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2016 (9) TMI 216 - SECURITIES APPELLATE TRIBUNAL MUMBAI

2016 (9) TMI 216 - SECURITIES APPELLATE TRIBUNAL MUMBAI - TMI - IPO - failure to disclose items which amounted to material information and ought to have been disclosed in the offer documents - Held that:- Appellant has partially failed to ensure proper disclosure of material information which was required for the investors in order to enable them to take an informed decision to invest or not to invest in the IPO in question. However, there are certain facts which remain undisputed. One, that the .....

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the Appellantís share in the IPO. Further, invoices and other documents have been produced by the Appellant for the purchase of raw materials and equipments required to run the business, and their validity is not in question. It is pertinently noted that most of the money which the Respondent alleges to have been transferred has been returned to the Appellant. The Respondent has fairly submitted that the Auditor appointed by SEBI itself has in its report dated January 25, 2016 noted that an amou .....

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de by SEBIís regulatory directions. - Further, it remains undisputed that ICDs which were given out of the IPO Proceeds to the tune of ₹ 32 crore given as ICDs to Saptrishi, Raw Gold and Wattkins. Today, however, this amount of ₹ 32 crore has been received by the Appellant, albeit with certain amount of delay. It is also to be noted that minutes of the annual general meeting held on September 12, 2012, attached as Exhibit F2 of the Appeal clarify that unequivocal permission was g .....

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this order in paragraphs no. 40, 45, and 50 cannot be sustained in law or on fact as elucidated, this Tribunal is of the opinion that in order to meet the ends of justice the period of debarment from the securities market of ten years imposed upon the Appellant should be reduced to seven years as the Appellant has already suffered by remaining out of the market for a period of more than four and half years by now. Ordered accordingly. As far as the money lying in the escrow account is concerned, .....

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hawat, Advocate i/b K. Ashar and Co. Per : Jog Singh 1. The present Appeals have been filed challenging order dated March 11, 2014 ( Impugned Order ) passed by the Respondent - SEBI against PG Electroplast Limited ( Appellant ) and its directors in exercise of SEBI s powers as conferred by sections 11(1), 11(4), 11(A) and 11(B) of the SEBI Act, 1992 ( SEBI Act for short) read with Regulation 11(1) of the Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market Regul .....

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certain entities and deposit it in an escrow account by ad-interim exparte order dated December 28, 2011. 2. The Appellant, which is a company incorporated under the Companies Act, 1956, in the process of floating an IPO filed its Red Herring Prospectus dated August 17, 2011 and Prospectus dated September 14, 2011 and came out with an IPO of 57,45,000 equity shares of ₹ 10/- each for cash at a price of ₹ 210/- per equity share. The IPO opened and closed on September 7, 2011 and Sept .....

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Act read with Regulations 3(a)-(d), 4(1), 4(2)(a), (d)-(f) and (k) of the PFUTP Regulations and Regulations 57(1), 60(4)(a) and 60(7)(a); Clauses 2(VII)(G), 2(VIII)(B)(5)(b) and (6); and Clause 2(XVI)(B)(2) of Part A of Schedule VIII read with Regulation 57(2)(a) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ( ICDR Regulations for short). The Interim Order prohibited the Appellant from raising further capital from the securities market; the Promoter/Directors of th .....

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3. Subsequently, a Show Cause Notice dated January 16, 2013 ( SCN ) was issued to the Appellant alleging non-disclosure of certain information viz., amounts raised through Inter-Corporate Deposits ( ICDs ), Board Resolution dated August 17, 2011, purchase orders for plant and machinery, names of certain suppliers, Agreements and Memorandum of Understanding entered into by the Appellant for the purchase of land; diversion of IPO Proceeds through repayment of ICDs and through investment in ICDs by .....

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Mehta and Shri Shiraz Rustomjee, for the parties at length and have perused the pleadings and documents brought on record. 5. The charges levelled against the Appellants, clubbed into two heads for the sake of convenience, are as under: 1) Non-disclosure of certain material information in the offer documents; and 2) Diversion of IPO Proceeds and other funds to entities which purchased the Appellant s shares to ensure full subscription to the IPO of the Appellants. 6. The case of the Respondent .....

