Sebi in its order on Friday held that Kapoor was in violation of Listing Obligation and Disclosure Requirement (LODR) by not disclosing encumbrance on Yes Bank shares
Mumbai:Rana Kapoor, former, MD and CEO of Yes Bank Ltd on Friday faced dual regulatory and enforcement action. While the Securities and Exchange Board of India (Sebi) penalised Kapoor with ₹1 crore penalty for disclosure violation, Enforcement Directorate provisionally attached his flat in London worth ₹127 crore.
Sebi in its order on Friday held that Kapoor was in violation of Listing Obligation and Disclosure Requirement (LODR) by not disclosing encumbrance on Yes Bank shares. The matter pertains to a private company and promoter entity, Morgan Credits Pvt Ltd raising ₹950 crore from Reliance Mutual Fund through bonds.
The Non Convertible Debentures (NCDs) issued by Morgan Credits were backed by Kapoor's personal guarantee of ₹410 crore, with a clause that Kapoor will provide his Yes Bank shares under certain conditions for outstanding dues. The shares were upto ₹810 crore.
Sebi observed that this transaction by Morgan Credits was not disclosed to the board of Yes Bank and to stakeholders. Kapoor considering he was the guarantor of the transaction and key managerial personnel of Yes Bank ought to have disclosed the transaction. This transaction was termed as material by Sebi in its order.
"The noticee (Kapoor) failed in ensuring the disclosure of aforesaid ‘encumbrance’ by Morgan, despite being an integral part of the transaction. The noticee also failed in informing the board of directors of the company about his material interests in the said transaction," said Sebi in the order .
"This is a case where by not disclosing the substantial material interest in the transaction to the board of directors of the company, the noticee has created an opaque layer between him and stakeholders," Sebi added.
The ED on the other hand attached Kapoor's London flat on the suspicion that Kapoor is trying to alienate this property in London and that he has hired a reputed property consultant for the same. The property was in the name of DOIT Creations Jersey Limited, where Kapoor is the beneficial owner, ED said.
The overseas property has been attached as ED alleges that the flat was bought through laundered money.
ED is investigating a money laundering case in affairs of Yes Bank. So far, the probe had found that Yes Bank invested Rs. 3700 Crore in the short-term debentures of Dewan Housing Finance Ltd.
"Kapil Wadhawan of DHFL paid kickback of Rs. 600 Crore to Rana Kapoor and his family members in the garb of loan of Rs. 600 Crore (given by DHFL) to DOIT Urban Ventures (India) Pvt. Ltd (Rana Kapoor group company)," said ED in its statement.
Yes Bank had also sanctioned a loan of Rs. 750 Crore to RKW Developers, a group company of DHFL beneficially owned by Kapil Wadhawan, Dheeraj Wadhawan and their family members.
"The said loan of Rs. 750 Crore had been sanctioned to them for their Bandra Reclamation Project, Mumbai, but the whole amount was siphoned off by Kapil Wadhawan and Dheeraj Wadhawan (promoters of DHFL) through their shell companies," said ED.