan taken by the subscribers, by pledging/creating charge on the GDR issue proceeds. It was also observed that such subscribers subscribed the GDRs without any valid consideration and sold the underlying shares in the securities market in India. Accordingly, where such modus operandi was prima facie observed such GDR issues made before the year 2009 were examined. SEBI initiated investigation as soon as SEBI came to know that such companies have adopted the modus operandi as referred to above. Since, the GDRs are issued abroad and related transactions were carried out outside India, SEBI had to call information from the various entities situated abroad in such large number of fraudulent GDR issues.

Such information inter alia included the details of (a) GDR issuer companies, (b) custodian of securities, (c) overseas depository, (d) overseas banks, (e) subscribers of GDR issue (mostly overseas), (f) lead manager, (g) various layers of transactions, etc. These information were not readily forthcoming. Therefore, SEBI had to collect information and documents from various sources including approaching the foreign regulators for assistance in procuring information and documents from the concerned entities situated outside India. The foreign regulators had also to collect this information from the concerned entities and then to furnish to SEBI. Thus, the process of collection of information in the matter was complex, tedious and time consuming. It is noted from SEBI order dated June 16, 2016 that investigation was initiated in respect of 59 GDR issues made by 51 Indian Companies during the period 2002 to 2014 involving the same modus operandi, as discussed above. It is noted that in many of these cases Mr. Arun Panchariya – Noticee no. 2 herein and his connected entities some of which are noticees herein viz: Vintaze FZE – Noticee no. 3, India Focus Cardinal Fund – Noticee no. 4, Mukesh Chauradiya – Noticee no., Cardinal Capital Partners – Noticee no. 12 and EURAM Bank – Noticee no. 3 have facilitated the GDR issues.

One of the connected entity of Noticee no. 2 i.e. Pan Asia Advisors Ltd. even contested the jurisdiction of SEBI over the GDRs which was ultimately decided by Hon’ble Supreme Court in SEBI Vs. Pan Asia Advisors Ltd. & Anr. (2015) 14 SCC 71 on July 06, 2015. Teldata was one such GDR issuer where modus operandi, as discussed above, was also observed and the investigation was completed in April, 2019. I note that after completion of the investigation, the SCN was issued to the Noticees on June 27, 2019.

15. Noticee no. 5, 6 and 10 have raised a preliminary objection that before initiating the present proceedings, SEBI ought to have obtained the leave of the Hon’ble High Court at Madras wherein the winding up petition against Teledata under Chapter VII of the Companies Act, 1956 has been admitted and a provisional liquidator has been appointed. In this regard, I note that in Company Petition No. 275 of 2010 filed before the Hon’ble Madras High Court, winding-up order in respect of Teledata was passed in July 2010. Thus, in respect of Teledata, Section 446 of the Companies Act, 1956 came into play in July 2010, which provided that when a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose. Thereafter, I note that Section 279 of the Companies Act, 2013 came into force on December 15, 2016 which also contained similar requirement. However, even after coming into force of Section 279 of the Companies Act, 2013, Section 446 of the Companies Act, 1956 remained in the force, as Section 465 of the Companies Act, 2013 which inter alia dealt with the repeal and saving of Companies Act, 1956 was not in force till January 30, 2019 when the same was brought into force, by virtue of notification no. S.O. 560(E) dated January 30, 2019, only in respect of repeal and saving of Companies Act, 1956. I note that in the present case, SCN came to be issued on June 27, 2019. I note that Section 279 of the Companies Act, 2013 does not contain any such requirement of taking leave from the Tribunal for continuing or initiating proceedings against any other persons including the directors related to the Company concerned and can be continued qua the other noticees. However, the findings in this order qua Teledata are mainly for the purposes of determining the liability of its ex-directors and promoter for the violations, as alleged against them in the SCN.

16. The short case alleged in the SCN is that, on March 12, 2010, Teledata came out with a GDR issue of 35,37,505 GDRs (representing 35,37,50,500 shares of Teledata), to be listed on the Luxembourg Stock Exchange. The GDRs were subscribed by a single subscriber – Vintage, a beneficially owned entity of Noticee no. 2. Vintage received the funds to subscribe to the issue from EURAM Bank, as loan. EURAM Bank had secured the loan given to Vintage by pledging, the proceeds from GDR issue of Teledata. Vintage repaid the loan only to the extent of USD 4.6 million and defaulted on the remaining repayment of USD 32.53 million. Thus, EURAM Bank recovered the default amount from the pledgee i.e. Teledata. 23,20,000 GDRs were transferred by Vintage to Noticee no. 2 connected FII sub-account Noticee no. 4. Noticee no. 4 converted GDRs into equity shares of Teledata and sold the converted equity shares to the tune of Rs. 31.57 crore on Indian stock exchanges. Noticee no. 4 was the FII sub-account of FII-Noticee no. 12 and 13. In view of the above, the SCN alleges that Arun Pancharia (Noticee no. 2) and his connected entities (Noticee no. 3, 4, 11, 12) alongwith Teledata (through the Noticee no. 5 to 10) and EURAM Bank, were party to this fraudulent scheme to deceive the investors in the Indian securities market by making them believe that Teledata had successfully attracted investment from global investors through issue of GDRs and by ultimately dumping the shares received from cancellation and conversion of GDRs on the investors in the Indian securities market.

