Confirmatory Order in the matter of Shivom Investment and Consultancy Limited

WTM/MPB/ISD/CONF/08/2018 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: MADHABI PURI BUCH, WHOLE TIME MEMBER CONFIRMATORY ORDER Under Sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of : S. No. Name of the Entity PAN 1. Shivom Investment and Consultancy Ltd. AAACG9355K

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”), in the interest of investors, vide its letter dated August 7, 2017 took the pre-emptive interim measures under section 11(1) of SEBI Act, 1992, in respect of listed shell companies including Shivom Investment and Consultancy Ltd. (hereinafter referred to as “SICL” / “Company”). SEBI placed trading restrictions, on the promoters/directors so that they do not exit the company at the cost of innocent shareholders. In view of the said objective, SEBI vide the said letter dated August 7, 2017 also placed the scrip in the trade to trade category with limitation on the frequency of trade and imposed a limitation on the buyer by way of 200% deposit on the trade value, so as to alert them trading in the scrip. The said measures were initiated by SEBI pending final determination after verification of credentials and fundamentals by the exchanges, including by way of audit and forensic audit if necessary. The measures also envisaged, on the final determination, delisting of companies from the stock exchange, if warranted. By virtue of these measure, trading in scrip was not suspended but allowed under strict monitoring so that investors could take informed investment

Order in the matter of Shivom Investment and Consultancy Ltd.

decisions, till SEBI and Exchanges completed their detailed examination of such companies. 2. Aggrieved by the aforesaid letter dated August 7, 2017 issued by SEBI, SICL filed an appeal No. 201 of 2017 before the Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”). The Hon’ble SAT vide order dated August 24, 2017, allowed SICL to withdraw the appeal with liberty to pursue the representation pending before SEBI. Hon’ble SAT directed SEBI to dispose of the representation of SICL as expeditiously as possible and in any event within a period of four weeks from the date of SAT Order. Hon’ble SAT also held that passing of any order on the representation made by the appellant would not preclude SEBI from further investigating the matter and initiate appropriate proceedings if deemed fit

3. Pursuant to the decision of Hon’ble SAT that the communication of SEBI dated August 7, 2017 is in the nature of quasi-judicial order, in the interest of natural justice, an opportunity of personal hearing was granted to SICL on Sep 08, 2017. The authorized representative of SICL had appeared for the said hearing.

4. Thereafter, SEBI vide Interim Order dated September 21, 2017 (hereinafter referred to as “Interim Order”), had modified, subject to para 22(v) of the interim order, the actions envisaged in SEBI’s letter dated August 07, 2017 and the consequential actions taken by Stock Exchanges, against SICL as under:

(i) The trading in securities of Shivom Investment and Consultancy Ltd. shall be reverted to the status as it stood prior to issuance of letter dated August 7, 2017 by SEBI. (ii) Exchange shall appoint an independent auditor interalia to further verify: a. Misrepresentation including of financials and/or business of Shivom Investment and Consultancy Ltd.; if any b. Misuse of the books of accounts / funds including facilitation of accommodation entries, if any

Order in the matter of Shivom Investment and Consultancy Ltd.

(iii) The promoters and directors in Shivom Investment and Consultancy Ltd. are permitted only to buy the securities of Shivom Investment and Consultancy Ltd. (iv) The shares held by the promoters and directors in Shivom Investment and Consultancy Ltd. shall not be allowed to be transferred for sale, by depositories. (v) The other actions envisaged in SEBI’s letter dated August 07, 2017 in para 1 (d) as may be applicable, and the consequential action taken by Stock Exchanges shall continue to have effect against Shivom Investment and Consultancy Ltd.

