sebi:WTM/AB/EFD-1/DRA-3/09/2018-19
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Facts / Headnote
Held Offer of ES to be deemed public issue in violation of Companies Act, 1956; directed GFICIL and Noticee Nos. 6,7,8,12 jointly and severally to refund Rs.6.80 crores with 15% p.a. interest within 3 months, with asset freeze, inventory, escrow and public notice directions; restrained directors from securities market for 4 years from completion of refund; proceedings against Noticee No.4 abated on death.
Provisions invoked
- s. 19
- s. 55A
- s. 73
- s. 28A
- s. 4A
- s. 67(3)
- s. 67
- s. 56
- s. 73(2)
- s. 73(1)
- s. 2(36)
- s. 60
- s. 67(1)
- s. 56(1)
- s. 56(3)
- s. 67(2)
- s. 56(4)
- s. 73(3)
Regulations
- Reg. 107
Parties
- Grass Root Finance & Investment Company (India) Ltd.
- Pradip Sarmah
- Maniram Hazarika
- Khargeswar Das
- Jiten Chandra Bora
- Jagneshwar Sakia
- Karuna Borah
- Gopi Bhuyan Ram
- Harisa Goyari
- Bikash Roy
- Keshab Gogoi
- Bhupen Burhagohain
- Guluk Gogoi
Holding
GFICIL's offer and allotment of equity shares to at least 9321 allottees raising at least Rs.6.80 crores during 1995-96 to 2006-07 was a deemed public issue violating sections 56(1), 56(3), 60 read with 2(36), and 73(1), 73(2), 73(3) of the Companies Act, 1956. GFICIL and directors in office during the offer were directed jointly and severally to refund with 15% interest and were restrained from the securities market.
Full text
Order in the matter of Grass Root Finance & Investment Company (India) Ltd. Page 2 of 24 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) received a reference dated 04/01/2017 from Reserve Bank of India against M/s. Grass Root Finance & Investment Company (India) Ltd. (hereinafter referred to as ‘GFICIL’/’the company’) whereby it was inter alia informed that GFICIL was earlier registered with RBI as a non-deposit taking non-banking financial company (NBFC) and its certificate of registration was cancelled on 05/04/2003. The reference further informed that GFICIL had issued shares to a large number of persons, apparently in violation of securities laws relating to public issue of shares. SEBI undertook an enxamination to ascertain whether GFICIL had made any public issue of securities without complying with the provisions of the Companies Act, 1956; Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) and SEBI (Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred to as ‘DIP Guidelines’).
Order in the matter of Grass Root Finance & Investment Company (India) Ltd. Page 3 of 24 ii. The above Offer of ES and pursuant allotment were deemed public issue of securities under the first proviso to section 67(3) of the Companies Act, 1956. Accordingly, the resultant requirement under section 60 read with section 2(36), section 56, sections 73(1), 73(2) and 73(3) of the Companies Act, 1956, read with DIP Guidelines, were not complied with by GFICIL in respect of the Offer of ES.
Order in the matter of Grass Root Finance & Investment Company (India) Ltd. Page 4 of 24 ii. The Noticee nos. 1 to 14, shall neither dispose of, alienate or encumber any of its/their assets nor divert any funds raised from public through the Offer of ES;
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Source: SecMarx — sebi:WTM/AB/EFD-1/DRA-3/09/2018-19. 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.