17. The following is an extract of certain clauses of the Loan Agreement dated February 26, 2010that was executed between Vintage and EURAM Bank for providing loan to Vintage so that Vintage could subscribe to the GDR issue of Teledata: “2 Nature and purpose of facility: Nature and purpose of facility” is “To provide funding enabling Vintage FZE to take down GDR issue of 35,37,505 Luxembourg public offering and may only be transferred to EURAM account nr. 580 016, Teledata Technology Solutions Ltd.” Security it is hereby irrevocably agreed that the following securities and any other securities which may be required by the Bank from time to time shall be given to the Bank as provided herein or in any other form or manner as may be demanded by the Bank: 3) Pledge of certain securities held from time to time in the Borrower’s a/c no. 540012 at the Bank as set out in a separate pledge agreement which is attached hereto as Annex 2 and which forms an integral part of this Loan Agreement. 4) Pledge of the account no. 580016 held with the Bank as set out in a separate pledge agreement which is attached hereto as Annex 2 and which forms an integral part of this Loan Agreement.”

18. From the examination of the above Loan Agreement, it was observed that Vintage had availed of loan facility to the extent of USD 36.96 million from EURAM Bank to subscribe to the GDRs of Teledata. The Loan Agreement was signed by Mr. Arun Panchariya (Noticee No.2) in the capacity of Managing Director of Vintage. The Pledge Agreement was an integral part of the Loan Agreement and account no. 580016 belonging to Teledata, wherein GDR proceeds were to be deposited, was under pledge, as security for the loan availed by the Vintage from EURAM Bank for subscribing to the GDR issue of Teledata, for the purpose of this Loan Agreement.

19. The following is an extract of certain clauses of the Pledge Agreement dated February 26, 2010that was executed between Teledata and EURAM Bank for providing collateral for the loan taken by Vintage so that Vintage could subscribe to the GDR issue of Teledata:

1. Preamble ““By Loan Agreement K260210-007 (hereinafter referred to as the “Loan Agreement”) dated 26 February 2010 the Bank granted a loan (hereinafter referred to as the “Loan”) to Vintage FZE, AAH-213, Al Ahamadi House, Jebel Ali Free Trade Zone, Jebel Ali, Dubai, United Arab Emirates (the “Borrower”) in the amount of USD 36,966,927.25. The pledger has received a copy of the Loan Agreement No K260210-007 and acknowledges and agrees to its terms and conditions.” 2. Pledge 2.1 In order to secure any and all obligations, present and future, whether conditional or unconditional of the Borrower towards the Bank under the Loan Agreement and any and all respective amendments thereto and for any and all other current or future claims which the Bank may have against the Borrower in connection with the Loan Agreement-including those limited as to condition or time or not yet due-irrespective of whether such claims have originated from the account relationship, from bills of exchange, guarantees and liabilities assumed by the Borrower or by the Bank, or have otherwise resulted from business relations, or have been assigned in connection therewith to the Bank (“the Obligations”) the Pledgor hereby pledges to the Bank the following assets as collateral to the Bank 2.1.1 all of its rights, title and interest in and to the securities deposited from time to time at present or hereafter (hereinafter referred to as the “Pledged Securities”) and the balance of funds up to the amount USD 36,966,927.25 existing from time to time at present or hereafter on the securities account(s) no. 580016 held with the Bank (hereinafter referred to as the “Pledged Securities Account”) and all amounts credited at any particular time therein.

2.1.2 all of its right, title and interest in and to, and the balance of funds existing from time to time at present or hereafter on the account(s) no. 580016 kept by the Bank (hereinafter referred to as the “Pledged Time Deposit Account”) and all amounts credited at any particular time therein…. (The pledged Securities Account and the Pledged Time Deposit Account hereinafter referred to as the “Pledged Accounts”, the Pledged Securities and the Pledged Accounts hereinafter collectively referred to as “Collateral”) 2.2 The Pledgor agrees to deposit with the Bank all dividends, interest and other payments, distributions of cash or other property resulting from the Pledged Securities and funds. 2.3 The Bank herewith accepts the pledge established pursuant to section 2.1 hereof.” Realisation of the Pledge: 6.1 In the case that the Borrower fails to make payment on any due amount, or defaults in accordance with the Loan Agreement, the Pledgor herewith grants its express consent and the Bank is entitled to apply the funds in the Pledged Accounts to settle the Obligations. In such case the Bank shall transfer the funds on the Pledged Accounts, even repeatedly, to an account specified by the Bank.

