Adjudication Order in Respect of Brooks Laboratories Ltd. and Others in The Matter of IPO of Brooks Laboratories LTD

BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO.- ID-4/AO/DRK/675-680/01-05/2015]
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF

INDIA ACT,1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR
HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING
OFFICER) RULES, 1995
In respect of:
1.
Brooks Laboratories Ltd. - PAN: AACCB5316P
2.
Mr. Atul Ranchal (Chairman) - PAN: ADMPR5359L
3.
Mr. Rajesh Mahajan (Managing Director)- PAN: AFGPM8060D
4.
Mr. Durga Shankar Maity (Chief Executive Officer) - PAN: AHNPM4221B
5.
Mr. Ketan Shah (Chief Financial Officer) - PAN: BIUPS7078D
6.
Ms. Parvinder Kaur (Company Secretary) - PAN: BNQPK5210E

(Address: Suite No. 203-204, Eco House,
Vishveshwar Nagar, Goregaon (E)
Mumbai- 400 063)
(In the matter of Brooks Laboratories Ltd.)

---------------------------------------------------------------------------------------------------------FACTS OF THE CASE IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI')
conducted an investigation into the alleged irregularities in the Initial Public
Offer (IPO) of Brooks Laboratories Ltd. (Brooks / Company) covering the
period from June 2011 to September 2011 (hereinafter referred to as
Investigation Period'). The investigation inter-alia revealed that (1) Brooks
Laboratories Ltd., (2) Mr. Atul Ranchal Chairman of Brooks, (3) Mr. Rajesh
Mahajan- Managing Director of Brooks, (4) Mr. Durga Shankar Maity- Chief
Executive Officer of Brooks, (5) Mr. Ketan Shah- Chief Financial Officer of
Brooks and (6) Ms. Parvinder Kaur Company Secretary of Brooks
(hereinafter referred to as 'Noticees No.1 to 6' respectively or all may be
collectively referred to as 'Noticees') along with several other entities / layers
had indulged into certain irregularities / fraudulent exercise including siphoning
off funds to the tune of ` 8 Crores from the IPO proceeds.
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APPOINTMENT OF ADJUDICATING OFFICER

2. Subsequent to the transfer of erstwhile Adjudicating Officer, the undersigned
was appointed as Adjudicating Officer vide order dated July 30, 2013, under
Section 15-I of the Securities and Exchange Board of India Act, 1992
(hereinafter referred to as the 'SEBI Act') read with Rule 3 of the SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer)
Rules, 1995 (hereinafter referred to as the 'Adjudication Rules') to inquire
into and adjudge under sections 15 HA and 15 HB of the SEBI Act, the
violation of the provisions of sections 12 A(a), (b) and (c) of SEBI Act read with
regulations 3 (a), (b), (c) and (d) and regulations 4(1), 4(2) (d), (e), (f) and (k)
of SEBI (Prohibition of Fraudulent and
Unfair Trade Practices relating to
Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP

Regulations), regulations 57(1), 60(4)(a), 60(7)(a) and Clauses 2 (VII) (G), 2
(XVI) (B) (2) of Part A of Schedule VIII read with regulation 57(2)(a) of SEBI
(Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter
referred to as ICDR Regulations) alleged to have been committed by the
Noticees.
SHOW CAUSE NOTICE, REPLY AND HEARING

3. A common Show Cause Notice No. EAD-3/DRK/JP/23066/2013 dated
September 11, 2013 (hereinafter referred to as SCN) was issued to Noticees
through Registered Post Acknowledgement Due under Rule 4(1) of the
Adjudication Rules requiring Noticees to show cause as to why an inquiry
should not be held against them and why penalty, if any, should not
be
imposed on them under sections 15HA and 15HB of the SEBI Act, for the
aforesaid alleged violations of the provisions of SEBI Act, PFUTP Regulations
and ICDR Regulations. Based on the findings of investigation, the following
allegations were leveled against Noticees in the SCN;
A. Noticee No. 1 / Brooks entered in to the capital market by way of an offer of

equity shares to the public in the price band of ` 90 to ` 100 per equity share
with a face value of ` 10 each aggregating ` 63 crores. The Red Herring
Prospectus (RHP) filed by Brooks was dated August 3, 2011 and the
Prospectus of Brooks was dated August 22, 2011 (hereinafter referred to as
'Offer Document').
B. Certain irregularities/fraudulent exercise were committed by the Noticees
along with the other entities / layers, resulting into siphoning off funds to the
tune of ` 8 crores from the IPO proceeds. The Board of Directors of the Brooks
passed certain resolutions to raise funds through short term unsecured loans
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in the form of Inter Corporate Deposits (ICDs) from some of the entities /
lenders (as shown in table /charts at para 4-5 of the SCN) in order to fund its
capital expenditure without the presence of independent directors. As per the
information available on the website of the Ministry of Corporate Affairs (MCA),
some of the entities / lenders from whom ICDs were raised, were connected /
related to each other. Copy of MCA website showing the inter-se relation /
connection of directors of said entities was provided to the Noticees along with
SCN.
C. The funds raised by Brooks in the form of ICDs, some portion / part was
transferred to entities namely- Suryamukhi Projects Pvt. Ltd. (Suryamukhi) a
project contractor and to the Neo Power Universal FZ LLC, UAE (Neo Power)
a company manufacturing equipment & machinery. The details of the fund flow
to Suryamukhi and the Neo Power are shown at table / charts at para 5-6 in
the SCN. Copy of Bank Statements / fund transfer detail amongst Brooks and
the entities as shown in para 4-6 of SCN were provided to the Noticees along
with SCN.
D. Brooks received a total sum of ` 61,03,07,312 (after deduction of issue
expenses) on September 02, 2011 from IPO proceeds, and then transferred
on September 2 & 3 of 2011 these funds to some of the entities from whom
most of the ICDs were raised. The details of entities and funds so transferred
were mentioned at Para 8 of the SCN.
E. The amount paid by Blue Print, Shardaraj, Sunshine and Konark (lenders)
aggregating to a sum of ` 8 crores to Brooks as ICDs were nothing but ` 7
Crores received from Shitalnath Buildcon Pvt. Ltd. (Shitalnath). Blue Print,
Shardaraj, Sunshine, Konark and Suryamukhi in the guise of ICDs, through
fictitious transactions and wrong book entries, have round tripped a total sum
of ` 8 crores. After the IPO, Brooks paid ` 8 crore to Blue Print, Shardaraj,
Sunshine and Konark out of the IPO proceeds towards repayment of these
ICDs along with ` 25 lac as interest on these loans. Brooks transferred ` 30.40
Crores out of the Issue proceeds to some entities from whom ICDs were
raised and also loaned to MK Distributors P. Ltd. on September 05, 2011. The
Issue proceeds were not utilized for the purpose stated under the object of the
Issue in page 67 of the Prospectus dated August 22, 2011.
F. Allegedly, through fictitious transactions and round tripping of funds, the
Noticees in concert with the said entities had siphoned off funds to the tune of
` 8 crores from the IPO proceeds. Copy of Bank Statements showing the
transfer of funds by Brooks to Konark, Blue Print, Shardaraj and Sunshine (the
entities from whom ICD were raised) were provided to the Noticees along with
the SCN.
G. Syal & Associates had given a quotation of ` 12.20 crores to the Brooks for
construction of building and same was disclosed in offer document, however,
in spite of a lower quotation, the management of Brooks appointed
Suryamukhi as a project contractor for an amount of ` 15.30 crores and the
said entire amount was paid in advance to Suryamukhi for project work i.e.
consultation and execution of architectural design, civil work, plumbing work,
electrical installation etc. without the infrastructure being developed at the
project site. Agreement dated June 01, 2011 entered into by Suryamukhi with
Brooks has been executed on a sheet of white paper and not on a proper
stamp paper. The same cannot be genuine as it is not a normal business
practice that a contract of such size and magnitude was not entered on a
stamp paper or registered, in order to give legal enforceability to such contract.
Allegedly, the entire motive to enter into such non genuine contract with
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Suruamukhi by Brooks, was to round trip the funds as mentioned in Para

