Promoters of a company has "shocked" the capital-markets regulator with their "level of audacity".
The promoter of Debock Industries and associates first listed a company only to defraud the investors and then submitted forged documents to the market regulator, who was investigating the company, said the interim order passed by Sebi on August 23.
The company which was initially listed on Innovators Growth Platform on June 5, 2018, migrated to the mainboard on NSE on March 31, 2022.
In an interim order, the Whole-time Member of Securities and Exchange Board of India (Sebi) Ashwani Bhatia stated, "The actions of the Company, prima facie, reveal a brazen and calculated effort to defraud investors and deceive regulatory authorities."
Bhatia added, "The case, based on material placed before me, does not appear to be a run of the mill case. The promoters have clearly indulged in siphoning of funds from the Company. It also appears that the very purpose behind listing this Company was to defraud investors and make huge gains for personal benefit."
Sebi has ordered the promoter and associates to deposit unlawful gains made of more than Rs 89.24 crore; has retrained Mukesh Manveer Singh from holding any key managerial personnel position in any listed company other than Debock or any other registered intermediary; and has barred the company and the others from the securities market until further orders.
The company appeared to have inflated its FY22 sales by approximately 72 percent and FY23's sales by around 77 percent, and inflated its purchases by around 94 percent in both the financial years, said the order. These were done through circuitous transactions to present a positive picture.
The company also appeared to have met the eligibility criteria to shift to the mainboard by "fictitious issue of warrants" and their subsequent conversion to equity. As Sebi's investigations revealed, the actual receipt of consideration was just Rs 30 lakh, which was made to look like Rs 8.28 crore in application money through circuitous transactions. Then the allotment of shares following the conversion of warrants was made with receiving the consideration due of Rs 28.12 crore.
This led to the artificial inflation of share capital and capital advances for purchase of assets on the balance sheet of the company for FY22 and FY23, "a misrepresentation that continues as on date", said the order.
Once shifted to the mainboard, the company did preferential allotments that were "nothing more than a hollow pretence".
The order said, "Once allotted, the shares were quietly transferred off-market to the promoters, who then offloaded them onto unsuspecting shareholders. As noted earlier in this Order, during the period FY21 to FY24, the promoter shareholding came down from 64.79% to 9.41% whereas the public shareholding went up from 35.21% to 90.56%. The Company, which only had 171 public shareholders as of March 31, 2021, had 53,389 shareholders by March 31, 2024."
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