Market regulator Securities and Exchange Board of India (SEBI) has asked Fingravy Wealth Creation Services Pvt Ltd and five others to refund the money, within three months, which they collected from investors for providing unregistered investment advisory services through a website. The market regulator also barred Fingravy Wealth Creation Services, its former and current directors, Dhiraj Gupta, Sumit Kumar, Hemanchal Singh, Ravindra Singh and Ashutosh Sharma, from markets for one year.
In an order, Ananta Barua, whole-time member (WTM) of SEBI
says, "(they) shall jointly and severally be responsible (to) issue public notice in all editions of two national dailies (one English and one Hindi) and one local daily with wide circulation, detailing the modalities for refund, including the details of contact person such as names, addresses and contact details, within 15 days of coming into force of this direction. The repayments to the clients, complainants or investors shall be effected only through banking channels (and not cash transfers), which ensures audit trails to identify the beneficiaries of repayments."
Earlier on 14 January 2020, SEBI passed an interim order on the matter. Mr Barua says, "After perusing through the observations in the interim order and the material available on record such as a copy of KYC documents of the bank, copy of screenshot of website www.fingravy.com, copy of payment receipts issued to the complainants, etc., I find that Fingravy Wealth Creation Services is an investment advisory firm that provides tips for the stock and commodity markets for consideration, and offers services in the area of investment planning and strategy for consideration."
Fingravy Wealth Creation Services collected Rs6.13 crore from investors in its three bank accounts. The company was also found misleading investors using the SEBI registration number of stockbroker Finvasia Securities Pvt Ltd. "...it is observed from the records of SEBI that Fingravy Wealth Creation Services is neither registered with SEBI in any capacity nor has it applied for registration as an investment adviser with SEBI."
"Through this misrepresentation, that Fingravy Wealth Creation Services has further concealed the truth that they are not authorised to deal in the securities market as it does not have the certificate of registration and are defrauding the public by luring/ inducing to avail its services to deal in securities. Such misrepresentation is therefore, fraudulent...," the WTM says in his order.
In cases of fraud, Mr Barua from SEBI says, it is a settled position of law that the corporate veil can be lifted and the directors can be held liable for the fraud of the company.
"The fact that the money has been collected during the tenure of these directors, both past and present, in the form of fees for the services offered by Fingravy Wealth Creation Services, indicates that the directors were involved at the time of the violations. Further, the corporate entity has been used, to perpetrate fraud on the investors. Thus, the violations committed by Fingravy Wealth Creation Services pertain to the time periods when the persons mentioned in the table above were acting as its directors," he added.
Interestingly, Fingravy Wealth Creation Services and four other directors contended that they had entered into a business arrangement with one Madhvi Kulkarni to handover the management of the company's affairs to her and her team, who will run the company on their behalf and, in lieu thereof, the directors agreed to share the profit in the ratio of 30:70.
"There is no single shred of document or other corroborating material, evidencing these claims," SEBI's WTM noted, adding, "Even if it were assumed that that Fingravy Wealth Creation Services was managed by Ms Kulkurni, I note that the said noticees cannot evade from the consequences of her actions as she was nothing but their agent and as claimed by these noticees themselves that they used to share profits in the ratio of 30:70."
"In the absence of any proof, I find that the claims of Fingravy Wealth Creation Services, Sumit Kumar, Hemanchal Singh, Ravindra Singh and Ashutosh Sharma, to blame Ms Kulkurni and her team for all the wrongdoings, is merely an afterthought, designed to escape from the consequences of the present proceedings," he says.
These five entities also claimed that the money received in the company's bank account was fees from consultancy provided to clients by Ms Kulkarni and her team, money transferred from a group company for paying salaries of employees and fees received from analysis reports of tax and management services.
SEBI, however, says, "There is no shred of evidence like invoice, service tax returns, and confirmation from clients, to prove that the money was indeed received for the purpose 'fees for tax and management consultancy', which it is claimed to be, by these noticees. On the other hand, there is ample evidence on record to establish that Fingravy Wealth Creation Services was providing unregistered investment advisory services through its website and online payment was received through the payment gateway 'Avantgrade' and offline payment were received through credit into the three bank accounts of Fingravy Wealth Creation Services, as mentioned on the website."
There was a twist in this case. Mr Gupta, the noticee no.2, stated that he is an Uber taxi driver and is completely unaware that someone has used his name as the director of Fingravy Wealth Creation Services. He contended that he also filed a complaint with Vijay Vihar police station in Delhi.
After perusing a copy of the complaint filed by Mr Gupta, the WTM of SEBI observed that it cannot be ascertained with certainty if the complaint was actually lodged with Delhi police since the acknowledgement stamp is not clearly visible.
"I note that at every stage involved in the process of appointment of director in a company, there are multiple validations, verifications, certifications and attestations by various stakeholders, which also includes professionals like chartered accountant (CA), company secretary (CS) and cost & works accountant (CWA). Therefore, to say that someone has been fraudulently made as a director of a company is a difficult proposition to be accepted," Mr Barua says, while rejecting the submission of Mr Gupta.
(Case No. WTM/AB/IMD/IMD-II CIS/21622/2022-23 Date: 29 November 2022)