above.
H. Out of said IPO proceeds, ` 2.50 crores was transferred by Brooks to Overall
Financial Consultants Pvt. Ltd. (Overall Financial) through layers of several
entities (as shown in diagram at para 11 of the SCN) which was ultimately
utilized by Overall Financial to trade in the scrip of Brooks and simultaneously
made losses which were adjusted through the IPO proceeds. By transferring
such funds, Brooks allegedly participated in fraudulent exercise whilst dealings
in the securities. Copy of Bank Statements showing the transfer of funds by
Noticee No. 1 to Overall through layers of entities, were provided to the
Noticees along with SCN as Annexure VII.
I. The core technical committee of Brooks in its report dated June 27, 2011 had
recommended to the Chairman of the Brooks to buy imported machineries.
The recommendation was implemented swiftly by Brooks without any
quotation from Neo Power (except proforma invoices) and moreover ` 13.97
crore was paid in advance through part payments between 21-Jul-11 to 02Aug-11. Under the heading Plant & Machinery at page no. 70 - 73 of the RHP
dated August 03, 2011 and page 69 72 of Prospectus dated August 22,
2011, the names of suppliers from whom the quotations were received for
supply of plant & machinery were disclosed, however, these suppliers were
based in India and the name of Neo Power (a foreign supplier) was not in the
list of the suppliers. Despite the fact that Brooks changed the procurement
process from indigenous suppliers to a foreign supplier and paid ` 13.97
crores in advance before the RHP dated August 03, 2011, no disclosure was
made about this important information in the RHP / Prospectus, which is
allegedly misleading in nature to investing public. Copy of extract of RHP/
page 70 -73 were enclosed along with SCN as Annexure VIII.
J. Brooks passed resolutions in its board meetings held on May 25, 2011, July 2,
2011 and July 21, 2011 to raise funds through short term unsecured loans to
fund its capital expenditure and borrowed ` 30.40 crores from 12 entities in the
form of ICDs. However, appropriate disclosure regarding said ICDs were not
mentioned / included in the RHP / Prospectus dated August 03, 2011 and
August 22, 2011 respectively. Copy of board minutes dated May 25, 2011,
July 2, 2011 and July 21, 2011 were enclosed along with SCN as Annexure IX.
K. Noticee No. 2 was the Chairman, Noticee No. 3 was the Managing Director,
Noticee No. 4 was the Director Technical of Brooks at the time of issue of
RHP / Prospectus and they signed the documents in that capacities. They
were conscious of the decisions regarding short term finance / ICDs,
appointment of project contractor and placement of purchase orders for plant
and machinery. Further, Noticee No. 5 was CFO / DGM Accounts and was
the authorized signatory to the agreement dated June 01, 2011 between
Brooks and Suryamukhi and was aware that Brooks had appointed
Suryamukhi as a project contractor. He was also one of the signatories to the
Prospectus and had declared that all the statements therein were true and
correct. Noticee No. 6 was the Company Secretary during the process of IPO
and she was also one of the signatories to the RHP / Prospectus. As a
Company Secretary, she was in charge of the entire issue process.
L. Noticees made declaration at page 326 of the Prospectus dated August 22,
2011 as under:
"We certify that all relevant provisions of Companies Act, 1956 and the
guidelines issued by the Government of India or the Guidelines and the
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Regulations issued by the SEBI, established under Section 3 of the Securities

and Exchange Board of India Act, 1992, as the case may be, have been
complied with and no statement made in this Prospectus is contrary to the
provisions of Companies Act, 1956, the Securities and Exchange Board of
India Act, 1992 or rules made or Regulations issued there under or guidelines
issued, as the case may be. We further certify that all the statements in this
Prospectus are true and correct".
M. However, they had failed to disclose aforesaid several vital information / facts
in the RHP / Prospectus. Therefore, it was alleged that all the Noticees
intentionally suppressed and failed to disclose such several vital information/
material facts, in the RHP / Prospectus, and misled the public/investors in
taking informed decision while investing in the said IPO.
N. Therefore, in light of series of events i.e. accepting of ICDs / repayments of
ICDs through IPO proceeds, round tripping of funds and siphoning off the
funds received in the IPO under a fictitious transfer, awarding the contract to
Suryamukhi at a price higher than the quote given by Syal & Associates,
diversion of IPO proceeds in equity market, non disclosures of several vital
information in the RHP/Prospectus, it was alleged that the Noticees
deliberately indulged into such fraudulent exercise in complicit with other
entities with an intention to defraud the investing public.
O. In view of the above, it was alleged that the Noticees have violated the
provisions of regulations 3 (a), (b), (c) and (d) and regulations 4 (1), 4 (2) (d),
(e), (f) and (k) of PFUTP Regulations read with sections 12 A(a), (b) and (c) of
SEBI Ac and regulations 57(1), 60 (4) (a), 60(7) (a) and Clauses 2 (VII) (G), 2
(XVI) (B) (2) of Part A of Schedule VIII read with regulation 57(2) (a) of ICDR
Regulations which reads under;
PFUTP Regulations
3. Prohibition of certain dealings in securities
No person shall directly or indirectly
(a) buy, sell or otherwise deal in securities in a fraudulent manner;
(b) use or employ, in connection with issue, purchase or sale of any security
listed or proposed to be listed in a recognized stock exchange, any
manipulative or deceptive device or contrivance in contravention of the
provisions of the Act or the rules or the regulations made thereunder;
(c) employ any device, scheme or artifice to defraud in connection with
dealing in or issue of securities which are listed or proposed to be listed on a
recognized stock exchange;
(d) engage in any act, practice, course of business which operates or would
operate as fraud or deceit upon any person in connection with any dealing in
or issue of securities which are listed or proposed to be listed on a recognized
stock exchange in contravention of the provisions of the Act or the rules and
the regulations made thereunder.
4. Prohibition of manipulative, fraudulent and unfair trade practice
(1) Without prejudice to the provisions of regulation 3, no person shall indulge
in a fraudulent or an unfair trade practice in securities.
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(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade

practice if it involves fraud and may include all or any of the following,
namely:(d) paying, offering or agreeing to pay or offer, directly or indirectly, to any
person any money or moneys worth for inducing such person for dealing in
any security with the object of inflating, depressing, maintaining or causing
fluctuation in the price of such security;
(e) any act or omission amounting to manipulation of the price of a security;
(f) publishing or causing to publish or reporting or causing to report by a
person dealing in securities any information which is not true or which he does
not believe to be true prior to or in the course of dealing in securities;
(k) an advertisement that is misleading or that contains information in a
distorted manner and which may influence the decision of the investors;
SEBI Act
12A. No person shall directly or indirectly
(a) use or employ, in connection with the issue, purchase or sale of any
securities listed or proposed to be listed on a recognised stock exchange, any
manipulative or deceptive device or contrivance in contravention of the
provisions of this Act or the rules or the regulations made thereunder;
(b) employ any device, scheme or artifice to defraud in connection with issue
or dealing in securities which are listed or proposed to be listed on a
recognised stock exchange;
(c) engage in any act, practice, course of business which operates or would
operate as fraud or deceit upon any person, in connection with the issue,
dealing in securities which are listed or proposed to be listed on a recognised
stock exchange, in contravention of the provisions of this Act or the rules or
the regulations made thereunder;
ICDR Regulations
Manner of disclosures in the offer document.
57. (1) The offer document shall contain all material disclosures which are
true and adequate so as to enable the applicants to take an informed
investment decision.
(2) Without prejudice to the generality of sub-regulation (1):
(a) the red-herring prospectus, shelf prospectus and prospectus shall contain:
(i) the disclosures specified in Schedule II of the Companies Act, 1956; and
(ii) the disclosures specified in Part A of Schedule VIII, subject to the
provisions of Parts B and C thereof.
Public communications,
research reports.
publicity
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materials,
advertisements
and
60 (4) The issuer shall make prompt, true and fair disclosure of all material
developments which take place during the following period mentioned in this
sub-regulation, relating to its business and securities and also relating to the
business and securities of its subsidiaries, group companies, etc., which may
have a material effect on the issuer, by issuing public notices in all the
newspapers in which the issuer had issued pre-issue advertisement under
regulation 47 or regulation 55, as the case may be:
(a) in case of public issue, between the date of registering final prospectus or
the red herring prospectus, as the case may be, with the Registrar of
Companies, and the date of allotment of specified securities;
60 (7) Any advertisement or research report issued or caused to be issued by
an issuer, any intermediary concerned with the issue or their associates shall
comply with the following:
(a) it shall be truthful, fair and shall not be manipulative or deceptive or
distorted and it shall not contain any statement, promise or forecast which
is untrue or misleading;
DISCLOSURES IN RED HERRING PROSPECTUS, SHELF ROSPECTUS
AND PROSPECTUS
Clause 2 of Part A of Schedule VIII
An issuer making a public issue of specified securities shall make the
following disclosures in the offer document. However, an issuer making a fast
track issue of specified securities may not make the disclosures specified in
Part B of this Schedule in the offer document. Further, an issuer making a
further public offer of specified securities may not make the disclosures
specified in Part C of this Schedule, in the offer document, if it satisfies the
conditions specified in para 2 of that Part:
VII (G) Sources of Financing of Funds Already Deployed: The means and
source of financing, including details of bridge loan or other financial
arrangement, which may be repaid from the proceeds of the issue.
XVI (B) (2) The signatories shall further certify that all disclosures made in
the offer document are true and correct.
4. The SCN was served upon Noticees and Noticees No. 1 to 2 and 4 to 5
through their letters dated September 24, 2013 and Noticee No. 3 through
letter dated September 23, 2013 sought certain documents viz. copy of
investigation report, copy of all correspondence / communication between
entities referred in the SCN and their statements recorded by SEBI. In said
letters, they also assured to submit reply towards the SCN within 4 weeks
upon receipt of said documents.
5. Vide communiqu dated September 30, 2013, Noticees No. 1 to 5 were

informed that no statements of entities are relied upon in the SCN and all the
relevant documents / evidences as relied in the said SCN, were already
provided to them along with SCN. Vide said communiqu, the relevant extracts
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of the investigation report were provided to them and they were also advised
to submit reply to the SCN immediately. However, the Noticees failed to
submit reply.
6. For the purpose of inquiry, a common notice of hearing dated October 23,
2013 was served upon Noticees providing an opportunity of hearing on
November 12, 2013 at SEBI Bhavan in Mumbai. In the said notice of hearing,
Noticees were also advised to submit their reply towards the SCN immediately
but not later than November 06, 2013. In respect to the said notice of hearing,
Noticees vide their letter dated November 11, 2013 sought adjournment of
hearing on the ground that they are in the process of preparing detailed reply
in consultation with their lawyers and they requested for another three weeks
time to file reply. Vide said letters, Noticees also requested for an opportunity
of hearing in the matter after filing their reply. In the meantime, Noticees No. 1
to 3 & 5 preferred an application for consent order in the matter before SEBI,
however, no reply towards the SCN was received from Noticees.
7. Thereafter, final opportunity of hearing was provided to Noticees on February
07, 2014 vide common notice dated January 21, 2014. As sufficient time was
granted to the Noticees for filing their reply towards the SCN, Noticees were
again advised under the said notice of hearing, to submit the reply not later
than January 31, 2014. Accordingly, Noticees filed their individual detailed
reply dated January 31, 2014 towards the SCN. In respect to the said notice of
hearing, a letter dated February 04, 2014 from Corporate Law Chambers India
Advocates was received wherein it was stated that Mr. Kumar Desai, Advocate
was engaged in the matter and he expressed personal difficulty to appear on
the scheduled date of hearing and hence request for short adjournment was
made by them. Considering the facts / circumstance of the case and principle
of natural justice, another final opportunity of hearing was provided to Noticees
on February 18, 2014 vide notice dated February 10, 2014. Vide letter dated
February 12, 2014, a confirmation for attendance on scheduled date of hearing
was received from the Corporate Law Chambers India Advocates.
8. The hearing on February 18, 2014 was attended by Authorised Representative
of Noticees viz. Mr. Kumar Desai- Senior Advocate, Mr. Vinay ChauhanAdvocate, Mr. Prashant
Ingle -Advocate,
Mr. Atul Ranchal (Chairman of
Brooks) and Mr. Rajesh Mahajan (Managing Director of Brooks). The

submissions made by them were recorded.
During the hearing, the said
authorised representatives reiterated as submitted in aforesaid detailed reply

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of Noticees. During the hearing, copy of certain case laws relied upon by them
were filed and they also assured to file additional written submissions within a
period of 15 days. Accordingly, the hearing was concluded in the matter.
Thereafter, additional reply / written submission dated March 08, 2014 was
received on behalf of Noticees.
9. The consent applications made by Noticees No. 1 to 3 & 5 have been rejected
by SEBI and an intimation to that effect was sent by concerned department of
SEBI to Noticees vide letter dated July 31, 2014 and to the undersigned on
August 04, 2014.
10. After taking into account the allegations, replies, submissions of Noticees as
stated above, including replies / written submissions of Noticees dated July 26,
2012 & December 11, 2012 filed before the Whole Time Member of SEBI and
other evidences / material available on records, the case is being decided as
under. The main submissions made by Noticees in their replies / written
submissions are summerised hereunder:
(i)
The Company is a pharmaceutical research and manufacturing services

