Securities Appellate Tribunal asks Sebi to take a fresh look at Zenith order

Terming the Securities and Exchange Board of India Sebi ) order on Mumbai-based software firm Zenith Infotech "not sustainable in the eyes of law", the Securities Appellate Tribunal (SAT) has directed the market regulator to take a fresh look into the matter.On Tuesday, the tribunal pulled up Sebi for the manner in which it acted against Zenith Infotech and directed the company to furnish a bank guarantee of $33.93 million (around 2000000000) and restraining the company's promoters from dealing in the securities market."The impugn ad-interim ex-parte order dated March 25, 2013, is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice," read the order passed by the tribunal."No complaint as it is mentioned in the order has ever been supplied to the appellants (Zenith Infotech and its promoters) by giving them an opportunity of hearing in the matter before the order could be passed."The tribunal has termed Sebi's action "no more than an eyewash" and has directed the capital market regulator to take up the matter for "fresh consideration expeditiously and preferably within a period of six weeks".In March, markets regulator Sebi barred promoters of Mumbai-based software firm and its promoters from buying, selling or dealing in securities in any manner whatsoever, till further order.The order also directed to furnish a bank guarantee of $33.93 million without using funds of the company or creating any charge on its assets.The capital market regulator restrained Rajkumar Saraf, Akash Saraf, Devita Saraf, Vijayarani Saraf, VU Technologies and Zenith Technologies Questioning the capital market regulator's jurisdiction on Foreign Currency Convertible Bonds (FCCBs), the order also stated that "In our considered opinion, September-October 2011 would have been the right time for Sebi to act, to protect interests of investors, provided it had the jurisdiction to do the same in respect of the FCCBs in question."According to Sebi, the probe revealed that while the company sold one of its divisions called MSD to Zenith RMM LLC for payment/redemption of Foreign Currency Convertible Bonds (FCCBs) dues for maturity, the substantial portion of the sale proceeds was diverted for the benefits/interest of promoters.Zenith Infotech had raised around $83 million in two tranches and the company in its EGM held in January 2011 took approval from its shareholders to sell its assets for repayment to offshore lenders.