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IPO scam: Sebi bans Edserv, CMD, 4 others for 3 years

IPO scam: Sebi bans Edserv, CMD, 4 others for 3 years
Regulator Sebi on Monday barred Edserv Softsystems, its CMD S Giridharan and four other promoter-directors from the securities markets for three years for non-disclosure of material information in the IPO papers. The other promoter-directors facing the ban include G Gita, Ilango Balakrishna, T S Ravichandran and S Arvind.

Giridharan was promoter as well as Chairman-cum CEO of Edserv, Gita was a promoter and Managing Director and Balakrishna, Ravichandran and Arvind were the directors of Edserv during January 2009 till March 2009, when the violations were made. Currently, Giridharan is promoter as well as Chairman & Managing Director of the company. Besides, Gita is a promoter of Edserv at present. Edserv came out with its initial public offer (IPO) of Rs 23.84 crore in February 2009. “Funds raised by Edserv through ICDs prior to the IPO were routed through various suppliers and the liability for repayment of such ICDs (Inter Corporate Deposits) were attached to the proceeds of IPO. As a result, the noticees were able to siphon off and divert IPO proceeds to the tune of Rs 4 crore,” Securities and Exchange Board of India (Sebi) said in its order.

Besides, the entities did not make disclosure regarding fund raising of Rs 4 crore through ICDs which were in the nature of a bridge loan. Further, they did not inform about purchase orders placed with Krishna Enterprises, Rajesh Service Centre and Shiv Impex and providing substantial amount as advance to them. “Non-disclosures of material information in the Prospectus were deliberate acts done to conceal the deeper underlying fraudulent activity of Edserv and its Promoter Directors,” it added.

By indulging in such activities, these entities violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations and ICDR (Issue of Capital and Disclosure Requirements) norms.

Accordingly, Sebi has prohibited these entities from “buying, selling or dealing in the securities market, in any manner whatsoever, for a period of three years.”  These entities have also been restrained from raising any further capital from the securities market. This order would come into force with immediate effect. 
PTI

PTI

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