Company having set up a well equipped manufacturing facility at Baddi,
Himachal Pradesh. It manufactures wide range of products catering to the
critical care segment.
(ii)
Company has planned to enter into manufacturing of intra-venous large volume

injectable (IV) in non PVC closed bags. Since, the said system is a next
generation system not available freely in India, the Company pioneered this
next generation high safety standard system to the masses in India at a
reasonable cost and also export it.
(iii)
The Company has consistently been a profit making company since inception
and in the last four finnacial year viz. 2009-10, 2010-11, 2011-12, 2012-13, we
have made a profit of 5.17 crores,
6.89 crores, 8.84 crores and 7.14
crores respectively.
(iv)
Till the year 2009, our unit at Baddi, Himachal Pradesh was running with very
good profit. The Company's consistent profitable performance made us to look
for expansion and growth. After scrutinizing various options, the Company
opted for setting up a Pharmaceutical Formulation Plant at Gujarat in a
Pharmaceutical Special Economic Zone (SEZ) named JB SEZ.
(v)
In order to meet the capital requirement for our proposed expansion, the
Company decided to come out with an IPO after being suggested of the same by
Mr. Dinesh Kaushik of D & A Financial Services Private Limited.
Subsequently, the Company engaged D & A Financial Services Private Limited
( D & A) as the Lead Merchant Banker in our IPO and a Memorandum of
Understanding ("MoU") dated November 24, 2010 was entered into between us
and D & A for that purpose.
(vi)
Post appointment as Lead Merchant banker to the issue, D & A sought various
documents / clarifications from the Company from time to time, conducted site
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visits/ inspections, conducted due diligence of the affairs of the Company for the
purpose of drafting offer document and making appropriate disclosures in the
same. The Company at all points of time religiously provided all the documents/
clarifications to D& A as and when sought by it. During the Issue process, the
Company had kept D & A in loop with regard to all its activities / decisions.
(vii)
Subsequently, the Draft Red Herring Prospectus (DRHP) was filed with
SEBI on 25.11.2010. The main objects of the IPO were disclosed in the offer
document. Requisite application seeking in-principle approval from the stock
exchanges was filed on 26.11.2010. The in-principle approval of the stock
exchanges for listing of the securities so proposed to be issued was also
obtained on 23.12.2010.
(viii)
During February 2011, the Government of India, in the annual budget,

proposed to cut tax incentives offered on SEZs. The Government of India also
proposed a deadline of March 31, 2012 for setting up manufacturing units in
any SEZ to avail tax benefits. In view of the same and since the IPO document
of the Company was pending clearance and there was no clarity of time frame
within which the same would be cleared. In light of said, we started exploring
the possibility of raising funds for short period in order to commence work in
the project.
(ix)
It is pertinent to note that the procurement of plant and machineries and the
civil work at site was required to go simultaneously. The machineries were to
be procured at early stage of construction of building of a plant, because few
machineries are required to be installed when building is being erected. It is not
feasible to install some machines after completion of the building. Land was
already tied up by the Company at the relevant time, only impediment was lack
of requisite infrastructure, which the Company was pursuing with JB SEZ for
providing the same expeditiously.
(x)
It was in this background, sometime around May 2011, the Company started
exploring short term funding option for its project activities as disclosed in the
offer document. In the meantime, the Company's Core Technical Committee
(headed by Dr. D S Maity-Technical Director who is Noticee No. 4 in the
present proceeding) recommended the import of high precision machineries as
per the latest international standards to cater to the highly regulated export
market for pharmaceuticals. Pursuant to the recommendation, the Company
shortlisted Suryamukhi for carrying out the project work at the proposed
project site at JB SEZ and the Neo Power for the supply of high precision
machineries.
(xi)
To ensure that preference and priority is given to the job so as to meet the
deadline of March 31, 2012, the Company, at the request of Suryamukhi paid
an amount of 15.30 crore for procurement of material required for erection of
plant at the proposed site in JB SEZ. This amount was paid out of the ICDs
raised by the Company.
(xii)
While placing orders for various machines and ancillary items with Neo Power,
the Company had instructed it to supply the following machine:- first - BFS
Bottlepack 4010 (main machine) and ancillary items like modular partitions,
walkable false ceiling, clean room doors, Hepa filter housing and the remaining
machine subsequently. The said sequence of supplying machines was indicated
as the machines were to be installed at the project site at different stages of
construction. The BFS Bottlepack 4010 and ancillary items were to be installed
at the start of civil work in the manufacturing area.
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(xiii)
For the purpose of supplying machines, based on the request of Neo Power, the
Company released a total advance of USD 31,31,092 to expedite the
procurement of machineries keeping in mind the March 2012 deadline. The
aforesaid amount was paid as advance on the basis of proforma invoices, out of
the ICDs raised by the Company.
(xiv)
Post placing the said orders for machinery with Neo Power and giving mandate
to Suryamukhi for civil work, the Company vigorously started pursing with JB
SEZ for providing the requisite infrastructure facilities, so that the Company
could acquire the land and commence its project at the site and complete it
before March 2012 deadline.
(xv)
On approval of DRHP, we filed RHP with SEBI. After approval of RHP on

August 01, 2011, the IPO opened on August 16, 2011 and closed on August 18,
2011. The issue was successful and was subscribed 1.76 times. The shares of
the company were listed on stock exchanges on September 05, 201. On
September 2 & 3, 2011 the Company received the total sum of 61,03,07,312
(after deduction of issue related expenses) as issue proceeds. Out of the said
proceeds, the Company repaid an amount of
30.40 crores (along with
interest after deducting TDS) towards the ICDs availed by the Company.
Further, the Company parked
14.40 crores in the fixed deposit and the
remaining balance of IPO was temporary utilized by the company for the
purpose in consonance with disclosures made in the prospectus.
(xvi)
It may be most pertinently noted that to put any machinery for the project in the
State of Gujarat, prerequisite is that the Company must be registered under
VAT under VAT Act 2003. For obtaining registration under VAT, prerequisite is
that the Company, which is setting up the manufacturing plant shall either own
the land or has lease land. Further apart from the VAT registration, the
Company must be registered with the Excise Department, the Company should
hold membership of Industrial Entrepreneurs Memorandum with the Union
Government of India, the Company should have license from Directorate
General of Foreign Trade to import machinery. Since the land for the project
was not ready for the external reasons over which we had no control, no
headway could have been made by the Company and there was no point for Neo
power to deliver machinery to us, as the same would have created further
complications for the Company. It was in these circumstances we had requested
Neo Power not to deliver the machineries procured by it.
(xvii)
Keeping in view the sluggish development at JB SEZ, Panoli, lack of

