SEBI fines Rs 1 Cr Fine On K Sera Sera’s Director for GDR Fraud

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(SEBI) India’s capital market regulator Securities and Exchange Board of India has penalized the major media and entertainment, business group. Such as K Sera Sera Ltd, also known as KSS Ltd for having defrauded Indian investors under Section 12A(a), (b), (c) of SEBI Act read with Regulations 3(b), (c), (d), and Regulations 4(2)(c), (f), (k) and (r) of PFUTP Regulations over the issuance of Global Depository Receipts in the year 2007 and 2009.  It has made the company liable to  Rs. 12.1 crore while Hussain  Sattaf, the directors, and managing director Rajesh Pavithran, the managing director have been asked to pay Rs. 1 crore each.

Following a thorough examination by the authorities, it was discovered that KSS had issued GDR issues on March 30, 2007, and May 15, 2009, respectively, with Pan Asia Advisors Ltd serving as the book-running lead manager for each of these companies. Further, that Arun Panchariya was the company’s founder, director, and only shareholder of Pan Asia. 

According to the order copy, the investigation report (IR) alleges that Mr. Panchariya designed and arranged the whole process of KSS GDR issuances to the detriment of Indian investors, whereby loans were secured for the subscription of KSS GDRs on both occasions.

Mr. Panchariya was also reported to be the Managing Director, a 100% shareholder, and an authorized signatory of Vintage, the company with whom KSS had a loan and pledging agreement for both of its GDR issuance. He used certain domestic businesses connected to him to convert the GDRs into underlying shares, which he then sold on the Indian securities market with the aid of some Foreign Institutional Investors (FIIs). KSS is also accused of violating Sections 11C(3) and 11C(6) of the SEBI Act by neglecting to submit some information required by SEBI and supplying false information.

The “Order” can be read hereunder –

Analyzing DHFL Insolvency Case

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On May 25, 2021, a panel of the National Company Law Appellate Tribunal (NCLAT) comprised of Justice A.I.S. Cheema and Mr. V.P. Singh stayed an order from the NCLT’s Mumbai bench. The order directed the creditors of Dewan Housing Finance Corp, to consider a  settlement offer from its promoter Mr. Kapil Wadhawan is the DHFL insolvency case which is considered to be one of the largest failures of any Non- Banking Finance Company(NBFC) and Corporate governance failure.

Brief Facts of the Case

The key facts of the case are that SEBI launched an investigation into Dewan Housing Finance Ltd after an accusation was made by an internet portal (DHFL). They hired an outside audit company to look into and evaluate DHFL’s finances. Due to such probes by multiple credit agencies, long-term credit ratings of DHFL were downgraded. On 30th May 2019, DHFL conveyed to the stock exchange its inability to publish its 4rth Quarterly report. It also delayed the payment of commercial papers of Rs 950 crores. 

As of 6th July 2019, DHFL had public deposits of only Rs 6,188 crores which fell from a staggering amount of Rs 10,166 crores since 2018. The consortium of banks and credit agencies led by SBI formulated a Debt Resolution plan, but the plan failed, thus RBI moved DHFL to NCLT for insolvency proceedings. On 29th November 2019 RBI filed an application for  Initiation of Corporate Insolvency Resolution Process against DHFL under IBC, 2016. On 19th May 2021 NCLT’s Mumbai Bench had directed that the settlement offer of Rs 91,158 crore from DHFL’s former promoter should be placed for consideration and voting before the Committee of Creditors(COC). The COC also filed a separate appeal with NCLAT against the Mumbai Bench’s order.

Contentions by the Counsels

On behalf of the COC, Solicitor General Tushar Mehta argued against the NCLT judgment of May 19th, 2019. He added that neither the NCLT nor the COC has the authority to issue such an order. According to Section 29A of IBC, 2016 which states that “A person shall not be eligible to submit a resolution plan if such person, or any other person acting jointly or in concert with such person” Section 29A also prohibits a promoter who is classified as a non-performing asset in the Company. Dr. Abhishek Manu Singhvi, Sr. 

Advocate for the Resolution applicant also contended that the proposal by  Piramal Capital and Housing Finance Ltd. was approved by CoC and RBI also showed no objection. The counsel for Wadhawan informed the court that the underlying goal of Wadhawan’s settlement offer was to maximize the value that creditors would get.


The NCLAT decided that the case needed to be heard and stayed the NCLT ruling, but added that the appellant’s pending status would not prevent the NCLT from ruling on Piramal Capital’s offer for DHFL. The Case next will be taken on 25th June 2020.


  • A promoter cannot make a settlement offer in an insolvency case, according to Section 29A of the IBC. So the settlement offer presented by Mr. Wadhawan even though to maximize profits is against Section 29A. But in the past NCLAT has turned over the decision of NCLT involving section 29A in the case of Sterling Biotech’s case. In the said case a settlement offer by promoters was accepted by the COC and Insolvency proceedings can be withdrawn at any stage as long as 90 percent of COC gives its approval by voters. This was introduced in the newly added section 12A of IBC, 2016.
  • The Court also directed the NCLT to decide “at the earliest” the application filed by the administrator.
  • The NCLAT also highlighted that the creditors should be given more time and they did not appreciate the hurry imposed on the Administrator and the COC to accept the 2nd settlement offer.
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