Order in respect of M/s. Vivro Financial Services Private Limited in the matter of Rights Issue of M/s. Ram Kaashyap Investment Limited.

Under Regulation 28(2) of the SEBI (Intermediaries) Regulations, 2008 against M/s. Vivro Financial Services Private Limited (Merchant Banker - SEBI Registration No. INM000010122) In the matter of Rights Issue of M/s. Ram Kaashyap Investment Limited.

1. Ram Kaashyap Investment Limited (hereinafter referred to as "the Company") came out with its rights issue of 3,51,60,000 equity shares of `10/- each for cash at par aggregating to `35.16 crores. Vivro Financial Services Private Limited (hereinafter referred to as "the Noticee"), a SEBI registered merchant banker acted as the Lead Manager and Knack Corporate Services Private Limited (hereinafter referred to as "Knack" or RTI), a SEBI registered Category I Registrar to an Issue and Share Transfer Agent acted as the Registrar to Issue with respect to the said rights issue. 2. The rights issue of the Company opened for subscription on November 18, 2010 and closed on December 16, 2010. When the rights issue was open, SEBI had conducted an inspection of the books of accounts and other documents/records of Knack during the period from November 23, 2010 to November 25, 2010. Since the rights issue of the Company was open for subscription during the inspection period, SEBI also examined the role of Knack in finalising the eligible shareholders list, the dispatch of the Composite Application Forms (CAFs) to the eligible shareholders of the Company and compliance with other procedural aspects relating to the rights issue.

It was inter alia noted that there were several complaints from the investors regarding non-receipt of CAFs. It was observed that the CAFs were not dispatched as mentioned in the advertisements issued by the Company and Knack had produced forged records/documents with regard to proof of dispatch of CAFs. 3. During inspection of Knack, following irregularities in the functioning of the noticee as Lead Manager while handling the rights issue of the Company were also prima facie observed :- (a) The noticee has not ensured that pre-issue advertisements are published by the Company in a regional language daily newspaper as required under regulation 55(2) of the SEBI (Issue of Capital and Disclosure Requirements)Regulations, 2009 (ICDR Regulations). Thus, the noticee has violated the said regulation 55(2) and Clause 1 of Code of Conduct specified in Schedule III read with regulation 13 of the SEBI (Merchant Bankers) Regulation, 1992 (MB Regulations). - 1 - (b) As seen from the statement given by the Managing Director of Knack, the noticee has not even done any in-person verification of the infrastructure and systems of the RTI and has violated the provisions of regulation 5(4) of the ICDR Regulations.

(c) The noticee has not exercised due diligence in ensuring that the Company enters into a valid agreement with the RTI and has violated Clause 4 of the Code of Conduct specified in Schedule III read with regulation 13 of the MB Regulations. (d) The noticee had not acted in a prompt and professional manner to ensure that the money for dispatch of CAFs are paid by the issuer to the RTI. (e) The noticee has not ensured and confirmed dispatch of all CAFs by Registered Post / Speed Post by the RTI before advising the Company to publish the pre-issue advertisements. Thus, the noticee has violated the provisions of regulation 54(1) of the ICDR Regulations read with Clauses 8 and 24 of Code of Conduct specified in Schedule III read with regulation 13 of the MB Regulations and regulation 60(6) of the ICDR Regulations. (f) During noticee's meeting with SEBI on December 03, 2010 noticee had insisted on receiving a confirmation letter from the RTI confirming the dispatch of CAFs on November 12, 2010 i.e. before the issue of the advertisement on November 15, 2010, though the noticee had not submitted proof of the confirmation letter.

Thus, the noticee has not only failed in its duty as a pre-issue Merchant Banker but also tried to misguide SEBI by falsely claiming to have received such a letter. The fact that the RTI had submitted that it had not sent such a letter followed by the corrective advertisement issued by the issuer on December 16, 2010 only reinforced the fact. Therefore, it is alleged that the noticee has failed to function in an ethical manner and to maintain high standards of integrity as required under Clauses 1 and 2 of Code of Conduct specified in Schedule III read with regulation 13 of MB Regulation. (g) The Company issued wrong advertisements on November 15, 2010 and November 30, 2010 regarding the dispatch of all CAFs along with the abridged letters of offer (ALoFs) to the share holders by Registered Post and Speed Post and therefore, it is alleged that the noticee has tried to misguide and deceive the shareholders, stock exchanges and SEBI thereby violating Clauses 7 and 20 of the Code of Conduct specified in Schedule III read with regulation 13 of MB Regulations and regulation 60(7)(a) of ICDR Regulations.