infrastructure development and reduced incentives for manufacturing plants in
SEZ, overall subdued interest of the manufacturers towards SEZ due to policy
paralysis, the Board of the Company, in the best interests of the company and
its shareholders, convened a meeting on December 17, 2011 to decide about
shifting of project from SEZ to Domestic Tariff Zone (DTZ). In the said Board
meeting it was decided to go for postal ballot process to pass a resolution in
this regard. Accordingly, postal ballot process was initiated on December
17,2011 and executed by registrar Link In Time and intimation in this regard
was duly made to Registrar of Companies on December 22,2011.
(xviii)
In the meantime, SEBI passed the ad interim ex-parte order dated December
28, 2011 prohibiting the Company, its Promoter and Directors from assessing
the securities market and from buying, selling or dealing in securities market,
directly or indirectly, till further orders. The Company was also prohibited from
raising any further capital from securities market, in any manner whatsoever,
till further directions. The Company was also directed to call back the
ICDs/money advanced by it to Suryamukhi and Neo Power, and to deposit the
Page 11 of 40
amounts together with all the IPO proceeds that were lying unutilized with the
Company across all its banks/ deposit accounts or any investments including
mutual fund, in an interest bearing account with a Scheduled Commercial
Bank.
(xix)
It may be noted that the project land currently acquired by the company at
Vadodara is far bigger in terms of area and the same has been acquired by the
Company at a lesser price.
(xx)
The shareholders had approved the proposal for change in the site of the
project. Since, the balance IPO proceeds were deposited in the Escrow Account
as per the directions of SEBI, the Company was severely handicapped
financially. The Company infused funds through internal accruals to procure
land at the alternate site at Vadodara by way of agreement dated March 09,
2012. Post procuring the land, the Company requested Suryamukhi to start civil
work. Suryamukhi took charge of civil work at the site on March 09, 2012 and
conducted surveys and obtained necessary approvals and permissions from
authorities. Subsequently, in November 2013, we have also acquired adjacent
land for the project.
(xxi)
With respect to the alleged non disclosure regarding ICDs, the Company
submitted that it provided all details and documents as and when required by
the merchant banker for the purpose of disclosures in the DRHP / RHP. For
making disclosures, the Company was totally dependent on Merchant Banker
and that it provided all documents and details called for, by the merchant
banker.
(xxii)
With regard to ICDs amount advanced to Suryamukhi and Neo Power, the
Company wrote to them for recalling the amounts advanced. Suryamukhi
informed that it cannot return the amounts as it has already tied up with subcontractors and had also procured the materials. Suryamukhi also informed
that it was ready to start the construction immediately as and when required by
the Company. Neo Power, while denying the return of monies, informed that the
machines viz., BSF Bottle Pack 4010 and ancillary items have already been
procured and could be delivered/shipped as and when required by the
Company. Regarding the remaining machines, Neo Power informed that it will
treat the order as cancelled in view of the directions of SEBI.
(xxiii) On acquisition of the project land, the Company requested Neo Power for
shipping the BSF Bottle Pack 4010 and ancillary items bought on the
Company's behalf as the same was required to be installed first during the civil
work. Neo Power shipped the machinery and the Company received the same
on May 17, 2012.
(xxiv)
The following amount was utilised from the issue proceeds viz. 562 lakh for
land acquisition, 498 Lakh for building construction and 1104 Lakh for
plant/machinery/utilities. Subsequently, SEBI had passed order dated July 09,
2013 inter-alia confirming direction issued against the Company.
(xxv)
From the aforesaid, it can be seen that funds given by the Company to
Suryamukhi and Neo Power was for the purpose of carrying out civil work and
supply of machinery. Therefore, it was wrong to allege that funds were
siphoned off. Every single penny utilized by the Company from its own fund as
well as IPO fund is duly accounted for.
(xxvi)
It is denied that there was any siphoning off funds to the tune of 8 crore from
the IPO proceeds as alleged. The said allegations are based on erroneous
Page 12 of 40
understanding of the factual position and are based on mere surmises and
conjectures.
(xxvii) At the relevant time we were not aware that all the said entities through whom
we had raised the ICDs are related entities and the same was of no concern to
us as they were introduced to us through a chartered accountant in our
business circle. At the relevant time there was nothing adverse about the said
entities in public domain. Here, it may be appreciated that we were borrowers
and not the lenders and our main concern was to raise funds on terms
acceptable to us.
(xxviii) It may be appreciated that while borrowing funds, we were not aware of the
sources of the funds of the Lenders and the same was of no concern to us.
Similarly, while making payments to Suryamukhi, our limited concern was that
we get the desired services for which they were engaged, which they have been
delivering religiously. We are not aware of the subsequent fund transfers done
by Suryamukhi to others and the same is of no concern to us. We have no
control over Suryamukhi or its affairs. We have an arms length relationship
with Suryamukhi.
(xxix) The allegation of round tripping of funds (to the extent of 8 crores out of total
IPO proceeds of
63 crores) is based on further transfer of funds by
Suryamukhi to others, who in turn have allegedly given funds to us by way of
ICDs.
(xxx)
Nothing has been brought on record to even remotely demonstrate as to how we

were allegedly aware of the subsequent transfer of funds by Suryamukhi. In this
context, it is submitted that the funds which we have given to Suryamukhi have
been duly accounted in our books and for the same we have received services
i.e. Consultancy and execution of architectural design, civil work, electrical
installations, etc. There is no dispute over flow of funds from the Bank accounts
of the Lenders to our Bank account and from our Bank account to the Bank
account of Suryamukhi. Copies of the bills raised by Suryamukhi from time to
time for the various services provided for the project are annexed.
(xxxi) As on date, more than 16 crores has already been incurred on the project. A
valuation Report from Government Approval Valuer is annexed. Therefore the
issue of alleged siphoning off cannot arise.
(xxxii) Save and except this allegation of siphoning off, there is nothing on record to
suggest that we are the beneficiaries and nor there is any allegation by SEBI
that we have been the beneficiaries. Further, it has also not been demonstrated
as to how the funds have come back either to the promoters or directors of the
Company directly or indirectly in any manner.
(xxxiii) The insinuation that the board of directors of the Brooks had passed certain
resolutions to raise funds, without the presence of independent directors, is
totally misplaced. Admittedly, the agenda for the meeting was circulated to all
the directors including the independent directors. Since, the independent
directors were not in a position to attend the meeting on the scheduled date, as
communicated by them, therefore the Board had decided to go ahead with the
passing of the resolutions.
(xxxiv) It is denied that the amount paid by Blue Print, Shardaraj, Sunshine and
Konark aggregating to a sum of 8 crores to us as ICDs were nothing but 7
crores received from Shitalnath as alleged. It may be noted that we had
individually and separately received funds from Shaitalnath, Blue Print,
Page 13 of 40
Shardaraj, Sunshine and Konark. We are not aware about the source of funds
of Shitalnath, Blue Print, Shardaraj, Sunshine and Konark and nothing has
been brought on record to show that we were aware of the same. Admittedly, at
the relevant time (i.e. during 30.5.2011 to 3.6.2011), we have only received the
funds.
(xxxv) As on date, an amount of
7,12,74,019/- has been spent as land cost, an
amount of
13,97,49,287/- as the cost of machinery and an amount of
15,30,00,000/- as the cost of construction. Further, an amount of
15, 86,30,701/- is lying frozen in the interest bearing account of State Bank
of India as per the directions of SEBI.
(xxxvi) Further, it has not even been alleged that by the alleged siphoning off of the
funds, either the Company or its promoters / directors have benefited in any
manner.
(xxxvii) Neither we nor any of the promoters of director is even remotely connected with
any of the entities as referred to in the para. No link or connection has been
established between the Company or its directors with the said entities from
whom the funds were raised through ICDs and repaid with interest.
(xxxviii) In so far as quotations received from Syal & Associates is concerned, it may be
noted that Syal & Associates are Architects and not project contractor as
alleged. It may be noted that at the relevant time Syal & Associates had vide
their letter only given an Estimate for the proposed work, which was limited
and restricted to only Civil Work alone.
(xxxix) The proposal of Suryamukhi is totally misplaced. It may be noted that the
agreement with Suryamukhi envisaged much wider gamut of activities to be
executed viz. Designing of the entire facility, execution of civil work and
electrical job etc.
(xl)
Merely because, the quotation of Syal & Associates was allegedly low, no
adverse inference can be drawn qua us for choosing Suryamukhi in the facts
and circumstances as set out above. To ensure that preference and priority is
given to the job assigned so as to meet the deadline of March 31,2012, the
Company at the request of Suryamukhi paid an advance of Rs. 15.30 crores
which was required by Suryamukhi to procure materirals required for erection
of plant at the proposed site in JB SEZ.
(xli)
In so far as agreement dated June 1, 2011 entered into by Suryanmukhi and us,
no adverse inference can be drawn merely because the same is not on stamp
paper. Aadmittedly, the parties to the agreement are abiding by term of
Agreement.
(xlii)
Thus the funds transferred to Shardaraj & Konark to others as alleged, post
receipt of repayments from us, were their own funds and not Companys funds
as insinuated. Further Shardaraj & Konark were free to use their funds as per
their wishes.
(xliii)
It is SEBIs own case that Konark & Shardaraj had lent funds of Rs. 5.50 crores
and Rs. 50 lacs respectively, by way of ICDs in May 2011 to the Company and
that Company had made repayments of 5.50 crores and Rs 50 lacs to Konark
& Shardaraj respectively in Sep 2011. It may be noted that the amounts
involved are same in both the legs of transfers. If that is so, it cannot be alleged
that Company transferred its own funds to the extent of 2.5 crores to Overall
through Konark & Shardaraj.
Page 14 of 40
(xliv)
It is denied that we had, out of IPO proceeds, transferred an amount of 2.50

