Order in the matter of Brooks Laboratories Ltd.

WTM/PS/14 / IVD/ID-04/JULY/2013

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 in the matter of Brooks Laboratories Limited against 1. Brooks Laboratories Limited 2. Its Chairman, Mr. Atul Ranchal 3. Its Managing Director, Mr. Rajesh Mahajan 4. Its (erstwhile) independent directors, Ms. Monika Sabharwal and Mr. Lalit Mahajan 5. Its Chief Executive Officer, Mr. Durga Shankar Maity 6. Its (erstwhile) Company Secretary and Compliance Officer, Ms. Parvinder Kaur, and 7. Its Chief Financial Officer, Mr. Ketan Shah

Date of Hearing: December 06, 2012 Appearances: For Brooks Laboratories Limited : 1. Mr. Vinay Chauhan, Advocate 2. Mr. Anant Upadhyay, Advocate For the Securities and Exchange Board of India: 1. Mr. Sharad K. Sharma, General Manager 2. Ms. Anitha Anoop, Deputy Legal Adviser 3. Mr. Siddhesh Lotlikar, Assistant General Manager 4. Mr. T. Vinay Rajneesh, Assistant Legal Adviser and 5. Ms. Jayeeta Ray, Assistant Legal Adviser (Presenting Officer)

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI"), issued an ad interim ex-parte Order dated December 28, 2011 (hereinafter referred to as "the interim order"), based on the prima facie findings of examination/investigation conducted into the Initial Public Offering ("IPO") of shares by Brooks Laboratories Limited (hereinafter referred to as "the Company") and the trading in the shares of the Company on the listing day (i.e. on September 05, 2011). The said order had prohibited the Company, Mr. Atul Ranchal (Chairman), Mr. Rajesh Mahajan (Managing

Director), its Independent Directors, Mr. Vivek Sharma, Ms. Monika Sabharwal and Mr. Lalit Mahajan, Mr. Durga Shankar Maity, Chief Executive Officer ("CEO"), Ms. Parvinder Kaur Company Secretary and Compliance Officer, and Mr. Ketan Shah, Chief Financial Officer ("CFO"), from accessing the securities market and further prohibited them from buying, selling or dealing in securities market, directly or indirectly, till further orders. The Company was also prohibited from raising any further capital from the securities market, in any manner whatsoever, till further directions. Further, the Company was directed to call back the Inter Corporate Deposits ("ICDs") advanced by it to Suryamukhi Projects Private Limited ("Suryamukhi") and Neo Power Universal FZ LLC ("Neo Power"), UAE, and deposit the same along with all the IPO proceeds that were lying unutilized with the Company across all its banks/deposit accounts or any investments including in mutual funds, in an interest bearing escrow account with a scheduled commercial bank, till further orders. The direction issued against the independent director, Mr. Vivek Sharma vide the interim order was revoked vide an order dated October 16, 2012, for reasons stated therein.

2. The Company, vide letter dated January 05, 2012, informed SEBI that it was in the process of filing a reply and would seek an opportunity of personal hearing. Thereafter, the Company requested inspection of all the documents/material relied upon by SEBI including copy of the investigation report, statements of various parties and records of proceedings relating to the investigation. SEBI, vide letter dated March 27, 2012, informed the Company that the interim order did not mention about any preliminary investigation report and that statements of parties were not recorded and also that certain letters sought for inspection by it was furnished by the Company itself to SEBI. Subsequently, the Company filed its detailed response vide letter dated July 26, 2012 and inter alia submitted as follows : (i) The issuance of the interim order was not justified as there was no emergent situation or circumstance warranting the same. (ii) The Company is a pharmaceutical research and manufacturing services Company having set up a well equipped manufacturing facility at Baddi, Himachal Pradesh. It manufactures wide range of products catering to the critical care segment.

It is setting up another factory at Vadodara, Gujarat, which is expected to be fully operational and functional soon. (iii) As part of its endeavour to tap futuristic pharmaceutical segments, the Company has planned to venture into manufacturing of intra-venous large volume injectable (IV) in non

PVC closed bags. Since, the said system is a next generation system not available freely in India, the Company pioneered this next generation high safety standard system to the masses in India at a reasonable cost and also export it. The new facility coming up at Vadodara apart from having locational advantage also has qualified manpower required for the facility. (iv) The Company has consistently made profits since inception. The size of its order book as on the date of the interim order was around ₹ 6.5 crore and as on date (of this reply) is around ₹ 14 crore. It has bagged orders from various state governments to the tune of around ₹ 20 crore. (v) Till the year 2009, the Company had only one unit at Baddi, Himachal Pradesh. The Company's consistent profitable performance made it look for expansion and growth. After scrutinizing various options, the Company opted for setting up a Pharmaceutical Formulation Plant at Gujarat in a Pharmaceutical Special Economic Zone (SEZ) named JB SEZ Private Limited ("JB SEZ") situated at Panoli, Gujarat. Accordingly, the Company initiated steps to acquire 7 acres of land in JB SEZ.

After finalising the site, the Company paid ₹ 63,30,169/-, being the 10% advance of the total consideration of the land reserved for the Company at JB SEZ. Assurance was given that the requisite infrastructure facilities would be provided at the earliest in order to enable the Company to set up its project. (vi) In order to meet the capital requirement for its proposed expansion, the Company decided to come out with an IPO after being suggested of the same by Mr. Dinesh Kaushik of D & A Financial Services Private Limited. Subsequently, the Company engaged D & A Financial Services Private Limited as the lead merchant banker in its IPO and a Memorandum of Understanding ("MoU") dated November 24, 2010 was entered into between itself and D & A Financial Services Private Limited for that purpose. (vii) During February 2011, the Government of India, in the annual budget, proposed to cut tax incentives offered on SEZs. The Government of India also proposed a deadline of March 31, 2012 for setting up manufacturing units in any SEZ to avail tax holiday benefits. In view of the same and since the IPO document of the Company was pending clearance, it started exploring the possibility of raising funds for short period in order to commence work in the project as disclosed in the offer document.

