Regulations
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.”
 

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SEBI curtails URO group of companies from mobilising funds
The URO group of companies were engaged in fund mobilising activity through issue of equity shares to more than 49 persons without complying with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("ICDR Regulations") and the provisions of the Companies Act, 1956
 
SEBI passed orders dated 19 March 2015 under sections 11, 11A, 11B and 11(4) of SEBI Act, 1992 in the matter of URO Infotech Limited, URO Infra Reality India Limited, URO Hygienic Foods Limited, URO Walkers Limited and URO Lifecare Limited directing the companies not to mobilise funds from investors. The companies and its directors are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities till further orders.
 
The companies were engaged in fund mobilising activity through issue of equity shares to more than 49 persons without complying with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("ICDR Regulations") and the provisions of the Companies Act, 1956.
 
SEBI received a reference dated 30 December 2013 from the Ministry of Corporate Affairs (MCA) regarding the complaints received against 'chit fund companies operative in the State of West Bengal - in respect of URO Autotech Limited & its group companies' and for examining the same. The above reference enclosed a Report from the Office of Regional Director, Eastern Region, MCA, inter alia alleging violation of sections 60, 73 read with 67(3) of the Companies Act, 1956 by URO Autotech Limited and requesting for referring the matter to SEBI. SEBI initiated an inquiry and found that public issue of equity shares had been made without observing proper procedure laid down under the law.
 
The SEBI Order concludes by saying, “This Order is without prejudice to the right of SEBI to take any other action including prosecution proceedings under section 24 of the SEBI Act and section 621 of the Companies Act, 1956 read with the relevant provisions of the Companies Act, 2013 and adjudication proceedings under the SEBI Act against the URO group of companies.”
 

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Black money bill equally tough on abetors, including banks
In a bid to get back ill-gotten money stashed by Indians abroad, curb the menace and deter future such practices, the proposed new law not only seeks stringent action against perpetrators but also abetors like banks, chartered accountants, directors and employees.
 
"In keeping with the commitment of the government for focussed action on the black money front, an unprecedented, multi-pronged attack has been launched to root out the menace of black money," the finance ministry said, seeking to explain the nuances of the proposed new legislation.
 
"The government is confident that this new law will act as a strong deterrent and curb the menace of black money stashed abroad by Indians," it said about the bill, the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, tabled in Lok Sabha by Finance Minister Arun Jaitley.
 
"Abetment or inducement of another person to make a false return or a false account or statement or declaration under the act will be punishable with rigorous imprisonment from six months up to seven years," it said.
 
"This provision will also apply to banks and financial institutions aiding in the concealment of foreign income or assets of resident Indians or falsification of documents," it said as the bill makes it clear that proceedings can be initiated both against individuals and against enitities.
 
The bill says when an offence is by a company, every individual in charge of its business at that time will be held guilty. The deemed deafaulters can also include a managing director, director, manager, secretary or official if they have shown consent, connivance or neglect.
 
"Wilful attempt to evade tax in relation to a foreign income will be punished with rigorous imprisonment from 3-10 years and with fine," Jaitley noted the statement of objectives and reasons, speaking about the liability in such cases.
 
"Failure to furnish a return of income though holding a foreign asset, failure to disclose the foreign asset or furnishing of inaccurate particulars of the foreign asset will be punishable with rigorous imprisonment for a term of six months to seven years."
 
The bill also lists how the monies payable under the act should be recovered.
 
"Every person being a manager at any time during the financial year will be jointly and severally liable for payment of any amount due under in respect of the company for the financial year, if the amount cannot be recovered from the company," says a note on clauses attached to the bill.
 
"The amount so intimated shall be the first charge on the assets of the company remaining after payment of the workmen’s dues and debts due to secured creditors to the extent specified," it says, speaking about the hierarchy of the lien.
 
Likewise, a debtor of the perpetrator can be asked to pay an amount not exceeding the amount of debt to meet the tax liability. Failure will make the debtor a defaulter. For this, A debtor is not a person who owes the perpetrator but also if money is held on account of the perpetrator. 

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COMMENTS

Gopalakrishnan Krishnan

2 years ago

Black Money first gets generated in domestic market and transferred to International Market through official and unofficial channels.The generation of black money in the domestic market needs to be totally eliminated through enforcement of all existing laws of the land without fear or favour and this requires very strong will power on the part of the Government to plug all loopholes where black money generation is made possible.Real Estate transactions, High value transactions in cash involving gold, silver , and other Commodities etc are to be tracked intelligently with proper tie up of point of sales, cash transfers, tax collections and Income tax returns with the aid of Information Technology,social audit and independent verification of all transactions in a centralized data collection center. The guidance value fixed for land deals in various states are seldom scruinised and put through strictly is a ground reality and this can be easily detected if honestly verified. The guidance value and the market price have no relationship and the market value on real estate transactions are three to four times of the guidance value. This can be easily tracked and fixed if the authorities so desire. The loss of revenue to the state Government through Corrupt practices in real estate transactions is known to all states and efforts are not even attempted to detect and fix the problem. Forex transactions are liberalised and it becomes an easy route to transfer funds. Over invoicing and under invoicing of imports and exports and other forex transactions the genuineness of which is seldom verified or suspected even make the international movement of funds is easy.Banks are also parties in helping generation and transmission of black money as they seldom suspect any transactions. The conversion of white money into black and vice versa through banks is a regular feature. In the absence of scrutiny of individual transactions by any agency including RBI,the banks can easily indulge in helping black money deals in different ways.

The black money malaise needs to be tackled culturally by educating the people involved in trade, commerce and making the law enforcement agencies accountable and responsible. The problem definitely is not insurmountable and there should be a willingness. Readiness is all that is required. Involve people and see that the target is easily met. 95% of the population will definitely not have black money. Only a few are having it and it can be controlled over a period.

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