Markets regulator Sebi has ordered Chakra Infrastructure and its directors to refund investors' money which it had raised illegally by issuing securities.
Besides, the Securities and Exchange Board of India (Sebi) has barred the firm and its directors from the capital markets for four years.
Chakra Infrastructure garnered funds illegally through issuance of Non-Convertible Redeemable Debentures (NCDs).
As per Sebi, the company had raised Rs 10.24 crore by issuing NCDs to 72 investors during 2012-13. While Chakra Infrastructure said it mopped up Rs 10 crore, there was an additional amount of over Rs 24 lakh about which complaints were received.
Since the shares were issued by the firm to more than 50 people, it qualified as a public issue that requires compulsory listing on a recognised stock exchange. It was also required to file a prospectus, among other things, which it failed to do.
In an order dated April 20, the regulator has directed the company and its directors to refund the money along with an interest of 15 per cent per annum.
The firm and its directors have been restrained and prohibited from buying, selling or otherwise dealing in the securities markets for four years and the ban will continue till the completion of refunds to investors.
In case the firm fails to comply with the order in three months, Sebi would make a reference to state government or local police to register a case against them for fraud, cheating and misappropriation of public funds.
Besides, the Ministry of Corporate Affairs would initiate the process of winding up of the company.
The directions would come into force with immediate effect.
Among the proposed measures, an existing Sebi-registered
Portfolio Manager will also be allowed to act as EFM with prior intimation from Sebi and subject to certain conditions.
Sebi has proposed procedure for registration of an existing foreign-based fund manager desirous of relocating to India, or as a fresh applicant.
Such applicants will be granted registration as Portfolio Managers to act as an EFM, provided they meet existing eligibility norms of being a body corporate, having net worth of Rs 2 crore, appointment of a Principal Officer and minimum two employees with requisite credentials.
The EFMs would be required to segregate the funds and securities of the EIFs from that of other clients, provide information to Sebi on a half-yearly basis, ensure compliance to the Prevention of Money Laundering Act and other regulations, as per the paper.
However, EFMs would be exempted from several provisions of the PMS Regulations with respect to the EIF, and would have to comply with the applicable regulatory and disclosure requirements of the respective jurisdiction.
EIF is a fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit.
Besides, the aggregate participation or investment in the fund, directly or indirectly, by persons resident in India does not exceed 5 per cent of the corpus of the fund; it has a minimum of 25 members who are, directly or indirectly, not connected persons.
"The aggregate participation interest, directly or indirectly, of 10 or less members along with their connected persons in the fund, shall be less than 50 per cent," as per the consultation paper.