The officials of the Company came in touch with certain lender entities who agreed to provide requisite funds to the Company by way of ICDs. Accordingly during May -June, 2007, the board of the Company decided to raise funds by way of ICDs and entered into documentation as suggested by the lenders. Between May and July 2011, the Company raised a total of ₹30.40 crores by way of ICDs from various entities. All the said monies raised through ICDs have come into the account of the Company and the same were supported by bank statements. After raising ICDs of ₹ 30.40 crore, the same were deployed as follows :

Name of the entity Amount (₹) Purpose Payment for providing consultancy and execution of Suryamukhi 15,30,00,000 architectural design, civil work, electrical installation etc. Neo Power 13,97,38,302 Placing purchase orders for plant and machinery (viii) While the Company was raising ICDs, it was in the process of identifying the entities who could provide services pertaining to the development of project site and the required machinery. In the meantime, the Company's Core Technical Committee recommended the import of high precision machineries as per the latest international standards to cater to the highly regulated export market for pharmaceuticals. Pursuant to the recommendation, the Company shortlisted Neo Power for the supply of high precision machineries. The Company engaged Suryamukhi for carrying out the project work at the proposed project site at JB SEZ. (ix) To ensure that preference and priority is given to the job so as to meet the deadline of March 31, 2012, the Company, at the request of Suryamukhi paid an amount of ₹15.30 crore for procurement of material required for erection of plant at the proposed site in JB SEZ. This amount was paid out of the ICDs raised by the Company. (x) While placing orders for various machines and ancillary items with Neo Power, the Company had instructed it to supply the following machines first - BFS Bottlepack 4010 (main machine) and ancillary items like modular partitions, walkable false ceiling, clean room doors, Hepa filter housing and the remaining machine subsequently. The said sequence of supplying machines was indicated as the machines were to be installed at the project site at different stages of construction. The BFS Bottlepack 4010 and ancilliary items were to be installed at the start of civil work in the manufacturing area.

(xi) On the request of Neo Power, the Company released a total advance of USD 31,31,092 to expedite the procurement of machineries keeping in mind the March 2012 deadline. The aforesaid amount was paid as advance on the basis of a proforma invoice dated June 20, 2011, out of the ICDs raised by the Company. (xii) Pursuant to the placement of orders for machinery with Neo Power and giving mandate to Suryamukhi for civil work, the Company vigorously started pursing with JB SEZ for providing the requisite infrastructure facilities as assured, so that the Company could acquire the land and commence its project. (xiii) Post the successful completion of IPO, the Company received the total sum of ₹ 61,03,07,312 (after deduction of issue related expenses) on September 2 and 3, 2011 as issue proceeds. Out of the said proceeds, the Company repaid the ICDs (along with interest after deducting TDS), to the entities as mentioned in paragraph 5 of the interim order. At the relevant time, the Company was not aware that all the said entities through whom it raised ICDs, are related or that they have common directors.

Its main concern was to raise funds on terms acceptable to it. Further, there was nothing adverse about the said entities in the public domain. (xiv) As regards the cases where there were no agreements, the Company submitted that short term lending without agreement is a normal practice. With respect to the alleged non-payment of interest the Company submitted that it had paid interest at the rate of 12% to all lender entities as per agreement/understanding. (xv) With respect to the alleged non disclosure regarding ICDs, the Company submitted that it provided all details and documents as and when required by the merchant banker for the purpose of disclosures in the red herring prospectus dated August 3, 2011 and in the prospectus dated August 22, 2011. For making disclosures, the Company was totally dependent on Merchant Banker and that it provided all documents and details called for, by the merchant banker. (xvi) The Company had raised ICDs of ₹ 4 crore from Shyama Properties Sales Private Limited (₹ 2 crore), Dreamvalley Sales Private Limited (₹ 1 crore) and Banke Behari Commercial Private Limited (₹ 1 crore).

While repaying, the said entities instructed the Company to pay M. K. Distributors Private Limited on their behalf. It was in this context that the Company paid an amount of ₹ 4 crore to M.K. Distributors. Subsequently, M. K. Distributors, on instructions from the aforesaid three entities returned ₹ 4 crore to the Company for transfer to the individual accounts of the entities. Accordingly, the monies were transferred to Shyama Properties, Dreamvalley and Banke Behari Commercial. (xvii) The balance amount of ₹ 14.40 crore (after returning the ICDs) was parked in fixed deposits by the Company. (xviii) During October 2011, the promoters of the Company visited the site at JB SEZ to assess the development work for themselves and found that the same did not match with the expectation for setting up the plant by March 2012. Since the acquisition of land for the project had a hit a road block, the Company requested Neo Power and Suryamukhi to bear with it for some time. There was also no point in delivering the machinery without possession of the project site. (xix) Keeping in view with the sluggish development at JB SEZ, the Board of Directors of the Company, in the best interest of the Company and its shareholders, convened a meeting on December 17, 2011 to decide about shifting of the project site from SEZ to Domestic Tariff Zone (DTZ).

A postal ballot was initiated and executed by its registrar and information in that regard was duly made to RoC on December 22, 2011. (xx) In the meantime, SEBI passed the interim order and the Company complied with the directions contained therein to the extent practically possible. With regard to ICDs advanced to Suryamukhi and Neo Power, the Company wrote to them for recalling the amounts advanced. Suryamukhi informed that it cannot return the amounts as it has already tied up with sub-contractors and had also procured the materials. Suryamukhi also informed that it was ready to start the construction immediately as and when required by the Company. Neo Power, while denying the return of monies, informed that the machines viz., BSF Bottle Pack 4010 and ancillary items have already been procured and could be delivered/shipped as and when required by the Company. Regarding the remaining machines, Neo Power informed that it will treat the order as cancelled in view of the directions of SEBI. (xxi) With regard to the direction of depositing the monies together with all IPO proceeds in escrow account, the Company had deposited an amount of ₹ 14.40 crore, being the balance amount of IPO proceeds that were lying with the Company at that time, and accordingly informed SEBI about the compliance vide an email dated February 07, 2012.

