SIPHONING OF IPO FUNDS BY 20 SMEs SEBII FINDS EVIDENCE FOR ISSUES MANAGED BY MERCHANT BANKER FIRST OVERSEAS CAPITAL LTD (FOCL)

 SIPHONING OF IPO FUNDS BY 20 SMEs SEBII FINDS EVIDENCE FOR ISSUES MANAGED BY MERCHANT BANKER FIRST OVERSEAS CAPITAL LTD  (FOCL)

SYNOPTICS TECHNOLOGIES LTD

SEBI’s probe cantered on Synoptics Technologies Ltd, an IT company that raised money via an SME IPO on the NSE Emerge platform.

The total IPO size was ₹ 54.04 crore, of which ₹ 35 crore was fresh issue money (i.e., funds raised from the public) according to SEBI.

PUBLIC  “ISSUE-RELATED EXPENSES.”

SEBI found that ~₹ 19 crore (about 54% of the fresh issue proceeds) was transferred out from the IPO escrow account before listing/trading began, under the guise of “issue-related expenses.”

BUDJETED  ISSUE RELATED EXPENSE

Crucially, this ₹ 19 cr was much larger than what was disclosed in the prospectus for issue-related expenses — Synoptics had declared only ₹ 0.80 Crore (₹ 80 lakhs) in the prospectus for those expenses.

WIDER PROBE — 20 SME IPOS IN FOCUS

SEBI has stated that it will examine ~20 other SME IPOs which had First Overseas Capital as the lead manager (between May 2022 and April 2025) to check if similar misuse occurred

SYNOPTIC & PROMOTERS BARRED:

 SEBI has debarred Synoptics Technologies and its three promoters (Jatin Shah, Jagmohan Shah, Janvi Shah) from the securities market, pending further investigations.

FOCL RESTRICTED:

SEBI has barred First Overseas Capital Ltd (FOCL) from taking any new merchant banking mandates (IPO management) until further orders.

REGULATORY RISK FOR SMES / IPO INVESTORS:

This is a big red flag for SME IPOs. SEBI’s move shows that even “small IPOs” (SME IPOs) are not free from serious misconduct.

MERCHANT BANKER ACCOUNTABILITY:

This case could set a precedent: merchant bankers can no longer just be "issue gatekeepers" they are being held accountable for post-IPO fund utilization.

R V SECKAR , FCS, LLB ,79047 19295

PENALTY ON STATUTORY AUDITOR FOR NON-DISCLOSURE OF RELATED PARTY TRANSACTIONS & MSME INTEREST DUES

 PENALTY ON STATUTORY AUDITOR FOR NON-

DISCLOSURE OF RELATED PARTY

 TRANSACTIONS & MSME INTEREST DUES

ROC Bangalore penalizes Statutory Auditor – Deloitte Haskins & Sells in the matter of Stanly OEM Sofas Limited

FACTS OF THE CASE

Non-disclosure of MSME interest details by statutory auditors is a serious issue leading to penalties for both the company and the auditor, as it violates the requirements of the MSMED Act, 2006 and the Companies Act, 2013.

Auditors are responsible for reporting the company's non-compliance, including details on unpaid amounts, delayed interest, and interest accrued but unpaid to MSME suppliers.

 Recent changes also require disclosure of all MSME payments, not just delayed ones, in Form 3CD of the tax audit report under Section 43B(h).

MSMED ACT, 2006:

Buyers of goods and services from MSMEs must disclose the status of payments to MSMEs in their annual accounts. This includes unpaid amounts, interest paid, and interest accrued but unpaid.

RELATED PARTY TRANSACTIONS NOT REPORTED

·      Non-disclosure of related entities as required under AS-18

 

·      Related party transactions carried out without proper Board approval.

 

ROC,BENGALURU LEVIES FINE ON PARTNER AT DELOITTE HASKINS & SELLS,

The Registrar of Companies, Karnataka, has imposed a penalty of ₹30,000 on Monisha Parikh, Partner at Deloitte Haskins & Sells, for failing to report critical non-compliances under Section 143 of the Companies Act, 2013 (Order dated 28.04.2025).

KEY TAKEAWAYS

Despite these significant irregularities, the statutory audit report contained no adverse remarks or qualifications.

This action underscores the increasing regulatory emphasis on auditor accountability, reporting diligence, and transparency in corporate disclosure.