(h) The noticee has not acted in a prompt and a professional manner to ensure that money for dispatch of CAFs had been transferred by the issuer to the RTI, thereby violating Clause 3 of Code of Conduct specified in Schedule III read with regulation 13 of the MB Regulations. (i) The noticee had not acted as an independent professional monitor and did not ensure the successful completion of the rights issue, but instead has been hand in glove with the issuer in furnishing fraudulent and misleading information and documents. Therefore, it is alleged that the noticee has violated Clause 4 of the - 2 -

Code of Conduct specified in Schedule III read with regulation 13 of the MB Regulations and regulation 64(4) of ICDR Regulations. 4. In view of the above, SEBI initiated proceedings against the noticee under the SEBI (Intermediaries) Regulations, 2008 ("the Intermediaries Regulations") and appointed a Designated Authority (hereinafter referred to as "the DA") to inquire into the alleged contraventions by the noticee. The DA found the noticee guilty on all counts on the basis of the observations of inspection and submitted his Report dated November 30, 2011 wherein he found that the noticee has violated the provisions of the following regulations, namely, i) Regulations 5(4), 54(1), 55(2), 60(6), 60(7)(a) and 64(4) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as ‘ICDR Regulations’); and ii) Clauses 1,2,3,4,7,8,20 and 24 of the Code of Conduct specified in Schedule III of Regulation 13 of SEBI (Merchant Bankers) Regulations, 1992 (hereinafter referred to as ‘MB Regulations’);

and recommended that the noticee may be prohibited to take up any new assignment or contract for a period of two months. 5. After considering the Report, a show cause notice dated December 08, 2011 (SCN) enclosing therewith a copy of the Report, was sent to the noticee advising it to show cause as to why appropriate penalty including penalty as recommended by the DA should not be imposed upon it. After seeking further time, the noticee filed its reply to the SCN vide its letter dated January 12, 2012. After seeking adjournments of dates of personal hearings given to the noticee after receipt of its reply, when Mr. Joby Mathew advocate of the noticee appeared and mentioned that the noticee desires to settle the matter through a consent order. Subsequently, the noticee filed its consent application to settle these proceedings through a consent order. However, the settlement proposal of the noticee was rejected by SEBI summarily without going into merits of the charges. 6. Since considerable time had elapsed after the last reply of the noticee and disposal of its consent application, another opportunity of personal hearing was granted to the noticee before me on October 09, 2013 when Mr. Joby Mathew, advocate of the noticee appeared and made submissions on behalf of the noticee. While arguing the matter in detail on the lines of written reply of the noticee, the learned advocate also contended that the consent application of the noticee has wrongly been rejected by SEBI since the charge against the noticee is mainly with regard to Code of Conduct violations and non exercise of due diligence. There is no charge of non-compliance of any primary obligation of the noticee with regard to disclosure requirements in the ICDR Regulations. Hence, the reason cited in SEBI letter number EFD/DRAIII/DSR/DT/536/2013

- 3 - dated January 07, 2013 for rejection of settlement proposal of the noticee is not correct. The submissions/ reply of the noticee, on merit, are inter alia, as following: (a) The noticee has denied all the allegations made against it in the SCN and has submitted that it had been a Merchant Bankers for the last 14 years having 6 branches in Maharashtra, Gujarat and Tamil Nadu. Since the year 2005, it had acted as Lead Managers for half a dozen Public and Rights Issues and there were no complaints against it by any issuer or investor and there are no instances of SEBI initiating any punitive action against it. Further, the lapses as alleged in this case were on the part of the Company and the Knack. The noticee was not aware of the irregularities and/or instances of non-compliances by the Knack who was RTI in the rights issue. The noticee had discharged its functions as a Lead Manager to the rights issue as stipulated in ICDR Regulations. However, the DA while recommending such a drastic penalty has failed to consider the implications on the noticee's business, clean track record and the fact that lapses were on the part of the Company and Knack whereas the noticee had become victim of the circumstances.

(b) Relying upon a copy of the pre-issue advertisement dated November 15, 2010 issued by the Company and published in Thinaboomi, a regional language newspaper the noticee has submitted that there is no violation of the provisions of regulation 55 (2) of ICDR Regulations and Clause 1 of Code of Conduct specified in Schedule III read with regulation 13 of the MB Regulations as alleged in the SCN. (c) As regards the allegation that the noticee did not independently assess the capabilities of Knack, it has submitted that the charge is levelled merely on the basis of the statement of Mr. Chandrasekaran, the managing director of Knack who had stated before the inspection team that infrastructure and systems of Knack was not inspected by the noticee prior to the rights issue in-person but was only confirmed over phone. In its written reply, the noticee had asked for an opportunity to cross-examine Mr. Chandrasekharan. However, during hearing on being specifically asked, Learned Advocate of the noticee submitted that the noticee did not want to press the request of cross-examination of Shri R. Chandrasekaran and pleaded that the matter may be decided on the basis of the defence submitted in the reply/submissions of the noticee.

(d) In this regard, the noticee has submitted that two of its officers had visited the office of Knack and had assessed its capabilities and other infrastructure required in a mid-size rights issue and found it satisfactory. Knack was existing STA of the Company and to avoid hassle and inconvenience of shifting and rearranging of shareholders data, if any, to another RTI they agreed to the proposal of the Company to continue Knack as the Registrar to the rights issue. The DA has exclusively relied upon the statement of Mr.Chandrasekaran, who being the - 4 -

Managing Director of Knack was not aware about the visit of its two officials. Further, the DA has held the case against the noticee on account of its inability to prove its stand on the basis of any evidence. The noticee has further submitted that SEBI has not prescribed any documents/materials to be maintained by a Merchant Banker in respect of independently assessing the capabilities of the RTI and therefore, it was not possible for it to submit any documentary proof in support of its submissions. According to the noticee, as Lead Manager to the rights issue, it had the responsibility to co-ordinate the issue duly ensuring compliance with ICDR Regulations and was expected to act upon representations given by Knack who are required to fulfil their responsibilities. However, this does not mean that it should micromanage every proceeding of the rights issue. (e) With regard to the allegation that the noticee failed to exercise due diligence in ensuring that the Company entered into a valid agreement with the RTI it has submitted that it had advised the Company to enter into an agreement with Knack The noticee acted on the representation of the Company in that regard due to existing relationship between the Company and Knack, who was share transfer agent of the Company prior to the assignment of Registrar's work in respect of the rights issue.

The DA gave such finding mainly due to inability of the noticee to prove its defence as the Company had not provided to it a copy of the MoU between the RTI and the Company despite its repeated requests. Relying upon the copy of the MoU dated January 21, 2010 now received from the Company it has submitted that the MoU was entered into between the Company and Knack and the same contains relevant terms, conditions, duties and responsibility of the RTI to be performed and discharged in the process of the rights issue. Thus, it has not violated Clause 4 of Code Conduct specified in Schedule III read with Regulation 13 of SEBI MB Regulations as alleged in the SCN. (f) With regard to the allegation that it has not ensured that the money for dispatch of CAFs are paid by the Company to the RTI, the noticee has submitted that it is not his responsibility, rather it is the obligation of the Company to pay the RTI for services rendered by it. For any non-compliance of contractual obligation between the Company and RTI, the noticee cannot be held responsible. (g) With regard to the allegation that the noticee did not ensure and confirm the dispatch of all CAFs by registered post /speed post by Knack, the noticee has submitted that :- (i) It had advised the Company to obtain a certificate from Knack along with postal register as a proof of having dispatched the CAFs.

The Company confirmed over phone on November 15, 2010 and by email dated November 17, 2010 to the noticee about having obtained the confirmation letter dated November 15, 2010 from Knack certifying and - 5 - confirming dispatch of CAFs and ALoFs to all the 9363 shareholders of the Company by November 13, 2010. (ii) Vide letter dated December 02, 2010 Knack had confirmed to the noticee the dispatch of CAFs along with ALoFs to 9363 shareholders. The confirmation letter did not mention the mode of dispatch. However, as Knack confirmed having paid `107/- per CAF as postal charge, the noticee made independent enquiries regarding the postal charges for dispatching CAFs and ALoFs through registered post or speed post and under certificate of posting and found that the same was approximately `110/- and ` 85/- respectively, which nearly matched with `107/-reported by Knack. Thus, on the basis of the said letters of Knack and the charges incurred by Knack, the noticee justifiably assumed that the ALoFs and CAFs were dispatched by Registered Post or speed post. (iii) Once the noticee came to know about CAFs dispatched under certificate of posting as disclosed by Mr. R. Chandrasekharan, Managing Director of Knack to SEBI on December 03, 2010, it had, through email dated December 06, 2010, forwarded to the Company a draft corrigendum to the advertisement disclosing that CAFs had been dispatched under certificate of posting and advised it to publish the same in the newspapers.

However the Company refused to issue the corrigendum on the ground that there was no specific/formal instruction from SEBI to it. Finally, after the deliberations and insistence by the noticee, the Company included the fact about the mode of dispatch of CAFs in the advertisement issued on the closure of the issue. (iv) It is the primary responsibility of the issuer Company to release all the rights issue advertisements. The noticee had provided drafts of the advertisement regarding the rights issue and the date of dispatch of the CAFs to investors and the mode of dispatch were inserted based on the representation made to it by the RTI, Knack. It had explained the procedure of dispatch of the CAFs to the Company and advised it to take confirmation from Knack regarding the dispatch of the CAFs and to retain the postal register records as a proof of dispatch. The Company confirmed the contents of the advertisement vide their emails. Drafts of other advertisements were also provided by the noticee to the Company and the contents of those advertisements were confirmed by the Company before they were published.

(v) Therefore, the noticee has not violated provisions of Clause 8 and 24 of Code Conduct specified in schedule III read with regulation 13 of the MB Regulations and regulations 54(1) and 60(6) of ICDR Regulations as alleged. (vi) The noticee had not tried to misguide and deceive shareholders, stock exchanges and SEBI as they were not aware of the mistake of dispatching - 6 - the CAFs and ALoFs under certificate of posting by Knack. The responsibility for the error in the advertisement dated November 15, 2010 was apparently with Knack and the Company. Further, the investors who did not receive CAFs could have submitted application in plain paper and neither the Company nor the noticee received any complaints/requests from investors for CAFs. Therefore the noticee has not violated provisions of Clauses 7 and/or 20 of the Code of Conduct specified in Schedule III read with regulation 13 of MB Regulations and regulation 60(7)(a) of ICDR Regulations. (vii) They had prepared the draft pre-issue advertisement and advised the company to go ahead based on the confirmation given by Knack. They therefore deny that they did not act as an independent monitor and also having violated Clause 4 of Code Conduct read with regulation 13 of SEBI MB Regulations and Regulation 64(4) of ICDR Regulations.

The noticee was not responsible for payment of monies by the Company to Knack and neither the agreement between the noticee and the Company nor ICDR Regulations cast any responsibility on them in that regard. By no stretch of imagination, the noticee can be made liable for the dues to be paid by Company to Knack and therefore, it is denied that the noticee violated the provisions of Clause 3 of Code of Conduct specified in Schedule III read with regulation 13 of MB Regulations.