(xxii) The shareholders had approved the proposal for change in the site of the project. Since, the balance IPO proceeds were deposited in the escrow account as per the directions of SEBI, the Company was severely handicapped financially. The Company infused funds through internal accruals [monies generated from the existing project of the Company at Baddi (Himachal Pradesh)] to procure land at the alternate site at Vadodara. The land which has been acquired is superior in terms of the facilities compared to the land proposed to be acquired earlier (in the SEZ). (xxiii) Post procuring the land, the Company requested Suryamukhi to start civil work. Suryamukhi took charge of civil work at the site on March 09, 2012 and conducted surveys and obtained necessary approvals and permissions from authorities. (xxiv) On acquisition of the project land, the Company requested Neo Power for shipping the BSF Bottle Pack 4010 and ancillary items bought on the Company's behalf as the same will have to be installed first during the civil work. Neo Power shipped the machinery and the Company received the same on May 17, 2012. With respect to the ancillary items, the same are expected soon from Neo Power.

(xxv) As on date, the Company has spent ₹ 5.25 crore on acquisition of the project land at Vadodara. The Company has already imported the BSF Bottle Pack 4010 worth ₹11.04 crore and that the ancillary items worth ₹ 6.40 crore would be imported soon. The work at the project site is going on in full swing and an amount of ₹ 3.50 crore has already been spent. As per the current schedule, the civil work is likely to be completed by July 2013 and the plant would be fully operational by September 2013. (xxvi) From the aforesaid, it can be seen that funds given by the Company to Suryamukhi and Neo Power was for the purpose of carrying out civil work and supply of machinery. Therefore, it was wrong to allege that funds were siphoned off. Every single penny utilized by the Company from its own fund as well as IPO fund is duly accounted for. Despite the freezing of funds to the extent of ₹ 14.40 crore by SEBI, the work on Company's project as disclosed in the prospectus is going on in full swing and the promoters are committed to the development and growth of the Company and its shareholders etc. (xxvii) With respect to the utilization of the ICDs, the Company submitted that : i. Short term loans were utilized to place purchase order for plant and machinery with Neo Power and also for payment to Suryamukhi for its services.

ii. It is a matter of record that the Company received ₹ 7 crore from Shitalnath on May 30, 2011 and ₹ 8 crore from Konark Group (as defined in the interim order) on June 2, 2011 as ICDs. At the relevant time, it was not aware that "the directors of Konark Group" and "the directors of Suryamukhi" are common or both are related entities as alleged. There is no embargo on engaging the services of an independent entity merely on the ground that the directors of the services provider (Suryamukhi) are common to another group of companies from whom short term loans were availed. iii. With respect to the placement of orders with Suryamukhi, the Company submitted that it made available all details and documents as required by merchant banker at all times. iv. With respect to the disclosure of suppliers, it was submitted that the list of suppliers and machinery was only indicative. v. The machineries including BSF Bottle Pack 4010 and ancillary item were decided to be imported based on the recommendation of the core technical team of the Company. Based on the interactions, discussions and presentations, the Company placed orders with Neo Power. The accounts of the Company reflected the advance paid to Neo Power for procurement of Machinery. The advances are duly accounted for and reflected in the accounts of the Company. It may be appreciated that the machines which have been received pursuant to the orders placed with Neo Power, are technically superior than the machines which the Company earlier planned to purchase. vi. The observation that the invoice mentioned that machinery have been shifted from its place of origin on July 20, 2011, August 08, 2011 and September 20, 2011 are actually incorrect as the proforma invoices nowhere mentioned about the date of shipping. The Company had received part of the machinery on May 17, 2012 and necessary duties were paid before taking possession. It was for the reasons that the acquisition of project land at JB SEZ did not fructify and the new project land was in the process of being identified, the Company had requested Neo Power to hold back the shipment of machines. It was in the peculiar circumstances that the Company had not received the shipment of machinery till November 2011.

vii. The fact that Mr. Parag Dinesh Doshi, signatory of proforma invoice with respect to the procurement of the machinery with Neo Power is the CEO of Neo Power and also a director of Hillston Advisors Private Limited which has given ICDs to the Company, cannot be the basis to draw any adverse inference against the Company and its projects. At the relevant time, the Company was not aware that Mr. Parag Dinesh Doshi was a Director of Hillston Advisors. The Company had borrowed funds from Hillston Advisors and the same were provided in terms of the understanding/agreement entered into with them. Funds, due to Hillston Advisors were repaid after the Company received funds of its own. (xxviii) The Company was completely dependent on its Book Running Lead Manager (BRLM), D & A Financial Services Private Limited, for the IPO process and provided all documents to the BRLM. The Company is not aware of the reason behind the alleged discrepancies pointed out in the interim order as it was totally dependent on the BRLM. (xxix) With respect to the 'trading' the Company submitted as follows : i. The Company is neither aware nor connected with the trading done by others in the shares of the Company.

It did not have any role to play in the trading. Admittedly, neither the Company nor the promoters /directors traded in the shares of the Company. ii. The transfer of funds by the Company viz., ₹ 50 lakhs to Sharadraj Tradefin Limited on September 2, 2011 and Konark Group, was towards repayment of ICDs raised by the Company. The Company is not aware or concerned with the funds received by the said entities. Except a lender-borrower relationship, it had no relation with Sharadraj Tradefin Limited and Konark Group. iii. The Company is not aware that Sharadraj Tradefin Limited had transferred funds to Makesworth Projects Developers Private Limited and Shridhan Jewelers Private Limited and further transfer to Overall Financial Services Private Limited or that Overall Financial Services Private Limited have traded the scrip. Neither the Company nor its promoters/directors have any connection, whatsoever with Makesworth Projects Developers, Shridhan Jewelers and Overall Financial. iv. The Company is not aware that Konark had transferred funds to Mangalmayee Hirise Private Limited or that Mangalmayee Hirise Private Limited had transferred funds to Overall Financial Services Private Limited, Khushboo Complex Private Limited, Growfast Realties Private Limited, Jagannath Consultants Private Limited, Silicon Hotels Private Limited, Neelkamal Dealcom Private Limited, Alishan Estates Private Limited, Pushpanjali Hirise Private Limited, as alleged.