6.2 Notwithstanding the foregoing, in the case that the Borrower fails to make payment on any due amount, or defaults in providing or increasing security, the Pledgor herewith grants its express consent and the Bank is entitled to realize the Pledged Securities (i) at a public auction for those items of Pledged Securities for which no market price is quoted or which are not listed on a recognized stock exchange or (ii) in a private sale pursuant to the provisions of Section 376 Austrian Commercial Code unless the Bank decides to exercise its rights through court proceedings. The Pledgor and the Bank agree to realize those items of the Pledged Securities for which a market price is quoted or which are listed on a stock exchange through sale by a broker publicly authorized for such transaction, a selected by the Bank. 6.3 The Bank may realize the pledge rather than accepting payments from the Borrower after maturity of the claim if the Bank has reason to believe that the Borrower’s payments may be contestable.”

20. From the examination of the Pledge Agreement, I find that Noticee no. 10, in his capacity as Authorized Signatory of Teledata, had signed the Pledge Agreement dated February 26, 2010, with EURAM Bank. By way of the Pledge Agreement, Teledata had agreed to make good all the default to the extent of USD 36.96 million that would be incurred by Vintage under the Loan Agreement. Teledata had agreed to pledge securities as well as funds lying in the a/c. no. 580016, maintained with EURAM Bank. In other words, Teledata had agreed to pledge the proceeds of GDR for the loan taken by Vintage. I note that the Pledge Agreement expressly records that Teledata has received a copy of the Loan Agreement.

21. From Teledata’s EURAM Bank statement, I find that out of GDR proceeds of USD 36.96 million, Teledata had transferred USD 4.63 million (includes the interest earned on money market instruments) to its subsidiary Bitech International. Further, on June 30, 2016, Euram Bank adjusted GDR proceeds to the extent of USD 32,533,384.23 against the loan account of Vintage, as observed from Teledata’s Euram Bank account and Vintage’s Loan account statement. Similarly, from the Vintage’s Loan account statement, I find that, out of the total loan amount of USD 36.96 million, Vintage repaid the loan amount to the extent of USD 4.60 million in 11 installments from April 19, 2010 to November 18, 2011 and thereafter, defaulted on remaining loan repayment.

22. From the copy of the judgement dated October 23, 2019 by the Hon’ble High Court at Madras, in C.A. No. 77 and 78 and 489 to 491 of 2017 in C.P. No. 275 of 2010, which has been submitted by Noticee no. 10, I note that Teledata through its ex-directors and a contributory has filed Comp. A. No. 79 of 2017 praying for directions to Respondent no. 2 to 6, therein, to jointly and severally pay the company in liquidation, the sum of US $ 32,470,974.97 together with interest at 6% per annum from 30.11.2011 along with future interest at the rate of 6% per annum till the date of payment. From the submissions of the EURAM Bank as recorded in the said order of the Hon’ble Madras High Court, I note that, - (i) Teledata through its ex-directors contested the invocation of pledge by EURAM Bank upon the default of loan repayment by Vintage, by filing a suit before the Commercial Court in Austria.

(ii) The said suit was dismissed on the ground that an arbitration clause existed in the Escrow Agreement and the Pledge Agreement.

(iii) The Court in Austria held that the execution of the Escrow Agreement is not in dispute and therefore, the Arbitration Proceedings should be conducted under the Escrow Agreement and that the arbitration clause contained therein is sufficient to assume and exercise jurisdiction over the dispute relating to the Pledge Agreement.

(iv) This position was confirmed in Appeals upto the Supreme Court of Austria. Accordingly, Teledata through its ex-directors commenced an Arbitration Proceeding before Vienna International Arbitration Centre, however, Teledata failed to prosecute the Arbitration Proceedings by remitting the requisite deposit/fees and therefore, the Arbitration Proceedings were terminated.

