SAT reduces market ban on Inventure Growth and limits restrictions on directors

Securities Appellate Tribunal (SAT) reduced the market ban period on Inventure Growth and Securities Ltd. (IGSL) to three years as well as limited restrictions on certain directors of the company in a matter related to furnishing of false information in Initial Public Offering (IPO) documents.

It was declared in the prospectus that no bridge loan was raised/scheduled to be repaid from the IPO proceeds. SEBI conducted an investigation in the case and found that the IPO proceeds were not utilized as per the object in the prospectus. Eventually, it was found that IFPL increased its lending against unsecured loan, gold etc. thus mis-utilizing the IPO proceeds. Further security deposits were accepted without disclosing the same as required in the prospectus.

The Whole Time Member (WTM) of Securities and Exchange Board of India (SEBI) concluded that except the charge of mis-utilization of IPO proceeds contrary to the intent of augmenting the interim working capital all other charges were established. Consequently, SEBI barred the company and all its directors from the securities market for four years.

The appellants were prohibited from accessing the securities market for a period of four years from the date of the order. They were further prohibited from associating themselves with any listed Company or partners in a partnership firm with effect from 1st February, 2019 and two of the Company’s Directors were warned to exercise due care and diligence.

The appellants appealed to the Securities Appellate Tribunal.

The SAT held that the appellants in the case were independent directors of the company and were not involved in the day to day management and control of the Company. In such circumstances, disclosures could not be attributed to them as they were independent directors and they were not associated in the day to day management or control over the Company.

The SAT held that it was positively declared in the prospectus that the Company has not raised any bridge loan. Therefore, it can be clearly declared that a false/wrong declaration was made in the prospectus in violation of ICDR Regulations. Further, with regard to non utilization of the IPO proceeds, it was held that the charge that the Company has mis-ulitized part of the fund by failing to appropriate the necessary amount towards money advanced by its subsidiaries specifically cannot be sustained.

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