Neither the Company nor its directors /promoters have any connection with the entities, Mangalmayee Hirise, Overall Financial, Khushboo Complex, Growfast Realties, Jagannath Consultants, Silicon Hotels, Neelkamal Dealcom, Alishan Estates, Pushpanjali Hirise. v. Nothing has been brought on record to demonstrate as to how the alleged amounts stated to be transferred are the issue proceeds of the Company only. The Company is not aware of the alleged transfer of funds in layers on September 05, 2011 and not concerned with the same. The Company denied that the amount transferred from the issue proceeds was to set-off losses, as alleged. vi. The Company is not aware that Mangalmayee, Khushboo, Silicon, Neelkamal, Alishan and Pushpanjali have common directors and that no adverse inference can be drawn against it on the basis of common directors in entities unrelated and unconnected with the Company. (xxx) The Company denied siphoning off of funds or that it failed to disclose material information. It denied that some of the funds received in the IPO was transferred through layers to Overall Financial who have traded in the scrip and made losses as alleged or that it gave exit in any manner to motivated bidders.

(xxxi) The Company requested that the interim order, to the extent it applied to it and its officers (directors) be reconsidered and withdrawn. It also requested that it be atleast permitted to utilize the monies lying frozen in the bank account for the ongoing project. In support of its request, the Company drew attention to the Order passed by the Hon'ble Calcutta High Court in the matter of RDB Rasayans Limited.

3. Mr. Ketan Shah, the CFO of the Company, vide letter dated December 03, 2012, inter alia submitted that he was not a member of the Company's board and was therefore not a party to the decisions taken in the Company's board meeting held on May 25, 2011, July 02, 2011 and July 21, 2011. He therefore contended that there is no justification for subjecting him to the directions issued vide the interim order. Ms. Parvinder Kaur, the erstwhile Company Secretary of the Company, made similar submissions.

4. Mr. Lalit Mahajan (erstwhile Independent Director of the Company) inter alia made the following submissions vide his reply dated December 04, 2012 : (i) He was appointed an Independent Director in the Company's board on October 01, 2010. (ii) He does not hold shares of the Company or of any company or traded in the last two years. (iii) He was not involved in day to day management and affairs of the Company. (iv) He did not attend the board meetings held on May 25, 2011, July 02, 2011 and July 21, 2011, when the Company decided to raise funds by way of ICDs to fund its capital expenditure. He was not aware of the ICDs even prior to the passing of the interim order. (v) After becoming aware of the alleged non-disclosures, he resigned from the Company.

5. Ms. Monica Sabharwal (erstwhile Independent Director of the Company), vide letter dated December 04, 2012, while informing that she was appointed as an Independent Director on the Company's board on October 01, 2010, made similar submissions as that of Mr. Lalit Mahajan.

6. Dr. Durga Shankar Maity, the Company's CEO, vide letter dated December 05, 2012, inter alia submitted that : (i) He has more than 20 years of experience in the 'Pharma' industry. (ii) He was appointed as Director (Technical) on the Company's board on September 10, 2010 and was responsible for the production part of the Company and not conversant with or responsible for the finance part. His role was restricted towards research and development of formulation of medicines. (iii) From September 10, 2010 till September 19, 2011, he was working for the Company as Director (Technical) and was appointed as CEO of the Company on September 19, 2011 (after successful completion of the IPO). (iv) In his capacity as a director, he had always acted honestly, bonafidely and in the best interests of the Company. He requested that the charges against him in the interim order be dropped and the directions issued be lifted.

7. Mr. Atul Ranchal (the Company's Chairman) and Mr. Rajesh Mahajan (the Company's Managing Director) filed replies vide separate letters dated December 05, 2012 and have submitted that they adopt the submissions made by the Company vide reply dated July 26, 2012.

8. An opportunity of personal hearing was afforded to the Company on December 06, 2012. In the hearing, Mr. Vinay Chauhan, Advocate represented the Company and reiterated the submissions made by the Company. The Company also filed its additional reply dated December 11, 2012, and inter alia made the following submissions : (i) As regards the receipt of machinery from Neo Power, the Company submitted that it received the shipment of BFS Bottle Pack 4010 on May 17, 2012. The same was evidenced by the bill of entry dated May 17, 2012, bill of lading dated May 6, 2012, bill raised by Unique Clearing and Shipping Company dated May 31, 2012, debit note from Unique Clearing and Shipping Company for various expenses including dock dues, wharfage, stamp duty charges, container clearing charges, freight bills, lorry freight, forklift charges, cart loading and unloading etc. The Company submitted that it had paid customs duty of ₹ 32,80,238/-. The Company further submitted that the said machine has been installed in its factory and that photographs of the same were tendered during the personal hearing.

(ii) The Company is putting up an injectable plant as disclosed in the prospectus. The project was underway and the construction is being undertaken by Suryamukhi and the main machine (BFS Bottle Pack 4010) supplied by Neo Power is already available at the site. (iii) In the project which is underway, there are two main blocks (utility block and production block) to be completed by Suryamukhi. Before the Company fully erects the main production block, it needs to have mixing and batch making vessels with load cells; heating and cooling arrangement and solution transport system; complete sterile water system with electronic softener and reverse osmosis method - super heated steam sterilizer for sterilizing all injectables after manufacturing. (iv) All these things have to be available at the Company's plant site before the production block is completed. Before casting the roof of the main production block, all the required systems, super heated sterilizer needs to be fixed. The Company also needs many other small machines and infrastructure before finishing the final block. (v) The Company needs to purchase all the said items before erecting the main production block.