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cument, along with the non-disclosure of agreements executed with Nimbus and Supreme for the purchase of raw materials, and agreements for the purchase of land. It is also an allegation levelled in the SCN that Board Resolution dated August 17, 2011 in which the decision regarding ICDs was taken was not disclosed in the RHP. 7. Further, a principal part of the IPO Proceeds has been allegedly diverted by the Appellant for transactions related to the securities market, giving and taking of ICDs, d .....

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in the Appellant s IPO. It is duly noted that agreements with Nimbus and Supreme stand cancelled today and that Nimbus has refunded the money, and some amount has also been recovered from Supreme. The Appellant has initiated proceedings against Supreme for the recovery of the remainder of the advance payment. 8. Several entities have acted in conjunction to abet the Appellant in its alleged scheme of routing money through various entities acting as intermediary channels to create a layered stru .....

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g volume in the Appellant s shares leading to a sharp rise in the price of the scrip. The SCN has alleged that the Appellants are guilty under the PFUTP Regulations for indulging in fraudulent practices and also under the ICDR Regulations for inadequate disclosures and misleading statements. 9. In their reply to the SCN, the Appellants submit that the Appellant company was incorporated in the year 2003 as part of PG Group when a plastic injection moulding unit was set up which led to the PG Grou .....

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nhance the company s business activities but realized that the contractors / suppliers would not begin work or supply raw material without advance payments. This led to the Appellant having to avail of finance through ICDs obtained from NBFCs and other companies in the interregnum. The Appellant states in its Reply to the SCN that SEBI has failed to take account of the fact that the Lead Manager to the Issue advices the company regarding disclosures and also prepares the RHP and Prospectus. More .....

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and land deals. SEBI has failed to prove that any benefit accrued to the Appellant or its promoters from the alleged diversion of funds. None of the IPO Proceeds were used by the Appellant to invest in the securities market. 11. It is further submitted by the learned Senior Counsel for the Appellant that the Appellant s IPO was underwritten in its entirety by the Book Running Lead Manager who undertook to ensure complete subscription of the IPO in question if the subscription had fallen below th .....

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Appellant company such as purchase of raw material and purchase of land for expansion of its business. There is not a shred of evidence to link the Appellant with any of the entities which dealt in its scrip and or the existence of a scheme allegedly concocted by the Appellant to create a misleading impression of demand in its scrip. Too many of the allegations contained in the SCN are based on conjectures and surmises which have failed to find their mark in any case. The non-disclosure regardin .....

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l and hence not considered necessary in terms of disclosure requirements. 13. With respect to the ICDs it is submitted that the Appellant s disclosure under the head of interim use of proceeds in the RHP as well as the Prospectus, permits the company to give loans to other entities in the form of ICDs in keeping with the investment policies of the Appellant as decided by the Board. It has been reiterated time and again that the ICDs have been recalled by the Appellant and legal proceedings have .....

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ce of purchase orders and land deals was in any way meant to aid the subscription to the IPO of the Appellant. 14. Having summarized the incidents that have led up to the passing of the Impugned Order dated March 11, 2014 for the sake of clarity, we shall now deal with the submissions of the parties in greater detail and give our findings thereon. 15. At the outset learned Senior Counsel for the Appellant, Mr. Shyam Mehta, submits that all allegations and charges as made out in the SCN and Impug .....

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it to repay Jainex and Pranneta would be ultimately used to purchase the Appellant s shares in the ensuing IPO. Further, there is no allegation levelled to the effect that the entities which ultimately bought the Appellant s shares were acting hand in glove with Jainex and Pranneta. It is also pointed out that the impugned transactions between Pranneta and Jainex on one hand and the Appellant on the other, and Pranneta and Jainex on one hand and the entities which bought the Appellants shares on .....

