SEBI directs GSHP Realtech to refund money collected through secured non-convertible redeemable debentures
The company was engaged in fund mobilising activity through issuance of Secured Non-Convertible Redeemable Debentures, to more than 49 persons, without complying with the relevant provisions of the Companies Act,1956 and provisions of the SEBI (issue and Listing of Debt Securities) Regulations, 2008
SEBI passed an order on 18 March 2015, wherein GSHP Realtech Limited and its directors and promoters, have been directed to refund the money collected by the company through issuance of secured non-convertible redeemable debentures, with interest at the rate of 15% per annum at half yearly intervals and also not to access the capital market in any manner. They have also been restrained and prohibited from buying, selling or otherwise dealing in the securities market, from the date of this order till the expiry of four years from the date of completion of refunds to investors.
The company was engaged in fund mobilising activity through issuance of secured non-convertible redeemable debentures, to more than 49 persons, without complying with the relevant provisions of the Companies Act, 1956 and provisions of the SEBI (issue and Listing of Debt Securities) Regulations, 2008.
SEBI had passed an interim order on 15 May 2014 in the matter, whereby it directed the company and its promoters/directors not to collect any more money from investors through issuance of securities.
An opportunity of personal hearing was afforded to the company on 22 August 2014, 26 September 2014 and 11 December 2014 by SEBI.
The SEBI member then pointed out, “I have considered the observations and allegations made in the SEBI Order, the submissions made by the company and other noticees who had filed replies and other material available on record. The allegation against the company and the directors is that the Company did not comply with the 'public issue' norms mandated under sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the provisions of the ILDS Regulations in respect of its offer and issuance of NCDs. The SEBI Order had, while considering the submissions made by the company, alleged that the company made a public issue of NCDs during the Financial Year 2012-2013 to a total of 535 persons for an amount of Rs2,63,94,200/-.”
The SEBI member strictly observed, “The company has not substantiated with proof that it has made offer and allotted securities to 'friends, associates and well-wishers of the company' and that it knew them before hand and made specific offers. Further, SEBI is also in receipt of numerous complaints from investors of NCDs alleging that the company has not returned their investments, which proves that the offer made by the company was not in terms of section 67(3)(a) and (b) of the Companies Act. Further, by merely contending that the allotment was on 'private placement' would necessarily mean the same and the nature of the offer and issue - whether private or public, has to be decided on the basis of the terms and conditions and conduct of the company.”
SEBI has insisted that the money collected by refunded, and the relevant portion of the SEBI Order says, “the natural consequence of not adhering to the norms governing the issue of securities to the public and making repayments as directed under section 73(2) of the Companies Act, 1956 is to direct the company, its former directors (who were the directors when the impugned offer and allotment of NCDs were done) and its present promoters/directors to refund the monies collected with interest to such investors.
Accordingly, the company and its former directors (who were the directors during the period of violations committed by the Company as found in this Order) namely
Dharampal Kumar Rawat and Sanjay Kumar Srivastava and its present directors, namely, Arun Kumar Singh, Mahesh Kumar Singh and Raj Kumar Mondal, shall be jointly and severally liable for making the refunds. Further, in view of the violations committed by the company and its former directors, to safeguard the interest of the investors who had subscribed to such NCDs issued by the company, to safeguard their investments, and also to ensure that the company does not collect any further monies pursuant to its offer of NCDs, it also becomes necessary for SEBI to issue appropriate directions against the company and the other noticees.”
The repayments to investors shall be effected only in cash through bank demand draft or pay order. The company and its present management are permitted to sell the assets of the company only for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalised bank, according to the SEBI Order.
To make sure that the investors come to know of the present position, the company, GSHP Realtech Limited shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect, said the SEBI Order.
Also, the SEBI Order has curtailed the debenture trustee by saying, “GSHP Welfare and Development Trust, the entity who was engaged by the company as its debenture trustee in contravention of law, shall not offer itself to be engaged as a debenture trustees or in any capacity as an intermediary in the securities market, without obtaining a certificate of registration to undertake that assignment as required under law.”
Finally, the SEBI Order says, “This Order is without prejudice to any action, including adjudication and prosecution proceedings that might be taken by SEBI in respect of the above violations committed by the company, its promoters, directors and other key persons.”