SEBI directs Katalyst Software to refund NCD investors with 15% interest

Sebi orders Katalyst Software to refund NCD investors with 15 percent interest

The Securities and Exchange Board of India (Sebi) has directed Katalyst Software Services Ltd. (KSSL) to refund funds raised through non-convertible debentures (NCDs) issued in 2017-18, along with 15 percent annual interest, after finding violations in the debt issuance process.

In a 55-page order, Sebi’s Quasi-Judicial Authority, Santosh Shukla, in his order said, KSSL had mobilised funds through NCDs purportedly issued as a private placement to Karvy Capital Ltd., but the securities were later transferred to more than 200 investors, effectively making it a public offer. The regulator held that the company bypassed disclosure and compliance requirements mandated under the Companies Act and SEBI’s debt regulations.

SEBI’s directions:

Sebi directed that KSSL must refund investors the money collected via NCDs in FY 2017-18, together with 15 percent per annum interest from the eighth day of collection till actual repayment.

Also, the company must publish a notice in all editions of two national dailies (one English and one Hindi) and in a widely circulated local newspaper, within 15 days, detailing the modalities for repayment and providing contact details for investor queries.

Sebi said, mode of refunds, including principal and interest, must be made only via verifiable banking channels such as demand drafts, pay orders, or electronic fund transfers, ensuring a clear audit trail to identify beneficiaries.

Sebi also barred the former promoter, Rahul Dilip Shah, for six months from accessing the securities market. Sebi order said, Shah is directed not to, directly or indirectly, access the securities market, by issuing prospectus, offer document and is restrained from soliciting money from the public in contravention of law, directly or indirectly and is restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in any manner whatsoever, for a period of six months from the date of this order

The order comes in the wake of a complaint by former promoter Rahul Dilip Shah, who had alleged irregularities in the pledge of his shares and collusion between Karvy and the majority shareholder group. Sebi’s probe into the NCD issuance established that investor funds were raised in a manner that circumvented regulatory safeguards.