The Ministry of Corporate Affairs (MCA) is probing a Rs 1,000 crore debenture issue by Gwalior-based Option One Industries after the company did not respond to the Registrar of Companies (Roc) demand for submission of key documents following investor complaints.
The regional directorate of the ministry at Ahmedabad has already directed the Registrar of Companies of Madhya Pradesh and Chhattisgarh to initiate prosecution proceedings against the company after issuing show-cause notice. A show cause notice was issued on August 30.
Ministry documents obtained through Right To Information (RTI) Act provisions by Mumbai-based activist Bhupinder Singh showed that the company had not responded with details sought by the RoC after repeated requests over three months beginning May.
Option One is engaged in “real estate” and is soon getting into “plot sale”, according to Mumbai-based promoter Samir Agarwal. “We have responded to the show-cause notice. We are issuing secured debentures which are secured by mortgage of properties. We have initially placed them with some 7-8 companies who will in turn sell them to investors,” Agarwal said over telephone. The company has also appointed a debenture trustee, he added. A detailed email questionnaire remained unanswered.
But, the debentures are peddled through agents on commission basis. Ashok, a Bhopal-based agent who peddles these debentures told Business Standard that “The debentures are available in multiples of Rs 100 and can be bought through a career plan, where in the seller will earn a higher commission or an MLM (multi-level marketing) plan, which involves bringing in new investors.”
The company website says that “OPTION ONE has been engaged in providing various fee-based services such as fund mobilization through issue of Debt, Equity, Structured hybrid instruments, etc. for many clients including Financial Institutions & Private Sector Corporate.”
It claimed that, “within a short span, OPTION ONE has emerged as one of India’s leading company in the Indian Fixed Income Market through management of private placements. Ranked No. 1 in private placement of fixed income instruments and amongst the top 3 players in the Debt Market segment, OPTION ONE Industries Ltd. has received various accolades and is playing a very significant role in developing a vibrant bond market in India.”
The registrar in its communication dated August 31, to the ministry’s regional directorate said that it has received complaints stating that “the company is running an illegal money circulation racket under the garb of an investment plan. Inspite of issuing number of letters as stated above, the company has not furnished any reply which gives enough scope for suspicion.”
The company has appointed Bollywood personalities such as Actor Aman Verma and Singer Bappi Lahiri as its brand ambassadors. A person who answered Lahiri’s mobile phone said “he was not in the country.”
Aman Verma said his contract was limited to brand endorsements and that he is not aware of the financial structuring of the company. Verma directed finance-related calls to his consultant RK Shetty.
Shetty, a Mumbai-based financial advisor, said he was an income tax consultant for the Agarwal family and had conducted a seminar on debentures in Madhya Pradesh. “ I am not aware of the legality and nature of this issue,” he added.
Option One website lists Verma, Shetty, Lahiri and Agarwal as members of the group’s advisory board.