Sebi had conducted an investigation with respect to issuance of Global Depository Receipts (GDRs) by BAL during November-December 2010.
In its investigation, the regulator observed that BAL had issued 1.12 million GDRs worth USD 10.38 million.
The entire GDR issue was subscribed by one entity — Vintage FZE, now known as Alta Vista International, Sebi said in an order.
It was observed that the subscription amount was paid by Vintage by obtaining a loan from European American Investment Bank AG (EURAM Bank).
As per the order, BAL had pledged the entire GDR proceeds as collateral against the loan availed by Vintage from EURAM Bank.
The same was carried out through a loan agreement entered between Vintage and EURAM Bank, and a pledge agreement entered between BAL and EURAM Bank, the order noted.
Dalmia had signed the pledge agreement on behalf of BAL, in his capacity as the chief financial officer (CFO) of the company, which had acted as the security for the loan taken by Vintage from EURAM Bank for subscribing to GDRs of BAL.
The GDR issue would not have been subscribed had BAL not given such security towards the loan taken by Vintage through the pledge agreement executed by Dalmia, Sebi said.
The GDRs were not issued in a genuine manner, but rather through a fraudulent arrangement, and such facilitation of the GDR issue and its subscription was not known to the public and investors, it added.
Therefore, Dalmia, who was the CFO of BAL at the relevant point of time when the fraudulent scheme was executed, is deemed to be an ‘officer who is in default’, and is responsible for the fraud committed by BAL, the regulator said.
By doing so, he violated the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, Sebi said while imposing a fine of Rs 20 lakh on Dalmia.