Order in respect of KPT Infotech Pvt Ltd. in the matter of Onelife Capital Advisors Ltd.

WTM/RKA/EFD/ 42/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI ORDER UNDER SECTION 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND REGULATION 11 OF THE SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 2003 IN RESPECT OF KPT INFOTECH PVT. LTD IN THE MATTER OF ONELIFE CAPITAL ADVISORS LTD. 1. Onelife Capital Advisors Limited ("OCAL"), a company incorporated under the Companies Act, 1956, came out with an Initial Public Offering ("IPO") to raise ₹36,85,00,000 through the issue of 33,50,000 equity shares of ₹10 each with a premium of ₹100 through 100% book building route. The IPO opened for subscription on September 28, 2011 and closed on October 04, 2011. The issue was over-subscribed by 1.53 times though it was graded "1"(CARE IPO rating of 1) that suggests poor fundamentals. The shares of OCAL were listed on October 17, 2011 in the Bombay Stock Exchange Limited ("BSE") and the National Stock Exchange of India Limited ("NSE"). 2. SEBI noticed that the IPO proceeds of OCAL were transferred to certain entities. SEBI, therefore, undertook a preliminary examination into the said IPO. During the preliminary examination, it was prima facie observed that OCAL had made mis-statements in its Red Herring Prospectus ('RHP') / Prospectus, failed to disclose material developments and had diverted the IPO proceeds for purposes other than the objects stated in the RHP/Prospectus. It was prima facie found that OCAL was aided and abetted by two entities namely, Fincare Financial and Consultancy Services Pvt. Ltd ("Fincare") and Precise Consulting & Engineering Pvt. Ltd ("Precise") in the said diversion of IPO proceeds. It was observed that OCAL had transferred ₹15.54 crore (42% of the IPO proceeds) to Fincare and ₹12 crore (32% of the IPO proceeds) to Precise. 3. On the basis of the preliminary examination, SEBI passed an ad-interim ex-parte order (hereinafter referred to as "interim order") against OCAL, its directors, Fincare, Precise and the Merchant Banker of OCAL - Atherstone Capital Markets Ltd ("ACML"), its Managing Director and Compliance Officer on December 28, 2011 and a clarificatory order on February 15, 2012. Vide

Order n respect of KPT Infotech Pvt. Ltd an Order dated January 16, 2013, SEBI confirmed the directions issued vide the interim order read with the clarificatory Order against all the entities. 4. Subsequent to the preliminary investigation, a detailed investigation was carried out by SEBI in the matter. The investigation, inter alia, revealed the following:

a. OCAL transferred ₹ 7.7 crore to an entity named KPT Infotech Pvt. Ltd ("KPT") for “brand building”. During the investigation, OCAL was asked to furnish Memorandum of Understanding (MoU) entered with KPT in response whereof OCAL replied that though the fund was transferred to KPT but the MOU could not be entered due to SEBI's interim order dated December 28, 2011. From the same reply, it was observed that the funds were transferred to KPT from December 12, 2011 to December 19, 2011 whereas the said SEBI order was passed on December 28, 2011. Hence there was no SEBI order in operation at the time of fund transfer. Moreover, no directions contained in the said SEBI order prohibited KPT or OCAL from entering into an MoU for the claimed objectives of IPO, as mentioned in the offer documents. b. It was observed that OCAL had identified KPT for brand building prior to transferring the funds on December 12, 2011. OCAL was in the knowhow of the investigation being carried out in its IPO and therefore, it transferred funds in a hurry to avoid repayment in the event IPO proceeds are called back, and KPT facilitated OCAL in doing so by accepting huge funds even without entering an agreement. c. It was further observed that as per the letter of OCAL dated March 22, 2012 even after about three months from SEBI's interim order, the MoU / agreement was not entered into.

Hence, it was observed that neither KPT nor OCAL attempted to ratify the so claimed arrangements even after passing of a long time since receipt of public money by KPT. d. Investigation further revealed that as per the MCA Website KPT's address is: 41- Suraj, Om Nagar, Opp. Golden Silver Appartment, Subhanpura, Vadodara. The names of the directors of KPT are Mr. Ashokkumar Fulabhai Patel and Mr. Pritesh Ashokkumar Patel. From the bank statement of KPT provided by OCAL, it was observed that ₹ 7.7 crore received from OCAL by KPT were transferred to Mr. Ashokkumar Fulabhai Patel, one of the director of KPT. e. On visiting the above mentioned address by SEBI officials on March 24, 2012, the given address was found to be a duplex located in a residential society and the same was also found to be locked. On inquiry, the neighbors stated that the duplex belonged to Mr. Ashok Fulabhai Patel and he had shifted to Mumbai 9-10 months ago and since then it was closed. Further, when asked about KPT and business of Mr. Ashokbhai, the neighbors stated that he used to deal in stock market and about KPT, the neighbors stated that they did not know anything. f. Based on the above, it was observed that when the funds were transferred to KPT, no business activity was being done from the address of KPT as available on MCA website/bank statement of KPT.

