SAT upholds SEBI order against SME firm Trafiksol ITS Technologies

SAT said that it was well within the rights of the Securities and Exchange Board of India (SEBI) to put the listing of the company on hold and order it to refund all investors that had put money in the public issue

The Securities Appellate Tribunal (SAT) has upheld the capital market regulator’s order against SME entity Trafiksol ITS Technologies that was directed to refund investor money post its successful initial public offer (IPO).

In an order issued on Tuesday, the appellate authority dismissed the appeal filed by the SME, saying there was no merit in the matter. It further said that it was well within the rights of the Securities and Exchange Board of India (SEBI) to put the listing of the company on hold and order it to refund all investors that had put money in the public issue.

The tribunal’s order also stated that Trafiksol ITS Technologies “has scant regard to the disclosure norms” and “and to the concerns of public shareholders, therefore, no useful public purpose will be served by allowing the IPO to proceed further, at this stage.”

The appeal filed by the SME stated that the show cause notice issued by SEBI did not mention that it could put the IPO on hold and hence any such direction exceeded the scope of investigations.

In an order issued on December 3, SEBI stopped the IPO of Trafiksol ITS Technologies and asked the company to refund the money to investors. The SEBI order was post a probe triggered by a complaint regarding the use of issue proceeds and wrongful disclosures.

Trafiksol, in its draft red herring prospectus, said that it was planning to buy from a third-party vendor “an Integrated Software Control Centre (ICCC) to function as the core operational hub for smart cities". But after receiving complaints about the viability of this vendor, SEBI asked BSE to investigate the matter and BSE had reported various concerns.

The SEBI order stated that, based on the findings from an inspection, the third-party vendor (TPV) seemed like a shell company.

The SEBI order further stated that Trafiksol had offered multiple and conflicting explanations for its engagement with the third-party vendor but the company "failed to provide is a single credible justification" for this.

Incidentally, the IPO of the company was a huge success with the offer getting subscribed 345 percent. The listing was scheduled on BSE on September 17.