Order against Enkay Texofood Industries Limited and its director

1. Enkay Texofood Industries Limited (hereinafter referred to as the Company) is a company incorporated under the Companies Act, 1956, having its registered office at Shree Sitaram Sadan (Bhatia Building), 4th Floor, 282, Shamaldas Gandhi Marg, Princes Street, Mumbai-400002. The Securities and Exchange Board of India (hereinafter referred to as SEBI) received several complaints against the Company from the investors and the same were forwarded to it for redressal. Periodical reminders were also sent to the Company for resolving such pending complaints. As on September 24, 2008, a total of three hundred and two investor grievances were pending unresolved by the Company. The investor complaints received against the Company were forwarded to the Company for resolving the same.

2. Thereafter, SEBI, vide letter dated September 25, 2008 advised the Company to resolve all the grievances within thirty days from the date of receipt of the said letter and to submit a status report. In the said letter, SEBI made a reference to Sections 15C and 24 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act). The said letter, which was sent to the Company by registered post, was delivered. Since the Company failed to redress the complaints or submit an action taken report, a reminder dated November 21, 2008 was sent to the Company addressing to the company secretary and also to its Managing Director, Mr. Tulsidas Goyal, advising them to resolve all the investor grievances and to submit a status report within seven days. Since no reply was received from either the company Secretary or the Managing Director, another reminder was again sent to them by SEBI on December 19, 2008. Although all the letters sent either to the Company Secretary or the Managing Director was acknowledged, and since no reply was received, a public notice was given on January 23, 2009 in the website of SEBI (www.sebi.gov.in) advising the Company to resolve the pending investor grievances and to submit the Action Taken Report. Despite such steps, SEBI had not received any response from the Company or its directors.

3. In view of the above, a show cause notice dated November 6, 2009 was issued to the Company by SEBI under Sections 11(4)(b) and 11B of the SEBI Act requiring it to show cause as to why it should not be restrained from accessing the securities market and prohibit it from dealing in securities till such time the pending investor grievances against the Company are resolved. Similar notice dated November 10, 2009 was also sent to its director, Mr. Harinarayan Sharma. Thereafter, the Company, vide letter dated February 20, 2010, submitted that it was registered with the Board for Industrial and Financial Reconstruction/Appellate Authority for Industrial and Financial Reconstruction [BIFR/AAIFR] and that since 2000, the manufacturing operations in all the units of the Company has been suspended as its capital had been eroded. It further submitted that the Company’s earlier registrar has retained the physical as well as computerized records of the shareholders as the Company was unable to pay the dues for its services. The notice issued to Mr. Harinarayan Sharma (director of the Company) had returned with a remark “not known….”.

Subsequently, an opportunity of hearing was afforded to the Company and its aforesaid director on August 5, 2010. Thereafter, the Company vide letter dated June 14, 2010, reiterated its submissions made vide letter dated February 20, 2010. As the notices could not be delivered on Mr. Harinarayan Sharma, copies of the show cause notice and the notice for hearing were pasted on the premises of the last known address of the said director. On the date of the hearing, Ms. Savita Singla (practicing Company Secretary) appeared on behalf of the Company and made submissions. During the course of hearing, the Company was advised to redress the investor grievances and submit an action taken report within a period of one month. Thereafter, pursuant to a request from the Company, SEBI vide letter dated September 14, 2010 forwarded copies of the 259 complaints (out of 309 complaints pending as on the date of the said letter). With respect to the remaining 50 complaints, the Company was informed of the names of the complainants and their addresses and was advised to contact them for redressing their complaints.

The said SEBI letter also informed the Company that the time to redress the complaints and to submit an action taken report has been extended to October 18, 2010. Thereafter, the Company, vide letter dated October 13, 2010 submitted that out of the 259 complaints, it had resolved 38 complaints and enclosed the details of the action taken. The Company also submitted that it had informed 50 complainants to forward their complaints to its registered office for redressal and submitted that it was in the process of redressing the remaining complaints. In this regard, it is noted that although the Company has mentioned in its letters that it has resolved 38 complaints pertaining to dividends, it had actually redressed only 23 complaints from the original list of complaints. Subsequently, the Company, vide letter dated October 25, 2010, submitted that out of the 259 complaints, it had sent letters to 246 shareholders asking for the details of their shareholding along with copy of their share certificates for transfer of shares. The Company also submitted that it was still tracing the addresses of the other complainants/shareholders so as to resolve their grievances.