5. The prima facie observations in the Interim Order are as under: “………. 17. Based on the replies given by the company in response to SEBI’s queries, prima facie observations are as under:

(a) In terms of the financial statements for FY 2015-16 and 2016-17 and information gathered from the depositories, except for shareholding in Kaushalya Infrastructure Development Corporation Ltd. and Prabhat Telecoms (India) Limited, other non-current investments in quoted securities are not reflected in the holding statements with the depositories as on March 31, 2016 and March 31, 2017. Thus the investments in quoted securities as per the financials do not match with the holdings available in depositories as on March 31, 2016 and March 31, 2017 leading to prima facie evidence that the Company has misrepresented its investments/financials. (b) Analysis of the bank statement account no. 00080350002341, Branch Kolkata- Stephen House (BBD Bag), HDFC Bank LTD. indicated that, there are numerous entries of funds received by Shivom from multiple entities and transferred to other entities on the same / next day. This cash flow pattern leaving minimal closing balances in the accounts does not appear to be consistent with normal lending operations in the organized sector. It is also

Order in the matter of Shivom Investment and Consultancy Ltd.

noted that the entire operation is run by three employees of which one is a peon. Sample instances from the bank statements are as follows:……. Thus prima facie it appears that the company is being used as a conduit to facilitate multiple transactions between entities/individuals raising the suspicion of facilitating accommodation transactions. (c) The company has failed to provide documents to support its short term borrowings i.e. the bulk of its sources of funds. (d) As per the company website, the name of the company was changed to Shivom Investment & Consultancy Limited on February 14, 1999 from G. Raj Financial Consultancy Private Limited. However, the NBFC registration certificate No. 05.01155 submitted to SEBI by the company till date is issued in favour of G. Raj Financial Consultancy Private Limited by RBI and not in favour of Shivom Investment & Consultancy Limited. As per the documents submitted, it appears that it was only vide letter dated 08/03/2017, 21/04/2017 and 15/05/2017, that the company submitted documents/information for change of status and change of name and issue of certificate of registration in new name of the company to RBI. Further, letter dated 29/06/2017 issued by company to RBI on ‘Condoning for not intimating for merger/amalgamation of the company’ indicates that the company did not inform about the merger/amalgamation of the company to RBI.

(e) The company has also failed to submit the affidavit from Mr. Pradip Kumar Sultania as sought during the course of hearing stating that: i. Whether he knows Mr. Vishal Bhuwania. If yes, what was the nature of their relationship and whether he was involved in any dealing, directly or indirectly with Mr. Bhuwania and whether Mr. Bhuwania was directly or indirectly involved in any dealing with the Company. ii. Reasons for resignation of Pradip Kumar Sultania from Shivom Investment & Consultancy Ltd.

Order in the matter of Shivom Investment and Consultancy Ltd.

iii. Confirm whether Pradip Kumar Sultania was performing the role of Managing Director of Shivom Investment & Consultancy Ltd. both in letter and spirit or whether he was guided by anyone else and if so by whom. 18. I note that there is prima facie suspicion that the company is being used as a conduit to facilitate multiple transactions between entities/individuals. I also note that the company has failed to submit documents to substantiate its Short Term Borrowings i.e. its major source of funds. I also note that there is no documentary evidence to support the genuineness of investments of the company. Thus, there is prima facie evidence of misrepresentation of business/financials as well as strong suspicion of misuse of funds/ the books of accounts of the company. The directors & KMPs have therefore prima facie failed to discharge their fiduciary responsibility. The company is also liable for the prima facie violations observed and it is imperative that in the interest of investors, the financials of the company be independently audited to establish their genuineness.

6. Vide said interim order, SEBI had advised SICL to file its reply/objections to the said interim order within 30 days from the date of receipt of the said interim order and also indicate in its reply whether it desires to avail an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard, if any. The said interim order also mentioned that if SICL had failed to file the reply or request for an opportunity of personal hearing within the said 30 days, the preliminary findings of the said interim order and ad-interim directions mentioned at para 22 of the said interim order shall stand confirmed automatically, without any further orders.

7. Vide email dated September 22, 2107 the copy of interim order was forwarded to SICL. SICL vide letter dated October 18, 2017 has submitted its reply/objections to the observations made in the Interim Order dated September 21, 2017. The parawise reply of SICL to the interim order is inter alia as under- a) Company Reply on Observation (17 a) in SEBI Interim Order

Order in the matter of Shivom Investment and Consultancy Ltd.

The company has been holding quoted investments long back before March 2000, but unfortunately we are unable to trace physical share certificates nor are these shares credited in our demat account number 10005910, maintained with Excel Stock Broking Pvt. Ltd. We have intimated the matter to the relevant companies to know the whereabouts of these shares. Copies of these letters are hereby enclosed along with its courier receipts. The company submitted Annexure I as details of other non-current investment in quoted securities and letters written by SICL to 7 companies seeking their shareholding details. Company stated that copy of physical share certificate & SH-4 share transfer deed, sales bill/purchase and bank statement are not available. b) Company Reply on Observation (17 b) in SEBI Interim Order  Our business model is to lend money to body corporate and our major source of income is interest. We generally do not keep funds idle and as soon as funds are available, disburse then as unsecured loans to known parties’ after following in-house process and procedure.  We deny that we acted as a conduit to facilitate multiple transactions between entities as alleged or otherwise. There were no accommodation transaction and hence suspicions raised in this matter is misplaced and unwarranted.  While on the subject, please note our statutory audit verified the relevant entities /documents and certified our amounts for the year ended 31.03.2017. c) Company Reply on Observation (17 c) in SEBI Interim Order Details of short term borrowings are enclosed as Annexure II. d) Company Reply on Observation (17 d) in SEBI Interim Order The company is following up with RBI for name change in its certificate, but till date no response has been received. e) Company Reply on Observation (17 e) in SEBI Interim Order Copy of affidavit by the present MD is enclosed herewith as Annexure III.

Order in the matter of Shivom Investment and Consultancy Ltd.

8. Further, vide another letter dated October 19, 2017, SICL in continuation to its reply dated October 18, 2017, submitted the following documents for reference and record: a) The copy of loan agreements wherein one borrowing agreements and 36 lending agreement along with evidence of bank transactions. b) Copy of share purchase bill, share sale bill along with copy of share certificate towards investment in unquoted shares as on March 31, 2017.

9. Vide its letter dated December 21, 2017, submitted to BSE with a CC marked to SEBI, SICL inter alia submitted that- “..We have strongly opposed for forensic audit of the Company. We have opposed as per SAT Order ref. no. WTM/MPB/ISD/36/2017 dated 21st September, 2017, where SAT has allowed us to raise objection, within 30 days of passing if the order. We have objected forensic audit of the Company. We request you to obtain SAT Order as our objection has not been rejected by SAT” (It may be noted that the SAT Order No. referred by SICL in its letter to BSE is in fact the reference to the Interim Order passed against SICL i.e. WTM/MPB/ISD/36/2017 dated 21st September, 2017.) 10. Vide interim order, SICL was advised to indicate in its reply whether it desires to avail an opportunity of personal hearing, if any. From the reply of SICL dated October 18, 2017, it is noted that Company has not specified whether it desires to avail an opportunity of personal hearing. Following the principle of natural justice, vide letter dated January 31, 2018, an opportunity of hearing in the matter of SICL was granted to it. The hearing was scheduled on February 15, 2018 at 2:30 p.m. and vide email dated February 12, 2018, SICL confirmed that their authorized person will attend the hearing. However, on February 15, 2018, neither SICL or its authorized person appeared for the hearing nor intimated the reason for the same. Further, no communication with regard to the request of adjournment has been made by the company till date. Thus, I note that ample opportunity has been given to SICL to avail an opportunity of personal hearing. Despite having been given ample opportunities,

Order in the matter of Shivom Investment and Consultancy Ltd.

SICL had failed to avail the same. I am, therefore, proceeding with the matter based on SICL replies & other material available on record and the issue for consideration before me is whether the directions in the Interim Order need to be continued, revoked or modified in any manner.

11. Based on the replies given by the company in response to Interim Order dated September 21, 2017, the observations are as under: a) In response to the observation made at para 17(a) of Interim Order, SICL stated that the company has been holding quoted investments long back before March 2000, however neither these shares are credited in its demat account number 10005910, maintained with Excel Stock Broking Pvt. Ltd nor SICL is able to trace physical share certificates of the same. SICL has submitted that it has intimated the matter to the relevant companies to know the whereabouts of these shares. In this regard I note that the company has submitted seven letters dated October 05, 2017, written by SICL to companies namely Elegant Marbles Ltd., Gangotri Iron & Steel Co. Ltd., Hanil Era Textiles Ltd., JMT Auto Ltd., JSW Steel Ltd., Moulik Finance & Resorts Ltd. and Tatanagar Bricks Ltd. seeking shareholding details in respective companies. I also note that it was only after the passing of interim order by SEBI that the company had written to respective companies seeking details of their holdings. However, it is to be noted that the company is already showing such investments amounting to Rs. 3 lakhs in their Annual Report for FY 2016-17 & FY 2015-16, without even having the relevant documents pertaining to the same till date. Therefore, there is sustenance of doubt on the authenticity and genuineness of such investment and prima facie finding rendered in the interim order that there is misrepresentation of investments/financials by the company has not been established to the contrary by the Company. Similarly, on perusal of the balance-sheet for 2016-17, it is noted that the company provided adjustment for share splits in two quoted securities namely JMT Auto Ltd.(-21/09/2016) and JSW Steel Ltd. (-04/01/2017), which the Order in the matter of Shivom Investment and Consultancy Ltd.

company claims to be holding since year 2000, however the said adjustment for share splits is provided without having any valid legal document like physical share certificate or demat statement with respect to the same. It is further noted that the company did not furnish any documentary evidence to show investments in other quoted securities. Therefore, there is sustenance of doubt on the authenticity and genuineness of such investment and prima facie finding rendered in the interim order that there is misrepresentation of financials by the company has not been established to the contrary by the Company.

b) In response to the observation made at para 17(b) of Interim Order, the company submitted 40 loan agreements containing 3 borrowing agreements and 37 lending agreements and has submitted that its business model is to lend money to body corporate wherein it generally does not keep funds idle and the funds are disbursed as unsecured loans to known parties’ as soon as they are available. SICL submitted that its major source of income is interest and it has not acted as a conduit to facilitate multiple transactions between entities as alleged. However, on perusal of the bank statement (June and July 2015) submitted by the company, it is noted that with regard to loan of Rs. 5 crore given to M/s. Renaissance Construction (a partnership firm), it appears that close to 13 transactions took place between SICL and Renaissance Construction where each transaction was preceded by an equivalent amount transferred from Unicon Tie-up Pvt. Ltd. to SICL. In this regard though SICL has submitted Loan agreement of Rs. 5 crore between SICL and to M/s. Renaissance Construction, however no loan agreements or any financial arrangement with Unicon Tie-up Pvt. Ltd. is submitted by SICL to refute the prima facie finding of SICL being used as a conduit to facilitate multiple transactions between entities/individuals as rendered in the interim order. Further, while reviewing the bank statements, I also note that transaction with the Unicon Tie-up Pvt. Ltd., Jackpot Vintrade Pvt. Ltd. and Dhanaasha Infracon Services Pvt. Ltd. appeared frequently. However the company did not submit any loan agreements/financial arrangement between them and SICL to refute the aforesaid prima facie finding of SICL being used as Order in the matter of Shivom Investment and Consultancy Ltd.

a conduit to facilitate multiple transactions between entities/individuals as rendered in the interim order. Therefore, in view of the bank statement submitted by SICL and lack of documentary support/ loan agreements or any financial arrangement, the prima facie finding rendered in the interim order that the company is being used as a conduit to facilitate multiple transactions between entities/individuals sustaining the suspicion of facilitating accommodation transactions has not been established to the contrary by the Company. I also note that SICL has not made any submissions on the finding that the entire operation of SICL with a balance sheet between of Rs. 60.52 crore (as on March -2017) and Rs. 85.01 crore (as on March -2016) is run by three employees of which one is a peon.

c) In response to the observation made at para 17(c) of Interim Order that the company has failed to provide documents to support its short term borrowings i.e. the bulk of its sources of funds, SICL has vide letter dated October 18, 2017 and October 19, 2017 submitted details of short term borrowings in its Annexure to the reply. I note that in the balance sheet of SICL, major reduction in short-term borrowings is shown from Rs. 20.43 cr. in March ending 2016 to Rs. 0.01 cr. in ending March 2017. In this regard, only three loan agreements (borrowing arrangement) were submitted by the company reflecting a total Rs. 1.32 cr. for 2015-16. The details of the same are as follows- Date of Particulars Amount Appointment Borrowings by Shivom Investment and Consultancy Ltd. 01/06/2015 From Ms. Anita Harlalka 13 Lakhs payable on demand @9 % for 3 yrs. (Unsecured) 28/01/2016 From ASP Infinity Solutions Pvt. 19.50 Lakhs payable on Ltd.- (Director of ASP is Ms. demand @9 % for 2 (Five) Anita Harlalka-Source: MCA) yrs. (Unsecured) 20/06/2015 From Apsara Selections Pvt. 1 crore payable on demand Ltd. (Director of Apsara is Ms. @9 % for 5 yrs. Anita Harlalka Source: MCA) (Unsecured)

Order in the matter of Shivom Investment and Consultancy Ltd.

On perusal of the loan agreement amounts and mapping it with the short term borrowings as provided in the balance sheet of 2015-16 and 2016-17, it appears that there is significant differences/shortfalls. It is noted that the above borrowing agreements are of the amount Rs. 1.325 cr. only whereas the total short term borrowings for 2016 Rs. 20.43 cr. Therefore, I note that SICL has not submitted the entire documents to support its short term borrowings i.e. the bulk of its sources of funds.

d) In response to the observation made at para 17(e) of Interim Order, as stated in the interim order dated September 21, 2017, the company did not submit the affidavit as sought by SEBI from Mr. Pradip Kumar Sultania as he was out of town. The company confirmed that his reply will be submitted in the due course of time as per his availability. However, the company submitted an affidavit from Mr. Varun Pravinchandra Aghara, current Managing director of the company in its reply. However, the company failed to provide an affidavit from Mr. Pradip Kumar Sultania. The submission in this regard is considered as insufficient as SICL was explicitly asked to submit an affidavit from Mr. Pradip Kumar Sultania.

e) Further, on the basis of records as per the MCA website, the following inter-se connections are noted- (i) As per MCA website, the Unicon Tie-up Pvt. Ltd. and Jackpot Vintrade Pvt. Ltd with whom transaction appeared frequently in the bank statements of SICL as referred in para 11(b) of the pre-para appears to be connected as their two past directors were same (Mr. Deepak Kumar and Mr. Bharak Pathak). However, directorship in Unicon Tie-up Pvt, Ltd. and Jackpot Vintrade Pvt. Ltd. changed in July 2017 on the same date. Unicon Tie-up Pvt. Ltd. Director Appointment Sobhan Debnath Date Joydeb Saha (22/07/2017)

Order in the matter of Shivom Investment and Consultancy Ltd.