23. From the judgment dated October 23, 2019 of the Hon’ble High Court at Madras, I note that the Comp A. No. 79 of 2017 was directed to be listed by the Hon’ble High Court on November 01, 2019. Further, developments on the said application have not been informed by Noticee no. 10. I note from the reply of Noticee no. 10 that on the basis of the aforesaid judgment of the Hon’ble High Court Noticee no. 10 seems to canvass that the Teledat and its ex-directors became aware about the purported Pledge Agreement only in and around March 2012, when EURAM Bank proceeded to appropriate the GDR proceeds in Teledata’s EURAM Bank account towards settlement of Vintage’s loan. I note that such a contention of Teledata and its ex-directors lacks merit for the following reasons:

a) In its board meeting dated January 30, 2010, the board of directors of Teledata had resolved the following (Annexure 8 to the SCN):

OPENING OF CURRENT ACCOUNT- EURAM BANK AUSTRIA FOR GDR ISSUE The Chairman informed the Board of Director that the Company wants to open a “Current Account” for domestic division with Euram Bank Austria for the purpose of GDR issue. After discussions, it was decided to open an account and following resolution was passed. RESOLVED THAT a bank account of the Company be opened with EURAM Bank Austria for GDR issue in the name of “Teledata Technology Solutions Ltd – GDR” and that the said Bank be and is hereby authorized to honour all cheques, Draft, Bils of Exchanges, Promissory notes and other negotiable instruments signed, drawn, accepted or made on behalf of the Company severally by Mr. K. Padmanabhan, Authorized Signatory of the Company and to act on any instructions so given relating to the said Account whether the same to overdrawn or not or relating to any transactions of the Company.”

From the above board resolution, I note that EURAM Bank was authorized by the board of directors of Teledata to act upon any instructions to honour cheques, Draft, Bills of Exchanges, Promissory notes and other negotiable instruments signed, drawn, accepted or made on behalf of the Company severally by Noticee no. 10 and to act on any instructions so given by Noticee no. 10 relating to the said Account whether the same to overdrawn or not or relating to any transactions of the Company. I note that the aforesaid resolution gave wide authority in the hands of Noticee no. 10 to do all such acts in relation to the transactions of the Company with EURAM Bank. In pursuance of this resolution, Noticee no. 10, acting as the authorized signatory for Noticee no. 1, entered into the Pledge Agreement with EURAM Bank wherein Teledata pledged GDR proceeds as collateral against loan availed by Vintage from EURAM Bank. I note that the Pledge Agreement was executed on February 26, 2010 in Mumbai and it was also Notarized. I note that it is not the case of Noticee no. 5 to 9 that Noticee no. 10 had unilaterally executed the Pledge Agreement without the requisite authority. From the Annual Report of Teledata for FY 2009-10, it is observed that all the then directors of Teledata, namely, Noticee no. 5 to 9, were present for all the board meetings of Teledata, including the impugned board meeting dated January 30, 2010. Therefore, I find that Noticee no. 5 to 9 had consciously agreed to approve the wide delegation of powers upon Noticee no. 10, to enable inter alia the execution of the Pledge Agreement.

b) From Teledata’s Euram Bank a/c statement and Vintage’s Loan a/c statement, I find that only after Vintage repaid loan installments, on same day or later, equal/ less amount of money was transferred from Teledata’s EURAM Bank account to its subsidiary Bitech International’s bank account. Thus, I note that transfer of funds from Teledata’s EURAM Bank account, was dependent on repayment of the loan by Vintage. I also note that the exact amount of loan repaid by Vintage i.e. USD 4.6 million, no more no less, the same amount of funds were transferred by Teledata to its subsidiary Bitech International (a slight difference on account of interest on money market investments). What is striking is the resemblance of the amount of loan being repaid by Vintage on each occasion and the amount being transferred by Teledata to its subsidiary on each such occasion (Ref. Table 5 above). In view of the above, I find that funds in Teledata’s EURAM Bank A/c. were not at the free disposal of Teledata, since they were pledged by virtue of the Pledge Agreement.

I note that Noticee no. 5 was the promoter and Chairman of Teledata for the FY 2009-10 and FY 2010-11. I also note that for the same period Noticee no. 7 was the Whole Time Director in Teledata and Noticee no. 6, 8 and 9 were the independent directors in Teledata. I also note that Noticee no. 5, 6 and 8 were members of the Audit Committee of Teledata for the FY 2009-10 and 2010-11, with Noticee no. 6 being the Chairman of the Audit Committee. I note that it was inter alia the responsibility of the Audit Committee in accordance with Clause 49(II)(D) of the then applicable Listing Agreement, to review the financial reporting process of the Company, review the annual and quarterly financial statements of the Company before being presented to the board of the Company and to review the Statement of Use/ Application of funds raised through public issue. I also note that in accordance with Clause 41(ii)(a) and 41(II)(e) of the Listing Agreement, the quarterly and the annual financial statements were to be approved by the board of directors of the Company. In view of the above statutory responsibilities on the members of the board of directors and the members of the Audit Committee, I find that none of the members of the board of directors or the members of Audit Committee of Teledata, while discharging their duties, over a period of almost two years, ever noticed the fact that the funds kept in Teledata’s EURAM Bank A/c, were under lien and not at the free disposal of Teledata. As the lien on the GDR proceeds of Teledata was prejudicial to the interests of the Company and its members, the directors of the company ought to have notice and raised red flags, which they failed to do.

c) The involvement of Teledata and in turn the involvement of Noticee no. 5 to 9 in the alleged fraudulent GDR Scheme is also evident from the following fact. I note that the Escrow account statement of Teledata, shows that GDR subscription money was received from only one entity i.e. Vintage. Thus, I find that GDR issue of Teledata (35.37 million GDRs amounting to USD 36.96 million) was subscribed by only one entity, i.e., Vintage. Therefore, I conclude that Teledata submitted wrong list of GDR subscribers to BSE, since, vide its letter dated March 16, 2010 (Annexure 2 to SCN), Teledata had intimated to BSE that GDRs were allotted to 12 allottees.