(h) The noticee did not have any personal interest in the rights issue of the company and had nothing to gain by any act or omission that is alleged in the SCN. The success of the rights issue depended upon the interest shown by the investors and thus they did not act together with the Company to furnish fraudulent and misleading information and documents. It was only the RTI and the Company who misled the noticee, the investors and SEBI and therefore, it is denied that the noticee did not act as an independent professional monitor and that it had allegedly been hand -in glove with the Company in furnishing fraudulent and misleading information and documents. (i) The order dated December 31, 2012 passed against the Company and its promoter had correctly held that the Managing Director of the Company and the RTI had conspired to deprive eligible public shareholders from applying in the rights issue and to enable the Managing Director to increase and consolidate his shareholding in the Company without attracting the obligations under the Takeover Regulations. (j) The noticee had exercised all diligence possible in the circumstances such as material disclosure of facts in Letter of Offer, ALoF, submissions made to SEBI from time to time, publication of pre-issue advertisement in regional language, visiting the office of the RTI and the exercise of ascertaining the rates of dispatch from the post office and had no reason to disbelieve the representations made by the issuer company or - 7 - the RTI and therefore, were not aware of the fraudulent intentions of either the Company or the RTI or both.

(k) Therefore, the noticee may be given the benefit of doubt and be discharged entirely from the present proceedings. The noticee has also assured to be more careful, cautious and diligent in future to take steps even beyond their mandate and to protect the interest of investors. 7. I have considered the SCN, the replies of the noticee, Report submitted by the DA, submissions made by the noticee during the hearings and subsequent to hearings and also the relevant material available on record. I note that the first charge against the noticee as found in the Report is that it had violated the provisions of regulation 55(2) of the ICDR Regulations read with Clause 1 of the Code of Conduct specified in Schedule III of the MB Regulations since there was no confirmation available on record from the Company that it had issued pre-issue advertisement in regional language newspaper as required in the said regulation 55(2). In this case, I, however, find that the noticee has established, on the basis of a copy of the advertisement dated November 15, 2010 published in Thinaboomi, a regional language newspaper widely circulated at the place where the registered office of the issuer is situated, that there was no non compliance of regulation 55(2) by the Company.

I, therefore, do not hold the noticee guilty on account of this charge. 8. The second charge against the noticee is that it had not independently assessed the capability of Knack before advising the Company on Knack's appointment as the Registrar to the rights issue of the Company. I note that, regulation 5(4) of ICDR Regulations provides that- "the Lead Manager shall, only after independently assessing the capability of other intermediaries to carry out their obligations, advise the issuer on their appointment." In this case, the charge has been levelled on the basis of the statement of Mr. Chandrasekharan, Managing Director of Knack who had stated on oath that the noticee had not inspected Knack's office prior to rights issue. However, on the contrary the noticee has claimed that its two officers had visited the office of Knack and had assessed its capabilities and other infrastructure required in a mid-size rights issue and found it satisfactory. Mr. Chandrasekaran, being the Managing Director of Knack was not aware about the visit of its two officials. The DA has found the noticee guilty on account of this charge since it could not produce any document/material in support of claim that its two officers had visited and the office of Knack and has solely relied upon the statement of Mr. Chandrasekaran.

9. In the facts and circumstances of this case, I, however, find merit in submissions of the noticee that it was not possible for it to produce any documentary evidence about such visit at the office of the Knack. In this case, the rights issue in question was to the existing shareholders of the Company. It is undisputed fact that Knack was existing STA of the Company.In my view, this fact could be a reasonable factor for considering the - 8 - proposal of the Company to continue the existing RTI who was a Category I SEBI registered RTI, unless the facts and circumstances raise suspicion about capabilities of the RTI. In this case, no material is available that suggests suspicion about capability of Knack at the time when the noticee agreed with proposal of the Company for appointment of Knack as RTI for the rights issue. In these facts and circumstances, in my view, the preponderance of probability is in favour of the noticee. I, therefore, give benefit of doubt to the noticee with regard to this charge. 10. The third charge against the noticee is that it did not exercise due diligence in ensuring that the Company enters into a valid agreement with Knack and has, therefore, violated the provisions of Clause 4 of the Code of Conduct specified in Schedule III read with regulation 13 of the MB Regulations.

I note that regulation 5(5) of the ICDR Regulations, casts obligation on the issuer to enter into requisite agreements with the intermediaries involved in its issue. Regulation 9A of the SEBI (Registrar to Issue and Share Transfer Agents) Regulations, 1993 (RTI ad STA Regulations) obligates the RTI to enter into a 'legally binding agreement' with the issuer company. Further, Clause 1 of the SEBI Circular dated October 11, 1994 issued to the Registrars to the Issues reads as under- "1. In terms of rule 4(1)(b) of the SEBI (Registrars to an Issue and Share Transfer Agents) Rules, 1993, all Registrars to an Issue / Share Transfer Agents are required to enter into a legally valid agreement with the Issuers/Body corporate. ……………………………………………………………………………………… ………. The Agreement must be stamped according to the Local Stamp Laws for the time being in force at the place of execution." 11. The words 'legally binding agreement' are of much significance since the agreement contemplated in regulation 9A read with Clause 1 of the above mentioned circular determine not only the inter se responsibilities and obligations of the issuer and RTI but also has bearing on the rights and interests of investors.

Such agreements must be enforceable and binding written agreements as per applicable laws including stamp laws. In this case the noticee has produced a copy of a Memorandum of Understanding (MoU) between the Company and Knack which was not on a stamp paper. From legal point of view as well as in commercial parlance, a MOU is used to depict and embody the understanding of the parties, in-principle, without creating any right or obligation of binding nature. In this case, it is clearly established that the Company and Knack did not execute a legally binding agreement as required in regulation 5(5) of the ICDR Regulations read with regulation 9A of the RTI ad STA Regulations and abovementioned SEBI circular. The charge against the noticee is that it failed to exercise due diligence as required from it under Clause 1 of Schedule III of the MB Regulations in ensuring that the Company and Knack entered into a legally binding agreement. In my view, the observance of due diligence depends upon the facts and circumstances of each case and there must be higher degree of preponderance of probability to hold a merchant banker - 9 - guilty on such charge.

In this regard, Hon'ble SAT in the matter of Imperial Corporate Finance and Services Private Limited Vs. SEBI [2005] 61 SCL 197 (SAT) has held as under:

"It can be safely said that lack of due diligence should run from the facts of each case and ultimately there can be no hard and fast rule as to what constitutes lack of due diligence. It depends entirely on the facts of each case. We however hold that before any person is found to have violated the concept of "due diligence", there must be an enquiry and the finding must be sustained by a higher degree of proof than that required in a civil suit, yet falling short of the proof required to sustain a conviction in a criminal prosecution. There must be convincing preponderance of evidence (see AIR 1984 SC 110). A Lead Manager is required to employ reasonable skill and care but he is not required to begin with suspicion and to proceed in a manner of trying to detect a fraud or lie unless such information excites his suspicion or ought to excite his suspicion as a professional man of reasonable competence." 12. It is seen that the above provisions of ICDR Regulations and the RTI and STA Regulations cast primary obligations on the Company and the RTI who is also a SEBI registered intermediary and subjected to detailed Code of Conduct and obligations.

These regulations specifically do not obligate the merchant banker to sit in judgment on the format which is prescribed in the RTI and STA Regulations especially when the RTI itself is registered intermediary. In view of the facts and circumstances of this case and guiding factors pronounced in the abovementioned order of Hon'ble SAT, I find that the preponderance of probability is in favour of noticee and give it benefit of doubt with respect to this charge. 13. The fourth charge against the noticee is that it had not ensured that the Company makes payments in advance to Knack. I note that the obligation of the Company towards payment to RTI emanates from their inter se responsibility stipulated in the agreement executed by them. The Lead Merchant Banker cannot be held responsible if the issuer fails to pay the RTI. Moreover, the charge of non-observance of Clause 3 of Code of Conduct specified under regulation 13 of MB Regulations has been levelled against the noticee solely on the basis of statement of Mr. Chandrasekaran and there is no other material to suggest that noticee failed to fulfil its obligation in this regard in prompt, ethical and professional manner.

