sebi:WTM/RKA/EFD/18/2016
This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.
Facts / Headnote
Found IQMS and its promoter-directors in violation of section 69 of the Companies Act, 1956, clause 6.3.8.1 and clause 8.6.2 of the DIP Guidelines, 2000; restrained twelve directors from accessing the securities market for three years; warned the company (now Firstobject Technologies Limited).
Provisions invoked
- s. 19
- s. 69
- s. 73
- s. 2(60)
Regulations
- Reg. 111
Parties
- IQMS Software Ltd. (now Firstobject Technologies Limited)
- K V N Vijaya Simha
- K Vijaya Kumar
- K J V Nageswar
- J Satya Suryanarayana
- T Sivaramprasad
- M. Gopala Krishna Chowdary
- Rama Raju V Indukuri
- Uma Maheshwar Rao Koneru
- Vernulpalli Prasad
- Kamineni Shridhar
- G. Venkataramana
- Gummadi Srinivas
Holding
IQMS Software Ltd. violated section 69 of the Companies Act, 1956 and clause 6.3.8.1 of the DIP Guidelines by getting its IPO subscribed by connected groups using its own funds to circumvent the 90% minimum subscription requirement, and the Noticees violated clause 8.6.2 of the DIP Guidelines by failing to make shares fully paid up within 12 months or forfeit the subscription money. Twelve directors were restrained from accessing the securities market for three years and the company was warned.
Full text
Order in the matter of IQMS Software Ltd Page 2 of 18 2) K V N Vijaya Simha (Managing Director), K Vijaya Kumar (Executive Director), K J V Nageswar, J Satya Suryanarayana, T Sivaramprasad, M. Gopala Krishna Chowdary, Rama Raju V Indukuri, Uma Maheshwar Rao Koneru, Vernulpalli Prasad, Kamineni Shridhar, G. Venkataramana and Gummadi Srinivas, were the promoter-directors of the company as per the prospectus. 3) IQMS came out with an initial public offer (“IPO”) of 45,00,000 Equity Shares of ₹10 each for cash at par aggregating to ₹450 Lakh. The issue opened on September 28, 2000 and closed on October 3, 2000. M/s Fedex Securities Ltd., Mumbai was the Lead Manager to the issue. M/s Bigshare Services Pvt. Ltd. Mumbai acted as the Registrar to issue (“RTI”) and share transfer agent (“STA”) of IQMS. The Bank of Madura Ltd. (now taken over by the ICICI Bank), D.N. Road, Mumbai and the Federal Bank Ltd. Fort, Mumbai were the Bankers to issue. IQMS received 2647 applications for 44,69,900 shares out of which 55 applications for 35,400 shares were rejected as invalid. Thus, in all 2592 applications for 44,34,500 shares were found to be valid and the allotment of shares was made accordingly. 4) In the above said public issue, Kalpesh K Chawalla, Hemang Jangla Group and Pankaj A Desai Group applied for shares through 34 applications. They were allotted 10,07,200 shares in the IPO which constituted 22.71 % of the total shares allotted. 5) Based on the investigation, it was alleged that th
Order in the matter of IQMS Software Ltd Page 3 of 18 Exchange Board of India Act, 1992 (“SEBI Act”) including restraining them from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities, for an appropriate period of time, should not be issued.
Order in the matter of IQMS Software Ltd Page 4 of 18 f) They denied the allegation that the Company has caused Kalpesh Chawalla or Hemang Jangla or Pankaj Desai to subscribe to the shares of IQMS Software ltd. Even from the extracts of the SCN, it is clear that the company and its directors had no role in the alleged fraudulent subscription by the above-mentioned persons. g) They denied the charge that the Company had allegedly used its funds to get the IPO subscribed. The SCN has not given any reasons or cause to make such allegation. Even a cursory glance at the chronological occurrences of events repudiated such allegations. h) From the averments in the SCN, they are unable to identify their role in the entire subscription to IPO by the said persons. The SCN enumerates the acts of some outsiders other than the Noticees. i) It does not bring out any role played in the alleged violation of the clause 6.3.8.1 and 6.13.1.7 of the DIP Guidelines. j) The Company received subscription for more than 90% of the issued amount on the date of the closure of the issue. There was no failure in the level of subscription below 90%. k) The calls were structured in such manner that the entire subscription money is called within 12 months. The Company did not choose to forfeit the shares in view of the worst prevailing stock markets then. All the shares were fully paid-up subsequently. There is no compulsion on the Company’s part that the shares must be forfeited in the event of non- receip
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Source: SecMarx — sebi:WTM/RKA/EFD/18/2016. 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.