Markets regulator Sebi on September 25 imposed a penalty of Rs 1 crore on Rana Kapoor, former MD and CEO of Yes Bank, for not making disclosures about Morgan Credit's transaction. By not disclosing about the transaction to Yes Bank's board of directors, Kapoor has created an opaque layer between him and stakeholders, Sebi said in an order.
Morgan Credits, which was an unlisted promoter entity of Yes Bank, raised Rs 950 crore from Reliance Mutual Fund, now Nippon India Mutual Fund, through unlisted Zero Coupon Non-Convertible Debentures (ZCNCDs)in April 2018. Kapoor, who was also the promoter of Yes Bank, entered into an agreement as a 'guarantor' with Morgan and Milestone Trusteeship Services with respect to the transaction through a trust deed.
Kapoor being a 'guarantor' of the agreement has provided "personal guarantee for the obligations of Morgan to the extent of Rs 410 crore and provided his shares in the company as a security for the outstanding amounts equal to Rs 820 crore, Sebi noted.
According to the regulator, Kapoor has hidden the material information of him being a 'guarantor' to the transaction from the board of directors of the bank and the same has directly impacted the lender in terms of the market capitalisation.
In addition, he failed to inform the board of directors of Yes Bank about his material interests in the transaction. "The transaction carried out by the noticee via Trust Deed dated November 14, 2018 by way of providing 'personal guarantee' for the obligations of the Morgan issued ZCNCDs was an event involving substantial material interest and was having direct bearing on the company," the regulator said.
By not disclosing the same to the board of directors of the company, the noticee (Rana Kapoor) has violated the provision of the LODR (Listing Obligations and Dislcosure Requirements) Regulation, Sebi noted. Further, Kapoor has failed in maintaining expected operational transparency towards the company and stakeholder.
Accordingly, the regulator imposed a "consolidated monetary penalty of total Rs 1 crore on the noticee,Rana Kapoor, for the violations of… the LODR (Listing Obligations and Disclosure Requirements) Regulations".