Vaishno Devi Dairy Products, 6 Directors Asked To Refund Rs25 Crore Illegally Collected from Investors for NCDs
Moneylife Digital Team 26 September 2024
Market regulator Securities and Exchange Board of India (SEBI) has ordered Vaishno Devi Dairy Products Ltd (VDDPL) and six of its directors to refund the money which it had raised illegally from investors and also barred them from the securities market between three months to four years. These entities had raised Rs25 crore through the issuance of non-convertible debentures (NCDs) in an illegal manner during FY13-14. They have been directed to refund the money along with an interest of 15%pa (per annum).
 
The six officials of VDDPLY penalised by SEBI are Nandkishor Harikishan Attal (promoter and managing director), Mayura Nandkishor Attal, Mahesh Brij Gopal Bhattad, Vasant Narayan Pinjan, Sahindra Jagannath Bhawale and Arati Sahindra Bhawale.
 
In an order, Dr Anitha Anoop, chief general manager (CGM) of SEBI, says, "I note that in the FY13-14, VDDPL allotted NCDs amounting to Rs25 crore to Karvy Capital Ltd (KCL) which were sold to the public, i.e. 185 investors within six months from various dates of allotment by  VDDPL. The extant modus or scheme adopted by VDDPL, which is a part of a design to circumvent the regulatory framework, is a deemed public issue of securities in terms of Section 25 of Companies Act, 2013."
 
SEBI launched an investigation into VDDPL, formerly Shubhi Agro Industries Pvt Ltd, following a complaint in July 2017. The complaint centred on the Company's issuance of NCDs during FY13-14 and its subsequent default on repayment. These NCDs were unlisted, raising serious concerns over regulatory compliance.
 
SEBI's probe revealed delays in obtaining information from VDDPL which failed to provide necessary documents, despite multiple requests from 2017 to 2019. Only after a visit to VDDPL's office in March 2019 were some documents submitted, contributing to the prolonged investigation.
 
VDDPL raised concerns about SEBI initiating proceedings nearly 10 years after the NCD issuance in early 2014. However, SEBI justified the delay, citing the company's unresponsiveness as the primary reason for the investigation's duration. SEBI referenced a similar case involving the securities appellate tribunal (SAT) to defend its position, highlighting that delays are not considered excessive when caused by complexities or non-cooperation from the Company under investigation.
 
VDDPL's information memorandum (IM) prohibited the circulation of NCDs to more than 49 investors, but the Company nonetheless allotted them to 185 individuals, breaching its own terms. 
 
Further, VDDPL's annual return for FY13-14, filed with the registrar of companies (RoC), included a list of these 185 debenture holders, proving the company's awareness of the large-scale allotment.
 
In its defence, VDDPL claimed that KCL had full control over the issuance and sale of the NCDs and that the Company lacked access to the beneficial position (BENPOS) reports showing the ownership of the debentures. However, SEBI's investigation revealed that VDDPL's managing director had signed documents acknowledging the issuance of NCDs to 185 investors. 
 
"Furthermore, KCL regularly submitted BENPOS statements, which were available to the Company. Despite this, VDDPL did not take any legal steps to rectify the breach of the IM's terms, failing to act on the downselling of NCDs," the market regulator says.
 
SEBI found VDDPL's reliance on SAT rulings in other cases involving BENPOS reports misplaced. In this instance, SEBI concluded that VDDPL's management was fully aware of the NCD downselling and failed to take appropriate action. Both VDDPL and KCL appeared to have engaged in a deliberate attempt to circumvent regulatory provisions on public issues
 
As a result, the investigation also confirmed that VDDPL's actions violated provisions of the Companies Act, 1956, especially regarding the issuance of NCDs, which were classified as a public issue and required listing on a recognised stock exchange. VDDPL failed to provide evidence of compliance with the listing requirement, breaching Section 73 of the Companies Act, 1956.
 
Parallel to SEBI's investigation, insolvency proceedings against VDDPL were initiated by the debenture trustee, Vistras, before the NCLT in September 2019. With the company undergoing the corporate insolvency resolution process (CIRP), the management of its affairs is now in the hands of an interim resolution professional (IRP), and a moratorium has been declared to prevent any enforcement of recovery suits.
 
On 8 September 2023, SEBI informed the resolution professional that VDDPL's NCDs from FY13-14 violated norms and should be cancelled. The NCLT noted this on 18 October 2023. Despite CIRP, the directors remain accountable, with their liability extending beyond the company's dissolution.
 
Nandkishor Attal played a key role in the fund-raising activities during FY13-14. As per SEBI's investigation, his liability as an officer in default was established, with obligations to refund the money collected from investors with interest at 15% per annum.
 