24. In view of the above, I find that Noticee no. 5 to 10 not only had the knowledge but they also were party to the execution of the fraudulent scheme of GDRs of Teledata that was perpetrated by Mr. Arun Panchariya and his connected entities.

25. I note that the Loan Agreement executed between Noticee no. 3 and Noticee no. 13 stated that Pledge of the account no. 580016 (Teledata’s EURAM Bank account wherein GDR proceeds were received) was an integral part of the Loan Agreement. Moreover, the preamble of the Pledge Agreement executed between Teledata and EURAM Bank referred to the Loan Agreement. I also note that a perusal of the aforesaid Loan Agreement and Pledge Agreement reveals that Noticee no. 13 granted loan to Noticee no. 3 specifically for subscription of GDRs of Teledata since the Loan Agreement mentioned the loan amount “… may only be transferred to EURAM account No. 580016 Teledata Technology Solutions Ltd…”. Thus, I find that the Loan Agreement and Pledge Agreement were part of a scheme where subscription of GDRs of Teledata was done through loan availed by Noticee no. 3 from Noticee no. 13 for which the security was provided by Teledata by pledging its GDR proceeds with Noticee no. 13. I note that the purpose of GDR issue is to raise further capital from overseas market for the Company. If the same proceeds are pledged for the purpose of facilitating the subscriber to subscribe to the GDR issue, then the purpose of raising capital itself is defeated.

26. I note that the Company reported the following in its annual report for FY 2009-10: “…TTSL has issued 35,37,505 GDRs representing 35,37,50,500 underlying Equity Shares of nominal value of Rs.2.00 each(offered at Rs.4.85 each) at USD 10.45 each GDR. Each GDR represents 100 equity shares in the capital of the company. The equity shares represented by the GDRs will represent approximately 242.58% of the company outstanding share capital before issue. The Proceeds amounting to USD 3,69,66,927.25(INR 17,15,689.93 thousand) from the said GDRs were received on 11/03/2010 and credited to EURAM Bank (European American Investment Bank) whose registered office is at Wallnerstrassee 4, A-1010, Vienna, Austria...”

Further, the Company reported the following in its annual report for FY 2010-11: “...GDR Proceeds: TTS successfully completed its Global Depository Receipts issue over a year ago. Thus far, the primary utilization of funds has been to: a) Provide working capital support for our businesses, and b) Provide funding to make the final payments for the acquisition of Abaris Inc We are pleased to inform the shareholders that the acquisition payments for Abaris Inc. were completed by November 2010. All obligations towards the acquisition of Abaris have been fulfilled. The remainder of the GDR funds is still safely in the banks...” I note that, this might have made investors believe that the said GDR issue was genuinely subscribed. Therefore, the entire scheme involving entering into Pledge Agreement, making disclosure in annual reports that the GDRs were successfully subscribed without disclosing the underlying arrangement to the investors resulted in publication of misleading news in the annual reports which contained information in distorted manner and which might have influenced the decision of the investors. Therefore, I find that this artificial arrangement for the issuance and subscription of the GDR issue of Teledata was fraudulent and would not have been possible without the participation of Noticee no. 5 to 10, belonging to the issuer Company. Therefore, I find that Noticee no. 5 to 10 were involved in a fraudulent and an unfair trade practice relating to securities market in contravention of the provisions of Section 12A(a) of SEBI Act, 1992 and Regulations 3(b) and 4(1) of PFUTP Regulations, 2003.

27. The SCN alleges that, the sole subscriber to the GDRs of Teledata i.e. Noticee no. 3, whose beneficial owner was Noticee no. 2, obtained loan from Noticee no. 13, for subscription of GDR issue for which security was provided by Teledata by pledging its future GDR proceeds. Further, the SCN observes that Noticee no. 3 defaulted on repayment of loan to Noticee no. 13 to the extent of USD 32.53 million, thereby, GDR proceeds to that extent were adjusted by Noticee no. 13 from the EURAM Bank account of Noticee no. 1. The SCN also alleges that entities connected to Noticee no. 2 i.e. Noticee no. 4 (who was also the subaccount of FII i.e. Noticee no. 13 and 12), was recipient of certain GDRs and Noticee no. 4 converted the GDRs and off loaded the converted equity shares in the India securities market. The SCN alleges that Noticee no. 13, 4, 3, 11 and 12 were all connected to Noticee no. 2.

28. I note that Noticee no. 2, appears to be the common thread which runs through Noticee no. 3, 4, 11, 12 and 13 and each stage of the fraudulent transactions which ultimately resulted in the loss of USD 32.53 million to Teledata. I note that there was an increase in the capital of Teledata through issue of GDRs for which Teledata did not receive commensurate consideration. The GDRs were subscribed by Noticee no. 3 which was a wholly beneficially owned entity of Noticee no. 2 and the funds for the same was obtained, as a loan from Noticee no. 13 based on a pledge of the GDR proceeds by Teledata through Noticee no. 10. In matter of Jindal Cortex Ltd. Vs. SEBI (Appeal No. 376 of 2019 decided on February 05, 2020), the Hon’ble SAT has held that 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. In this case, the beneficiary of this fraudulent scheme appears to be, in the first stage, Noticee no. 3 who received allotment of 35.37 million GDRs of Teledata but defaulted on the loan taken from Noticee no. 13 to the extent of USD 32.53 million and based on the Loan Agreement and Pledge Agreement the outstanding loan amount was realized from GDR proceeds. Therefore, Noticee no. 3 did not have to pay full consideration for the GDRs and received GDRs of Teledata worth USD 32.53 million for free. I note that Noticee no. 2 was the beneficial owner of Noticee no. 3. Thereafter, Noticee no. 3 transferred certain GDRs to Noticee no. 4 (which was also wholly beneficially owned by Noticee no. 2) which sold the converted equity shares in the Indian market and made money. I note that in the matter of Pan Asia Advisors Ltd. v. SEBI (order dated October 25, 2016 in Appeal No. 126 of 2013) the Hon’ble SAT has discussed the role of Noticee no. 2 in six GDR matters wherein the modus operandi adopted was similar. In the said matter the Hon’ble SAT has held as follows:

“Even though all GDRs were not converted and sold, it is apparent that the modus operandi adopted by the appellants was not only to create an artificial impression that the GDRs have been subscribed by foreign investors, but also to create an impression that after the GDR issue, investors in India have started subscribing to the shares of issuer companies when in fact the shares were sold and acquired by the entities controlled by AP. In these circumstances inference drawn by SEBI that at every stage of the GDR issue, the acts committed by the appellants constituted fraud on the investors in India cannot be faulted.” 29. I find that said scheme of issue of GDRs of Teledata constitutes ‘fraud’ and I find that Noticee no. 2 connived with Noticee no. 5 to 10 of Teledata to structure the fraudulent issue of GDRs wherein Teledata suffered a loss to the tune of USD 32.53 million. I note that Noticee no. 3 was also a wholly owned entity of Noticee no. 2 and was part of the fraudulent scheme wherein without paying real consideration, it received allotment of GDRs. Some of such GDRs were transferred by Noticee no. 3 to Noticee no. 4 who after converting them into underlying shares of Teledata, sold the shares in the Indian securities market and thus, made the profit of Rs. 31.57 Crores. Therefore, I find that Noticee no. 2 and Noticee no. 3 were involved in a fraudulent and an unfair trade practice relating to securities market in contravention of the provisions of Section 12A(a) of SEBI Act, 1992 and Regulations 3(b) and 4(1) of PFUTP Regulations, 2003.

30. I note that Noticee no. 4 was a sub-account of FII- Cardinal Capital Partners i.e. Noticee no. 12 for the period from July 20, 2011 to June 19, 2017. I also note that Noticee no. 2 was 100% shareholder and Chief Investment Officer (as on July 12, 2010) of Noticee no. 12. Noticee no. 12 held 100% shares of Noticee no. 4. Thus, I find that Noticee no. 12 and Noticee no. 4 were both connected entities of Noticee no. 2, as FII - Cardinal Capital Partners did not make investment in India except their sub-account of Noticee no. 4 which sold shares of Teledata in the Indian securities market. In view of the above, I find that Noticee no. 12 and Noticee no. 4 were party to the fraudulent scheme of issue of GDRs and also were involved in an unfair trade practice in securities market, in contravention of the provisions of Section 12A(a) of SEBI Act, 1992 and Regulations 3(b) and 4(1) of PFUTP Regulations, 2003. I note that some of the GDRs were transferred by Noticee no. 3 to Noticee no. 4 who after converting them into underlying shares of Teledata, sold the shares in the Indian securities market and thus, made the profit of Rs. 31.57 Crores. I note that the said profit of Rs. 31.57 Crores was made by Noticee no. 2, 3 and 4 in violation of the securities laws. Therefore, I find that Noticee no.