I, therefore, do not hold the noticee guilty on account of this charge. 14. The fifth charge against the noticee is that it had not ensured and confirmed that in the rights issue of the Company, the CAFs and ALoFs were dispatched by Registered Post or Speed Post by Knack before it advised the Company to publish the pre-issue advertisement. Before dealing with this charge, I deem it necessary to briefly mention here the background of the charge. I note that in the rights issue of the Company, applications from only 439 out of 9363 shareholders for value of `31.92 crores were - 10 - received. It was found during inspection and also from the subsequent confirmation received from the postal authorities that CAFs were not dispatched by Knack to the shareholders of the Company. I note that in terms of regulation 54(1) of the ICDR Regulations, the ALoFs along with CAFs should be dispatched through ‘registered post or speed post’ to all the existing shareholders at least 3 days prior to the opening of the issue. 15. In terms of regulation 2(f) of the RTI and STA Regulations, the RTI is appointed by an issuer to carry on the following activities on its behalf : (i) collecting applications from investors in respect of an issue; (ii) keeping a proper record of applications and monies received from investors or paid to the seller of the securities; and (iii) assisting the issuer in: (a) determining the basis of allotment of securities in consultation with stock exchange; (b) finalising list of persons entitled to allotment; (c) processing and dispatching allotment letters, refund orders or certificates and other related documents in respect of an issue; 16. In view of the above provisions, I note that while assisting the issuer in dispatch of CAFs, etc., the RTI acts as its agent.

Thus, primarily the issuer is under obligation to comply with regulation 54(1) of the ICDR Regulations. The RTI acting as agent of the issuer is also obligated to comply with the requirements of that regulation while dispatching the CAFs to shareholders of the issuer. 17. Regulation 55(1) further obligates the issuer to issue the pre-issue advertisement inter alia in one regional language daily newspaper with wide circulation at the place where its registered office is situated. As per the provisions of said regulation 55(2) the pre-issue advertisement should contain the following:- (a) the date of completion of dispatch of abridged letter of offer and the application form; (b) the centres other than registered office of the issuer where the shareholders or the persons entitled to receive the rights entitlements may obtain duplicate copies of the application forms in case they do not receive the application form within a reasonable time after opening of the rights issue; (c) a statement that if the shareholders entitled to receive the rights entitlements have neither received the original application forms nor they are in a position to obtain the duplicate forms, they may make application in writing on a plain paper to subscribe to the rights issue; (d) a format to enable the shareholders entitled to apply against their rights entitlements, to make the application on a plain paper specifying therein necessary particulars such as name, address, ratio of rights issue, issue price, number of equity shares held, ledger folio numbers, depository participant ID, client ID, number of equity shares entitled and applied for, additional shares - 11 - if any, amount to be paid along with application, and particulars of cheque, etc. to be drawn in favour of the issuer’s account; (e) a statement that the applications can be directly sent by the shareholders entitled to apply against rights entitlements through registered post together with the application moneys to the issuer's designated official at the address given in the advertisement; (f) a statement to the effect that if the shareholder makes an application on plain paper and also on application form both his applications shall be liable to be rejected at the option of the issuer.

18. I further note that under regulation 60(6) the issuer company is required to obtain approval of the Lead Manager in respect of all issue advertisements and to make copies thereof available with him at least till the allotment is completed. Further, in terms of provisions of regulation 67 of the ICDR Regulations, the Lead Manager is also expected to have close co-ordination with all intermediaries involved in the issue. 19. In view of the above, I find that the obligation of due diligence on the part of the merchant banker assumes significance on account of its role in appointment of other intermediaries under regulation 5 of the ICDR Regulations, its authority to approve the pre issue advertisements/ publicity material under regulation 60(6) and its obligation to maintain close co-ordination with the registrars to the issue under regulation 67. I, further find that the Lead Manager, having such obligations cast upon it by ICDR Regulations, is expected to exercise due diligence in ensuring that the CAFs and ALoFs are issued by RTI and the issuer in accordance with provisions of regulation 54(1).

20. It is noted that in the pre-issue advertisement dated November 15, 2010 the Company had announced that CAFs and ALoFs were dispatched by registered post/speed post by November 13, 2010. Later, the Company issued another advertisement on the date of closure of the issue i.e. December 16, 2010 wherein it announced that CAFs were dispatched under certificate of posting instead of registered post/speed post on November 12, 2010 and the same was inadvertently communicated as sent by registered post/speed post in its earlier advertisement. According to Knack it had dispatched the CAFs and ALoFs under certificate of posting and not by registered post/speed post. In view of these conflicting information, SEBI sought confirmation from Department of Posts (the T. Nagar Post Office, Chennai) whereupon it was confirmed that 9363 articles claimed to have been dispatched by Knack, was not at all booked under speed post, registered post, unregistered mail or even under certificate of posting. 21. In this case, it has been established that the pre-issue advertisement dated November 15, 2010 issued by the Company contained untrue, false and distorted statements.