OCAL had given all the money in advance without executing any MoU / agreement with KPT. Thus, the funds were given by OCAL to Mr. Ashokkumar Fulabhai Patel under the garb of transfer of funds to KPT towards the object of the issue i.e. brand building. g. Mr. Tatsat Mehta was one of the first directors of KPT and signatories to the Article of Association of KPT and was erstwhile compliance officer of OCAL. Investigation revealed that the Articles of Association of KPT do not have any provision of carrying out business for “brand building”/ advertisement for which money was given to KPT. h. It was also revealed that KPT is located in Vadodara. However, its account is in Indian bank in the same branch where OCAL and its other promoter entities, Fincare and Precise have their accounts. From the bank statement of KPT it was observed that the entire money was transferred by KPT to Mr Ashokkumar Fulabhai Patel one of its Directors From the bank statement of Mr Ashokkumar Fulabhai Patel, it was observed that out of ₹ 7.7 crore received from OCAL, an amount of ₹ 7.2 crore was transferred to M/s Chenaji Narsingji.

From the details of this transactions of M/s Chenaji Narsingji, it was found that the funds were used for purchase of gold in the name of Mr. Ashok Fulabhai Patel. i. Summons was issued to KPT to appear before the investigating authority. However directors/ representatives of KPT did not appear before the investigating authority nor did they send any reply to the summons. j. During the investigation, the source of funds of promoters for subscription to share capital of OCAL and then further movement of the same fund from OCAL was examined. From the bank account statements of promoters, OCAL, group companies of OCAL and other entities, it was observed that around ₹ 7 crore of promoter capital has been received by Mrs. Shalini Patidar and Mr. Ashok Fulabhai Patel (One of the KPT's director), both of whom have purchased shares of Decolight Ceramics through preferential allotment. The bank account of both Mrs. Shalini Patidar and Mr. Ashok Fulabhai Patel was opened in the same bank branch i.e. Indian Bank, King Circle Branch and exactly on the date of receipt of fund from promoter/group companies of OCAL.

As mentioned above Mr. Ashok Fulabhai Patel had received funds from IPO proceeds of OCAL. Therefore, it was observed that KPT was a front entity of the promoters of OCAL.

k. Thus from the above, it was inferred that director of KPT had old and close association with OCAL and its promoters KPT had agreed to receive and also received IPO funds from OCAL for the claimed objective of brand building which was not even provided in its Articles of Association. Further, even after passing of a long time since receipt of funds, KPT had not entered into agreement with OCAL with regard to the same. The director of KPT bought gold in his own name with the public money received from OCAL. Further, KPT had not even extended its cooperation to SEBI in its investigation. Hence, the sequence of events i.e. non-existence of claimed objective of brand-building in KPT's Article of Association, haste in transferring and receiving of IPO proceeds, non-execution of MoU, ultimate investment of IPO funds in gold in the name of an individual, non-cooperation with SEBI investigation, etc. indicate that the alleged transfers made to KPT by OCAL from public money were not genuine and as per claims of OCAL. The above sequence of events indicated close collusion of KPT with OCAL and that KPT had facilitated diversion of IPO proceeds of OCAL by acting in a manner described above.

5. In view of the above, SEBI issued a show cause notice dated June 05, 2013 (hereinafter referred to as "the SCN") to KPT calling upon it to show cause as to why appropriate directions under sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") and regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations"), should not be issued against it. The SCN alleged that KPT violated section 12 A (a),(b),(c) of SEBI Act and regulations 3(a), (b),(c),(d) and 4 (1) of PFUTP Regulations which read as under- 12A. No person shall directly or indirectly— (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder; 3. Prohibition of certain dealings in securities No person shall directly or indirectly- (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. 6. Vide email dated September 19, 2013 and September 11, 2013, Mr. Pritesh Patel (director of KPT) requested for grant of 15 days' time to file a detailed reply to the SCN. Subsequently, KPT vide letter dated September 24, 2013 filed its reply to the SCN, inter alia, submitting the following: a. OCAL had approached KPT for brand building. One of the directors of KPT had vast experience in brand building and contacts in industry. Oral understanding was reached between OCAL and KPT and money was transferred. MoU could not be entered as SEBI by its interim order had issued prohibitory directions with no clarity on its duration against OCAL and hence, there was no point in executing a formal MoU for the assignment. Both the parties have never denied the understanding. KPT is not concerned with the disclosures made by OCAL and KPT was not aware of the source of funds. There was no collusion between KPT and OCAL.

