SEBI issues interim order against Indus Weir Industries Limited and its directors for a fraudulent scheme

The regulator found that the company and its directors had raised funds from investors by issuing preference shares without complying with the legal requirements and had misused the funds for personal gains.

NEW DELHI (India CSR): The Securities and Exchange Board of India (SEBI) has passed an interim order against Indus Weir Industries Limited and its directors for indulging in a fraudulent scheme of raising funds from investors by issuing preference shares without complying with the legal requirements and misusing the funds for personal gains.

The regulator has issued an interim order cum show cause notice against the company and its directors for raising funds from investors by issuing preference shares without complying with the legal requirements and misusing the funds for personal gains.

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The Securities and Exchange Board of India (SEBI) has issued an interim order cum show cause notice against Indus Weir Industries Limited and its directors for raising funds from investors by issuing preference shares without complying with the legal requirements and misusing the funds for personal gains.

According to the order dated May 25, 2023, SEBI found that Indus Weir Industries Limited, a public limited company engaged in the manufacture of food products, had issued 1,00,000 preference shares of Rs. 100 each to 10 investors between March 2014 and March 2015 and collected fund from them.

SEBI noted that the company and its directors had not obtained the necessary approvals from the shareholders, the board of directors and the Registrar of Companies (ROC) for issuing the preference shares. They had also not filed any offer document or information memorandum with SEBI or ROC as required under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

SEBI also observed that the company and its directors had not created any security or trust deed for the preference shares as required under the Companies Act, 2013. They had also not paid any dividend or redeemed any preference shares as per the terms of issue.

SEBI further noted that the company and its directors had misused the funds raised from the investors for their personal benefits. They had transferred Rs. 75 lakh to another entity named Secure Investor Investment Advisory, which was also involved in providing unauthorised investment advisory services and was barred by SEBI in an earlier order. They had also used Rs. 15 lakh for purchasing a car and Rs. 10 lakh for repaying a loan.

SEBI stated that the company and its directors had prima facie violated the provisions of the SEBI Act, 1992 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 by making false and misleading representations to the investors, issuing preference shares without complying with the legal requirements, diverting and misusing the funds raised from the investors, and failing to protect the interests of the investors.

In view of these findings, SEBI has directed Indus Weir Industries Limited and its directors to cease and desist from mobilising any fresh funds from investors by issuing securities or otherwise until further orders. SEBI has also restrained them from accessing the securities market and prohibited them from buying, selling or otherwise dealing in securities, directly or indirectly, until further orders.

SEBI has also directed them to provide a full inventory of all their assets and properties within 21 days from the date of receipt of this order. SEBI has also asked them to show cause within 21 days as to why suitable directions or prohibitions under Sections 11(1), 11(4), 11A and 11B of SEBI Act, 1992 should not be issued against them.

SEBI has also advised the investors who have invested in the preference shares of Indus Weir Industries Limited to file their claims with SEBI along with supporting documents within a period of three months from the date of receipt of this order.