Further, it has been proved that CAFs were not dispatched to the shareholders of the Company at all. It has also been established that Knack had, in order to hide its functional deficiencies, actually created false proof of dispatch of CAFs. In separate proceedings, - 12 - appropriate enforcement actions had been taken against Knack and the Company and its promoters/directors vide order dated November 08, 2012 and December 31, 2012, respectively. 22. As stated above, in terms of regulation 60(6) of ICDR Regulations, the advertisements in question had to be is issued with approval of the noticee who does so on the basis of issue related material provided to it by the issuer and RTI. There is no dispute as to the fact that the advertisement in question had been approved by the noticee. The noticee has submitted that the Company had confirmed to it over phone on November 15, 2010 and later by an email dated November 17, 2010 that Knack had confirmed by its letter dated November 15, 2010 to the Company that it had dispatched CAFs to all the shareholders of the Company. By letter dated December 02, 2010 Knack had confirmed to the noticee that the CAFs and ALoFs were dispatched to 9363 shareholders of the company on November 12, 2010 at a cost of `10, 01,841/.

It is noted that these letters do not mention the mode of dispatch of CAFs and ALoFs. In my view, the noticee, having authority to approve the contents of the advertisement, must have taken extra care to ensure that the advertisement contain true and correct facts with regard to the dispatch of CAFs including the mode of dispatch prescribed in the regulations. At least, when the advertisement dated November 15, 2010 was issued by the Company without disclosure about the mode of dispatch of CAFs, the noticee should have got alerted and should have taken immediate steps to ensure correct disclosure by way of corrigendum and for dispatch of CAFs through prescribed mode. I further note that the independent inquiry about the postal charges represented by Knack in its letter dated December 02, 2010 as claimed by the noticee was much after the advertisement dated November 15, 2010 was issued and when SEBI had started inspection. 23. It is also noted that the noticee was in receipt of several complaints relating to the non-receipt of the CAFs from the investors. This fact itself should have alerted the noticee and prompted it to make efforts to ensure true and correct disclosures in the advertisements and dispatch of CAFs in prescribed mode.

In the facts and circumstances of the case, I find that the noticee committed lapse and while discharging its role under regulation 60(6) read with regulation 64(4) of the ICDR Regulations, it did not exercise due diligence and independent professional judgment required from it under Clause 4 of the Code of Conduct specified in Schedule III read with regulation 13 of the ICDR Regulations. 24. I note that the noticee is neither connected with Knack nor with the Company or its promoters/directors. There is no allegation in this case that the noticee connived or colluded with the Company or its promoters/directors and Knack in their fraudulent, deceitful and manipulative device, plan, scheme or artifice, etc. The facts and circumstance also do not indicate complicity of the noticee in the fraudulent acts and omissions of the Company its promoters/directors and Knack. Out of all charged in the SCN and the Report, the noticee has been found to be non-compliant with regard to - 13 - only one charge i.e. non-exercise of due diligence with regard to the content of advertisement relating to dispatch of CAFs along with ALoFs.

Considering these facts and circumstances, I am of the view that warning to the noticee would be commensurate with the nature of default found in this case. 25. I, therefore, in exercise of powers conferred upon me by virtue of section 19 read with section 12(3) of the Securities and Exchange Board of India Act, 1992 and regulation 28(2) of the SEBI (Intermediaries) Regulations, 2008, hereby warn Vivro Financial Services Private Limited a Merchant Banker (SEBI Registration No. INM000010122) to be careful and cautious in the conduct of its merchant banking activity and to adhere to and comply with all the statutory provisions while carrying out its activities in the securities market. 26. This order shall come into force with immediate effect.

Date: December 20, 2013 RAJEEV KUMAR AGARWAL Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

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