SAT Sets Aside SEBI Order Against Lyka Labs In GDR Manipulation Case
SEBI in June 2020 banned Lyka Labs after conducting a probe which found the firm had issued GDRs and raised $5 million in 2005.
The Securities Appellate Tribunal has overturned a SEBI order banning Lyka Labs from securities markets for three years in a matter related to manipulation of global depository receipts.
While setting aside the order, the tribunal said, "The direction of the whole-time member in restraining the Lyka Labs from accessing the securities market was excessive and disproportionate to the misconduct especially when on a similar charge SEBI's adjudicating officer had imposed a penalty which was accepted and paid by the firm."
The regulator in June 2020 banned the firm after conducting a probe which found Lyka Labs had issued GDRs and raised $5 million in December 2005.
It further noted that the company had made fraudulent arrangements for facilitating the financing of the subscription to the GDR issue and had made misleading disclosures to the investors at large.
Also, on the basis of authorisation given by the board of directors, Lyka Labs facilitated the subscription to its GDR issue by Fusion Investment on the strength of a loan obtained by it from Banco Bank against which the GDR proceeds of the company were kept as security.
However, SAT in its order noted that the "findings given by the WTM that the proceeds of the GDR was eventually received by the company in India though belatedly. The issue was of the year 2005-2006. The company is still running and is in the pharmaceutical business.
"There is no allegation of any defalcation of any funds nor there is any financial irregularity of the company other than the non-disclosure made by the firm."
Affirming the order of the WTM for the violation committed by the company, it said "we reduce the direction of debarment of three years to the period undergone."