Home » » SEBI penalizes TATA Group company, Ashok Alco-Chem Ltd, Alchemist Infra Realty Ltd, Sahara

SEBI penalizes TATA Group company, Ashok Alco-Chem Ltd, Alchemist Infra Realty Ltd, Sahara

Written By Gopal Krishna on Thursday, July 18, 2013 | 8:11 AM

On July 18, 2013 at page 13, Prabhat Khabar, Bhojpur edition reported that Tata Group's Tinplate Company of India Limited has been penalized by the Securities and Exchange Board of India (SEBI), the regulator for the securities market in India since 1988 to make a payment of Rs 2.28 lakh to settle the matter for its " cut and paste" mistake in updating its shareholding pattern.

The Hindu Business Line reported it on July 17, 2013 based on PTI release.SEBI in a consent order dated June 28, has settled charges of takeover norms violation by the Tinplate Company of India Ltd (TCIL) after it paid Rs 2.28 lakh.
Besides, the market regulator said it will not initiate any enforcement action against the company. A consent order enables settling administrative or civil proceedings between the regulator and the party concerned.
The company had been charged with delay in filing the shareholding details under the SEBI’s Takeover Regulations for 2009 and 2010. 

Besides, there was inaccurate disclosure regarding change in shareholding of the company between March 31, 2010 and March 31, 2011. 

However, “change in shareholding had never taken place but that the change in the shareholding which had actually taken place between March 31, 2010 and March 31, 2011 and had already been indicated in the relevant disclosures for that particular year had been repeated for the next year due to a ’cut and paste’ error.” 

Consequently, the disclosures for the period between March 31, 2010 and March 31, 2011 indicated a change in shareholding pattern even though there was no such change. Also, there was no change in control of the company during the period. 

TCIL submitted an application with SEBI in December, 2012 following which their representatives held a meeting with the regulator’s internal committee on consent. 

After that, the consent terms were placed before the High Powered Advisory Committee of SEBI. The committee recommended the case for settlement upon payment of Rs 2.28 lakh towards settlement charges.
The applicant (TCIL)has remitted the sum towards settlement fees.

In a separate consent order, SEBI has settled charges of takeover norms violation by Ashok Alco-Chem Ltd after it paid Rs 3.52 lakh.

The company had not filed the disclosures regarding its shareholding details between 2001 and 2007 and 2009 within specific time-frame.
   
Business Standard reported on June 22, 2013 based on PTI report that in a fresh crackdown against ‘collective investment schemes’, SEBI has asked Alchemist Infra Realty Ltd to wind up all such activities and refund the money collected from public investors, which could be more than Rs 1,000 crore, within three months. The company and its five directors have also been barred from the securities market till the time all its schemes are wound up and the money is refunded to investors. In its order dated June 21, 2013 SEBI  has also warned the company and its directors of initiating prosecution proceedings and a criminal case for “offences of fraud, cheating, criminal breach of trust and misappropriation of public funds” if its orders are not complied with.

SEBI probe also found the investment application forms of the company also mentioned it was part of ‘Alchemist Group’, which was engaged in diverse activities such as steel, food and beverages, IT, healthcare, media, aviation, realty, hospitality, education and tea estate, among others, with asset base of over Rs 5,000 crore.

“Thus, an investor/applicant is misled to believe the company, Alchemist Infra Realty Ltd, is part of the Alchemist Group, whereas the company has contended (before SEBI) that it is not associated with the Alchemist Group,” the SEBI order said.    

The said ‘Alchemist Group’ is headed by industrialist K D Singh, currently a Rajya Sabha MP of Trinamool Congress from Jharkhand. SEBI began its investigations into the affairs of the company in 2011 after receipt of an anonymous complaint about Alchemist Infra Realty Ltd mobilising money from the public investors in breach of regulations.

The regulator later found that the company was running 'collective investment schemes' in the name of real estate business and had garnered Rs 1,087 crore as on March 31, 2011. The company was charging up to 75 per cent as 'development charges' from the money collected from investors towards purchase of land.

During the initial probe, the company refused to provide details sought by SEBI, saying the regulator did not have a jurisdiction and it was not running any Collective Investment Scheme (CIS) business. Alchemist Infra later provided some details to SEBI after repeated reminders and SEBI issued show-cause notices to the company and its directors in 2012.  In the meantime, the company sought to settle the case through SEBI's consent mechanism, but the plea was rejected by the regulator. The company also approached Jharkhand High Court in Ranchi in February 2013, but the court dismissed its petition through an order dated May 10, 2013 and asked SEBI to conclude its inquiry and pass an order within six weeks.