The Company, thereafter, vide letter dated December 2, 2010 submitted that it has decided to issue duplicate share certificates instead of the originals and for the purpose, has forwarded the indemnity bond and affidavit to the respective shareholders. It further undertook that after receipt of the said documents, it would issue fresh duplicate share certificates in physical form. The Company further submitted that it has satisfactorily resolved 38 complaints with respect to “dividends”. The Company, vide its letter dated December 6, 2010, had also enclosed copies of the communication it had with a few of the complainants. Thereafter, vide letter dated December 11, 2010, the Company informed SEBI that it had issued duplicate share certificates to those shareholders who had submitted indemnity bonds and affidavits. However, it failed to submit any proof of redressing such complaints as required under SEBI Circular OIAE/Cir-1/2009 dated November 25, 2009 and the erstwhile Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (since rescinded). Thereafter, SEBI vide letter dated March 16, 2011 reminded the Company to submit the current status of redressal.

However, inspite of receiving such advice from SEBI, the Company failed to respond or submitted any action taken report.

4. I have considered the facts of the case and the material available on record. As per SEBI letter dated September 25, 2008, there were three hundred and two investor complaints pending unresolved by the Company. As stated above, the Company had redressed only 23 complaints out of 302 complaints. Even after affording sufficient opportunities, the Company had failed to redress majority of the investor grievances. Further, it had not submitted any proof of redressal in respect of issuance of duplicate share certificates claimed to have been issued by it in redressal of the connected complaints. It is noted that even after SEBI had issued a reminder to the Company vide letter dated March 16, 2011 advising it to submit the current status of redressal, the Company has failed to respond till date. As on May 5, 2011, two hundred and ninety nine investor complaints are pending unresolved by the Company. The said number of complaints includes all complaints received in the interim period and forwarded to the company for redressal. In respect of the submission that the Company was registered with BIFR, it is noted from the website of BIFR that the said case (Case no. 31 of 2006) has abated. The protection of the investors in the securities market is one of the paramount duties of SEBI and the present case involves a listed company that had failed to redress the investors’ grievances. Therefore, the Company and the persons who were in-charge and responsible for the affairs of the Company as on the date of issuance of the notice, are liable for the failure of the Company to redress the said investor complaints. As stated above, Mr. Harinarayan Sharma, the director of the Company has also failed to respond to the notices issued to him by SEBI in the matter. In view of the above reasons, it would not be in the interest of the investors to permit such a company and its director to access or deal in the securities market. Therefore, appropriate direction needs to be issued to the Company and its director, Mr. Harinarayan Sharma, who was in charge and responsible for the affairs of the Company, for their failure to redress the grievances of the investors.

5. I also note that, SEBI had passed an Adjudication Order dated March 31, 2010 under Section 15-I of the SEBI Act against the Company and imposed a penalty of `30,00,000/- (`25,00,000/- under Section 15C of the SEBI Act and `5,00,000/- under Section 15A(a) of the SEBI Act) on it for non-redressal of investors grievances and failure to respond to SEBI. The Company has failed to pay the aforesaid penalty till date.

6. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11(4)(b) and 11B thereof, hereby restrain the company, Enkay Texofood Industries Limited [Permanent Account Number AAACE0833A and having its address at Shree Sitaram Sadan (Bhatia Building), 4th Floor, 282,

Shamaldas Gandhi Marg, Princes Street, Mumbai–400002] and its director, Mr. Harinarayan Sharma (having his address at 229, Priyanka Green City, Bardoli Road, Kododara, Char Rasta, Surat, Gujarat) from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, till all the pending investor grievances against the said company are resolved and the same is reported to and confirmed by the Securities and Exchange Board of India.

7. This Order shall come into force with immediate effect.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

PLACE: MUMBAI DATE: JULY 6, 2011