ORDER UNDER REGULATION 10(2) OF SEBI (DEBENTURE TRUSTEES) REGULATIONS, 1993 AGAINST ARYAMAN FINANCIAL SERVICES LTD.
Aryaman Financial Services Ltd. is registered with SEBI as a category I Merchant Banker (INM 000006807). Aryaman Financial Services Ltd. (hereinafter referred to as ‘the applicant’) has made an application dated 29.10.2001 to Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) for registration as debenture trustee as per Regulation 3 of SEBI (Debenture Trustees) Regulations, 1993.
The application was examined and considered taking into account all the matters which are relevant to a debenture trustee as per Regulation 6 of the SEBI (Debenture Trustees) Regulations, 1993 (hereinafter referred to as the ‘said Regulations’). As the activity of debenture trustee is fiduciary in nature, it is important that it fulfills each and every requirement, as prescribed under Regulation 6 of the said Regulations, in letter and spirit. On scrutiny, it has been found that the applicant had an unsatisfactory track record as merchant banker. It has been observed that the Merchant Banker had failed in exercising due diligence in the issues lead managed by it, which are as under:
- Rich Paints Ltd.,
- Eider-e-Commerce Ltd
- Ashu Motors and General Finance Ltd.,
- Gurukul Technologies Ltd.,
- My Fellow Fashions (Exports) Ltd
After due process in each case, SEBI has issued warnings to the Merchant Banker for lack of due diligence in four cases (Enquiry proceedings not over in Gurukul Technologies Ltd.) In addition to the above, it was observed that the Merchant Banker had submitted incorrect information in the declaration furnished to SEBI along with the offer documents of the following issuer companies :
- Tabassum International Ltd.,
- Rajpurohit GMP (India) Ltd.
- Shine Computech Ltd.
- Dynacons Systems & Solutions Ltd.
Therefore, it was felt that the application for grant of registration as debenture trustee should be rejected as the applicant failed to fulfill the criteria of being a fit and proper person as required under Regulation 6(f) of the said Regulations. The same was communicated to the applicant vide letter dated August 5, 2002 and an opportunity of hearing was given as per Regulation 10(1) of the said Regulations. The hearing was fixed on 24.8.02. Further, SEBI vide letter dated August 20, 02 re-scheduled the hearing for August 26, 2002. Shri P.V.R Murthy VC and MD, Shri Mohan Datari, President of Aryaman Financial Services Ltd. appeared before me on the said date and submitted that they were thinking of withdrawing the application as the market conditions had changed since the time they applied and hence they did not wish to take on the activities of debenture trustee any more. However, they still responded to the allegation regarding their not being fit and proper person and made their submissions.
I have carefully considered and examined the application of Aryaman Financial Services Ltd. I have also considered the submissions made before me during the hearing. It is pertinent here to mention that the said Regulations cast on the debenture trustee onerous responsibilities which are fiduciary in nature. Therefore, it is necessary in the interests of investors to evaluate the performance of the applicant as a merchant banker in order to examine and correlate as to whether the applicant would be able to carry his responsibilities as a debenture trustee as per the said Regulations, if registration is granted. The track record of the applicant as merchant banker shows that it has failed to comply with due diligence requirement in several issues that have come over a period of time. This makes the applicant fall short in fulfilling the criteria of being a fit and proper person as prescribed in Regulation 6(f) of the said Regulations.
Therefore, in exercise of the powers conferred upon me under section 4 (3) of SEBI Act, 1992 read with Regulation 10(2) of the said Regulations I, reject the application made by Aryaman Financial Services Ltd. to register itself as a debenture trustee.
PLACE: MUMBAI
DATE: 20TH September 2002