crores to Overall through layers of several entities as alleged. Said observation
is unfounded and baseless. Admittedly, there is no transfer of funds between us
and Overall. In fact, we are not aware of the said entity and we have no
connection / relation with Overall or its promoters, directors, employees etc.
(xlv)
We are not aware that Overall had utilized

2.50 crores for trading in the
securities market as alleged or that while trading Overall had made losses as
alleged. Admittedly, as per the Chart in the para, Overall has not received any
monies from our bank account. On the contrary, overall has received monies
from some entities.
(xlvi)
It is denied that order as placed with Neopower without quotation as alleged. In

this context it may be noted that based on the interactions, discussions and
presentations, we had placed the orders with New Power. In so far as payment
of advance to Neo Power is concerned it may be noted that, based on the
request of Neo Power the Company released advance to Neo Power to expedite
the procurement of machineries keeping in mind the March 31, 2012 deadline,
as stated in earlier paras.
(xlvii)
With regard to non-mentioning of name of Neo Power in the prospectus, it is

submitted that the list of suppliers and machinery was only indicative and the
end use of machines was same. Further, all the documents including the
quotations were duly provided to the BRLM. We were totally relying on the
BRLM with regard to the IPO process and the preparation of the RHP/
Prospectus and other relevant documents as required to be done by the BRLM
in the IPO process.
(xlviii) Entire SCN and the allegations are vague, lacking of material particulars and
unintelligible. It is not clear from the SCN as to what evidences are available to
substantiate each of the charges levelled against each of the Noticees.
(xlix)
We have already suffered debarment for a period of more than 2 years as on

date and the debarment continues. As a result of the punitive directions, the
growth of the Company has already impeded and suffered considerably to the
detriment of not only the Company but also its shareholders. There are no
complaints against us either by our clients/investors or anybody else.
(l)
We have fully cooperated in the proceedings with SEBI. We have an impeccable

track record, and no history of non-compliance, save and except under these
proceedings. The violations as alleged in the Notice are technical, venial and
unintentional.
Reply of Noticees No. 2 6

(li)
Since part of the charges in the SCN pertain to the Company / Brooks, we adopt
the detailed reply dated January 31st , 2014 filed by the Company, inter alia
refuting the allegations in the Notice, issued in the adjudication proceedings, in
order to avoid repetition.
(lii)
We specifically deny that we have violated any of the provisions of the SEBI Act
or the Regulations as alleged. We deny that there was non-disclosure of
material information in the prospectus or that there was misstatement in the
prospectus or that there was misutilisation of the issue proceeds as alleged, as
all acts done by us were bonafide in nature and under the supervision and
instructions of the Management.
Page 15 of 40
(liii)
Over the years, we have built a very strong professional reputation with
sustained good work conduct and sound integrity. we have a clean track record
without any history of non-compliance. We are not connected to any of the
entities or their directors as referred to in the SCN.
(liv)
There is nothing to indicate in the SCN that we have made any gains or derived
unfair advantage. The Violations as alleged in the SCN are technical, venial
and unintentional. Our conduct has all along been bonafide. All the disclosures
were made bonafide, dehors sinister intent or design.
(lv)
we have already suffered disproportionately for the alleged violations.

Debarment already suffered is sufficient and no further imposition of monetary
penalty is warranted.
(lvi)
Charges in the SCN are predominantly arising from the decisions taken by the
Company regarding short term finance / ICDs, appointment of project
contractor and placement of purchase orders for plant and machinery. It is
pointed out that all the above decisions were taken in a bonafide manner in the
best interests of the Company.
(lvii)
Noticee No. 4 also stated that he had joined as a Chief Executive Officer of
Brooks since 19.09.2011. He has a total work experience of approximately 23
years. Before joining Brooks, he had worked at M/s Venus Remedies Limited
and M/s Unimark Remedies Limited at senior positions. He had joined the
Company as it was looking at setting up Baddi (H.P) plant etc. At present, his
job profile includes Production, Quality Control & Quality Assurance and he is
working on a fixed compensation of 1,06,000 per Month only. He held 3,000
shares of the company but never traded in the shares of the Company and no
such allegation of making any trading gains is also leveled against him.
(lviii)
Noticee No. 5 also stated that he is working with Brooks as a Chief Financial
Officer since December 15, 2010. At present, he is working as a salaried
employee of the Company on a monthly remuneration of 67,000/-. His work
profile includes supervising accounts departments, liaisoning with Bank and
other financial institutions, preparation of budget for cost control among
others. He is not a director of the Company. Charges in the Notice are
predominantly arising from the decisions taken by the Company to enter into an
agreement dated June 01, 2011 to appoint Suryamukhi as the project
contractor, wherein I was the authorized signatory and also signed the
prospectus declaring that all the statements therein were true and correct. I
may like to point out that all the decisions regarding appointment of
Suryamukhi as project contractor were taken in a bonafide manner by the
Company and in the best interests of the Company. Further, all the statements
and disclosures made in the prospectus are true and correct.
(lix)
Noticee No. 6 also stated that I have resigned as a Company Secretary of

Brooks since February 2012, due to certain personal problems. At the relevant
time, I was working as a salaried employee of the Company on a monthly
remuneration of 26,000/- without any perks. My work profile included setting
forth policies and adherence to the rules for the preservation of price sensitive
information among others. I never held any shares in the Company. I have
never traded in the shares of the Company and no such allegation of making
any trading gains is also leveled against me. Charges in the SCN are
predominantly arising from the decisions taken by the Board in its various
Page 16 of 40
meetings held on May 25, 2011, July 02, 2011 and July 21, 2011. It is pointed
out that I was not a party to those decisions, since I was not a member of the
Board.
(lx)
The Noticees along with aforesaid replies also enclosed various annexures in
support of their case and the same are produced as under;
(i)
(ii)
(iii)
Copy of letter written by Brooks to SEBI dated September 24, 2013.

