March 26, 2013
PR No. 30/2013

Interim Order against Mr. Rajkumar Saraf, Mr. Akash Kumar Saraf, Ms. Devita Saraf, Ms. Vijayrani Saraf, VU Technologies Private limited and Zenith Technologies Private Limited in the matter of Zenith Infotech Limited (ZIL)

Shri Rajeev Kumar Agarwal, Whole Time Member, SEBI, has passed an ad interim ex -parte order dated March 25 , 2013 restraining Mr. Rajkumar Saraf, Mr. Akash Kumar Saraf, Ms. Devita Saraf, Ms. Vijayrani Saraf, VU Technologies Private limited and Zenith Technologies Private Limited from accessing securities market and prohibiting them from buying, selling or dealing in securities in any manner whatsoever, till further directions.

Further, the board of directors of ZIL is hereby directed to furnish, within 30 days from the date of this order, bank guarantee(s) of a minimum tenure of one year, for USD 33.93 million (i.e. the amount of sale proceeds of MSD Division that has been diverted), in the name of Securities and Exchange Board of India, without using the funds of ZIL or creating any charge on assets of ZIL. The bank guarantee may be invoked in case any adverse inference is drawn by SEBI in its final order with regard to the actions of Board of directors/promoters of ZIL in diverting the sale proceeds of MSD Division and SEBI deems it necessary to compensate ZIL in the interest of its shareholders.

SEBI received complaints against Zenith Infotech Ltd, a company listed on BSE and NSE inter-alia alleging that ZIL defaulted on its obligation to redeem the FCCBs due in 2011 which has resulted in erosion of shareholders' value.

During examination of the said scrip, it was observed that;

1. ZIL had raised US$ 33 & US$ 50 million by issuing 'FCCBs which were due for redemption in September 2011 and August 2012, respectively.

2. ZIL in its EGM held on January 29, 2011 took approval from its shareholders to sale its assets for repayment/redemption of FCCBs due for maturity.

3. On September 26, 2011, ZIL announced to exchanges that it has sold one of its division, (Managed Services Division) MSD, to Zenith RMM LLC.

4. It was observed that the substantial portion of sale proceeds of MSD Division of ZIL was diverted for the benefits/interests of promoters and/or directors and subsidiaries which was not remotely connected to the authorization of the shareholders.

5. Further, it was observed that the ZIL and its promoters/directors not only disregarded shareholders' resolution but also adopted fraudulent device and artifice to defraud the shareholders by concealing and misrepresenting information to the exchanges.

6. The aforesaid apparent asset stripping of ZIL for the purpose of benefitting the interests of its promoters /directors and related entities led to the following consequences:

a. Shareholders/investors have lost considerable value as a result of sharp price fall in the scrip of ZIL from approximately ?190 on September 23, 2011 to approximately ?45 on November 30, 2011 i.e. a fall of approximately 75% in just 45 trading days. The price of the scrip has further gone down to ? 19 as on March 07, 2013.

b. The shareholders' value has eroded because of the misconduct of the promoters/directors.

c. The company is still fastened with the liability to pay back the FCCB holders on account of redemption thereof. This will further have a financial burden on shareholders' wealth in ZIL.

7. The above examination, prima facie, shows that the promoters/directors of ZIL have in a devious manner attempted to take away the assets of a listed company directly and indirectly for their own benefit or for benefit of entities owned and controlled by them, thereby causing loss to shareholders. Thus, the aforesaid entities have,prima facie, violated

• Section 12A (b) & (c) of the Securities and Exchange Board of India Act, 1992 and regulations 3 (c) and (d) of the Securities and Exchange Board of India (Prohibition of the Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
• Clauses 21and 36 of the Listing Agreement read with section 21 of Securities Contracts (Regulation) Act, 1956.
• Clauses 2.1, and 7.0 (ii) of Code Of Corporate Disclosure Practices For Prevention Of Insider Trading provided in Schedule II read with Regulation 12 (2) of SEBI (Prohibition of Insider Trading) Regulations, 1992.

For full copy of order against AKASH RAJKUMAR SARAF, click here.

For full copy of order against DEVITA RAJKUMAR SARAF, click here.

For full copy of order against RAJKUMAR SARAF, click here.

For full copy of order against VIJAY RAMCHANDRA MUKHI, click here.

For full copy of order against VIJAYRANI RAJKUMAR SARAF, click here.

For full copy of order against VIPIN SHAH, click here.

For full copy of order against VU TECHNOLOGIES PVT.LTD., click here.

For full copy of order against ZENITH INFOTECH LTD., click here.

For full copy of order against ZENITH TECHNOLOGIES PVT.LTD., click here.