SEBI Cracks Down on Debock Industries for Major Fraud
In response to these findings, SEBI has imposed several immediate and stringent measures.
The Securities and Exchange Board of India has taken action against Debock Industries Ltd. after serious allegations of financial misconduct.
SEBI's investigation reveals that the company's promoters have engaged in a scheme to defraud investors and deceive regulatory authorities.
According to SEBI’s observations, Debock Industries was involved in systematic financial manipulation. The regulator noted that the case at hand is not considered routine and indicates a significant breach of trust and regulatory norms.
SEBI’s findings suggest that the promoters of the company syphoned funds, using the listing of the company as a means to defraud investors and gain substantial personal benefit. The preferential allotment of shares, which was intended to justify the company’s move to the main board of the National Stock Exchange, has been exposed as a facade.
Once these shares were allotted, they were discreetly transferred off-market to the promoters, who subsequently sold them to unsuspecting shareholders. This led to a drastic decrease in promoter shareholding from 64.79% to 9.41%, while public shareholding surged from 35.21% to 90.56%. The number of public shareholders also ballooned, from 171 in 2021 to 53,389 by March 31, 2024.
Further compounding the issue, SEBI found that after Debock Industries migrated to the NSE’s main board, the company conducted a rights issue in which the promoters did not participate.
The funds raised from this rights issue, which were supposed to be used for legitimate business purposes, were reportedly misappropriated by the promoters and their associates. This was followed by another preferential allotment, with similar allegations that the company did not receive the proceeds. Overall, a pattern of back-to-back financial issuances, which cumulatively should have generated close to Rs162 crore, seems to have evaporated.
The SEBI order also noted that many transactions were mere book entries fabricated to inflate the balance sheet. The financial statements of Debock Industries have been described as a work of fiction.
The regulatory body has also uncovered that forged bank statements were submitted to SEBI, demonstrating a level of audacity and disregard for legal compliance. The regulator noted that blatant deception not only undermined the integrity of the securities market but also cast a shadow on all honest companies striving to maintain transparency and ethical conduct.
In response to these findings, SEBI has imposed several immediate and stringent measures.
Mukesh Manveer Singh, Chairman and Managing Director of Debock Industries, and Priyanka Sharma, the former Non-Executive Director, have been restrained from holding any director or key managerial positions in listed companies or SEBI-registered intermediaries.
Promoter Sunil Kalot is also barred from trading or accessing the capital markets. The implicated individuals are required to deposit Rs 89.24 crore, identified as unlawful gains, into an interest-bearing Escrow Account within 15 days. Additionally, they are instructed to return all funds from the rights issue, excluding the amount already directed to be impounded, back to the company.
Banks and depositories associated with these individuals have been directed to freeze their accounts and restrict transactions, allowing only those necessary to comply with SEBI’s order. No debits are to be made from these accounts without SEBI’s permission, except for transferring funds to the Escrow Account.
This is an interim order, which means a temporary order is in place for the time being. Additionally, it's an ex parte order, which means that it was passed without the participation of the Debock.