Auditors must ensure accurate statutory disclosures to avoid penalties and legal consequences.

R V SEKAR FCS,LLB, 79047 19295

FOR THE ATTENTION OF LANDLORS & TENANTS FROM JULY 1, 2025, EVERY RENTAL OR LEASE AGREEMENT MUST HAVE DIGITAL STAMPING + REGISTRATION — OR YOU COULD FACE PENALTIES UP TO ₹5,000!

 FOR THE  ATTENTION OF LANDLORS & TENANTS

FROM JULY 1, 2025, EVERY RENTAL OR LEASE

 AGREEMENT MUST HAVE DIGITAL STAMPING +

 REGISTRATION — OR YOU COULD FACE

 PENALTIES UP TO ₹5,000!

Renting a house without a registered agreement is no longer safe or valid.

From July 1, 2025, every rent deal must have digital stamping + registration — or you could face penalties up to ₹5,000!

WHAT THE NEW RULE SAYS

MANDATORY DIGITAL STAMPING FROM JULY 1, 2025

As of July 1, 2025, all new rental agreements (residential & commercial) must be digitally stamped via authorized online/e-stamping platforms.

This means you can’t just use traditional physical stamp paper like before.

PENALTY FOR NON-COMPLIANCE

If you don’t use a digital stamp for a new rent agreement, there’s a fine of ₹5,000.

According to some sources, the fine applies to the landlord or property owner.

REGISTRATION STILL RELEVANT

Beyond stamp duty, the agreement may also need to be registered, depending on the state and the duration of the lease. For instance, in Maharashtra, rent agreements for more than 11 months must be registered.

Not registering (or improper stamping) can have legal consequences.

WHY THIS CHANGE IS HAPPENING?

FRAUD PREVENTION:

Digital stamps make agreements more traceable and harder to forge.

LEGAL CLARITY & ENFORCEABILITY:

Digitally stamped agreements are more legally robust.

Convenience & Transparency: Process goes online; easier to store, verify, and retrieve.

WHAT YOU SHOULD DO IF YOU'RE INVOLVED IN A RENT DEAL

LANDLORDS:

Make sure any new or renewed agreement is digitally stamped. Don’t risk the ₹5,000 penalty.

TENANTS:

Ask your landlord to provide a digitally stamped agreement. Keep a copy.

USE AUTHORIZED PLATFORMS:

Use government-approved e-stamping portals (e.g., SHCIL or state portals) to do this properly.

REGISTER IF REQUIRED:

Check your state’s rules on registration (especially for long-term leases) and do the registration if mandatory.

SAVE DIGITAL COPIES:

Once stamped, save the PDF + the digital certificate — this will be useful for legal, HRA, or verification purposes.

KEY TAKEAWAYS

STATE VARIATIONS:

 Stamp duty rates and registration rules differ a lot between states. Example: Maharashtra has its own rates and portal rules.

ONLY NEW AGREEMENTS:

 Many sources say this rule applies for new or renewed rental agreements from July 1, 2025.

R V SEKAR FCS,LLB, 79047 19295

CAN A CHARTERED ACCOUNTANT BE HELD FOR ABETMENT OF MONEY LAUNDERING MERELY ISSUING FORM 15CB UNDER THE INCOME-TAX ACT ?

 CAN A CHARTERED ACCOUNTANT BE HELD FOR ABETMENT OF MONEY LAUNDERING MERELY ISSUING FORM 15CB UNDER THE INCOME-TAX ACT ?

[THE DEPUTY DIRECTOR V. MURALI KRISHNA CHAKRALA — SLP (CRIMINAL) DIARY NO. 8123/2024 (SUPREME COURT)]

FACTS OF THE CASE

The petitioner K. Murali Krishna Chakrala (a Chartered Accountant) had issued five certificates in Form 15CB under Rule 37BB of the Income‑tax Rules, 1962 in favour of M/s B.K. Electro Tool Products (a Chennai-based entity) for foreign outward remittances.

The remittances were alleged by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) to be part of bogus import transactions/fictitious bank accounts and hence involving the proceeds of crime.

 

The prosecution sought to implicate the CA under Section 3 of PMLA — for “knowingly assisting” in money-laundering by issuing Form 15CB without validating the genuineness of the underlying transactions.