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lse. The Appellant took seven ICDs in all, four of which were repaid before receiving the IPO proceeds. It is argued that the fact that these entities were repaid after the Appellant received the IPO Proceeds alone cannot vitiate the transactions between the Appellant and these entities are per se illegal. This, by itself, cannot lead to the assumption that these dealings were not regular transactions conducted in the ordinary course of the Appellant s business. Jainex and Pranneta are both Non- .....

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in case the ICDs had been raised earlier than two months from the date of the offer document being registered with the ROC. As far as Regulation 57(1) of the ICDR Regulations is concerned, it is also submitted that the said Regulation only covers those transactions which enable applicants to make an informed investment decision. 18. In response to SEBI s allegation regarding the diversion of IPO Proceeds through investment in ICDs, it is reiterated by the Appellant that there is no connection be .....

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d there is nothing untoward in them accepting and extending funds from and to other entities. 19. The reason for entering into ICD agreements dated September 20, 2011 with Saptrishi, Raw Gold and Wattkins as explicated by the Appellant is as follows. One of the objects of the IPO, as disclosed in the offer documents, was to repay the loan facilities availed of by the Appellant from Standard Chartered Bank. Since their repayment fell due in December 2011 and the Appellant had already received the .....

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ation for 2,10,000 shares, the Appellant submits that since ICDs were deposited with Raw Gold on September 22, 2011, the finding that the Appellant s funds transferred to Raw Gold were used to fund MJ Commodities application for allotment does not stand the test of reason since the said application was made earlier on September 12, 2011. 20. With respect to the non-disclosure of Board Resolution dated August 17, 2011, the Appellant submits that the RHP dated August 17, 2011 was approved in the m .....

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s opinion being in the nature of high quality interest bearing liquid instrument as disclosed in the Offer Documents. It is further submitted that the entire principal amounts deposited with Saptrishi, Raw Gold and Wattkins have since been recovered. The said amounts were, therefore, not routed out of the reach of the Appellant s shareholders in any manner. 21. It is submitted by the Appellant with respect to the allegation of siphoning off and diversion of money through purchase orders placed f .....

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t analysed the underlying transactions and particularly failed to appreciate that the purchase of plant and machinery was a duly disclosed object in the Appellant s Prospectus. It is wrong to allege that the Appellant made payments a year in advance of the supply of machinery since the supply in fact began 4-5 months after the payments were made as is evidenced by delivery challans and other receipts adduced before this Tribunal. 22. With respect to allegations of the Respondent that agreements .....

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two companies no longer wished to be associated with the Appellant. The Appellant never attempted to create an artificial volume in the scrip of the Appellant through these transactions. In this context, it is further submitted that the Appellant s intention to place purchase orders on Modi Alloys and Aggarwal Steel was clearly disclosed in the RHP. However, the Prospectus was not updated by the Merchant Banker to the Issue to reflect that purchase orders had in fact been placed after the filing .....

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rials but trading companies, and second, agreements executed with the two entities were not material contracts in nature but agreements in the ordinary course of business. Therefore, their names were not required to be mentioned in the offer documents. 24. Finally, dealing with SEBI s allegation of diversion of IPO Proceeds through payment of consideration for land deals, the Appellant submits that there is no connection established between the Appellant and Safeco and Realnet with whom agreemen .....

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lant since the manner in which Saptrishi utilized the funds, once the Appellant made payments, was beyond the Appellant s control as well as concern. It is the Appellant s submission that the land purchased from Saptrishi has not been independently valued by the Respondent, nor has the cost of construction of the factory to be constructed on the said land been verified and hence it is not open to the Respondent to question agreements entered into by the Appellant in the ordinary course of busine .....

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None of the money paid to Eastern, Safeco and Realnet was utilized for the purchase of the Appellant s shares and that transactions executed by the Appellant are genuine. For instance, the payment made to Aggarwal Steel in lieu of plant and machinery was, as alleged by SEBI, apparently routed to Wonder Vincom, Pranneta, Pushpanjali and Rakesh Industries. However, none of the money was utilized by these entities to purchase shares of the Appellant. It, therefore, emerges that there is no pattern .....

