The Securities and Exchange Board of India (Sebi) has “warned” public sector Central Bank of India for violating regulatory norms as a debenture trustee in relation to the issue of debentures by two entities. Sebi, which issued an order on the issue, did not impose any financial penalty on the state-owned bank, but is quite unprecedented as a rap on the knuckles.
It advised public sector lender Central Bank of India to be careful while discharging its duties as a debenture trustee. Debenture trustee is the trustee of debenture stock or stock issued as a loan security to secure the debts of a company.
The Sebi order posted on its website says: “the bank has lost sight of statutory duties... while functioning as a debenture trustee. Being a public sector bank, it should have been all the more careful and diligent in its duties.” The order mentioned the bank’s alleged violations as a debenture trustee in respect of the rights issue of 15% secured redeemable non-convertible debentures by Synergy Financial Exchange (SFEL) and a 19.5% similar issue by DCM Financial Services.
The regulator after a probe found that SFEL defaulted on its payments on both interest and principal and this situation could have been avoided had the bank done its due diligence. The bank is alleged to have violated key Sebi provisions that mandates inspection of books of accounts, record, registration of body corporate and trust property to the extent necessary for discharging its obligation.
Central Bank of India was found to have not called a meeting of the debenture holders to inform them about the actual condition of SFEL, it said.
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