DECISION OF THE MADRAS HIGH COURT

The High Court held that issuing Form 15CB by a CA in the ordinary course of professional duty does not automatically amount to an offence under Section 3 of PMLA unless there is knowledge or intent (mens rea) of assisting laundering.

SUPREME COURT PROTECTS PRACTICING CHARTERED ACCOUNTANT :

SC Held that merely issuing Form 15CB under the Income-Tax Act does not amount to abetment of money laundering.

The Supreme Court upheld this reasoning by Chennai High Court, affirming that the CA cannot be held criminally liable merely for performing his statutory duty under tax law.

KEY TAKE-AWAY POINTS

Issuing Form 15CB by a CA in good faith, based on client-submitted documents, is not by itself offence under PMLA.

To incur liability under Section 3 PMLA, there must be knowledge or conscious assistance in process connected with proceeds of crime.

R V SECKAR , FCS ,LLB 79047 19295

CAN A COMPANY RAISE ₹24000 CRORES THROUGH PRIVATE PLACEMENT OF OPTIONALLY FULLY CONVERTIBLE DEBENTURES (OFCDS) WITHOUT SEBI’S CONSENT ?

 CAN A COMPANY RAISE  ₹24000 CRORES

 THROUGH PRIVATE PLACEMENT OF

 OPTIONALLY FULLY CONVERTIBLE

 DEBENTURES (OFCDS) WITHOUT SEBI’S

 CONSENT ?

SEBI V. SAHARA INDIA REAL ESTATE CORPORATION LTD. & ORS.

FACTS OFF THE CASE

Two Sahara group companies — Sahara India Real Estate Corporation Ltd. (SIRECL) and Sahara Housing Investment Corporation Ltd. (SHICL) — raised approximately ₹24,000 crore from around 3 crore investors between 2008–2009.

No public listing. No SEBI approval. Just promises of high returns — wrapped in trust and paperwork.

But when SEBI started asking questions, Sahara called it “a private arrangement.”

OUTSIDE SEBI’S REGULATORY JURISDICTION

They issued Optionally Fully Convertible Debentures (OFCDs), claiming these were “private placements” and therefore outside SEBI’s regulatory jurisdiction.

RED HERRING PROSPECTUSES (RHPS)

The companies filed Red Herring Prospectuses (RHPs) with the Registrar of Companies (RoC) under the Companies Act, 1956, not with SEBI.

LEGAL QUESTION

Can a company raise funds from the public under the guise of a “private placement” without complying with SEBI regulations and disclosure norms?

SEBI’s RETALIATION

The offer was made to more than 50 investors, which automatically makes it a public issue under Section 67(3).

Sahara failed to comply with SEBI’s public issue norms — no listing, no prospectus, and no investor protection mechanism.

Hence, the money raised violated the SEBI Act, 1992, Companies Act, 1956, and ICDR Regulations, 2009.

DEFENSE BY SAHARA

Claimed that the issue was private, offered only to “friends, associates, group employees, and loyal customers.”

Asserted that since RHPs were filed with the RoC, SEBI had no jurisdiction.

Also claimed that the funds were refunded to investors.

SUPREME COURT’S VERDICT

The Supreme Court upheld SEBI’s jurisdiction and ruled:

Sahara had illegally issued Optionally Fully Convertible Debentures (OFCDs) to millions of people, violating public issue rules under the Companies Act, 1956 and SEBI Act, 1992.

The  Supreme Court ordered Sahara to refund over ₹24,000 crores with interest to investors through SEBI — marking a historic assertion of SEBI’s regulatory power.

KEY TAKEAWAY:

 No  Company is above market regulation. If money is raised from the public — even indirectly — SEBI’s jurisdiction automatically applies.

which was in violation of  the SEBI Act, 1992, Companies Act, 1956, and ICDR Regulations, 2009.

R V SECKAR , FCS , LLB 79047 19295

WHICH COMPANIES HAVE TO FILE FORM DRR UNDER FEMA WITH RBI THROUGH YOUR BANKER ?

 WHICH COMPANIES HAVE TO FILE FORM DRR UNDER FEMA WITH RBI THROUGH YOUR BANKER ?

WHAT IS FORM DRR –( DISINVESTMENT/REPATRIATION REPORT) UNDER FEMA?