2, 3 and 4, are jointly and severally liable to disgorge an amount of Rs. 31.57 Crores.

31. I note that Noticee no. 11 has contended that he was merely an employee of Noticee no. 3, following orders and he was not involved in any decision making process. I note that the SCN has arrayed Noticee no. 11 not merely because he was observed to have worked in the capacity of Managing Director of Vintage (when Vintage stopped repaying the outstanding loan and defaulted on loan of USD 32.53 million), rather on the various connections brought with Noticee no. 2, Noticee no. 11 has been alleged by the SCN to be a long term associate of Noticee no. 2 and thus, alleged to be playing a role in aiding and abetting the fraud perpetrated by Noticee no. 2. I note that whether as the director or as an employee of Noticee no. 3, the association of Noticee no. 11 with Noticee no. 2 and his role in the impugned fraud alongwith Noticee no. 2 is stark.

32. Noticee no. 11 was one of the signatories alongwith Noticee no. 2 to operate the bank account of Vintage with EURAM Bank (source: Annexure 7 to the SCN – KYC documents of Vintage). Noticee no. 11 was a trusted associate of Noticee no. 2, so much that he was even made the qualification shareholder in Ramsai Investment Holdings Pvt. Ltd. (formerly known as Vintage FZE Investment Holdings Pvt. Ltd.), a company 99.99% held by Noticee no. 2 during the period 2009-2013. Noticee no. 11 was also the past director of Ramsai Investment Holdings Pvt. Ltd. for the period from February 4, 2008 to March 17, 2016. Noticee no. 11 acknowledges that he had signed certain documents as the Managing Director/ Director of Vintage (such as loan agreement dated Fevruary 14, 2011 in the matter of subscription to GDR issue of Rasoya Proteins Ltd. and letter written to EURAM Bank like Annexure 26 to the SCN), but contends that these documents were signed on the instructions of Noticee no. 2 since Noticee no. 2 was addressing conflict of interest concerns being raised by EURAM Bank. I note that the mere fact that Noticee no. 11 agreed to purportedly act on the instructions of Noticee no. 2 and to sign as the MD/ director of Vintage, speaks loud of his association with Noticee no. 2 to project his status as director/Managing Director of Vintage by ‘holding out’.

Noticee no. 11 signed the requests for redemption of loan amount for GDR issue of Teledata in the capacity of Authorized Signatory of Vintage. Further, according to Noticee no. 11’s submission, he was employed with Noticee no. 3 from September 2005 to September 2017, thus vindicating the fact of long-term association with Noticee no. 2. In view of the above, I find that Noticee no. 11 was not a mere employee but a close associate of Noticee no. 2 and as such Noticee no. 11 was aware of the scheme devised by Noticee no. 2 for various GDR issues and was a party to the fraudulent scheme related to the GDR issue of Teledata as well. Thus, I find that Noticee no. 11 has violated the provisions of Section 12A(a) of SEBI Act, 1992 and Regulations 3(b) and 4(1) of PFUTP Regulations, 2003. I also note that Noticee no. 11 has been alleged by SEBI to be involved in 14 GDR issues involving fraudulent schemes orchestrated by Noticee no. 2 and he has already been debarred from dealing in securities, in at least two such cases by SEBI vide order dated February 20, 2020 passed in the matter Visu International Ltd and order dated July 14, 2020 passed in the matter of Farmax India Ltd.

33. Regarding the role of Noticee no. 13, it is noted that it had provided loan to Noticee no. 3 for subscribing to the issue of GDRs of Teledata, in terms of Loan Agreement and Pledge Agreement. Interestingly, the security for said loan was not provided by the borrower i.e. Noticee no. 1. In fact no collateral or security (even not in the form of GDRs which were to be subscribed by Noticee no. 3 from the said loan taken from Noticee no. 13) was provided by Noticee no. 3. The security of the loan was provided by Noticee no. 1 and accepted by Noticee no. 13, by way of pledge on the subscription proceeds of Teledata which were paid by Noticee no. 3 after availing loan from Noticee no. 13. The structure of the said loan transaction is suspicious, wherein a lender provides a loan to borrower without taking any security from the principal borrower rather accepts entire security from the third party to say guarantor (i.e. Teledata). The said structure of the loan transaction clearly indicates that Noticee no. 13 was part of the dubious scheme of issue of GDR of Teledata. Noticee no. 13 has also been found involved in the various other GDR issues of Indian companies investigated by SEBI.

