sebi:WTM/MPB/ISD/134/2018
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Facts / Headnote
Interim Order dated September 21, 2017 confirmed
Provisions invoked
- s. 19
- s. 13
- s. 16
Parties
- M/s Indian Infotech & Software Limited
Holding
The directions contained in the Interim Order dated September 21, 2017 against M/s Indian Infotech & Software Limited are confirmed, as IISL failed to submit documentary evidence to contradict the prima facie findings of misrepresentation of financials and business and suspicion of accommodation transactions.
Full text
Order in the matter of M/s Indian Infotech & Software Limited Page 2 of 13 (i) The trading in securities of IISL shall be reverted to the status as it stood prior to issuance of letter dated August 7, 2017 by SEBI. (ii) Exchange shall appoint an independent forensic auditor inter alia to further verify: a. Misrepresentation including of financials and/or business of IISL, if any; b. Misuse of the funds / books of accounts of the company, if any. (iii) The promoters and directors in IISL are permitted only to buy the securities of IISL. The shares held by the promoters and directors in IISL shall not be allowed to be transferred for sale, by depositories. (iv) The other actions envisaged in SEBI’s letter dated August 07, 2017 in para 1 (d), as may be applicable, and the consequential action taken by Stock Exchanges shall continue to have effect against M/s Indian Infotech & Software Limited
Order in the matter of M/s Indian Infotech & Software Limited Page 3 of 13 (b) During the course of hearing IISL was advised to provide the valuation certificate on the basis of which goodwill amount was calculated with respect to the goodwill amount appearing in the Balance sheet as on March 31, 2016 amounting to approximately Rs. 51 crore (carried forward from previous years). However, the company has only provided the calculation of the goodwill amount and failed to provide the valuation certificate. This calls into question the genuineness of the value of goodwill reflected in the financials. (c) On the RBI website as on August 31, 2017, the company is appearing under category ‘Investment Company’. However, Statutory Auditor Certificate says that the company is Loan Company. Further, their Annual Report (2015-16) says that approximately 85% of the turnover of the company is from IT and Software Products. Thus, there are significant contradictions in respect of the claimed business of the company and prima facie misrepresentation of its business. (d) With respect to the query related to the income (sales of goods/services) of approximately Rs. 91 crore and the purchase of traded goods of approximately Rs. 106 crore in the financial year 2015-16, the company, in its reply, stated that in the financial year 2015-16, the company as an NBFC Company also traded in various equity shares of Listed and Unlisted Company both through the Online Platform and Offline mode. Further, co
Order in the matter of M/s Indian Infotech & Software Limited Page 4 of 13 As per the explanation given by company for the year 2015-16, that the amount of Rs. 91 crore reflect the purchase of shares and not purchase of goods, however, from the Cash flow statement for the year ended March 31, 2016, the Cash flow with respect to purchase of Investments appears to be Rs. 37.50 lakhs only. Hence, from the above it prima facie appears that the company had made wrong presentation about the business in its annual report and Annual Return for the year 2015-16 and also the explanation provided by the company with respect to the purchases/sale of goods/services appearing in Annual report for the year 2015-16 is insufficient and unreliable. Thus there are significant contradictions in respect of the claimed business of the company and prima facie misrepresentation of its business. (e) The HDFC bank statement account no. 00600350115229, Branch Mumbai- Fort, Manekji Wadia Bldg, Ground Floor, Fort. and Yes bank statement account no 020185700000189, Branch – SEEPZ Andheri, received from the company show that, there are numerous entries of funds received by IISL from multiple entities and transferred to other entities on the same day leaving a negligible closing balance in the bank account. This does not appear to be consistent with a normal lending pattern of NBFCs. Further, in respect of its borrowings, the company has failed to provide any documentary evidence of the same. Thus, prima fa
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Source: SecMarx — sebi:WTM/MPB/ISD/134/2018. 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.