It therefore needs to be appreciated that plant and factory making is integrated, where each step is linked to the other. (vi) The Company therefore, needs funds to be employed in the project. Though Neo Power and Suryamukhi are ready to deliver the services, the resource crunch faced by the Company has resulted in the delay in installing the items. The same has impeded the smooth progress of the project. (vii) The delay in infusion of funds by the Company (which is currently happening through internal accruals) has resulted in slowing down the progress of the project and has escalated the project costs also. The Company has requested the release of monies from the escrow account in order to purchase all the required items/machines and for completing its main building block. It has referred to an order passed by the Hon'ble High Court at Calcutta permitting usage of funds. The Company has also submitted that despite the impediments it has performed impressively. Its performance could have been even better but for the interim order passed by SEBI consequent to which it is not able to utilise the IPO proceeds.

(viii) The performance of the Company as reflected in its financials further reinforces and fortifies the commitment of the management /promoters towards the Company and its projects. (ix) It submitted that the project site may be inspected to ascertain the bonafides of its submissions. The Company also submitted that it has suffered restrained directions for a period of almost one year and requested that the same may be lifted. (x) The Company has stated that if SEBI was not inclined to lift the restrain order completely, it should atleast be permitted to use the funds lying locked and frozen in the escrow account, subject to any terms and conditions as deemed fit by SEBI, in the overall interest of the project, the Company and the shareholders.

9. SEBI vide letter dated May 28, 2013 advised the Company inter alia to (i) inform the reasons for the Company to review its purchase order and referring the matter to the technical committee; (ii) provide details of utilization of the issue proceeds towards the object of the issue along with documentary evidence; (iii) inform the progress of the work in its industrial premises and documentary evidence with respect to the same; and (iv) furnish photographs (with recent date imprint on them) with respect to the civil work done at the industrial premises. In response, the Company vide letter dated June 07, 2013 made the following submissions : a) The Company had appointed the technical committee as on June 03, 2011 and elected Dr. D.S. Maity (who was then the Director-Technical) as the head of the committee. The main objective of the committee was to recommend/update the top management with the best/newest technologies so that decisions could be taken accordingly in the best interests of the Company. b) In June 2011, the Company's Chairman Mr. Atul Ranchal and its Managing Director Mr. Rajesh Mahajan attended the seminar "CPhl & ICSE China 2011" between 21-23 June 2011 which was organized by "CPhl Worldwide".

The seminar is attended by many dignitaries from the pharmaceutical sector from all over the world to share knowledge and the latest developments. Thereafter, both the said directors shared their experience in terms of technological advancements and the latest machineries/equipments being used to the technical committee head. The same was done so that the Company can also procure the best possible machinery which can fulfill the demands and meet the latest international standards. c) After going through all the possible options and keeping in mind interests of the Company, the technical committee recommended that machines be imported instead of indigenous machines. The recommendation was made in view of high international standards which were significant if the Company was to compete with international competitors. d) Taking note of the recommendation, the management placed order with Neo Power Universal FZ LLC, UAE. e) At the relevant time, the Company was given to understand by the merchant bankers that the list of machineries set out in the offer document is only indicative and flexibility was available for changing the same.

The machines procured by it were for the purpose disclosed in the offer document. f) According to the Company, the details of utilization of the issue proceeds towards the object of the issue was as follows : OBJECT AMOUNT(in lakhs) EVIDENCE Land 562.40 Copy of the agreement Building construction 498.00 Certificate from Structural Engineer Plant, Machinery & Utilities 1104.00 Bill of entry and bill of lading

A few photographs were also enclosed to demonstrate the progress of civil work in the Company's industrial premises.

10. I have considered the replies/submissions of the Company, its Chairman, Managing Director, the aforesaid Independent Directors, CEO, CFO and Company Secretary and Compliance Officer, the oral submissions made by the Company during the personal hearing, the additional submissions made by the Company and relevant material available on record. The limited issue to be considered in this Order is to decide whether, based on material available on record and after considering the submissions, the directions issued by SEBI vide the interim order needs to be continued, revoked or modified in any manner, in so far as it relates to the aforesaid entities/persons. 11. The company came out with an IPO for raising ₹ 63 crore. The primary objective of its IPO was to set up a manufacturing unit at JB SEZ Private Limited (at Panoli, Gujarat) for manufacturing various pharmaceutical formulations and to meet long term working capital requirement. The issue was assigned IPO Grade 2 by ICRA, which indicated below average fundamentals. The Company received a total sum of ₹ 61,03,07,312 (after deduction of issue related expenses) as issue proceeds on September 2, 2011. The Company was found to have transferred a substantial sum to various entities from the issue proceeds stating that the same were the repayments of short term loans (ICDs) availed by the Company from them.

In paragraph 5 of the interim order, the names of entities from whom the company received ICDs and the names of entities to whom funds from the IPO proceeds were transferred were mentioned. The same included Shitalnath Buildcon Private Limited, Konark Commerce and Industries Limited, Jagdhatri Dealcom Private Limited, Pushpanjali Commotrade Private Limited, Blueprint Securities Private Limited, Sunshine Housecon Limited, Pioneer Prodev Private Limited, Shardaraj Tradefin Limited, Hilston Advisers Private Limited, Shyama Properties Sales Private Limited, Dreamvalley Sales Private Limited and Bankebihari Commercial Private Limited. The Company had also transferred ₹ 4 crore to M. K. Distributors Private Limited. On the basis of the preliminary investigation in the matter, SEBI had prima facie observed that certain entities to whom the company had transferred monies from the issue proceeds are related. 12. In the Prospectus dated August 22, 2011, a detailed break up as to how the issue proceeds would be utilized by the Company was mentioned. Though, the Board of Directors of the Company had resolved in the meetings held on May 25, 2011, July 2, 2011 and July 21, 2011 to raise ICDs to fund the company's capital expenditure, no such disclosures with respect to same and the proposal to repay the ICDs from the issue proceeds were disclosed in the RHP dated August 3, 2011 or in the Prospectus dated August 22, 2011. Though, the Company had in its submissions explained the reasons why it raised funds through ICDs, it failed to give any explanation/reasons as to why such material facts were not disclosed in the offer documents issued for raising money from the public.

