Capital markets regulator Sebi has barred Hahnemann Herbals Ltd (HHL) and its present and former directors from the securities market for allegedly violating public issue norms.
According to the Securities and Exchange Board of India (Sebi), the company issued redeemable preference shares worth Rs 23.18 crore to 25,231 people between 2008-09 and 2012-13.
Since these shares were issued to more than 50 investors, these qualified to be a public issue, which requires compulsory listing on recognised stock exchanges.
Among others, the firm was also required to file prospectus, which they failed to do.
In an interim order dated December 30, Sebi Whole Time Member S Raman said, "... I find that there is no other alternative but to take recourse through an interim action against HHL and its directors, for preventing that company from further carrying on with its fund mobilising activity under the offer of redeemable preference shares."
The present directors of the company who are banned are Goutam Banerjee, Santi Rajan Banerjee and Bidhan Chandra Ray.
While, Pijush Gupta, Nihar Ranjan Khuntia, Balaram Chatterjee, Asit Roy, Subodh Kumar Dutta, Pradip Sarkar, Raja Banerjee, Pradip Bose, A K Goswami and Ashok Chowdhury are the past directors who are also prohibited from the markets.
The directions shall take effect immediately and shall be in force until further orders, Sebi said.
As a strong votary of transparency in corporate India,
Sinha said regulators too "cannot escape the scrutiny of their working" as they are, in several cases, empowered as "mini states" with vast power.
"It was time to pause and think whether we are creating too many institutions to ensure accountability or should we aim towards more accountability in more institutions," he added.
He cautioned large companies about the narrative of public accountability now extending to corporates, a phenomenon earlier restricted to politicians and bureaucrats.
Sinha said whenever a large episode of misconduct is detected, a perception gets built about "regulatory capture" coming in the way of effective action.
Giving examples of outcry on ponzy schemes, the Sebi chairman said while a need was felt to further empower the regulators, it is also then incumbent on the regulators to be accountable to Parliament and public.
This is all the more true because in many cases in several countries regulators are given powers equivalent to "mini states" enjoying quasi-judicial powers along with executive powers which in many cases have Parliamentary backing by way of subordinate legislations or rules which are attached to the main laws, he added.
Reminding the corporates of the changing environment where there is more scrutiny, Sinha raised the issue of corporate compensation at the senior levels. Citing global examples, he said companies after companies are paying in exorbitantly to their CEOs even if they are making losses.
In the Indian context, Sinha said the Sebi has noticed and stopped instances where small insignificant private companies were being merged with the listed companies at a huge valuation primarily to provide gain to the promoters at the cost of other shareholders.
However, the Sebi chief pressed for checks and balances to ensure that in the name of accountability the very functioning of the regulators is not throttled.
Talking about accountability at Sebi, he said that judicial review is another major safeguard. The orders passed by the capital markets watchdog can be challenged before the Securities Appellate Tribunal (SAT). Sebi has track record of 94 per cent of success at the appellate level.
Besides, the regulator follows a policy of consultation before it undertakes any fresh regulation or changes any existing legislation.
He also said that corporate governance is also getting more attention. Audit committee, related party transaction, and independent director are some of the areas where accountability of corporations are being tested vigorously.
Sinha also touched upon the issue of gender sensitivity among Indian firms which still do not measure up to the global standards despite improvement in the last five years.
Technology of e-voting is encouraging that augmented participation by the shareholders.
When asked about the time frame for cutting down the time for listing of companies on stock exchanges to four days from six days, Sinha said that Sebi cannot give any time frame in this regard.
Earlier this week, Sebi said it is working towards cutting down the time taken for listing of companies on stock exchanges to four days.
Regarding dividend distribution policy, Sinha said the regulator has already asked top 500 listed companies to formulate a 'dividend distribution policy'.