KPT was not acting as a front of OCAL to divert funds. b. KPT was not aware and concerned about SEBI's visit. Reliance on statements of neighbors for drawing adverse inferences is legally untenable. Based on the address no adverse inference can be drawn about KPT carrying out its business. Further, it is denied that funds were given by OCAL to Mr. Ashok Kumar Patel. Admittedly, OCAL had transferred funds to KPT and not to Mr. Ashok Kumar Patel and the funds were transferred to Mr. Ashok Patel by KPT as a loan in ordinary course of business.

c. Mr. Tatsat Mehta (compliance officer of OCAL) resigned in June, 2010 and no adverse inference can be drawn due to this fact. Further, KPT was in process of amending its Articles of Association in order to include provision of carrying business of brand building / advertisement for which the money was given to it. d. It was alleged in the SCN that Mr Ashokkumar Fulabhai Patel (director of KPT), out of ₹ 7.7 crore received from OCAL, transferred ₹ 7.2 crore to M/s Chenaji Narsingji, for purchase of gold. It was also alleged that KPT has its account in Indian bank in the same branch where OCAL and its other promoter entities, Fincare and Precise have their accounts. In this regard, KPT submitted that no adverse inference can be drawn as its directors stay in Mumbai and one of the directors also has a bank account in the same branch. Further, the money was given to Mr. Ashok Patel as loan and KPT was not aware how it was used. e. No summons was received by KPT and the receipts also fail to show the delivery to KPT and no signatures of its representatives are there on receipts. f. In relation to the allegation that OCAL and its promoter entities transferred around ₹ 7 crore to Mrs. Shalini Patidar and Mr. Ashok Fulabhai Patel, KPT submitted that Mr. Ashok Patel has informed KPT that these funds were received in 2010 which is much prior to filing offer document by OCAL and has nothing do with KPT or OCAL.

It was also given to KPT to understand that Mr. Ashok Fulabhai Patel has nothing to do with Mrs. Shalini Patidar and is not concerned with her transactions. 7. An opportunity of personal hearing was granted to KPT on November 13, 2013. However, it did not avail the same and waived its right of personal hearing vide its letter dated November 15, 2013. In the interest of justice another opportunity of hearing was granted to Fincare on January 13, 2015. However, KPT again did not avail the said opportunity of hearing. 8. I have examined the SCN, reply of KPT and other material available on record. 9. KPT has contended that it was approached by OCAL for brand building as one of its directors had vast experience in brand building and contacts in industry and only an oral understanding was reached between OCAL and KPT and money was transferred to it. Further, a MoU could not be entered as SEBI by its interim order had issued prohibitory directions with no clarity on its duration against OCAL and hence, there was no point in executing a formal MoU for the assignment. In this regard, I note that the funds were transferred to KPT by OCAL from December 12, 2011 to December 19, 2011 whereas the said SEBI order was passed on December 28, 2011. Thus, there was no SEBI order in operation at the time of fund transfer.

Further, no directions contained in the said SEBI order prohibited KPT or OCAL from entering into an MoU for the claimed objectives of IPO, as mentioned in the offer documents. Furthermore, the mere fact that OCAL simply transferred a substantial portion of its IPO proceeds i.e. ₹7.7 Crore to KPT without entering into any formal agreement, is itself evident of a prior understanding/collusion between OCAL and KPT. In view of the above, I do not find any merit in the above contention of KPT in this regard and reject the same. 10. KPT has also contended that it was not concerned about SEBI's visit to its registered office address and no adverse inference can be drawn on the basis of the statements of its neighbors. In this regard, I note that SEBI's visit to the registered office address was carried out in the course of SEBI's investigation process. The inquiry from the neighbors was done only because no one was present at the registered office address of KPT which itself was located at a residential premises and not a commercial one. Further, KPT has not submitted any documentary evidence to suggest that it was carrying out its business from its registered office or from any other office. In light of the above, KPT cannot dispute the inference that has been drawn in the investigation against it pursuant to SEBI's visit. 11. I note that with respect to absence of any provision in KPT's AoA for carrying out the business of brand building, KPT has contended that it was in the process of amending its AoA. In this regard, I note that as per KPT's submission, its oral understanding with OCAL was reached before it received payment from OCAL in December 2011, whereas the reply to the SCN was sent by KPT in September 2013. It is surprising that KPT being a private company could not amend its AoA in a span of around 2 years, especially when it had bagged a big project of ₹7.7 crore from OCAL for the specific business of brand building. It is also pertinent to note that the founder of KPT, Mr Tatsat Mehta was also the compliance officer of KPT. In addition thereto, KPT did not furnish any evidence to show that it had any previous experience in brand building or that it has had taken any steps towards carrying out the task of brand building assigned to it by OCAL. In view, thereof, I do not find any merit in the contention of KPT in this regard.