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erests of the investors. 26. Per contra, the Respondent submits that statements and disclosures were made by the Appellant in the RHP and Prospectus in contravention of Clause 2(VII)(G) of Part A of the ICDR Regulations which mandates the disclosure of bridge loans and other financial arrangements which may be financed through the IPO Proceeds. A statement was made in the offer documents to the effect that no bridge loan had been raised against the IPO Proceeds even when various ICD agreements w .....

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ch eventually bought shares of the Appellant on the first day of listing. An amount of ₹ 9.47 crore was allegedly diverted to ETL Infrastructure Finance Ltd. ( ETL ) through Jainex using a circuitous methodology. ETL finally paid ₹ 1.5 crore to its broker for purchase of the Appellant s shares on the first day of listing. Similarly, after receiving funds from the Appellant, Prraneta sent the money to Saptrishi who then passed it on to several entities which then purchased the Appella .....

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help prove the Appellant s case. It is further submitted, on behalf of the Respondent, that in view of the vast scope of the instant matter, SEBI did not consider it feasible to conduct a detailed inquiry into each of the Appellant s transactions before proceeding against the latter particularly when the facts on record establish a strong case against the Appellant. 28. The Respondent submits that Board Resolution dated August 17, 2011 to invest in ICDs of other companies was not disclosed in th .....

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7(2)(a), 60(4)(a), 60(7)(a) and Clause 2(VII)(G) of Part A of Schedule VIII of the ICDR Regulations. Further, money from these ICDs was then diverted to Saptrishi, Wattkins and Raw Gold to other entities which eventually bought the Appellant s shares. The end entities which eventually purchased the Appellant s shares after receiving money from the Appellant through Saptrishi were Jaimini Trading Pvt. Ltd., Saptrishi Multitrade Private Ltd., Frank Mercantile Pvt. Ltd. and Cellworth Mercantile Pri .....

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s responsible for these subsequent transactions by those entities which had also invested in the IPO in question despite the Appellant having no connection with them. 29. The Respondent submits that the disclosure stating that no purchase orders had been placed for plant and machinery is entirely incorrect since, as per the record, several purchase orders were placed by the Appellant with entities such as Modi Alloys, Aggarwal Steels etc., aggregating to an amount of ₹ 52.23 crore solely t .....

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oned entities, the Respondent states that all the equipment was not delivered by February 2012 but delivery continued upto June 2012, inspite of the fact that the Appellant made an advance of ₹ 28.3 crore to the two companies during the months of August- September 2011. The Respondent submits that the Appellant failed to disclose the names of Nimbus Industries Ltd. and Supreme Communications Ltd. in the list of suppliers for plastic granules even though two agreements dated August 31, 2011 .....

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purchasing plastic granules were diverted through Nimbus and Supreme to entities which then allegedly further transferred moneys to other companies which ultimately purchased the Appellant s shares. In response to the Appellant s submissions that transactions with Nimbus and Supreme were genuine transactions, the Respondent states that the agreements did not specify the quality or quantity of the granules to be supplied. The Appellant also failed to disclose agreements and MOUs entered into by .....

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ptember 2, 2011 with Realnet Infraprojects Pvt. Ltd. for a consideration of ₹ 12-15 crore, out of which ₹ 2 crore was paid in advance; and finally agreement dated August 26, 2011 with Eastern Resorts Pvt. Ltd. for consideration amounting to ₹ 25 crore of which ₹ 10.30 crore was paid in advance by the Appellant. It is submitted by the Respondent that none of the aforementioned detail was disclosed in the RHP or Prospectus despite the fact that funds to the tune of ₹ .....

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respect, the agreements with Safeco, Realnet and Eastern Resorts were cancelled. Money paid to Saptrishi was diverted to various entities to facilitate subscription to the Appellant s IPO. Realnet received money from ChinInfo which has traded in the Appellant s scrip when the IPO was launched, and eventually the agreement with Realnet was cancelled since Realnet was unable to acquire any land. With respect to Safeco, it is submitted that although the money has been refunded to the Appellant, the .....