Jackpot Vintrade Pvt. Ltd Director (22/07/2017) Tara Sarkar Bidyut Bhawal Dhanaasha Infracon Jitendra Mishra (02/08/2017) Services Pvt. Ltd. Pradip Bhojak (01/09/2017)

Source: MCA website (ii) As per MCA website, Ms. Anita Harlalka, ASP Infinity Solutions Pvt. And Apsara Selections Pvt. with whom SICL has entered into borrowing agreements for the total amount Rs. 1.325 cr. as detailed in pre-para 11(c), appears to be connected to each other. It is noted that Ms. Anita Harlalka is director in ASP Infinity Solutions Pvt. Ltd. and Apsara Selections Pvt. Ltd. indicating that the eventual lenders are connected. (iii) In addition to the replies offered by Shivom against the observations under interim order, Shivom vide its letter dated October 19, 2017 submitted copy of share purchase bill, share sale bill along with copy of share certificate towards investment in unquoted shares as on March 31, 2017. On perusal of the above share bill towards investment in unquoted shares, the following is observed: Date Purchased by Unquoted Equity Qty Total shares In Rs. 21/03/2017 Shivom from M/s. Silverson 14,265 6.72 Cr. Jackpot Tradelinks Pvt. Ltd. at a Vintrade Pvt. cost of Rs. 4715.74 per Ltd. share 21/03/2017 Shivom from M/s. Vedant 38,000 3.8 Cr Jackpot Commodeal Pvt. Ltd. at Vintrade Pvt. a cost of Rs.1000/- per Ltd. share Sold by 22/03/2017 Shivom to M/s. Silverson 866 0.40 Cr. Unicon Tie-up Tradelinks Pvt. Ltd. at a Pvt. Ltd cost of Rs. 4715.13 per share

Order in the matter of Shivom Investment and Consultancy Ltd.

It is noted that the total investments in unquoted equity as per the Annual Report of 2016-17 stands at Rs. 10.11 cr. Further, it appears that director (Mr. Mahesh Sharma since 17/08/2011) of Shivom Investment and Consultancy Ltd., director (Mr. Ashish Jain since 22/08/2013 till date) of Silverson Tradelink Pvt. Ltd. and director (Mr. Arun Gupta since 22/08/2013 till date) of Vedant Commodeal Pvt. Ltd, appears to be connected as they are having common directorship in Pinnacle Vintrade Ltd.

Director from 17/08/2011 to 28/06/2017

Director from 22/08/2013 till date

Director from 22/08/2013 till date

Source: https://www.tofler.in/visualization?cin=U64201WB1995PTC068152 Date of appointment of the directors is sourced from MCA Website.

The aforesaid connections as referred at para 11e (i) (ii) and (iii) shall be referred to the forensic auditor to take them into account while executing their mandate as stipulated in the interim order.

12. Finally, I note that SICL, at this stage, has failed to submit sufficient documentary evidence in support of its claims and has also failed to give a plausible

Order in the matter of Shivom Investment and Consultancy Ltd.

reason/explanation along with suitable documentary evidences for the charges /allegations / prima facie findings as described in the interim order. I also note that further enquiry/audit in the matter is pending.

13. In view of the above, I find that the facts and circumstances of the case as brought out in the Interim Order have not changed, justifying the dis-continuation/modification/revocation of the directions passed in the Interim Order. It is further directed that the audit as stipulated in the interim order shall also cover the connections as referred at para 11e (i) (ii) and (iii) above while executing their mandate as stipulated in the interim order.

14. Thus, I, in exercise of the power conferred upon me under sections 11, 11(4), 11A and 11B read with section 19 of the Securities and Exchange Board of India Act, 1992 hereby confirm the directions contained in the Interim Order dated September 21, 2017.While the directions in the interim order dated September 21, 2017 are confirmed, the direction regarding audit shall continue.

15. Copy of this Order shall be forwarded to the recognized stock exchanges for information and necessary action.

16. Copy of this Order shall also be forwarded to the Ministry of Corporate Affairs and Serious Fraud Investigation Office for their information.

DATE: May 17, 2018 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in the matter of Shivom Investment and Consultancy Ltd.