sebi:ORDER/SBM/KL/2022-23/16940

SEBI · SEBI · 2019-07-29 · Suresh B Menon, Adjudicating Officer

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Facts / Headnote

Adjudication proceedings disposed without penalty; Noticee exonerated

Provisions invoked

• s. 11B
• s. 15
• s. 19
• s. 12A
• s. 15H
• s. 15I

Regulations

• Reg. 3
• Reg. 3(a)
• Reg. 77
• Reg. 77(1)

Parties

• M/s Hamraj Fashions Consultants Private Limited (now known as Gilani Infra Private Limited)

Holding

The Adjudicating Officer disposed of the adjudication proceedings initiated vide SCN dated December 31, 2019 against Hamraj Fashions Consultants Private Limited without imposing any penalty. The alleged violations of Regulations 77(1) and 77(3) of the ICDR Regulations and Sections 12A(a), (b), (c) of the SEBI Act read with Regulations 3(a), (b), (c), (d) and 4(1) of the PFUTP Regulations were held not established.

Full text

Adjudication order in respect of Hamraj Fashions Consultants Private Limited Page 2 of 12 cash at a premium of Rs. 8.60 per share on preferential basis to 27 non-promoter entities, on October 14, 2010 and the warrants were converted into equity shares in two tranches i.e. on March 02, 2011 and March 31, 2012. Among the aforesaid 27 non- promoter entities, it is observed that one M/s Hamraj Fashions Consultants Private Limited (now known as Gilani Infra Private Limited and hereinafter referred to as ‘Noticee’) was allotted 37,00,000 warrants on preferential basis. Pursuant to the conversion of the aforesaid warrants to equity shares on March 02, 2011, the total consideration amount to be paid by the Noticee to SHL, for subscription of the aforesaid shares amounted to Rs. 6,88,20,000/-. In this regard, in terms of the provisions of Regulations 77 (1) and 77 (3) of ICDR Regulations, the Noticee was required to transfer the total amount of Rs. 6,88,20,000/- to SHL at the time of allotment of equity shares, pursuant to exercise of option against each such warrant i.e. before March 14, 2012. However, it is alleged in the investigation that the total funds transferred by the Noticee to SHL towards subscription of the aforesaid 37,00,000 convertible warrants amounted to only 25% of the required amount i.e. Rs. 1,72,05,000/-, which is less than the required amount of Rs. 6,88,20,000/-. Therefore, it is alleged in the investigation that the Noticee failed to transfer the remaining 75%

Adjudication order in respect of Hamraj Fashions Consultants Private Limited Page 3 of 12 4. In view of the above, SEBI initiated adjudication proceedings against the Noticee under the provisions of Section 15HA and Section 15HB of the SEBI Act.

Adjudication order in respect of Hamraj Fashions Consultants Private Limited Page 4 of 12 aforesaid failure on the part of the Noticee 1, it is alleged that the Noticee 1 does not have any justification/ explanation with respect to the return of the funds to the Noticee 2 to 10. As the consideration received from the Noticee 2 to 10 was less than the required amount, it is alleged that the Noticee 1, by issuing equity shares to the Noticee 2 to 10, without receiving full consideration and the Noticee 2 to 10 by receiving shares without paying full consideration, have together violated Regulation 77(1) and 77(3) of ICDR Regulations. c. It is alleged that as the Noticees 2 to 10 did not pay full consideration for the conversion of warrants to equity shares, the aforesaid Noticees 2 to 10, were benefited by the company at the loss of other shareholders of the company. d. When a company raises capital through share issuance, it is a capital infusion and ordinary investor perceives such capital infusion as a measure which strengthens the company's financial fundamentals thereby attracting the investing public to transact in the shares of the company. However, in the instant matter it is alleged that although the listed company i.e. the Noticee 1, gave a public impression of such capital infusion through preferential allotment, in reality, the Noticee 1, interalia, allotted shares to nine out of the 27 allottees without receiving full consideration. In view of the above, it is alle

Source: SecMarx — sebi:ORDER/SBM/KL/2022-23/16940. 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.