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m Order to the extent that the Appellant failed to recall the ₹ 32 crore given in respect of ICDs to Saptrishi, Raw Gold and Wattkins and as on the date of the Impugned Order ₹ 4.84 crore had been deposited in the Escrow Account created as per the Respondent s instructions. Although, by the time the appeal came up for hearing before this Tribunal the Appellant had already recovered the amounts as directed by SEBI by the Impugned Order dated March 11, 2014 except an amount of ₹ .....

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n of securities or control 12A. No person shall directly or indirectly - (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed .....

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……………. Regulations 3(a) - (d), 4(1), 4(2)(a), (d)-(f) and (k) of Prohibition of Fraudulent and Unfair Trade Practices Regulations, 2003 Prohibition of certain dealings in securities 3. No person shall directly or indirectly (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive .....

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ed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made thereunder. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or any unfair trade practice if it involved fraud and may include all or any of the fo .....

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luctuation in the price of such security; (e) any act or omission amounting to manipulation of the price of a security; (f) publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities; (g) to (j) …………………………………… (k) an advertisement that .....

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hellip;………………… Public communications, publicity materials, advertisements and research reports 60(4)(a). in case of public issue, between the date of registering final prospectus or the red herring prospectus, as the case may be, with the Registrar of Companies, and the date of allotment of specified securities; 60(7)(a). it shall be truthful, fair and shall not be manipulative or deceptive or distorted and it shall not contain any statement, prom .....

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he issuer or proposed to be purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered for subscription by the offer document or the purchase or acquisition of which has not been completed at the date of issue of the offer document, other than property: (i) the contract for the purchase or acquisition whereof was entered into in the ordinary course of the issuer s business, the contract not being made in contemplation of the issue nor the issue in co .....

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III)(B)(6) Land : (a) The names of the entities from whom the land has been acquired / proposed to be acquired alongwith the costs of acquisition, along with the relation, if any, of such entities to any promoter or director of the issuer. (b) Details of whether the land acquired by the issuer is free from the encumbrances and has a clear title and whether it is registered in the name of the issuer. (c) Details of whether the issuer has applied / received all the approvals pertaining to land. If .....

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……………………………. Manner of disclosures in the offer document. 57.(2)(a) the red-herring prospectus, shelf prospectus and prospectus shall contain: (i) the disclosures specified in Schedule II of the Companies Act, 1956; and (ii) the disclosures specified in Part A of Schedule VIII, subject to the provisions of Parts B and C thereof; 33. On a perusal of the PFUTP Regulations, we note that Regulations 3(a)-(d) speak of prohib .....

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trading in any scrip. Regulations 4(2)(d)-(e) prohibit any action executed with the intention of causing fluctuations in the price of the scrip. Regulation 4(2)(f) prohibits the publishing of any false information by any person dealing in securities. Regulation 4(2)(k) prohibits the publishing of an advertisement which is misleading in any manner or distorts the information it presents to prospective investors. 34. We now move on to those provisions in the ICDR Regulations which are alleged to h .....

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the date of allotment of securities must be published in newspapers and made available for public consumption. Regulation 60(7)(a) of the ICDR Regulations states that any advertisement or report published by an issuer company must be true, fair and not meant to distort any information or mislead prospective investors. 35. Clause 2(VII)(G) of Part A of Schedule VIII mandates disclosure of any bridge loan financing availed of by the issuer company in the offer document; Clause 2(VIII)(B)(5)(b) and .....

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lant s misconduct, if any. 37. The first allegation levelled against the Appellant deals with the failure to disclose items which amounted to material information and ought to have been disclosed in the offer documents. 38. The first instance of non-disclosure relates to ICDs taken by the Appellant in the nature of bridge loans. A bridge loan in financial parlance is nothing but a short-term loan availed of by companies to meet their immediate fiscal requirements, this is precisely what an inter .....

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to note that all these seven agreements, vide which the Appellant received an aggregate of around ₹ 52 crore, were executed after the filing of the RHP, but before the filing of the Prospectus i.e., between August 17, 2011 and August 31, 2011. A perusal of the Impugned Order dated March 11, 2014 clearly points out that the Appellant could not have disclosed this information in the Draft RHP, which was filed on September 23, 2010 or even in the RHP which was filed, after incorporating SEBI .....

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formation and should have been incorporated in the offer documents so as to enable the prospective investors to appreciate the company s financial background in a better manner before investing in the forthcoming IPO. Moreover, intention or the lack thereof behind the non-disclosure does not matter much, particularly in light of the mandatory language of Clause 2(VII)(G) to the effect that any loan in the nature of a bridge loan must be disclosed in the offer document. We, therefore, hold that t .....

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ee ICD agreements were entered into between the Appellant and the concerned parties for amounts of ₹ 15 crore, ₹ 7 crore and ₹ 10 crore. Although by disclosing in the Prospectus that the Appellant intends to invest the IPO Proceeds in interest bearing liquid instruments, the Appellant satisfied the disclosure requirements as per the ICDR Regulations, the Appellant did not in categorical terms disclose that it wished to invest the IPO Proceeds in ICDs. We note that even though t .....

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tainable in view of the fact that it is evident from the records that the RHP and Prospectus do contain the names of these very suppliers whose quotations had already been disclosed and the machinery was purchased from these suppliers in fact. 42. The Respondent has submitted before us that the list of suppliers of plastic granules to the Appellant, as disclosed in the offer documents, omits the names of Nimbus and Supreme and that this amounts to non-disclosure of material information. From the .....

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rs, the list did not include their names. Thus, the purpose underlying the principle of disclosure had been achieved by disclosing the same names in the offer documents in one context or the other. It is, therefore, wrong to hold the Appellant guilty of simple non-disclosure in this regard. At the most it would be an inadvertent omission. 43. Finally, the Appellant has been held guilty by the Respondent for allegedly not disclosing agreements and MOUs entered into for the purchase of land. Agree .....

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owever, stated that it had not entered into any commitment for any strategic initiatives… which as per the Respondent is a misstatement. The Appellant s defense that the aforesaid agreements did not need to be disclosed since they fell under the General Corporate Purpose head cannot be accepted because the money allocated towards general corporate purposes was only ₹ 21.4 crore as opposed to the ₹ 80 crore which was sought to be spent on the land purchase agreements. In this r .....

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ing of the IPO. This amount was eventually returned to the Appellant. Similarly, the Appellant is also alleged to have diverted proceeds through investment in ICDs of other companies. It is a matter of fact that out of the ₹ 33 crore transferred to Saptrishi, a sum of ₹ 15 crore was transferred to entities such as Jaimini and Cellworth. Jaimini used ₹ 1.5 crore to buy shares of the Appellant in the IPO, and routed around ₹ 3.5 crore to Saptrishi and Frank. Further, it bec .....

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en Financial Services and Adcon. Eden paid some money to Pushpanjali who, in turn, transferred it to Cellworth and Jaimini, both of which traded in the Appellant s scrip on the date of listing. Further, Adcon transferred money to its broker in order to buy the Appellant s shares. In this context, it is noted that the ICDs were placed by the Appellant and taken around the same time. Therefore, it is indeed hard to accept the Appellant s submission that it was in need of funds for running its day .....

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t and out of this around ₹ 12 crore was given to Wonder Vincom which, in turn, paid the money to Chin Info, Safford and Nihal, which seem to have bought the Appellant s shares. Similarly, almost ₹ 4 crore was given by Aggarwal Steels to other entities, after having received ₹ 5 crore from the Appellant. 46. Copies of invoices, delivery challans and receipts regarding Municipal Taxes etc. have been brought on record by the Appellant to establish the genuineness of its transactio .....