12. In relation to KPT having its account in Indian bank in same branch as OCAL and its promoter entities, Fincare and Precise, it has contended that no adverse inference can be drawn from the said fact. In this regard, I note that as per MCA's records the office of KPT is located in Vadodara, Gujarat. Further, KPT in its reply has neither stated its primary place of business/office and nor mentioned the address of its directors. In three circumstances, the fact that KPT has a bank account in Mumbai in the same bank and same branch in which OCAL,

Precise and Fincare have bank accounts, does show that KPT was connected with OCAL, Precise and Fincare. 13. I note that KPT did not respond to the summons issued to it on the ground of non-receipt thereof. I, however, note from the record that the acknowledgments of delivery of summons are available and were also provided to KPT along with the SCN. It is important to mention that KPT has not provided any evidence to dispute the validity and veracity of the said acknowledgements. Thus, it becomes clear that KPT intentionally did not respond to the summons issued by SEBI to it.

14. With respect to transfer of around ₹7 crore to Ms. Sahalini Patidar and Mr. Ashok Fulabhai Patel by OCAL and its promoter entities, KPT submitted that the said transfers were made in 2010. I find that these transactions show that Mr. Ashok Patel was also connected to OCAL since 2010. Moreover, as stated earlier, Mr. Tatsat Mehta (erstwhile compliance officer of OCAL) was also connected to OCAL. Further, from the bank statement of KPT, it was observed that the entire money transferred to it by OCAL (i.e. ₹7.7 crore) was transferred by KPT to Mr. Ashokkumar Fulabhai Patel one of the Directors of KPT. Out of the said amount, Mr. Ashokkumar Fulabhai Patel, transferred ₹7.2 crore to M/s Chenaji Narsingji which were used for purchase of gold in the name of Mr. Ashok Fulabhai Patel. According to KPT, the said ₹7.2 crore were transferred to Mr. Ashok Patel by KPT as a loan in ordinary course of business. In this regard, as noted earlier Mr. Ashokkumar Fulabhai Patel was connected to OCAL since 2010. Further, there is no plausible explanation given by KPT for the transfer of almost entire amount received from OCAL to its director as a loan in the ordinary course of business which was further transferred to another entity and was used to purchase gold. I find that the transfers of huge amounts from OCAL to KPT, KPT to its director, from the director to M/s Chenaji Narsingji for vague reasons and the ultimate purchase of gold using the money raised from the IPO of OCAL exhibits that the so-called transfer of consideration for the purpose of brand building was only a farce and KPT aided OCAL in that regard. 15. I note that KPT did not have the expertise or competency in the business of 'Brand Building' as brought out in the SCN and despite the same OCAL paid ₹7.7 crore to KPT which was subsequently used to purchase gold in the name of a director of KPT. The said transfer from OCAL to KPT was without any formal arrangement. I find that the said transfer of funds was not for the stated objects of the IPO of OCAL.

16. In light of the aforesaid findings, I find that KPT facilitated OCAL in siphoning off / diversion of IPO proceeds and therefore violated section 12 A (a),(b),(c) of SEBI Act and regulations 3(a), (b),(c),(d) and 4 (1) of PFUTP Regulations. 17. I, therefore, in order to protect the interest of investors and the integrity of the securities market, in exercise of the powers conferred upon me under section 19 read with sections 11(1), 11(4) and 11B of the SEBI Act and regulation 11 of the PFUTP Regulations hereby restrain KPT Infotech Pvt. Ltd. from accessing the securities market and also prohibit it from buying, selling, and otherwise dealing in securities market, directly or indirectly, in any manner whatsoever, for a period of five years from the date of this order. 18. This Order shall come into force with immediate effect.

Sd/-

Date: May 13th, 2015 RAJEEV KUMAR AGARWAL Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA