The company was found engaged in fund mobilising activity through issue of NCRSDs to more than 49 persons without complying with the relevant provisions of the Companies Act, 1956 and SEBI (Issue and Listing of Debt Securities) Regulations, 2008, according to the SEBI Order
SEBI, in its Order on Equinox Infratech Limited, directed that the company shall forthwith cease to mobilise any fresh funds from investors through the offer of Non-Convertible Redeemable Secured Debentures (NCRSDs) or through the issuance of equity shares or any other securities to the public and/or invite subscription.
The company and its directors viz. Prabir Chakraborty, Prasanta Chakraborty, Sandeep Chatterjee, Rahul Kumar Shahi and Nandalal Balti are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, and are restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in the securities market, according to the SEBI Order.
The Debenture Trust namely Equinox Debenture Trust (represented by its trustee viz. Arpita Chakraborty), is prohibited from continuing with her present assignment as a debenture trustee in respect of the Offer of NCRSDs of the company and also from taking up any new assignment or involvement in any new issue of debentures.
The company was found engaged in fund mobilising activity through issue of NCRSDs to more than 49 persons without complying with the relevant provisions of the Companies Act, 1956 and SEBI (Issue and Listing of Debt Securities) Regulations, 2008.
SEBI had received a complaint dated 25 July 2013 alleging that Equinox Infratech Limited is illegally raising money from the general public through the issuance of debentures. The complainant also provided a copy of brochure-cum-application for the issuance of Non–Convertible Redeemable Secured Debentures (‘NCRSDs’) by Equinox. SEBI vide e-mail dated 25 August 2013 received one more complaint against Equinox Group alleging the illegal raising of funds by them. SEBI started an investigation and found out that the company was involved in a public issue activity.
SEBI found Equinox’s claim, "We would like to bring to your attention that we have issued debentures of the company purely on a private placement basis," as false. SEBI also conducted physical verification of Equinox's registered office address at Gwalior on 15 October 2014. During the visit it was noted that the company did not exist at the given address.
Efforts were also made by SEBI to obtain information on Equinox from Ministry of Corporate Affair's Website i.e. MCA21 portal.
The SEBI Order inferred from the investigation, “from the abovementioned, it will follow that since the Offer of NCRSDs is a public issue of securities, such securities shall also have to be listed on a recognised stock exchange, as mandated under Section 73 of the Companies Act, 1956. In this regard, reference is made to Sections 73 of the Companies Act, 1956, of which sub-Sections (1), (2) and (3) are relevant for the instant case…”
As the company had not registered its prospectus with the RoC (Registrar of Companies), the SEBI Order made it clear, “In view of the same, I find that prima facie, Equinox has not complied with the provisions of Section 60 of Companies Act, 1956.”
SEBI, in its investigation, also found that Equinox Debenture Trust (represented by its trustee viz. Arpita Chakraborty) has prima facie, failed to meet the eligibility criteria specified under the provisions of the Debenture Trustees Regulations and therefore, has acted as unregistered Debenture Trustees, which amounts to violation of the abovementioned provisions of the SEBI Act read with the Debenture Trustee Regulations.
On the debenture redemption reserve requirement, the SEBI Order observed, “Further, under Section 117C of the aforesaid Act, where a company issues debentures, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, from out of its profits every year until such debentures are redeemed. Based on the material available on record, I find that Equinox has not complied with the provisions of Sections 117C of the Companies Act, 1956 and therefore, has prima facie violated the aforesaid provisions.”
As the violations by the company are severe, SEBI has issued the Order with strict restrictions. SEBI plans a refund of money already collected and says in its Order, “In this context, Equinox and its abovementioned Directors are advised to show cause as to why suitable directions/prohibitions under Sections 11(1), 11(4), 11A and 11B of the SEBI Act including the following, should not be taken/imposed against them: Directing them jointly and severally to refund money collected through the Offer of NCRSDs along with interest, if any, promised to investors.”
Finally, the SEBI Order concludes by saying, “This Order is without prejudice to the right of SEBI to take any other action that may be initiated against Equinox and its abovementioned Directors; its Debenture Trustee, viz. Equinox Debenture Trust (represented by its trustee viz. Arpita Chakraborty), in accordance with law.”