SEBI finds ₹7.95 crore IPO funds diverted to four vendors

This order details SEBI's adjudication proceedings against the Managing Director of Veerkrupa Jewellers Limited (VJL), the merchant banker First Overseas Capital Ltd. (FOCL), and three other individuals for alleged violations related to the misuse of IPO proceeds and breach of escrow agreement terms.

Who it concerns: Mr. Chirag Arvindbhai Shah, First Overseas Capital Ltd. (FOCL), Ms. Mala Soneji, Mr. Rushabh Pradeep Shroff, Mr. Satyen Bhupendra Dalal, and Veerkrupa Jewellers Limited (the issuer).

What SEBI found or ordered

• SEBI found that 100% of VJL's net IPO proceeds (₹7.95 crore) were remitted directly to four third-party vendors (Akshat Gold, Karuna Bullion, Navkar Gold, Satva Gold) from the escrow account.
• SEBI observed that FOCL used the wrong instruction form (Annexure A2 for issue expenses) to authorize these transfers, violating the Escrow Agreement.
• SEBI noted that VJL's MD, Mr. Chirag Arvindbhai Shah, submitted false information to SEBI by claiming he signed the RTGS forms, which contradicted evidence from FOCL and Axis Bank.
• The order cites alleged violations of LODR Regulations, ICDR Regulations, and Merchant Bankers Regulations by the noticees.
• The document is an Adjudication Order initiated under Section 15-I of the SEBI Act, 1992.

Also in the document

• The total amount involved in the disputed IPO proceeds is ₹8.10 crore raised in July 2022.
• The investigation revealed that the vendor requests were sent via WhatsApp with disappearing messages enabled, preventing FOCL from providing dated receipts.
• The order notes that the banker to the issue (Axis Bank) processed the instructions on face value, indicating process lapses.