SEBI order also imposed market restrictions on the company's key figures. Nandkishor Attal and Mayura Nandkishor were prohibited from accessing the securities market for two years, while other directors, such as Mahesh Bhattad, Vasant Pinjan, Sahindra Bhawale and Arati Bhawale, faced a three-month market restriction.
Comments
Sumangal.B
2 months ago
Mr. Nandkishore Attal has disobeyed SEBI by not issuing advertisement inviting claims by not posting advertisements in two national and two local dailies prominently within 15 days by 10th Oct 24 . How do we make this information reach SEBI DDHS Cell and the SEBI Adjudicating officer?
kumarashit03
2 months ago
Despite SEBI's order to refund the money, neither the Directors or promoters of the company have attempted to reach out to the investors, showing absolute lack of respect to the ruke of law. What else can one expect from such fraudsters - who are amassing personal wealth by duping senior citizens of their hard earned monies.
If they cannot refund the monies, life imprisonment should be the norm for such fraudsters
Sumangal.B
2 months ago
SEBI has been Requested to Amend their order to include 484 Debenture Holders, Amount Raised Rs 52.5 Crores Period January 14 to 31 Mar 2017 (Not Just March 2014). Benpos obtained from Registrar and Transfer Agent Kfintech ltd by Debenture Trustee ITCL Vistra Ltd as of December 20, shows 494 Debentures issued to 484 Investors (Some have bought Multiple Debentures in Multiple ISIN / Series. Debentures were issued in 3 Tranche / 12 Series from Jan 14 to March 17 in violation of SEBI norm on Private Placement. NCLT on the other hand keeps dishing out adjournments. Number hearing is about to touch 30 Now. Defaulting Resolution Applicant Cum Director is making all possible efforts to prolong the case so that they can run the Resolution Professional owned Plant (May be on Rental basis) and keep on making money floating a new Company called Milky Fresh Food Products Ltd. We bought Shubhi Rasmalai (Shubhi is brand name of VDDPL mortgaged to Debenture Trustee used illegally. Has RP rented out the premises to Milky Fresh Food Products ltd. RP does not reply on this to trustee and does not Send him the Rental agreement. Investors suffer while defaulters enjoy. Is this our legal system?
agrover999
2 months ago
It is shocking to see that Directors of Vaishno Devi Dairy Products have not complied with SEBI order yet. They have not initiated any action to reach out to the Investors to take their claims. The Directors of the Company are taking the law of the country very lightly and must be put in jail for flouting the regulations and fleecing more than INR 52.5 crores of hard earned money of investors. The payable amount alongwith inteest as per SEBI order works out to be more than INR 100 Crores.
shivraja
2 months ago
This is only a penalty related to the financial markets. Based on this ruling and the complaints of multiple investors, the Pune police is investigating the criminal side of this matter and these criminals will soon face justice for their crimes. They have taken full advantage of the laxities and delays in the Indian judicial system and market regulations to play this game, but will soon be brought to book.
Sumangal.B
2 months ago
SEBI Has erred. Total No of Investors who were sold 494 Debentures is 484 and total Collection was 52.5 Crores, not merely 25 Crores from 180 Investors till March 14. Sell of Debentures continued by VDDPL's Selling Agent Karvy Capital Ltd till March 2017 even much after first default in Nov 15 and total default in November 16. Claim submitted by Debenture Trustee ITCL Vistra to NCLT appointed Resolution Professional in October 19 was 129.5 Crores. In her resolution plan Director Ms. Mayura Attal offered a mere 52 Lakhs as against the claim of 129.5 Crores. Debenture trustee with 64.03% majority rejected the plan in 10th COC meeting on 8th Dec 20. Ms. Mayura Attal to block appointment of liquidator challenged the rejection of her plan in Dec 21, revised it in Aug 22. 29th Hearing of NCLT is Scheduled on 24th Oct. Delhi High Court has ordered ED to conduct investigation against 3 Karvy Companies and 13 Other schemes claimed to be Ponzi Schemes by Petitioner Debenture Holders in Nov 22. ED has done nothing till date. No FIR has been registered by EOW Police Pune till date on Complaint submitted on 7t Nov 23 so far. Mr. Nandkishore Attal has failed to publish advertisement in 2 National and 2 Local Pune dailies inviting claims from Investors which should include Principal + Karvy Fees + 15% Interest from 8th day of Investment till date of Payment
shrikantgurjar
Replied to Sumangal.B comment 2 months ago
As an aggrieved investor, I pray to SEBI and other relevant institutions to bring relief at the earliest with proper disbursal of principal and penal interest
katiyar.devendra
Replied to shrikantgurjar comment 2 months ago
It is clearly a wilful breach by the company, and where the assurances have been that the legal system of the country is being followed at the time of investment. The investors have been senior citizens or have become so, waiting! We need this to be sorted.
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