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Informist, Monday, Jul. 13, 2026

 

--SC OKs SEBI fines on Kotak AMC for lapses, late payouts in some FMPs

 

NEW DELHI – Upholding a Securities Appellate Tribunal's Mar. 6 order, the Supreme Court Monday affirmed the Securities and Exchange Board of India's penalties against Kotak Mahindra Asset Management Co. Ltd., its trustee company Kotak Mahindra Trustee Co. Ltd., and certain officials. The market regulator had fined the asset management company, a wholly owned subsidiary of Kotak Mahindra Bank, and others in a case related to regulatory lapses and delayed payouts by Kotak Mahindra Asset Management and others in certain fixed maturity plans.

 

The case is with regard to Kotak Mahindra AMC launching six fixed maturity plans as close-ended debt schemes. They were to mature between Apr. 8, 2019 and May 15, 2019. Thereafter, the company made investments in zero-coupon non-convertible debentures of Konti Infrapower and Multiventures Pvt. Ltd. and Edison Utility Works Pvt. Ltd., belonging to Essel Group. Essel Group was the promoter of Zee Entertainment Enterprises Ltd. and some other companies. Cyquator Media Services Pvt. Ltd., also an entity of Essel group and one of the promoters of Zee Entertainment, agreed to secure an investment made by Kotak Mahindra AMC with Konti Infrapower and Edison Utility Works. For this, Cyquator Media pledged its equity shares in Zee Enterprises equivalent to 150% and said it will top up in case of a drop in share price of the latter.

 

On Jan. 25, 2019, the share price of Zee Entertainment fell sharply and consequently, the collateral also fell below the mandated 150%. However, Cyquator did not top it up as agreed. Thereafter, letters of intent were executed among the issuers Konti Infrapower and Edison Utility Works and pledger Cyquator. A separate agreement was also entered between the issuers and Kotak Mahindra AMC to extend the date of maturity of the zero coupon debentures till Sept. 30, 2019. The schemes were wound up on their respective maturity dates and payment was made to the investors except for the portion invested in zero coupon debentures, which was ultimately paid in September 2019 by invoking the pledge and selling the Zee Enterprises shares.

 

SEBI said adequate care was not exercised by Kotak Mahindra AMC while making investments in zero-coupon debentures. The market regulator said extension of maturity dates was in violation of mutual fund regulations and disclosure to unit holders was not made timely.

 

The appellate tribunal set aside a direction issued by SEBI requiring Kotak Mahindra AMC to disgorge a portion of the investment management and advisory fees collected from investors in six fixed maturity plans. However, it upheld findings of regulatory lapses and dismissed Kotak Mahindra AMC's and others' plea on penalties.

 

Investors repose trust in mutual fund companies and invest their hard-earned money, said the appellate tribunal. Kotak Mahindra AMC making investment in Konti Infrapower and Edison Utility Works based on a pledge, without assessing the financial strength of the companies is a serious lapse, said the appellate tribunal. This is compounded by not informing investors timely about the events leading to the partial redemption, it said. Challenging the appellate tribunal's order, Kotak Mahindra AMC moved the apex court.

 

At 1104 IST, the shares of Kotak Mahindra Bank were down 0.2% at INR 376.70 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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