Form DRR (Disinvestment/Repatriation Report) is used to report:

·      Full or partial disinvestment from a foreign JV/WOS (Joint Venture or Wholly Owned Subsidiary), and

·      Repatriation of sale proceeds to India.

·      Form DRR is used for reporting the issue or transfer of Depository Receipts (DRs), such as American Depository Receipts (ADRs) or Global Depository Receipts (GDRs), that are issued in accordance with the Depository Receipt Scheme, 2014.

This ensures compliance with Regulation 16 of the FEMA (Overseas Investment) Regulations, 2022.

REGULATORY CONTEXTUAL

Relevant Regulation: Rule 19 and 20 of the Foreign Exchange Management (Overseas Investment) Rules, 2022

Prescribed Form: Form DRR (Annexure IV of the Overseas Investment Regulations, 2022)

Governing Notification: FEMA Notification No. 120/2004-RB (as updated through the 2022 Overseas Investment Regulations)

DEADLINE FOR FILING FORM DRR

Within 30 days from the date of disinvestment or repatriation of proceeds

TO WHOM FORM DRR HAS TO FILED WITH ?

·      The Authorised Dealer (AD) Category-I Bank through which the original investment was made.

 

·      The AD Bank submits the report to the RBI via the FIRMS Portal (Entity Master / Overseas Investment section).

 

·      The filing is done through the Single Master Form (SMF) on the RBI's Foreign Investment Reporting and Management System (FIRMS) portal. The SMF is a unified platform for reporting various foreign investment transactions. After filing ,the Authorised dealer will forward the form to RBI.

ATTAHEMENTS TO THE FORM DRR

DOCUMENTS TO BE ATTACHED

·      Copy of valuation certificate

·      Proof of remittance of sale proceeds

·      Copy of share purchase/sale agreement

·      Auditors’ certificate confirming accounting and repatriation

·      Any regulatory approval letters (if applicable)

 

OUTCOMES FOR NON-ADHERENCE

Failure to file Form DRR within the prescribed time may result in:

·      Violation under Section 13 of FEMA, 1999

·      Liability to penalty and compounding proceedings by RBI

In summary, Form DRR is a mandatory compliance requirement under FEMA for the reporting of transactions related to Depository Receipts and  full or partial disinvestment from a foreign JV/WOS.

 

R V SECKAR , FCS ,LLB 79047 19295

DEADLINE REMINDER – LAST DATE FOR FILING FORM PAS-6 IS 29th NOVEMBER 2025 APPLICABLE FOR UNLISTED PUBLIC COMPANIES AND, NON-SMALL PRIVATE COMPANIES.

                                      DEADLINE REMINDER –

 LAST DATE FOR FILING FORM PAS-6 IS 29^th

NOVEMBER 2025 APPLICABLE FOR UNLISTED

 PUBLIC COMPANIES AND, NON-SMALL

 PRIVATE COMPANIES.

TO WHICH COMPANIES IT IS APPLICABLE

Form PAS-6 filing is mandatory for all unlisted public companies and non-small private companies to report on the reconciliation of their share capital.

PURPOSE OF THE FORM

This half-yearly report reconciles issued capital against shares held in physical and dematerialized forms and must be submitted to the Registrar of Companies (ROC) within 60 days of each half-year end.

To reconcile issued, physical & demat share capital and ensure data consistency with NSDL/CDSL.

TO WHICH COMPANIES  FORM PAS-6 IS NOT APPLICABLE

Exemptions apply to Nidhi companies, government companies, and wholly-owned subsidiaries.

IS PAS-6 IS APPLICABLE TO LISTED COMPANIES?

Form PAS-6 is not applicable to listed companies.

Listed companies are governed by the Securities and Exchange Board of India (SEBI) regulations and are required to file a similar share capital reconciliation certificate on a quarterly basis with the stock exchanges under Regulation 76 of the SEBI (Depositories and Participants) Regulations, 2018.

BY WHOM PAS-6 IS TO BE CERTIFIED ?

PAS-6 is to be certified by A Practicing Company Secretary / Chartered Accountant.

 WHAT HAPPENS IF FORM PAS-6 IS NOT FILED?

Non-filing may attract penalties under Section 450 of the Companies Act, 2013.

CAUTION

File Form PAS-6 on the MCA portal before 29/11/2025 to stay compliant and to avoid payment of penalties.

R V SECKAR , FCS,LLB 79047 19295