sebi:QJA/AA/DDHS/DDHS-SEC-1/30807/2024-25

SEBI · SEBI · 2024-03-28 · Dr. Anitha Anoop, Chief General Manager

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Order finding VDDPL in violation of public issue norms of the Companies Act, 1956 and SEBI (Issue of Listing of Debt Securities) Regulations, 2008 for issuance of NCDs to more than 49 persons in F.Y. 2013-14

Provisions invoked

• s. 19
• s. 55A
• s. 22
• s. 73
• s. 28A
• s. 25
• s. 4A
• s. 17
• s. 67(3)
• s. 67
• s. 248
• s. 250
• s. 58
• s. 14
• s. 56
• s. 73(2)
• s. 465
• s. 73(1)
• s. 2(36)
• s. 60

Regulations

• Reg. 7
• Reg. 6
• Reg. 9
• Reg. 10
• Reg. 17
• Reg. 12
• Reg. 8
• Reg. 15
• Reg. 14
• Reg. 200
• Reg. 4(2)(a)
• Reg. 3(a)
• Reg. 26
• Reg. 16(1)
• Reg. 107
• Reg. 4(2)(b)
• Reg. 4(2)(c)
• Reg. 29(e)
• Reg. 5(2)(b)

Parties

• Noticee 1 (Managing Director of VDDPL)
• Noticee 2
• Noticee 3
• Noticee 4
• Noticee 5
• Noticee 6
• Vaishno Devi Dairy Products Limited

Holding

VDDPL was found to have violated the public issue norms under the Companies Act, 1956 and SEBI (Issue of Listing of Debt Securities) Regulations, 2008 by issuing NCDs to more than 49 persons (185 investors) in F.Y. 2013-14, which constituted a deemed public issue under Section 67(3) of the Companies Act, 1956 read with Section 25(2) of the Companies Act, 2013. The company also failed to comply with Section 73 of the Companies Act, 1956 by not seeking listing permission or refunding monies.

Full text

Order in respect of Vaishno Devi Dairy Products Limited Page 2 of 39 of NCDs viz, copies of Information Memorandum (IM), Debenture Trustee Agreement (DTA), pricing supplements, application forms etc. Information was also sought from the Registrar of Companies (ROC), Pune. SEBI thus undertook an examination to ascertain whether VDDPL had raised funds in violation of the Companies Act, 1956 and SEBI (Issue of Listing of Debt Securities) Regulations 2008 (hereinafter referred to as ‘ILDS Regulations’).

Order in respect of Vaishno Devi Dairy Products Limited Page 3 of 39 Mumbai Bench dated 03.09.2019 admitting the insolvency petition.

Order in respect of Vaishno Devi Dairy Products Limited Page 4 of 39 4.6 Based on the examination by SEBI, it was observed that VDDPL had made issuance of NCDs to more than 49 persons in the F.Y. 2013-14 in violation of the public issue norms laid out in the Companies Act, 1956 and SEBI (Issue of Listing of Debt Securities) Regulations, 2008. 4.7 The Information Memorandum (IM) dated 13.01.2014 was issued by VDDPL for issuance of debentures on private placement basis. In terms of the IM, KCL was specified to act as Sole Book Runner and Lead Arranger and Karvy Computershare Private Limited as the Registrar to the issue. The IM, inter alia, provided the following :-  Page 39 of IM provided the following disclaimer clause : ‘The issue is being made strictly on private placement basis and is not intended to be circulated to more than 49 persons nor intended to be listed on a stock exchange at any time.’  The role of the sole Arranger in the assignment is confined to marketing and placement of the NCD on the basis of the IM. The IM also provides for use of IM by the sole arranger for the purpose of soliciting subscription from qualified institutional investors in the NCD.  Minimum number of NCDs to be applied for were to be 10 and in multiple of 1 NCD thereafter. 4.8 The IM contained a disclaimer clause, which, inter alia, prohibited circulation to more than 49 persons. However, NCDs were issued to more than 49 persons in contravention to the terms set out in the IM. 4.9 The co

Source: SecMarx — sebi:QJA/AA/DDHS/DDHS-SEC-1/30807/2024-25. 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.