The ICDs were raised prior to the filing of RHP. Therefore, the Company ought to have made proper and complete disclosures regarding the names and details of the person from whom ICDs were taken, the terms and conditions including rate of interest and tenure, the manner of return/repayment of the ICDs. There is no gain saying that it provided all information/details to its lead merchant banker and is not aware as to why such discrepancies occurred in its RHP/Prospectus. The Company, as an issuer of securities to the public through its IPO, has a duty to make proper, true and complete disclosure of material facts. The Company has allegedly failed to do so. 13. The Company has transferred ₹ 4 crore out of the issue proceeds to M. K. Distributors Private Limited on September 03, 2011. As per the details submitted by the Company, the said entity had not placed any ICDs with the Company. In its submissions, the Company has stated that it had raised ₹ 4 crore through ICDs from Shyama Properties Sales Private Limited (₹ 2 crore), Dream Valley Sales Private Limited (₹ 1 crore) and Bankebihari Commercial Private Limited (₹ 1 crore).

According to the Company, the aforesaid three entities had instructed it to return the monies due to them to M. K. Distributors on their behalf. It was in that regard the Company paid an amount of ₹ 4 crore to M. K. Distributors. The Company further submitted that since M. K. Distributors had returned the said amount for transfer directly to the said entities, the Company had transferred the same accordingly. I note that the Company, in its Board Meeting held on August 10, 2011, had decided to advance a loan of ₹ 4 crore to M.K. Distributors Private Limited. Therefore, the aforesaid submission of the Company is at variance with the Company's decision to extend loan to M.K. Distributors. The transfer of money to M.K. Distributors and the subsequent re-transfer from M.K. Distributors to the Company remains doubtful.

14. The Company had informed that the short term loans which were raised by it were utilized to make payments to Suryamukhi and Neo Power against their services. Suryamukhi was engaged as a project contractor for providing consultancy and execution of architectural design, civil work, electrical installation etc., and was advanced /paid a sum of ₹ 15.3 crore. The Company had entered into a contract on June 1, 2011 with Suryamukhi for providing the aforesaid services. Though the agreement was concluded much prior to the public issue, the company has not disclosed the engagement of Suryamukhi in its RHP and Prospectus. I also note that the RHP/Prospectus of the company had mentioned the names of suppliers of plant, machinery, utilities etc., and the quotation for such services were given in the year 2010. The interim order, in paragraph 11, had mentioned that the quotations were received by the Company through electronic mail and that the same did not match with those quotations which were disclosed in the offer documents of the Company. 15. The interim order had mentioned that the Company, on the basis of the recommendation of its technical team, proceeded in placing orders for plant and machinery with Neo Power without any quotations.

Neo Power is found to be a foreign entity. It is alleged that the Company failed to disclose that it had placed orders for machinery with Neo Power, a foreign entity, and had paid 50% of the consideration as advance to it. The Company has not stated as to how it identified Neo Power for supply of machineries required by it for its business. Whether the Company floated a tender for supply of machines it required or shortlisted the name of Neo Power from a list of service providers, has not been explained. The interim order has also mentioned that Mr. Parag Dinesh Doshi, who is the signatory to the proforma invoice from Neo Power is the CEO of Neo Power and also a director in Hilston Advisors Private Limited, an entity which had placed ICDs with the Company. The Company has submitted that it was not aware of the relationship between those entities which had placed ICDs with it and the position of the CEO of Neo Power in an entity which had advanced ICDs to it. It is very strange to note that certain entities which have advanced ICDs to the Company had common directors and that a director of one such entity is the CEO of a foreign vendor which was engaged for supply of machineries.

I also note that the Company, vide its letter dated June 07, 2013, while submitting, that it decided to import machineries has not given any reasons as to why and on what basis Neo Power was identified. Considering the facts such as the failure of the Company in disclosing the appointment of Neo Power for supply of imported machinery, the Company not providing the basis/reasons for engaging the Neo Power (the foreign vendor) for supply of imported machinery, the submission of the Company that it was not aware of the relationship between the ICD provider and the foreign vendor (Neo Power) cannot be accepted.

16. I also note that the Company has submitted a copy of the agreement to support its expenditure of ₹562.40 lakhs towards "land". I have perused the agreement and note that the same is an agreement to sell dated February 24, 2012. The Company has agreed to purchase land from the vendor (Mr. Narendrasinh Kesarisinh Parmar) for a total consideration of ₹3,00,32,000/-. The document also records that the Company has already paid ₹55,51,000/- and has to pay the remaining consideration of ₹2,44,81,000/- at the time of execution of the sale deed or at the time of execution of other necessary documents. It has also been specifically recorded that "It is agreed between the parties hereto that the sale deed for the schedule land/property to be executed on or before 24-04-2012." However, the Company has not submitted the sale deed with respect to the transaction. Further, the said agreement cannot be proof for expenditure of ₹562.40 lakhs (i.e., ₹5.62 crores) towards land as the value mentioned in the agreement is only ₹3 crore. The Company has not provided any material to support its expenditure of ₹2.62 crores towards land.

As regards expenditure of ₹498 lakhs towards "Building Construction", the Company has provided a certificate dated June 04, 2013 signed by a Structural Engineer. It is mentioned therein that Suryamukhi Projects Private Limited is developing the production facility for the Company and that the expenses incurred for the development works out to the tune of ₹498 lakhs. In this regard, I note that the interim order has mentioned that the Company has paid ₹15.30 crores to Suryamukhi and the same has been claimed to be for the purpose of construction of the building. The said document provided by the Company is only with respect to ₹498 lakhs and has not provided any material with respect to the balance ₹10 crores transferred to Suryamukhi. 17. The Company has shown that it has spent ₹1104.00 lakhs (₹11.04 crores) towards 'Plant, Machinery & Utilities" and provided copies of bill of entry and bill of lading as evidence for the same. I have perused such documents. As per the Bill of Entry, the Company has imported "BFS Bottle Pack 4010 Machine Along with Standard Accessories (Bag Filling Sealing)".