The company filed another petition before the Delhi High Court on June 4 in the matter, after which it was asked to reply to SEBI's show-cause notice by June 11. In its reply, the company maintained that SEBI did not have any jurisdiction over its activities and it was not running any CIS business.   

SEBI found that Alchemist was seeking investments of a minimum amount of Rs 1,000 and in multiples of Rs 1,000 thereafter, wherein investors were allotted immovable property that could be leased out to the company under 'fixed term tenancy agreement'.   

The regulator said it was clear that the transactions of the company were "not at all a land purchase-sale transaction' and the only document that the purchases were getting was a 'certificate of property', which was rather like a certificate of investment.   

SEBI said that the business schemes run by the company were entirely in the nature of CIS and were being operated without necessary regulatory approvals.   Accordingly, SEBI ordered that Alchemist Infra Realty cannot collect any money from investors or launch or carry out any scheme which could be identified as a CIS activity.     The regulator also asked the company and its directors to wind up all the existing CISs and refund the investors' money within three months.  SEBI said it would initiate prosecution proceedings against the company and its directors, make reference to the state government and police to register a civil/criminal case, and ask the Corporate Affairs Ministry to initiate winding-up process for the company, if its orders are not complied with.  

The regulator also barred the company and its five directors -- Brij Mohan Mahajan, Narayan Madhav Kumar, Balvir Singh, Chandra Shekhar Chauhan and Sunil Kanti Kar -- from the securities markets till the time all the CIS activities are wound up and the money collected from them are refunded with returns due to the investors.

  
The Hindu Business Line reported on July 17, 2013 that the Supreme Court has pulled up Sahara group for not refunding Rs 24,000 crore to investors and said that Sahara chief Subrata Roy and directors of its two companies will have to appear before the Court if its order is not complied with.

A Bench of Justices K.S. Radhakrishnan and J.S. Khehar also came down heavily on the Securities Appellate Tribunal (SAT) for restraining SEBI from taking coercive action against Sahara, as ordered by the apex court. The Bench, which said that the Sahara group must refund the amount by August 31 or face personal appearance, however, refrained from passing orders as Roy’s counsel pleaded that no such order be passed without hearing him. The case was then posted for hearing on July 24.

“Comply with our judgment or we will pass orders. Pay the amount or face personal appearance before the court,” the Bench observed, expressing displeasure at Sahara group not depositing Rs 24,000 crore with SEBI for disbursement to nearly three crore investors. Last August, the Court had directed the Sahara group to refund the amount by end-November. This deadline was extended and the companies were directed to deposit Rs 5,120 crore immediately, Rs 10,000 crore in the first week of January and the rest in February first week. Sahara has so far deposited Rs 5,120 crore with SEBI. The Bench also restrained other courts and tribunals, including SAT, from passing any order in the matter. “No High Court or SAT shall pass any order pertaining to our August 31, 2012 judgment,” it said, adding that SAT had no business to pass orders on a Supreme Court verdict. 


Earlier, The Hindu reported on June 23, 2013 based on PTI release that SEBI has been able to get hold of cash and investments totalling about Rs. 52 crore and details of more than 450 acres of land so far through its attachment orders against Sahara group entities. In the high-profile case involving refund of over Rs. 24,000 crore to the bondholders of two Sahara companies, SEBI had passed orders for attachment of various properties and freezing of accounts in February, 2013 after the entities failed to deposit the entire money.
The cash totalling over Rs. 23 crore, received from various banks pursuant to these orders, has been invested in a term deposit for now, while investments worth about Rs. 28 crore in mutual funds and demat accounts have also been frozen, sources said. After passing its attachment orders, SEBI informed all the banks, depositories, mutual funds and NBFCs, among others, about the matter and also requested RBI to direct the chiefs of the banks to transfer the money of Sahara firms to a designated SEBI account.
The SEBI had also approached the Collectors of as many as 600 districts to request them not to permit the concerned Sahara entities and persons from any sale or transfer of properties attached by the regulator.
As a result, the District Collectors and Revenue Officers from various parts of the country have provided SEBI details of more than 450 acres of land belonging to Saharas, sources added.

The regulator has already asked the Supreme Court to allow it to appoint an Officer of Special Duty and other officers to deal with the objections and claims relating to the property to be sold and for conducting the sale of the property to garner funds for refunding the investors’ money.

Saharas have so far deposited Rs. 5,120 crore with SEBI towards the refund and claims that this amount is more than sufficient to meet the outstanding liabilities towards its bondholders as the group has already paid close to Rs. 20,000 crore directly to the investors.


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