Can you or any other experienced member here tell me, what sort of legal options a minority shareholder can take in such cases where promoter’s actions are so blatant and obvious ?
First of all, it depends on how much one is invested. For a big investor - it is worth in my view to pursuing the company for its wrongdoing.
Promoters are generally sophisticated, charming and convincing and very well connected. If they are hatching a plan, I am sure they hatch it well in advance (with the help of expert lawyer and accountant) and make sure they create as complex structure as possible, which makes it difficult to track the funds — the case in points in DHFL and 8K software.
By the time investor know about the fraud, the damage is already done, promoters have already taken the money from the company into their own bank accounts or assets and the stock price already hammered down. So, even if one pursues, he would not get much other than plenty of pain and a huge commitment of time from his part. Despite that, if he succeeds, how much he will get - not much in my view.
All in all, I think the pay-off is not worth the efforts unless you are a considerable investor in the stock.
The best strategy would be to follow what Mr Ramdeo Agarawal has suggested- The moment you know there is something fishy, run away from it, even if you see 100 baggers in the stock.
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The new member to join this ever green and ever increasing family is 8K Miles 
You are right, it may not be worth the time and effort in terms of monetary value for a small investor. But I think, not letting off such promoters and dragging them to courts is the only civil way to send out strong signals to other crooks in the game. But even the courts will be helpful only when there are laws in place to protect the rights of minority shareholders. The fact that such promoters get off so easily tells me either the laws are very weak or there aren’t any. Maybe some lawyer who is also an investor can shed some light on this.
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8K Miles was such a clear case of fraud but still some gullible investors got charmed by cloud, AWS, awards. VP thread had ample warning on this company.
It’s really sad that it has taken more than a year to officially be labelled a fraud. Shows the state of our country. This article came in oct 2018 -
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Going through the contents of this thread and other threads in the VP Forum have been very fruitful. I could avoid many companies which tanked as a result of corporate governance or high leverage. The warnings of many seniors like Phreak have done yoemen service to novices like me who could avoid these stocks and save our hard earned money. The work is highly appreciated and a big salute to the VPers who are handholding the bigginers.
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The contents of VP threads helped me in avoiding two big losses in SREI Infra Finance and Kellton tech, really grateful to these threads as they are really helpful for small investors like me
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Close on the heels of DBS complainthttps://forum.valuepickr.com/t/opto-circuits/330/63?u=pankaj_dharamshi, The Central Bureau of Investigation (CBI) in Bengaluru registered a case against Bengaluru-headquartered Opto Circuits (India) Limited (OCIL), a medical technology company, after State Bank of India (SBI) alleged that it had incurred a loss of Rs 354 crore because the firm falsified and forged documents while availing cash-credit facilities.
In his complaint filed on Monday evening, M Ramakrishna Shenoy, assistant general manager of State Bank of India, stressed assets management branch, said the company cheated the bank between 2011 and 2016 and identified the accused as OCIL; Vinod Ramnani, chairman and promoter director and his wife and former promoter director Usha Ramnani, residents of Kasavanahalli on Sarjapur Road; Jayesh Patel, promoter director and resident of California, US; Thomas Dietiker, promoter director, resident of California, and other unknown persons.
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Old article from Money life- but very relevant for this thread.
Hear first 2 min to understand modus-operandi. This is particularly relevant for penny stock listed on BSE.
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Some insights into DHFL from an incisive piece in Mint:
Leaving aside the matter of disclosure (that forms the headline), which is the least of worries for the promoter, the findings are damning, promoters action so brazen that every regulator should have been seized of the matter, listing suspended, special court set-up to rule on the alleged fraud and the public (which funds all of the regulators / Govt / Courts) protected. DHFL is a public limited desposit raising company. That we are nowhere close has very ominous signs. Not to mention also that IL&FS is also nowhere close to resolution. Cobrapost allegations, which was dismissed by atleast one CNBC market moving commentator as novices by a quick tweet, are all proving to be true.
Some key findings:
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Auditors of Dewan Housing and Finance Corp. Ltd ] filed a fraud complaint with the corporate affairs ministry as early as August and this information was withheld from lenders as they were drawing up a recast plan!!! This plan had to be scuttled soon after this knowledge!
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“During the course of the audit, the auditors had also raised concerns on certain repayments. Repayments by some entities could not be traced in the financial statements of DHFL." Simply wow! Whether the repayments were falsely declared, or they were taken out of DHFL to some parties is not mentioned. KPMG also says that repayments to the tune of Rs 1,941 crores by 28 entities are missing in DHFL bank statements. I couldn’t figure out what it actually means. Were the repayments fudged or were the repayments made but did not reach DHFL because they were taken out before that via intermediary agents, or were all not bank accounts not used for audit?!
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…these transactions (Rs 40,000 crores) included intercorporate deposits of ₹5,652 crore, certain loans and pass-through certificates amounting to ₹32,425 crore and ₹257 crore, respectively. These were due to deficiency of documents and accounting entries without depositing of cheques. This would mean cash was likely fudged. Just wondering what sanctity even any rating would have.
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“Multiple accounting entries were initially recorded in certain customer accounts for receipts despite the cheques or negotiable instrument not been deposited in the bank(s) and these have been subsequently reversed,"
Now with SFIO also joining the probe the matter will get even more uncertain!
But, on the other hand ladies and gentleman here’s what DHFL management said loudly on the cover of its annual report:
@esoteric this makes 8K Miles look naive
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#diffsoft
I haven’t followed this company over the years because I dislike real estate related companies.Since the Cobrapost revelations I have been reading about the misdemeanours of this co.
Is this KPMG report.available in the public domain for reading?
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No, very unlikely they will put it up given the stakeholders involved.
Good read on the promoter shenanigans in this recent IPO company. Stock is down 20% LC today.
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Came across this ppt, not sure about the source.
It talks about modus operandi of a fraudster based on authors’s experience for over 2 decade.
The PPT is rather big and packed with information, so need time in your hand to go through it.
Highly recommend.
https://drive.google.com/file/d/1zirEs488OEEbk3ZjnvdBb6lxh4vogRIt/view?usp=sharing
Due to the size of the file (e.g 5 MB), I cannot upload it here, hence sharing from my drive. If anyone encounter any problem, let me know.
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Sterling Biotech Group: Is the ‘Generous’ Danny Patel of Sandesara Drive, Virginia, Managing Fugitive Sandesaras’ Vast US Assets?
A completely unconnected litigation in the United States has thrown up yet another money trail of the fugitive Sandesara family, the promoters of Sterling Biotech and Sterling SEZ, that owes Indian public sector banks (PSBs) vast sums of money.
For those who have not followed this scandalous story, the Sandesaras (Nitin, Chetan and Dipti) are absconding and are believed to be holed up in Nigeria where they have extensive businesses.
They have been accused of money laundering and have lookout notices issued against them by every national investigation agency –Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and Serious Frauds Investigation Office (SFIO).
And, yet, Indian PSBs are working with them to settle the massive outstanding dues of their group, of over Rs15,600 crore, at a 55% haircut through an emissary. The Sandesaras are also pushing banks to file litigation to buy time to make the payment.
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Audit Regulator NFRA Finds Serious Lapses In Deloitte’s Audit Of IL&FS Financial Services
Deloitte Haskins and Sells LLP (DHS) failed to meet auditing standards when it vetted the books of India’s IL&FS Financial Services Ltd (IFIN) for the 2017/2018 financial year, the audit watchdog said on Thursday.
IFIN is a unit of Infrastructure Leasing & Financial Services (IL&FS), a major Indian infrastructure financing and construction firm which defaulted on some debts last year, triggering wider concerns about risk in the financial industry.
The government has taken control of the group and has appointed a team to turn it around.
An audit quality review disclosed that Deloitte Haskins failed to comply with required standards on auditing (SAs), the National Financial Reporting Authority (NFRA) said in a statement.
“The instances of failure noticed are of such significance that it appears to NFRA that DHS did not have adequate justification for issuing the audit report asserting that the audit was conducted in accordance with the SAs,” NFRA said.
Audit Quality Review Report for IFIN
A spokesman for Deloitte India said the IFIN audit for financial year 2017/2018 was a joint audit, adding that the firm’s “audits have been performed in accordance with applicable laws, regulations and professional standards in India.”
DHS and KPMG affiliate BSR & Associates jointly conducted the 2017/2018 audit.
India has been seeking to ban both auditing firms for five years, alleging lapses in their audits of IFIN, according to a filing by the corporate affairs ministry, Reuters reported in June. Both firms denied any wrongdoing…
NFRA said the audit quality review identified non-compliance with the requirements of SAs and spelled out insufficiencies in the quality controls of audit firms, but was not a rating tool.
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Here’s a case study of how SEBI treats informants attempting to expose wrongdoing and judge for yourself. The company, Urja Global Ltd, is listed on both, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Whistleblower, Surendra Singh Rao is at pains to point out that it is just one among hundreds that use the same modus operandi .
Stock Manipulation Is Rampant & Unchecked: Here’s Why
We must remember that this brazen manipulation is happening in listed entities on national bourses, which are technically subject to very strict reporting requirements, disclosure rules and corporate governance standards.
SEBI’s response makes you wonder whether its officials have even a rudimentary understanding about the reason why such detailed and copious disclosures are mandated under its repeatedly tightened corporate governance and disclosure rules.
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What fraud did SREI do?
Jiya Eco Products Ltd (JEPL) is a SME company from Gujarat.
JEPL was incorporated in December 2011. Subsequently, the Company was converted into a public limited company in February 2014. It Filed Draft prospectus in Feb 2015 and vide prospectus dated June 22, 2015 it raised Rs. 458.28 lakhs through Initial Public Offer on BSE SME platform
Subsequently the Company was listed on BSE SME Platform on July 2015 and was migrated to BSE Main Board with effect in February 2018. National Stock Exchange Limited permitted shares of JEPL(and 13 other Companies) to trade and admitted to deal on the exchange In August 2019.
JEPL claimed to be the only listed company that manufactures biomass briquettes and pellets from agriculture waste and forest waste such as cotton stalk, groundnut shells, cumin waste, forest leaves, household waste, etc. These briquettes and pellets are substitutes of some other commonly-used feed such as coal, charcoal, firewood, diesel, petrol and LPG etc. The company also claimed Bio fuel manufactured by the it was much cheaper as compared to the prices of the petroleum products. Bio Fuel provides 30-50% savings as compared to regular fuel.
The company has an existing plant at Bhavnagar and was expanding its operations in Gandhidham.
Promoters of JEPL has other entities - Jiya Eco India Limited (Wholly Owned Subsidiary), Jiya Eco (Gandhidham) Private Limited (Wholly Owned Subsidiary) and Sahaj Chem Industries
Earlier red flags
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Jiya Eco India Limited (JEIL), a company owned by promoters was acquired by JEPL in March 2018 by JEPL from the promoters with the ultimate purpose of converting it as the wholly owned subsidiary. The Company’s subsidiary JEIL has declared two 1:1 bonus issues in quick succession in the 2nd week of September 2018 and 2nd week of June 2019. Thereafter Thereafter JEIL has filed Draft Prospectus with BSE SME Platform, -proposing a public issue of 24,96,000 equity shares of face value of Rs. 10 each To purchase bio-pellet burner machines of Rs. 480 lakhs
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Promoters of JEPL has other entities - Jiya Eco (Gandhidham) Private Limited and Sahaj Chem Industries which are engaged in similar line of business as JEPL.
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The Company issued 49,74,585 convertible warrants and at Rs. 54 each (including premium of Rs 44 each), aggregating to Rs. 26,86,27,590. Out of above, 43,20,254 equity shares has been allotted upon conversion of warrants 654,331 warrants have been forfeited in August, 2019 (Warrant holders would have lost 25% of upfront amount deposited) As a result of this and also transfer of certain shares from promoter & promoter group to public, the shareholding of Promoter & Promoter Group has decreased from 63.63% (as on March 31, 2018) to 39.53% (as on March 31, 2019) . Therafter, the Company has announced 1:1 bonus, which does not affect the shareholding pattern further.
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Receivables led sales growth
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Sale of shares by Harshad M. Monpara (Director / Promoter)
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Very long working capital cycle
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Auditors have resigned twice in last few years
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Operating cash flows are negative for most of the financial years.
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Resignation of Mr. Harshad Monpara Non-executive Promoter Director and Mr. Nitin Kapadia as Independent Director of the Company,
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Delay in plant commissioning
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Frequent Equity Dilution and Increased Borrowings
The search was conducted by GST officials at the premises of the Company and its wholly owned subsidiary in last week of December 2019
As per news item in Gujarati Newspaper high irregularities of Rs. 375 crores were noticed including bogus sales,.
None of the links relating to Investors are opening on the Company’s website .
https://www.jiyaeco.com/invest.php
The Company is yet to file its version to BSE on this News Report.
Investors need to be careful.
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The regulator, which had conducted an investigation in the matter of the alleged irregularities during the initial public offering of various scrips, had observed certain irregularities in the transactions in the shares that were issued through the IPOs during the period 2003-05, before their listings on the stock exchanges.
The two had been accused of making unlawful gains by cornering shares of various companies meant for retail investors.