United Phosphorus Ltd (UPL) and its chairman Jaidev (Jai) Rajnikant (JR) Shroff paid Rs20.22 crore to settle a case related to fraudulent and unfair trade practices with markets regulator Securities & Exchange Board of India (SEBI). The market regulator investigated UPL and Mr Shroff to ascertain whether they were routing funds to the Indian securities market using overseas bank accounts with UBS AG Bank.
Dr Anitha Anoop, chief general manager (CGM) of SEBI, passed the settlement order stating that the market regulator will not initiate any other enforcement action against UPL and Mr Shroff for these violations.
Following an email query from a newspaper, SEBI investigated the company and its chairman from 1 January 2006 to 31 March 2008.
After the investigation, SEBI issued a show-cause notice (SCN) to UPL and Mr Shroff. The SCN alleged that UPL, assisted by Mr Shroff, had used SEBI-registered FII- Matterhorn Advisory Singapore Pte Ltd sub-account Matterhorn Ventures to indirectly trade in its own scrips listed in India. This financial route (FII route) was alleged to be opted by opening an overseas account with UBS in the name of Tulippe Universal Ltd (TUL), where Mr Shroff—promoter and executive director of UPL—was a beneficial owner and exercised control over the transactions in the UBS account.
"The fund to undertake the transaction was allegedly provided to TUL through UPL's wholly-owned Mauritius-based subsidiary company Bio-Win Corporation Limited, concealing the true source of funds invested in the Indian securities market. By indulging in the arrangement or scheme, it was alleged that UPL, assisted by Mr Shroff, made a wrongful gain of about Rs4.2 crore computed on a notional basis," the SCN says.
However, on 15 April 2024, SEBI received two settlement applications from UPL and Mr Shroff proposing to settle the proceeding through a settlement order without admitting or denying the findings of fact and conclusions of law.
On 15 July 2024, the authorised representatives of UPL and Mr Shroff had a meeting with the internal committee (IC) of SEBI and discussed the terms of the settlement. The IC considered the factors enumerated under regulation 10 and schedule II of the Settlement Regulations and recommended Rs55.44 lakh for UPL and over Rs6 crore for Mr Shroff as indicative amounts for settlement.
Further, the total disgorgement amount for Mr Shroff was calculated as Rs13.66 crore where the illegal gains are Rs4.29 crore and the interest at 12%pa (per annum) from the date of default or 10 February 2006 till the date of submission of settlement application on 15 April 2024 is Rs9.37 crore.
The IC asked the authorised representatives of UPL and Mr Shroff to submit revised settlement terms. In their revised application, the company and its chairman proposed to offer Rs20.22 crore as the aggregate of the indicative amounts mentioned, along with the total disgorgement amount plus the interest of 12%pa towards the settlement amount.
The high-powered advisory committee (HPAC), in its meeting held on 28 August 2024, considered and recommended the settlement terms.
The recommendation of the HPAC was approved by the panel of whole-time members (WTMs) of SEBI. On 24 October 2024, UPL and Mr Shroff informed SEBI about the remittance of Rs20.22 crore.
As reported by
Moneylife, UPL donated Rs60 crore via electoral bonds but did not disclose it to the exchanges. "A close analysis of the electoral bonds makes it clear that companies are either donating out of fear or for incentives—quid pro quo for contracts, projects or orders. Of course, the line between incentives and coercion often blurs in the messy negotiations between political parties and businesses. In any case, shareholders and citizens remain in the dark in both situations." (
Read: Electoral Bonds: Where Are the Disclosures?)
