sebi:IVD-ID5/ESL-KCSL/AO/DRK/ASG/EAD3-305/01-03-2012
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Facts / Headnote
Violation found; penalty of Rs. 10,00,000 imposed on Keynote Corporate Services Ltd. under Section 15HB of SEBI Act, 1992
Provisions invoked
- s. 15
- s. 15H
- s. 15J
Regulations
- Reg. 111
Parties
- Keynote Corporate Services Ltd.
Holding
Keynote Corporate Services Ltd., as BRLM for the IPO of ESL, failed to exercise due diligence and ensure adequate disclosure of Rs. 4 crores ICDs in the Prospectus, violating Clauses 5.1 and 5.3.3.2(ii) of DIP Guidelines read with Regulation 111 of ICDR Regulations, and was penalized Rs. 10 lakh under Section 15HB; the allegation of connection with Devkant/Shri Ram Ratan Kanoonga was not accepted.
Full text
Page 2 of 21 2. The Investigation Report (hereinafter referred to as ‘IR’) concluded that certain entities had violated SEBI Act/ Rules/ Regulations while dealing in the IPO of ESL. In this regard, it was noted from the findings of the IR that Keynote Corporate Services Ltd. (hereinafter referred to as ‘the noticee’) was the Book Running Lead Manager (hereinafter referred to as ‘BRLM’) for the IPO of ESL.
Page 3 of 21 5. The SCN made the following allegations against the noticee: a. Connection between Shri Ram Ratan Kanooga and the noticee The IR has alleged that it has been observed from the reply dated February 04, 2010 of Devkant Synthetics (I) Pvt. Ltd. (hereinafter referred to as ‘Devkant’), an entity which had provided loan/ ICDs to ESL, and the loans/ICD documents provided by ESL and other entities that the promoter and director of Devkant, Shri Ram Ratan Kanoonga (hereinafter referred to as ‘Kanooga’) knows Shri B Madhuprasad (the noticee’s vice-chairman). Devkant had applied in the IPO for 80,000 shares and was allotted 42, 647 shares. Devkant had provided ICDs of Rs. 1.5 crores to ESL. It was observed from the ICD/loan documents that Kanoonga was appearing as the sole arbitrator for certain loans/ ICDs to ESL. The SCN alleged that Kanoonga (connected entity to the noticee) was common person for loans/ICDs to ESL worth ` 3 crores.
Page 4 of 21 the entities namely Rajesh Service Centre, Krishna Enterprises, Mahadev Impexs and Shiv Impexs had aided and abetted ESL in siphoning off the funds. In view of the same, the IR alleged that the noticee had failed to exercise due diligence while carrying out its duties as BRLM in the IPO of ESL.
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Source: SecMarx — sebi:IVD-ID5/ESL-KCSL/AO/DRK/ASG/EAD3-305/01-03-2012. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.