Copy of letter written by SEBI to Brooks dated September 30, 2013.
Copy of Certificate issued by the Health & Family Welfare Department,
Himachal Pradesh to Brooks.
(iv)
Copy of Certificate issued by the National Agency for Food and Drug
Administration and Control, Nigeria to Brooks.
(v)
Copy of quarterly disclosures made to Stock exchanges regarding results of
Brooks from quarter ending September30,2011 to September 30,2013.
(vi)
Copy of letter dated January 05,2012 and January 23, 2012 & email dated
February 07,2012 written by Brooks to SEBI.
(vii) Copy of letter dated January 31, 2012 written by SEBI to Brooks.
(viii) Copy of the Notice dated December 17, 2011 issued to the shareholders of
Brooks seeking their approval.
(ix)
Copy of the agreements dated March 09,2012 and November 13, 2013 entered
into by Brooks to purchase land.
(x)
Copy of the requisite approvals & the photographs of the muhurat puja of
Brooks plant in Gujarat.
(xi)
Copy of Bill of Landing and Bill of Entry, evidencing the import of machine by
Brooks.
(xii) Copy of Brooks reply to SEBI dated July 26, 2012.
(xiii) Copy of Written Submissions made by brooks to SEBI dated December 11,
2012.
(xiv) Copy of SEBI letter to Brooks dated May 28,2013.
(xv) Copy of Brooks letter to SEBI dated June 7, 2013.
(xvi) Copy of WTM SEBI Order dated July 9,2013.
(xvii) Copy of Bills /Invoice raised and proof of payment of Service Tax by
Suryamukhi.
(xviii) Copy of Bills / Invoice raised by raw materials suppliers for Brooks Plant in
Gujarat for which Suryamukhi has made the payment.
(xix) Valuation Report from a Government Approved Valuer.
(lxi)
Several case laws are relied by the Noticees in their support which are as
under;
Canara Bank vs. Debasis Das- (2003) 4 SCC 557.
Commissioner of Central Excise, Bangalore vs. Brindavan Beverages(P) Ltd.
(2007) 5 SCC 388.
Bacha F Guzdar vs. CIT, Bombay- AIR 1955 SC 74.
Telco & Ors. vs. The State of Bihar & Ors. AIR 1965 SC 40.
Belmont Finance Corporation Ltd. vs. William Furniture Ltd. & Ors. (1979) 1 All
ER 118.
Ashok K Choudhary vs. SEBI decided by SAT on 05/11/2008.
Vidyut Shah vs. SEBI decided by SAT on 13/08/2010.
Order dated October 25,2012 passed by Whole Time Member SEBI in the matter
of Tijaria Polypipes
Page 17 of 40
CONSIDERATION OF EVIDENCE AND FINDINGS

11. I have taken into consideration the facts and circumstances of the case and
the material made available on record.
Allegation of Round Tripping and Siphoning off Funds.

12. In respect of the allegation of fictitious transactions and round tripping /
siphoning off the funds, it is observed from the investigation report that the
Board of Directors of Brooks, without the presence of Independent Directors in
all three meetings, passed certain resolutions to raise funds through short term
unsecured loans in the form of Inter Corporate Deposits (ICDs) from the below
mentioned entities, in order to fund its capital expenditure.
Date of
Board
meeting
May 25,
2011
July 02,
2011
July 21,
2011
Name of the entity from whom

ICDs were raised
Amount
(in ` cr.)
Date of Board
meeting when
minutes were
approved.
Shital Nath Buildcon P. Ltd.
15.00
Blue Print Securities Ltd.
1.00
Konark Commerce &

Industries Ltd.
5.50 June 8, 2011
Shardaraj Tradefin Ltd.
0.50
Bankebehari Commercial P. Ltd.
1.00
Dream Valley Sales P. Ltd.
1.00
Jagdhatri Dealcomm P. Ltd.
1.35
Pioneer Prodev P. Ltd.
0.65
Pushpanjali Commotrade P. Ltd.
1.00
Shyama Properties P. Ltd.
2.00
Sunshine Housecon Ltd.
1.00
Hillston Advisors P. Ltd.
0.40
July 21, 2011
July 25, 2011

` 30.40
TOTAL
13. Raising of the funds from the aforesaid entities by Brooks is not in dispute in
the present proceedings. It is observed from the available records / Annexure
II of the SCN (copy of ICICI Bank Ltd. statements) that the funds raised by
Brooks in the form of ICDs were transferred to Suryamukhi in some part.
Page 18 of 40
Further, Suryamuki in turn transferred the said amount to Blue Print, Shardraj,
Sunshine and Konark (the so called lenders from whom the ICDs were raised)
either directly or through some of the entities, in a round tripping manner.
Further Blue Print, Shardraj, Sunshine and Konark transferred the said amount
to Brooks which was in turn again transferred to Suryamukhi and then from
Suryamukhi to Konark etc. The details of such fund flow (round tripping of
funds) is shown in the following chart :-
14. From the aforesaid Chart, it can be clearly seen as under:a. On May 30, 2011, Brooks received ` 4 crores as ICDs from Shitalnath
which was immediately transferred to Suryamukhi on June 1, 2011.
b. On June 1 & 2, 2011, Suryamukhi transferred a total sum of ` 3.50 crores
to Blue Print (through Mangalmayee), Shardaraj, Sunshine and Konark
(through Pushpanjali and Balram Tie Up).
c. On the same day i.e on June 2, 2011, these funds were once again
transferred to Brooks by Blue Print, Shardraj, Sunshine and Konark as
ICDs (i.e. round tripping). On June 2, 2011, Brooks also received ` 3
crores from Shitalnath in addition to ` 4 crores received on May 30, 2011.
d. On June 3, 2011, Brooks again transferred ` 6 crores to Suryamukhi who
in turn transferred ` 4.50 crores to Konark which was once again
transferred to Brooks as ICDs (i.e. round tripping).
e. On June 4, 2011, Brooks further transferred ` 5 crores to Suryamukhi.
Page 19 of 40
15. On the basis of records / evidences and from the above details, the round
tripping / rotation of the funds by Brooks and the aforesaid lenders / entities, is
established. It is clear that the amount shown to have been paid by Blue Print,
Shardaraj, Sunshine and Konark aggregating to a sum of ` 8 crores to Brooks
as ICDs, were nothing but ` 7 crores received by Brooks from Shitalnath (` 4
crores on May 30, 2011 and ` 3 Crores on June 02, 2011) and were rotated
amongst themselves in the guise of ICDs. It may be added that action in terms
of adjudication proceedings has already been concluded against the so called
lenders / entities etc. (25 entities) vide adjudication order dated December 31,
2013 for such fraudulent involvement.
16. Further, it is also observed from available records that Brooks received a total
sum of ` 61,03,07,312 (after deduction of IPO expenses) on September 02,
2011 from the IPO, and then immediately transferred funds to the lenders /
entities on September 2 & 3 of 2011 from whom the ICDs were said to have
been raised including Blue Print, Shardaraj, Sunshine and Konark. It is noted
from Annexure V of the SCN (copy of Bank Statements of ICICI Bank Ltd.) that
Brooks paid the said total amount of ` 8 crores to Blue Print (` 1 crore),
Shardaraj (` 50 lakh), Sunshine (` 1 crore) and Konark (` 5.5 crores) from the
proceeds of IPO as repayment of said ICDs along with ` 25 lakh as interest on
these loans. Further, it is also noted from the said annexure that several other
lenders / entities were repaid from the IPO proceeds by Brooks including
repayment of ` 15 crores to Shitalnath on September 02, & 03 of 2011. It is
also observed from the investigation report that Brooks also loaned to MK
Distributors P. Ltd. out of IPO proceeds on September 05, 2011.
17. In respect of allegation of siphoning off funds, it is worthwhile to mention that