The approximate cost of the said machinery including customs duty payable comes only to ₹11 crores, whereas the Company has paid a total amount of ₹13.97 crores to Neo Power purported for purchase of the machinery. 18. The interim order had also observed that on the listing day i.e. September 5, 2011, an entity, namely, Overall Financial Consultants Private Limited, bought and sold 6.65 lakh shares of the Company and had incurred losses to the tune of ₹ 2.13 crore. When the trail of funds was tracked, it was observed that the Company had transferred ₹ 50 lakh on September 2, 2011 from the issue proceeds to Sharadaraj Tradefund Limited. Thereafter, Sharadaraj Tradefund Limited transferred ₹ 25 lakh each to Makesworth Project and Developers Private Limited and Shridhan Jewelers Private Limited. These two entities had together transferred ₹ 50 lakhs to Overall Financial Consultants Private Limited. Overall Financial Consultants Private Limited was also found to have received funds to the tune of ₹ 2 crore from entities, namely, Growfast Realties, Jaganath Consultants, Silicon Hotel, Khusboo Complex, Neelkamal Dealcom, Alishan Estates and Pushpanjali Hirise.

The said entities had received funds from Mangalmayee Hirise, who in turn had received IPO proceeds from the Company through layers [from the Company to Konark (₹ 5.5 crore) and then to Mangalmayee (₹ 5.5 crore)]. The interim order had observed that Overall Financial Consultants Private Limited, the entity who traded on the listing day and incurred losses, had received a total of ₹ 2.50 crore by September 5, 2011 out of the issue proceeds of the Company, as mentioned above. 19. The said transfer of monies to Overall Financial Consultants Private Limited was allegedly done through layers of entities. It is prima facie alleged that the Company had transferred funds to the said entity in order to set off its losses sustained by it through its trades in the shares of the Company on the listing day. The Company has submitted that its transfer of monies to Sharadaraj Tradefin Limited and Konark Commerce and Industries Limited was towards repayment of ICDs and that it was not aware of further transfer of funds by these entities. However, considering the facts such as the non-disclosure of receipt of ICDs from various entities, the Company's proposal to repay such ICDs out of the IPO proceeds and the actual transfer of funds out of the issue proceeds to such entities, the prima facie relationship found amongst certain entities who are claimed to have advanced ICDs to the Company and the preponderance of probabilities arising out of the facts and circumstances of the case, I am not convinced at this stage with the submissions made by the Company in this regard.

20. The Company, while not disputing the non-disclosure of the facts with respect to the raising of funds through ICDs, payment to entities from whom ICDs were raised through funds raised through IPO, the appointment of Suryamukhi as the contractor, orders placed for plant and machineries with Neo Power and the advance payments made to them, has submitted that it relied on its lead manager, D & A Financial Services Private Limited and had furnished all information and documents sought by it. However, the Company and its directors/officers cannot wriggle out of their obligations in respect of the Company's fund raising exercise.

21. As observed in the interim order, seven companies namely Konark Commerce &Industries Ltd., Sunshine Housecon Ltd., Shardaraj Tradefin Ltd., Blue PrintSecurities Ltd., Pioneer Prodev P. Ltd., Pushpanjali Commotrade P. Ltd. and Jagdhatri Dealcom P. Ltd. have common directors. As per the information available on the website of Ministry of Corporate Affairs, it was noted that Blue Print, Sunshine and Shardaraj have common address. Further, Jagdhatri and Pushpanjali also have common address. Therefore, based on the criteria of common directors and common addresses, the above entities who have given ICDs to the Company and to whom issue proceeds were transferred appear to be connected. Further, 2 entities namely Bankebihari Commercial P. Ltd. and Dream Valley Sales P. Ltd. have common directors and address. I note that Mr. Parag Dinesh Doshi, signatory of the proforma invoice of Neo Power, is the CEO of Neo Power and is also the director of Hillston Advisors, which had given ICDs to the Company. It is observed that the directors of the Konark Group (as defined in the interim order) from whom ICDs were availed by the Company and the directors of Suryamukhi Projects are common. It is therefore noted that certain ICD providers and certain other entities to whom issue proceeds were transferred had common directors. It is also noted from paragraphs 19 and 20 of the interim order that certain entities who were part of the chain through whom the IPO proceeds were routed from the Company to Overall Financial, had common directors as mentioned therein. Considering the facts and circumstances, it is clear that all these transactions were not at arms length and gives rise to a presumption that the ICD mechanism was adopted by the Company to siphon off the issue proceeds. 22. From the foregoing, the following observations inter alia emerge– a) No disclosures were made in the RHP/prospectus by the Company with respect to the decision to avail ICDs. b) Presence of common directors and common addresses between certain entities that have extended ICDs and between certain entities to whom the Company has transferred funds from the issue proceeds. c) Non-disclosure of the engagement of Suryamukhi for providing consultancy and execution of civil work and electrical installation and for which the Company has paid ₹15.3 crore.

