The Securities and Exchange Board of India (SEBI), India’s markets regulator, issued an ex-parte interim order on Tuesday against the promoters and associates of Darjeeling Industries Limited, accusing them of orchestrating a complex plot that included circular funding, misuse of preferential issue proceeds, and suspected stock price manipulation.
Additionally, the regulator has questioned the listed company’s very existence, stating that it was unable to locate any operational presence at either of its stated registered office locations.
SEBI identified ten noticees in its 62-page interim ruling, including Managing Director Ashok Dilipkumar Jain, who it claimed was the brains behind the alleged plot.
Dilip Sanklecha, Sonali Parmar, Abhishek Prakash Jain, Kirti Ravi Kothari, Kalidas Magar, Joy Banerjee, Punyah Sachin Jain, and director Pradeep Sutodiya are the other noticees. The regulator stressed that its conclusions are prima facie and require further inquiry and responses from the notifyees.
Darjeeling Industries collected Rs 11. 76 crore by issuing convertible warrants to ten non-promoter investors, according to SEBI. The regulator claimed that Ashok Jain directly or indirectly financed at least Rs 1. 71 crore, or more than 58 percent of the amount, through his relatives and related companies, despite the investors first subscribing Rs 2. 94 crore. According to SEBI, this cast significant question on the allottees’ real independence as investors.
Additionally, the regulator claimed that Darjeeling Industries gave Ashok Jain the entire amount of Rs 2. 94 crore almost immediately after getting the subscription money. SEBI dubbed the sequence of transactions as circular funding, claiming that the money went via a number of companies after returning to the original firm.
According to the ruling, a big chunk of the cash was redirected to businesses that appeared to have no relationship to Darjeeling Industriies’ stated agricultural trading business.
Payments of approximately Rs 3. 09 crore to Lifeway Hygiene LLP (a baby-care products maker), Rs 1 crore to Shree Adhyashakti Metals Pvt. Ltd. (a scrap recycler), more than Rs 1. 28 crore to Antala Industries, Rs 40 lakh to Le Lavoir Ltd. (where Ashok Jain is also a director), and an additional Rs 40 lakh to the newly established Ghantiram Foods were questioned by SEBI.
After they were received, a sizable portion of the money that was sent to Ghantiram Foods was withdrawn in cash, according to the investigators.
Additionally, SEBI questioned the company’s real activities. Investigators discovered during inspections that Darjeeling Industriies was not operating out of its stated Mumbai registered office, which had been previously acquired by an unrelated finance firm that had purchased the property.
The firm continued to provide the address for board meetings, nevertheless. The office was locked when it was visited at the stated location in Rajkot, and there were no indications of trade or business. Additionally, the regulator pointed out that the company’s publicly available website was inactive.
In addition, the ruling was based on information obtained during a distinct investigation involving Surendra Jain, who is a suspect in the Sunshine Capital incident.
According to SEBI, WhatsApp chats supposedly tied Ashok Jain to Surendra Jain and included debates about Darjeeling Industries, shareholder lists, business expenses, and market operations.
According to the regulator, these talks, when examined in conjunction with the fund trail and trading patterns, suggested a coordinated scheme to manipulate the company’s shares.
Since a considerable portion of the preferentially assigned shares’ lock-in period was set to expire on June 30, SEBI claimed that it responded quickly. The regulator was worried that the notification recipients may have sold their shares and recorded illegal earnings at the expense of public investors.
At current market prices, it was estimated that shares owned by Ashok Dilipkumar Jain and related entities may have brought in as much as Rs 29. 05 crore.
In light of its ongoing investigation, SEBI has forthwith placed the noticees under market restrictions. The regulator reaffirmed that the interim order’s conclusions are preliminary and that all affected parties will have a chance to present their defense before any final ruling is made.