Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Forum Articles Highlights TMI Notes SMS News What's New Calendar Imp. Links Database More...
Extracts
Home List
← Previous Next →

P.G. Electroplast Ltd and Others Versus ecurities and Exchange Board of India, Mumbai

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 there is no connivance or connection for that matter which has been .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cuments 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 ₹ 80 crore has been successfully recalled by the App .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disputed 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 granted to the Board of the Appellant, as per Section 61 of the C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, the Appellant shall be at liberty to use for the objects of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent 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 Regulations, 2003 ( PFUTP Regulations for short), prohibiting the lat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rim 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 September 12, 2011 respectively. The Appellant s shares were listed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 the Appellant were prohibited from dealing in the securities marke .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

N ) 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 the Appellant; diversion of funds through purchase orders; cont .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 as set out in the SCN is that several material facts have been a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h 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, dubious land deals and unnecessary purchase of raw material. It i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

imbus 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 structure for supposedly hoodwinking the market regulator. This was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 Group becoming a renowned player in the electronic market. The prima .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ontractors / 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. Moreover, the RHP itself is considered by SEBI before the Prospectus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 the required minimum benchmark of 90% of the total issue size as p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 regarding the Board Resolution dated August 17, 2011 in the RHP is said .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

irements. 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 been initiated to recover the same. The agreements with Nimbus a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Impugned Order have been exaggerated in pursuit of the Appellant comp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hase 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 the other, have not been analysed by the Respondent either in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

paid 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-Banking Financial Corporations registered with RBI and, by the v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 between the entities which purchased the Appellant s shares and th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 IPO proceeds in September-October 2011, the Appellant decided t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 meeting held on August 17, 2011 itself and, therefore, the RHP co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iquid 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 for supply of plastic granules and plant and machinery that no co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o 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 entered into with Nimbus and Supreme appeared to be untrue, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt. 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 of the RHP although the Appellant had duly brought this develop .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h 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 agreements have been executed for the purchase of land with the exceptio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 business when the said agreements are clearly within the four corners .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

zed 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 suggesting that the Appellant had any unethical understanding w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 were executed by the Appellant. A large proportion of the IPO fun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Appellant s shares. As far as the Appellant s assertion that ICDs were .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

alf 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 the RHP and Prospectus. The Appellant executed identical ICD Agree .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hedule 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 Private Limited, all of which bought the Appellant s shares. Simila .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 towards machinery and equipment. The placement of such huge quant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 each were executed with these two entities for purchase of plas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

preme 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 PGEL with certain entities for purchase of land, thereby violati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

deration 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 ₹ 80 crore were involved in the said deals. The Appellant stated i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 last payment in this regard was made in 2013-14 even when the C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8377; 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 ₹ 3.77 crore. 32. We have heard the learned senior counsel for bot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rectly - (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 to be listed on a recognized stock exchange; (c) engage in any .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, 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 device or contrivance in contravention of the provisions of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 following, namely :- (a) indulging in an act which creates false o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 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 is misleading or that contains information in a distorted manne .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, promise or forecast which is untrue or misleading; ……& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 consequence of the contract; or (ii) as respects which the amount .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd 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 no such approvals are required to be taken by the issuer, then .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

………. 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 prohibition of certain types of dealings in securities which are fraud .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 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 have been violated by the Appellant. Regulation 57 deals with the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ers 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 (6) require disclosure of the purchase of property and any land .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inst 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-corporate deposit represents. Clause 2(VII)(G) of Part A mandat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt 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 s suggestions and on being approved by the Company s Board of D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts 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 the ICD agreements should have been disclosed in the Prospectus a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 the Prospectus did state that the Appellant would be investing th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 facts it is borne out that the Appellant entered into two separ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rlying 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. Agreements for the purchase of land were executed with Saptrishi, Saf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny 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 regard, therefore, the Impugned Order does not carry any legal in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lant. 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 becomes clear from a perusal of the documents produced before us th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

jali 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 to day business and hence the finding in the impugned order in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncom 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 transactions with Aggarwal Steels as well as Modi Alloys. It is not the ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ant 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 money to entities such as Sunlight, Scanpoint, Pearl, Fantasy a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 currently underway. 48. Further, it is a matter of fact that there .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

etched 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 inference that the Appellant motivated or pressurized, in any manner, to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Appellant stating that they would require an advance payment of & .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ey 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 the procurement of land for the Appellant since the time-period .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Realnet conducted its business primarily in Mumbai and it was v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 relating to violation of PFUTP Regulations is a serious charge and h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 page stating that the amount so sanctioned by the bank was Nil . .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 no connivance or connection for that matter which has been estab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 ₹ 80 crore has been successfully recalled by the Appellant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

  ↓     Latest Happening     ↓  

Forum: GST rates on mobile recharge business

Forum: Cess paid instead of SGST

Circular: Constitution of National Anti-profiteering Authority (NAA) under GST-reg.

Forum: import purchase

Highlight: Sharing of expenses - BAS - promotion of business of group companies - sharing of expenditure for common facilities cannot be treated as service by one to another in such arrangement.

News: RBI Reference Rate for US $

Forum: 3B mistake

Forum: Input credit of gst paid on urd

Article: Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

Circular: Certain Clarifications sought on Construction Services provided in the Real Estate Sector reg.