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ficance since this was an understanding arrived at by the Appellant on the one hand and Modi Alloys and Aggarwal Steels on the other, purely on the basis of their business requirements and other commercial considerations. The Appellant cannot be, thus, held to be guilty of this part of the charge as well. 47. Next, the Respondent submits that an amount of ₹ 7.25 crore was transferred by the Appellant to Nimbus and SCL on the pretext of plastic granules. Nimbus and SCL, in turn, transferred .....

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nd cancelled their veracity need not be delved into. However, we do note from the records that an amount of ₹ 3.77 crore which was transferred to Supreme was not transferred from the IPO Proceeds but from the Appellant s own funds. The Appellant submits that it has initiated winding up proceedings against Supreme since it has been unable to get a refund of the said amount. This is the only amount that has yet to be recovered by the Appellant and the process for the same is stated to be cur .....

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hat money was diverted through purchase orders seems a bit far-fetched and we, therefore, hold that the Appellant was merely engaging in its usual commercial activities while transacting business with Modi, Aggarwal, Nimbus and Supreme who would have bought shares in the IPO in question. No cogent and convincing evidence is brought on record by the respondent that those entities had any relationship in the form commonality of directors, control, address etc. There is nothing to draw the inferenc .....

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from agricultural to non-agricultural, the developmental cost of the land and the cost to build a factory thereon. The Appellant has produced certain documents on record which corroborate the Appellant s submissions. The authenticity of these documents is not disputed and a few particularly relevant ones are mentioned hereinbelow : a) Letter dated August 5, 2011 from Realnet to the Appellant stating that they are awaiting a positive response. b) Letter dated August 30, 2011 from Realnet to the A .....

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d December 1, 2011 from Realnet to the Appellant stating that they have failed to provide land and will return the money to the Appellant at 14% interest p.a. f) MoU dated August 26, 2011 executed between Eastern and the Appellant. g) Cancellation of MoU executed between Eastern and the Appellant on October 11, 2011. h) MoU executed between August 27, 2011 between the Appellant and Safeco. i) Letter dated December 22, 2011 from the Appellant to Safeco asking for an update on the status regarding .....

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. k) Cancellation deed dated March 20, 2012 executed between the Appellant and Safeco. 50. An analysis of the abovesaid documents reveals that the Appellant s dealings with Saptrishi, as far as the agreement for the purchase of land is concerned, are genuine and not illegal or fabricated. It is argued by Shri Rustomjee, learned senior counsel for the Respondent, that the Appellant entered into an MOU with Realnet which did not mention the total amount to be paid for the land and that even though .....

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of the Impugned Order in question. Similarly, the MOU executed with Safeco has been cancelled and the entire amount of ₹ 15 crore has been refunded to the Appellant. In such a situation, the submissions of the Respondent appear to be based on material which is completely inadequate, particularly when the charge pertaining to PFUTP is sought to be established against the Appellant. There has to be sufficient material to bring home such a severe charge against the Appellant. The charge rela .....

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a the Appellant cannot, by themselves, be treated as link to the series of transactions which might have led to the purchase of the Appellant s share in the IPO. 51. The Respondent s final allegation is that of failure to prevent misrepresentation in respect of the amount of the term loan availed of by the Appellant from Standard Chartered Bank apparently by first mentioning in the RHP and Prospectus that an amount of almost ₹ 37 crore was sanctioned by the bank and then on the following p .....

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of ten years debarment to enter the capital market imposed on the Appellant, is highly disproportionate and calls for modification to meet the ends of justice in the case in hand. 53. To sum up, the Appellant has partially failed to ensure proper disclosure of material information which was required for the investors in order to enable them to take an informed decision to invest or not to invest in the IPO in question. However, there are certain facts which remain undisputed. One, that there is .....

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pellant s share in the IPO. Further, invoices and other documents have been produced by the Appellant for the purchase of raw materials and equipments required to run the business, and their validity is not in question. It is pertinently noted that most of the money which the Respondent alleges to have been transferred has been returned to the Appellant. The Respondent has fairly submitted that the Auditor appointed by SEBI itself has in its report dated January 25, 2016 noted that an amount of .....

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