Market regulator Sebi on Friday disposed of its investigation against Unitech’s erstwhile promoters Sanjay Chandra and Ajay Chandra in a case pertaining to the alleged routing of funds to the Indian securities market using overseas bank accounts as it found no evidence. Sebi had conducted a suo-moto investigation to ascertain whether there was any routing of funds to Indian securities market by the two Chandra brothers through the bank accounts with UBS AG, in violation of the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.
The period of investigation was from April 2006 to March 2008.
In the investigation report, the regulator alleged United Corporate Parks PLC UCP) was connected to the noticees/Unitech.
It also alleged that Ajay Chandra was a non-executive director in UCP, while Unitech had a 4.52 per cent stake in UCP through its subsidiary Nectrus Ltd — a foreign subsidiary of Unitech whose account was held with UBS Singapore Branch.
Thereafter, Sebi issued a show cause notice on May 3, 2023, against the noticees (Sanjay Chandra and Ajay Chandra).
During the probe, it was observed that the account of Unitech Overseas, a foreign subsidiary of Unitech, was maintained with UBS bank in Zurich.
In its 25-page order on Friday, Sebi said, “…the whole allegation in the matter is that noticees (Sanjay Chandra and Ajay Chandra) transferred the funds from Unitech to its overseas subsidiary viz Unitech Overseas Ltd, and then these funds were transferred among the other foreign subsidiaries of Unitech, including the connected/ related entity viz UCP/its subsidiaries using UBS accounts in different countries”.
Sebi Chief General Manager G Ramar said in the order that these funds were ultimately routed from UBS accounts to Pluri, which were then finally used to buy the shares of Unitech, directly or indirectly, through funds/FIIs like Sophia Growth Fund and Deutsch Bank Mauritius Ltd (DBML).
Pluri (Pluri Emerging Companies PCC) was incorporated in Mauritius as a private limited company by shares, and is a protected cell company.
“I further note that neither there is any evidence, documents or detail on record to establish that the fund transferred by Unitech to Unitech Overseas Ltd was only subsequently transferred to Pluri nor there is any material/facts/information whatsoever brought on record in the IR (investigative report) to show that the source of investment by Pluri w.r.t. its investment in the scrip of Unitech, directly or indirectly, is linked to Unitech,” he said.
Further, there is no detail or evidence on record with regards to fund transactions from Unitech/its subsidiaries to UCP or its subsidiaries, as alleged in the show cause notice, Ramar said.
“… I do not find sufficient corroborative evidence, either in the IR or in the material made available along with the IR to establish the allegation that noticees have dealt in securities of Unitech indirectly in a fraudulent manner and employed manipulative and deceptive practices in connections with the purchase and sale of securities of Unitech or have misrepresented the truth and concealed a material fact known to them of buying the shares of Unitech fraudulently,” Ramar said.
In its order, Sebi decided to “dispose of the proceedings initiated against the noticees” vide show cause notice dated May 3, 2023 “without issuance of any directions”.
The order will come into force with immediate effect. In January 2020, Unitech’s board was superseded by the central government on the Supreme Court’s direction.
Both the brothers were serving as managing directors of the company before the board was superseded.