Further, I note that Noticee no. 13 had a joint venture with Noticee no. 2 in the year 2009 i.e. EBAL which has not been denied by Noticee no. 13. I am of the view that this fact establishes that Noticee no. 2 and Noticee no. 13 were connected, since, entering into a joint venture implies that the two entities know each other well enough to trust each other to pursue common business interests. Further, as found above, it is also incomprehensible that a bank who had given loan to Noticee no. 3 did not ask for any security from Noticee no. 3 itself but agreed to give loan on the security entirely provided by a third party i.e. Teledata and on the basis of something which was not in the possession of Teledata, as on the date of entering into the Pledge Agreement. All this indicates that Noticee no. 13 was well aware and part of the fraudulent scheme. Moreover, Noticee no. 13 was registered as FII with SEBI during November 20, 2008 to November 20, 2011 and during this time it had only one sub account, i.e. Noticee no. 4. Therefore, from these facts, I find that Noticee no. 13 was also part of the devious scheme wherein Noticee no. 13 took a registration as an FII with SEBI for the sole purpose of facilitating the sale of shares by the sub account -Noticee no 4. Without the role of EURAM Bank and Cardinal Capital Partners as FII, the fraudulent scheme could not have been completed and the shares of Teledata could not have been dumped in the Indian securities market.

In view of the above, I find that Noticee no. 13 has indulged in a fraudulent and an unfair trade practice relating to securities market and thus violated the provisions of Section 12A(a) of SEBI Act, 1992 and Regulations 3(b) and 4(1) of PFUTP Regulations, 2003.

34. The violations committed by the Noticees, as noted above, whereby, camouflage of GDR issue was created to mislead the Indian investors is prejudicial to the interest of the investors and the securities market. Such acts calls for issue of appropriate directions as contemplated under Section 11B(1) and 11(4) of the SEBI Act, 1992.

Directions:

35. In view of the above, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4) and 11B(1) of the SEBI Act, 1992 read with Section 19 of the SEBI Act, 1992, hereby direct that: . (i) As discussed in para 15 above, due to the passing of the winding-up order by the Hon’ble Madras High Court in Company Petition No. 275 of 2010, against Teledata, the present proceedings against Noticee no. 1 are disposed off without any adverse directions.

(ii) Noticee No. 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11, are restrained from accessing the securities market and further prohibited from buying, selling or dealing in securities, directly or indirectly, in any manner, whatsoever, or being associated with the securities market in any manner, whatsoever, for a period of two (2) years from the date of coming into force of this order qua the said Noticees;

(iii) Noticee no. 2, 3 and 4 are further directed to jointly and severally, disgorge illegal gains of Rs. 31.57 Crores, made by Noticee no. 4, within a period of 45 days from the date of coming into force of this order qua the said Noticees. The amount shall be remitted by the said Noticees alongwith interest at the rate of 12% per annum from April 8, 2010 (i.e. the date of first sale of shares received upon cancellation of GDRs) till the date of payment of amount directed to be disgorged hereunder, to the Investor Protection and Education Fund (IPEF) referred to in Section 11(5) of the SEBI Act, 1992. In case, Noticee no. 2, 3 and 4, fail to comply with the said direction, then without prejudice to liability to pay the said disgorgement amount and/or the interest thereon, they shall be further restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in the securities market, till the actual payment of disgorgement amount or till the completion of the debarment directed at sub-para (a) above, whichever is later.

(iv) Noticee no. 12 and 13 are hereby warned to ensure that all their future dealings in the Indian securities market be done strictly in accordance with law.

36. The obligation of the said Noticees, restrained/ prohibited by this Order, in respect of settlement of securities, if any, purchased or sold in the cash segment of the recognized stock exchange(s), as existing on the date of coming into force of this Order, are allowed to be discharged irrespective of the restraint/ prohibition imposed by this Order. Further, all open positions, if any, of the said Noticees, restrained/ prohibited in the present Order, in the F & O segment of the recognised stock exchange(s), are permitted to be squared off, irrespective of the restraint/ prohibition imposed by this Order.

37. This Order comes into force with immediate effect qua Noticee no. 2, 3, 4 and 11. In view of pending COMP. A. No. 79 of 2017 in C. P. No. 275 of 2010, before the Hon’ble Madras High Court, this Order shall come into force on ninetieth day from the date of this order qua Noticee no. 5, 6, 7, 8, 9 and 10 and shall be subject to the judgement/ order, if any, passed by the Hon’ble Madras High Court in the aforesaid COMP. A. No. 79 of 2017.

38. A copy of this Order shall be forwarded to the Noticees, recognized stock exchanges, depositories and registrars and transfer agents (RTAs) of mutual funds for information and necessary action.

39. A copy of this order may also be sent to the Official Liquidator of Teledata, the RBI, the Enforcement Directorate and Ministry of Corporate Affairs for information and necessary action, if any.

Sd/- Date: Date: August 13, 2021 ANANTA BARUA Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA