Sebi orders Prayag Infotech to refund investors money

Markets regulator Sebi today ordered Prayag Infotech Hi-Rise and its former as well as current directors to refund the money that the company collected illegally from investors and barred them from the markets for at least four years.

According to Sebi, Prayag Infotech had made an offer of

Redeemable Preference Shares (RPS) between 2007-2008 and 2011-12 and raised at least Rs 131.37 crore from over 1.57 lakh investors.

The number of investors to whom equity shares were allotted during these financial years are in excess of 49 so the firm was under a legal obligation to list such shares on a stock exchange. Among others, it was also mandatory for the firm to bring out a prospectus with respect to the public issue.

 

However, the company did not comply with the provision 'public issue' norms under Companies Act.

"Since PIHL (Prayag Infotech High Rise Ltd) came out with offers of RPS which were deemed to be public issues and PIHL was mandated to comply with the 'public issue' norms as prescribed under the Companies Act... I find that PIHL has contravened the said provisions," Sebi Whole Time Member Madhabi Puri Buch said in an order.

Accordingly, the regulator asked the company's directors -- Basudeb Bagchi and Lakshmi Kant and its former directors -- Avik Bagchi and Swapna Bagchi -- to jointly and severally, refund the money collected by the firm through the issuance of RPS with an interest of 15 per cent per annum to the investors.

In case they fail to comply with the directive, Sebi, on the expiry of three months, may recover such amounts, from the company and the directors.

The company and these directors have also been restrained from the securities markets till the refund is completed.Thereafter, they will be prohibited from the markets for a further period of four years from the date of completion of the refund.

These directors have also been "restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, or any intermediary registered with Sebi from the date of this Order till the expiry of 4 years from the date of completion of refunds to investors".

Earlier in March this year, the regulator had imposed Rs 1 crore fine on the company and its two directors for failing to provide requisite information sought by its investigating authority.

The information sought included details of the scheme-wise amount mobilised by the company, along with number of investors, detailed break of the refund made and name and address of the reedemable preference shareholders to whom refund has been made.

In February 2014, the regulator, through an interim order, had barred Prayag Infotech, its promoters and directors from mobilising funds through issuance of securities to the public.