d) Non-disclosure of the fact that the Company has engaged Neo Power for supply of machinery. The CEO of Neo Power was found to be a director of an entity which had placed ICDs with the Company. e) Irregularities in the placing of orders for machinery and execution/construction of civil work. f) Company not providing documents with respect to its entire expenditure of ₹562.40 lakhs. The Company has also failed to provide copy of the sale deed with respect to its claimed purchase of land and instead had produced only the agreement to sell. Further, the Company has not provided bills/receipts for the expenditure of approx. ₹14 crores to Neo Power. g) The transfer of substantial funds from out of the issue proceeds which found their way to those entities who had suffered losses on account of their trading in the shares of the Company on the listing day. Such transfer by the Company is prima facie held to be for the purposes of recouping of the losses by those entities. The above factors cast aspersions on the bonafides of the Company and the manner in which it has utilised the issue proceeds raised in its IPO. 23. Mr. Atul Ranchal (Chairman of the Company), Mr. Rajesh Mahajan (the Managing Director), Mr. Durga Shankar Maity, the Company's CEO (erstwhile Director - Technical) were part of the Board meetings when resolutions were passed for raising funds through ICDs. I also note that Mr. Durga Shankar Maity was the Chairman of the Core Technical Committee that recommended the import of machineries for production, quality control, etc. With respect to Mr. Ketan Shah, CFO (erstwhile DGM - Accounts) and Ms. Parvinder Kaur (the erstwhile Company Secretary), I note that they were signatories to the Prospectus. Further, Mr. Ketan Shah was the authorized signatory to the contract entered into between the Company and Suryamukhi for the civil work and Ms. Parvinder Kaur being the Company Secretary of the Company, is the key person who executes the day to day activities encompassing all the key areas of Corporate Governance especially during the process of IPO. Therefore, Mr. Ketan Shah and Ms. Parvinder Kaur cannot overlook their responsibilities on the pretext that they were not part of the Board Meetings when the decisions were taken.

24. From the foregoing, I find that the submissions of the Company and its directors/officers, Mr. Atul Ranchal, Mr. Rajesh Mahajan, Mr. Durga Shankar Maity, Mr. Ketan Shah and Ms. Parvinder Kaur at this stage, do not give any plausible reasoning/explanation for their actions. I also note that investigation in the matter has been completed and appropriate action as deemed appropriate, in accordance with law, would be initiated against the Company and the aforesaid persons. In the light of above facts and circumstances of the matter, I am therefore of the considered view that no intervention is called for, at this stage, in either vacating the directions issued vide the interim order or modifying them, with respect to the Company, Mr. Atul Ranchal, Mr. Rajesh Mahajan, Mr. Durga Shankar Maity, Mr. Ketan Shah and Ms. Parvinder Kaur. 25. Ms. Monika Sabharwal and Mr. Lalit Mahajan have resigned from the post of Independent Directors of the Company on January 06, 2012. They were also the signatories to the Prospectus though they did not attend the board meetings held on May 25, 2011, July 02, 2011 and July 21, 2011, when the Company decided to raise funds by way of ICDs.

They have submitted that they were not involved in the day-to-day management/affairs of the Company. Since the said individuals have already undergone the restraint imposed vide the interim order for more than a year and that they were not responsible for the day to day affairs of the Company during their tenure when they were the directors, I am of the considered view that the directions issued against them issued vide the interim order be vacated. 26. I note that the Company has submitted that if SEBI was not inclined to lift the restraint order completely, the Company should atleast be permitted to use the funds lying locked and frozen in the escrow account, subject to any terms and conditions as deemed fit by SEBI, in the overall interest of the project, the Company and the shareholders. I note that the Company has submitted that it needs funds to be deployed for meeting the project related expenses. The Company has also submitted that despite impediments, it has performed well. In support of its request, the Company drew my attention to an Order passed by the Hon'ble Calcutta High Court in the matter of RDB Rasayans Limited.

I have perused the said Order and note that the SEBI Order dated December 28, 2011 issued in the matter of IPO of RBD Rasayans Limited, which inter alia directed the said company to call back the loan extended from the issue proceeds, was challenged before the said Court. While disposing off the writ petition, the Hon'ble High Court had observed that by allowing the applicants to utilize a sum of ₹ 6.50 crore (out of IPO proceeds of ₹ 31.60 crores) for the purpose for which the IPO was made with some conditions would sub-serve the interest of the investors. I further note that when this order was issued by the Hon'ble High Court, the investigation in the matter of IPO of RDB Rasayans Limited was still underway. 27. In this case, I note that the Company has raised ₹ 63 crore through its IPO and received ₹ 61.04 crore as issue proceeds after deduction of issue related expenses. As per the prospectus dated August 22, 2011, the proposed aggregate expenditure on land, building and construction and plant and machinery is ₹ 38.49 crore. The funds deposited in the escrow is only ₹ 14.40 crore.

Therefore, the Company already had ₹ 46.64 crores at its disposal to meet its IPO objectives. I further note that the investigation in the matter has been completed and further proceedings are being initiated against the Company and its directors/other officials. A show cause notice would be issued with all material relied upon by SEBI with respect to the charges against the Company and its directors/other officials in the matter. Thereafter, a decision would be taken in that proceeding, conclusively determining whether the Company and its directors/other officials were responsible for such contraventions/lapses alleged against them. Considering the same in the light of the fact that the funds deposited in the escrow account are the funds of the investors who have subscribed to the shares of the Company in its IPO, and also as the manner of utilization of such IPO funds by the Company is doubtful at this stage, I am of the considered view that it would not be proper to order the release of funds from the escrow account. The same could be decided only on completion of such proceedings against the Company/its directors/other officials.

28. In view of the forgoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4) and 11B thereof, hereby issue the following directions : (i) the directions issued against Brooks Laboratories Limited, its Chairman - Mr. Atul Ranchal, its Managing Director - Mr. Rajesh Mahajan, its Chief Executive Officer - Mr. Durga Shankar Maity, its erstwhile Company Secretary and Compliance Officer - Ms. Parvinder Kaur and its Chief Finance Officer - Mr. Ketan Shah, vide the ad interim ex-parte Order dated December 28, 2011 in the matter is confirmed. The said directions would continue to be in force till further orders from SEBI.

(ii) the directions issued against Ms. Monika Sabharwal and Mr. Lalit Mahajan (erstwhile independent directors of Brooks Laboratories Limited) vide the ad interim ex-parte Order dated December 28, 2011 are vacated with immediate effect.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Date : July 9th, 2013 Place: Mumbai