Forum: transfer of shares

Forum: Input tax credit

News: Anti-dumping duty on import of bus/truck tyres from China

News: Fast-track GST refund, else ₹ 65K cr may be stuck: Exporters

Highlight: It is open to the Settlement Commission to use best judgment in arrival of the figure. Nonetheless it has to explain the manner in which the best judgment figure has been arrived at by the Settlement Commission - HC

Highlight: Deemed dividend u/s 2(22)(e) - advances given to societies - in the absence of legal right of the assessee in the said society the amount advanced cannot be treated as deemed income.

Highlight: When electrical installations are treated as plant and machinery the depreciation has to be allowed @ 25% as per provisions contained u/s 32

TMI Note: Capital Gain - transfer of right in the land or transfer of land itself - addition u/s 50C - Harassment to the honest tax payers

Highlight: Option to avail composition scheme under GST by electronically filing an intimation in FORM GST CMP-02 and FORM GST ITC-03 upto 30-9-2017 - See Rule 3(3A)

TMI Note: Does ICDS apply for the purposes of computing exemption u/s 11 to 13.

Highlight: Voluntary Reporting of Estimated Current Income and Advance Tax Liability - CBDT issues draft notification

TMI Note: Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents would prevail over ICDS.

Highlight: Provisions of ICDS shall prevail w.e.f. AY 2017-18 to the transactional issues dealt therein over earlier judicial pronouncements.

Notification: Levy of anti dumping duty on New/unused pneumatic radial tyres with or without tubes and/or flap of rubber (including tubeless tyres) having normal rim dia code above 16 originating in, or exported from China PR

News: Voluntary Reporting of Estimated Current Income and Advance Tax Liability

TMI Note: In case of conflict between ICDS and other specific provisions of the Income-tax rules, 1962 governing taxation of income like rules 9A, 9B etc. of the Rules, which provisions shall prevail.

TMI Note: Does ICDS apply to computation of Minimum Alternate Tax (MAT) u/s 115JB of the Act or Alternate Minimum Tax (AMT) u/s 115JC of the Act.

TMI Note: Where a term has not been defined under ICDS, nor under the Act, but has different interpretations given to it by the courts in tax cases, and in ICAI Accounting Standards, which interpretation would prevail while interpreting ICDS.

TMI Note: Whether the provisions of ICDS apply to a non-resident who claims the benefit of a double taxation avoidance agreement (DTAA).

TMI Note: In case any of the ICDS provisions is contrary to a circular or press release issued by the CBDT, which would prevail over the other.

TMI Note: ICDS-I requires disclosure of significant accounting policies and other ICDS requires specific disclosures. Where is the taxpayer required to make such disclosures specified in ICDS.

Notification: Income Computation and Disclosure Standards (ICDS) - New ICDS to be effective from AY 2017-18

News: RBI Reference Rate for US $

Highlight: GST - Detention of goods under transport - discrepancy in documents - the statutory provisions provide a mechanism for adjudication following detention of goods including for the provisional release thereof pending adjudication - HC

Highlight: Reassessment - first few paragraphs of the assessment order dealt with objections and disposed of accordingly - Unfortunately, the manner in which the AO has decided the issue is wholly unsustainable in law - HC

Highlight: Business expenditure u/s 37 - liquidated damage - breach of contract terms - Expenditure was not incurred for any purpose which is an offence or which is prohibited by law - cannot be disallowed - HC

Highlight: Valuation - inclusion of reimbursement of expenses - managing participation of clients in certain mela, fairs, promotional activities etc. - They are liable to service tax on the gross amount received - They cannot restrict their tax liability to only agency commission

Highlight: TDS liability - ITAT confirmed the liability - We do not see how it is possible for us to uphold the order of the Tribunal and when it purports to decide two Appeals of the Revenue by single paragraph conclusion - HC

Highlight: Reopening of assessment - sufficiency of material available with the AO to form a belief that income chargeable to tax had escaped assessment - bogus purchases - seller refused to respond - notice would not be interfered with - HC

Highlight: Exemption u/s 11 - education activities - transport and hostel facilities surplus cannot be considered as business income of the assessee society

News: Draft Notification for insertion of new rule 39A in the Income-tax Rules, 1962 comments and suggestions-reg.

Highlight: Genuineness of labour wages expenses, embroidery charges, fabrication expenses etc. - getting work done through small workmen who do not have any permanent place of residence - disallowance of ad hoc expenditure deleted.

Highlight: Project import - Since the goods were never used for the purpose for which it was imported, the actual user condition has been violated - Redemption fine and penalty imposed.

Highlight: Penalty u/s 112 (a) - CHA - Lack of due diligence and failure to take more precautions can not, by itself, bring in penal consequences

Highlight: Import of services - GST - The fact that those services were received outside India will not change the fact that the services have been paid for by the beneficiary appellant, who is located in India. - Demand confirmed.

Notification: SEZ for IT/ITES at Madhurwada Village, Visakhapatnam District in the State of Andhra Pradesh - denotified.

Highlight: Merely because payment is received in Indian rupee, it cannot be said that payment against export has not been received in convertible foreign exchange.

Highlight: Merely vehicle numbers was not mentioned on the invoices cannot be the reason to deny Cenvat Credit

Highlight: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017 - Circular

Circular: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version