In an interim order passed today, the market regulator also asked the Zenith board to provide a bank guarantee of USD 33.93 million, an amount equivalent to the funds that have been diverted from the company, without using the funds or assets of the firm.
The six promoters -- Chairman Rajkumar Saraf, Managing Director Akash Saraf, Vu Technologies, Zenith Technologies, Devita Saraf and Vijayrani Saraf -- have been asked to file their replies, if any, to Sebi within 21 days.
They have been restrained from accessing the securities market and prohibited from buying, selling or dealing in securities, directly or indirectly, till further directions.
Sebi began probing the matter after its Integrated Market Surveillance System alerted on a sudden change in the share price of Zenith Infotech Ltd (ZIL) in late 2011.
In the meantime, Sebi also received complaints of ZIL promoters wilfully hiding some key transactions and financial details and about a default in redemption of certain bonds.
A preliminary inquiry showed that ZIL had defaulted on redemption of FCCBs (Foreign Currency Convertible Bonds) despite raising money through the sale of its MSD Division, and the same information was not disclosed to investors.
As news of probable default spread, the stock fell from Rs 190 on September 23, 2011 to Rs 45 on November 30, 2011.
Sebi further found that from the sale proceeds of MSD Division of ZIL, an amount of USD 33.93 million was diverted for purposes that were not even remotely connected to the shareholders' authorisation for repayment/redemption of FCCBs.
"The sequence of events and pattern of transactions in this case prima facie indicate that the ZIL and its promoters/ directors not only wantonly defaulted in redemption of FCCBs and disregarded shareholders' resolution but also adopted fraudulent device and artifice to defraud the shareholders..." Sebi said in its interim order.
"... They diverted the monies realised from the sale of the MSD Division for the benefits/interests of promoters and/or directors and subsidiaries," the regulator said.
Sebi said that the promoters and directors of the company have been prima facie found to have "stripped the assets of ZIL for the benefit/interest of companies/entities controlled by them in fraudulent and deceitful manner..."
The regulator further said that the investors have lost considerable amount of money and the shareholders' value has eroded because of the misconduct of the promoters/directors.
Besides, it said the company is still fastened with the liability to pay back the FCCB holders on account of redemption thereof and this will further have a financial burden on shareholders' wealth in ZIL.