Market regulator Securities and Exchange Board of India (SEBI) has ordered Fiidex Industries Ltd (noticee 1) and its managing director (MD) Hasibul Islam (noticee no 2) to refund Rs1.02 crore with an interest of 15%pa (per annum) to investors. Fiidex Industries collected this amount through the issuance of secured redeemable non-convertible debentures (NCDs) during FY11-12, FY12-13 and FY13-14.
In an order, G Ramar, chief general manager (CGM) of SEBI says, "...it was noted that Fiidex had made illegal money mobilisation to the tune of Rs6 crore. Though, the actual break-up of the aforesaid amount in terms of mobilisation through debentures, deposits, preference shares was not known, however as per the examination of copies of certificates received in Union ministry of corporate affairs (MCA) and registrar of companies (ROC) reply and the list of allottees filed by company annexed to the annual return for FY11-12, amount collected through issuance of debentures was found to be at least Rs1.02 crore.
While barring 10 entities, including Fiidex Industries and its MD, from markets for three years, SEBI also directed them to refund application money collected from investors pending allotment of securities, if any, with an interest of 15% per annum.
The other entities involved are Golam Mustafa Syed (noticee 3), Anish Ahmad (noticee 4), Dibyendu Roy (noticee 5), Sekh Arfat Ali(noticee 6), Samim Reza (noticee 7), Binimoy Biswas (noticee 8), Fiidex Industries Debenture Trust (noticee 9)and Mehebub Alam (noticee 10).
"....since, the liability of the company to repay under section 73(2) is continuing and such liability continues till all the repayments are made, Mr Islam, is co-extensively responsible along with the company for making refunds along with interest under section 73(2) of the Companies Act, 1956 and section 27(2) of the SEBI Act," the CGM says in the order.
SEBI investigation into Fiidex Industries began after the RoC, Kolkata referred the matter to SEBI.
During an inspection, it was discovered that Fiidex Industries had raised funds by issuing NCDs to the public without adhering to SEBI's regulations and guidelines. Despite Fiidex Industries claims that the NCDs were issued as private placements, SEBI investigation revealed that the company had issued the NCDs to over 49 investors, which is classified as a public issue under the Companies Act and SEBI regulations.
Fiidex Industries raised a total of Rs1.02 crore over three financial years. The funds were collected without filing a prospectus or listing the NCDs on a recognised stock exchange, which are legal requirements for public issues. Specifically, Rs45.60 lakh was raised in FY11-12, Rs49.65 lakh in FY12-13, and Rs6.86 lakh in FY13-14. SEBI's analysis also revealed that the company failed to pay interest or return the principal amounts to investors, leading to complaints.
Further investigation into Fiidex Industries financial records indicated discrepancies, including large cash deposits, suggesting the total amount raised could have exceeded the reported Rs1.02 crore.
SEBI's investigation further highlighted multiple violations, including non-compliance with disclosure norms, misrepresentation of financials, and improper use of NCDs as a proxy for deposits. Additionally, the company failed to comply with public issue norms, such as listing on recognised stock exchanges, as required for public offers to 50 or more individuals.
Bank records and documents from the MCA revealed discrepancies in Fiidex Industries claims that the NCDs were privately placed. Evidence showed that the number of unique investors exceeded the limit for private placements, making it a public issue under Section 67(3) of the Companies Act, 1956.
SEBI's findings also implicated several directors and trustees of Fiidex Industries. Notably, Mr Islam, as MD, was held responsible for refunding the funds with interest. Other directors, including those who claimed to be ‘sleeping directors’, were found to have received commissions from Fiidex Industries and could not evade liability. The company appointed Fiidex Industries Debenture Trust (FIDT) as the debenture trustee, with Mr Alam acting on its behalf without the requisite SEBI registration.
Fiidex and its directors violated provisions under the SEBI Act, Companies Act, and SEBI (Debenture Trustees) Regulations, 1993. They failed to adhere to mandatory requirements for public offers, including registration, disclosures, and repayment obligations.
In addition to the refund directive, SEBI has barred Fiidex and its directors from accessing the securities market or dealing in securities in any manner for three years.
