SAT admits Zenith Infotech plea,asks Sebi to file reply in two weeks

The Securities Appellate Tribunal (SAT) has admitted a plea filed by Zenith Infotech against the capital market regulator’s order of furnishing a bank guarantee of $33.93 million (R1840000000) and restraining the company’s promoters from dealing in the stock market. The tribunal has directed the Securities and Exchange Board of India (Sebi) to file a reply within two weeks. It has further allowed the offshore bondholders to become an intervener and file their submissions. The tribunal will hear the matter on May 7 and has granted a relief from furnishing the bank guarantee till the next date of hearing. Late last month,Sebi restrained the promoters of Zenith Infotech from buying,selling or dealing in securities in any manner whatsoever,till further directions. Further the board of directors were directed to furnish a bank guarantee of $33.93 million without using the funds of the company or creating any charge on its assets. According to the Sebi order,investigations revealed that the entities attempted to take away the assets of the listed company directly and indirectly for their own benefit or for benefit of entities owned and controlled by them in a devious manner,thereby causing loss to shareholders. The promoter entities that have been barred from the market are Rajkumar Saraf,Akash Kumar Saraf,Devita Saraf,Vijayrani Saraf,VU Technologies and Zenith Technologies . According to the capital market regulator,the probe revealed that while the company sold one of its division – MSD (Managed Services Division) – to Zenith RMM LLC for repayment/redemption of FCCBs due for maturity,the substantial portion of the sale proceeds was diverted for the benefits/interests of promoters and/or directors and subsidiaries. Zenith Infotech had raised $33 million and $50 million by issuing FCCBs that were due for redemption in September 2011 and August 2012,respectively. The company in its EGM held on January 29,2011 took approval from its shareholders to sell its assets for repayment/redemption of FCCBs.