an amount of ` 8 crores was paid from the IPO proceeds to 4 entities viz. Blue
Print, Shardraj, Sunshine and Konark from whom money in the form of ICDs
was raised although the money originally did not belong to them, rather an
amount of ` 7 crores received from Shitalnath was rotated / round tripped
through Suryamukhi / other entities as mentioned in Chart 1. By way of such
round tripping of funds, the figure of ` 7 crores was raised to ` 8 crores. Since,
the said amount actually came from Shitalnath and not from the said 4 entities,
the repayment of ` 8 crores to the said 4 entities from the IPO proceeds (as if
they had advanced ICDs to Brooks) amounts to siphoning off funds from the
IPO proceeds.
Page 20 of 40
18. It is important to add here that as per Bank Statements (Annexure II of the
SCN) it can be seen that only ` 7 crores was transferred from the Bank
account of Shitalnath to Brooks on May 30, 2011 and June 02, 2011 and as
observed in pre paras / Chart 1 that after receipt of ` 7 crores from Shitalnath,
the same was rotated / round tripped through Suryamukhi and 4 lenders (Blue
Print, Shardraj, Sunshine and Konark). Therefore, as observed in the
investigation report, an impression was created by Noticees that this amount
was lent by said 4 lenders, which infact is not correct.
19. It is also observed from the investigation report that Noticees have transferred
` 4 crores to M K Distributors from the Issue proceeds.
20. Thus, the Issue proceeds were not utilised for the purpose as stated under the
Objects of the Issue as mentioned in the Offer Document.
21. Noticees contended that nothing has been brought on record to demonstrate
as to how they were aware of the subsequent transfer of funds by Suryamukhi
and there is nothing on record to suggest that they were the beneficiaries or as
to how the funds have come back either to the Promoters or Directors of the
Company directly or indirectly in any manner. Noticees contended that the said
allegations are based on erroneous understanding of the factual position and
is based merely on further transfer of funds by Suryamukhi to others who in
turn have allegedly given funds to them by way of ICDs. Noticees submitted
that they were not aware that all the said entities through whom they had
raised the ICDs are related entities and the same was of no concern to them.
Similarly, while borrowing funds, they were not aware of the sources of the
funds of the lenders and while making payments to Suryamukhi, their limited
concern was that they get the desired services for which Suryamukhi was
engaged.
22. Aforesaid contentions of Noticees are not acceptable in view of the following
reasons. As per available records / Annexure IV of the SCN (copy of Directors
details of other entities / layers / lenders as per MCA Website) it is observed
that the said entities are having common Directors as mentioned in the table
below :
Sl.
No.
Name of the entity
Name of the Directors
Konark Commerce &

Industries Ltd.
Pramod Ramdin Sharma

Pulak Bagchi
Page 21 of 40
Address
(Involved in Round
tripping of Funds /
Lender )
Ajay Agarwal
Neeraj Kedia
Raj Pandey
Sunshine
Housecon
Ltd.
(Involved
in
Round tripping of
Funds / Lender)
Harish Sureka
Pulak Bagchi
Neeraj Kedia
Blue Print Securities

Ltd.
(Involved
in
Round tripping of
Funds / Lender)

Pulak Bagchi
Neeraj Kedia
Bajrang Sultania
Shardaraj Tradefin Ltd.

(Involved in Round
tripping of Funds /
Lender)
Pulak Bagchi
Bajrang Sultania
Neeraj Kedia
Suryamukhi
Projects Pramod Ramdin Sharma
Pvt. Ltd. (Involved in Pulak Bagchi
Round tripping of
Funds / Layer)
Mangalmayee Hirise
Pvt. Ltd. (Involved in
Round tripping of
Funds / Layer)

Pulak Bagchi
Rakesh Jindal
Pushpanjali Hirise Pvt.

Ltd. (Involved in
Round tripping of
Funds / Layer )
Umesh Singh
Pulak Bagchi
Growfast Realtors Pvt.

Ltd.

Pulak Bagchi
Khusboo Complex Pvt.

Ltd.

Pulak Bagchi
10
Makesworth Projects &

Developers Pvt. Ltd.

Pulak Bagchi
11
Alishan Estates (Pvt.)

Ltd.
12
Shirdhan Jewellery Pvt. Pramod Ramdin Sharma

Pulak Bagchi
Ltd.

Umesh Singh
13
Jagarnath Consultants
Pvt. Ltd.
Umesh Singh
Neeraj Kedia
14
Silicon Hotel Pvt.. Ltd.

Umesh Singh
Page 22 of 40
10A, Hospital Street,

2nd Floor, Kolkata700 072
1 Crooked Lane,
1st Floor, Room No.
109,
Kolkata- 700 069
4A, Madan Mohan

Burman Street,
Kolkata - 700 007
10A, Hospital Street,

2nd floor, Room No.
205, Kolkata- 700
072,
1A, Mezzinine Floor,

Room
No.
114,
Grant Lane,
Kolkata- 700 012
3rd Floor, Room No.
313, 156A Lenin
Sarani,
Kolkata- 700 013
15
Neelkamal Dealcomm
Pvt. Ltd.
Umesh Singh
Neeraj Kedia
3, Saklat Place,
Kolkata- 700 072
23. From the above, it is clear that Blue Print, Shardaraj, Sunshine and Konark
(from whom Brooks had availed ICDs) and the project contractor i.e.
Suryamukhi etc. were actually related to each other as they were having
mostly the same Directors. It is not out of place to mention that as per Bank
statement, Blue Print & Shardraj and Sunshine & Konark have common
address. Common address of several entities / layers etc. are also shown in
the aforesaid table. Further, the business relationship of Brooks with the said
entities is apparent from the fact of availing ICDs and awarding project
contract. Therefore, the contention of Noticees that they are not aware of the
connection of aforesaid entities does not hold much weight. Further, not only
Blue Print, Shardaraj, Sunshine, Konark and Suryamukhi have common
Directors inter-se, but also they have the common Directors with other entities
/ layers etc. as mentioned in aforesaid table. Therefore, it can be concluded
that they are related / connected to each other and form a group. From the
aforesaid observation and also as noted from the available records that in the
agreement entered into by Brooks with many entities viz. Konark, Pioneer,
Pushpanjali Hirse for availing the ICDs, Mr. Pramod Sharma was the common
authorised signatory / common Director for such entities and also Mr. Neeraj
Kedia was the common Director / authorised signatory for the Jagdhatri and
Shardraj. Therefore, the plea of Noticees that they are not aware of inter - se
connection / relation of Blue Print, Shardraj, Sunshine, Konark and
Suryamukhi is not acceptable.
24. Noticees contended that there is nothing on record to suggest that they were
the beneficiaries or as to how the funds have come back either to the
Promoters or Directors of the Company directly or indirectly in any manner.
The said contention of Noticees has not been dealt with as that has not been
alleged in the SCN.
25. It is worthwhile to mention that Noticees in their reply dated January 31, 2014
have given the breakup of the expenditure as follows:
Sr. No.
Object
Expenditure ( )
Land Cost
7,12,74,019
Machinery
13,97,49,287
Construction
15,30,00,000
Page 23 of 40
Frozen in the interest bearing account of

State Bank of India as per the directions
of SEBI
Total
The balance amount of
15,86,30,701
52,26,54,007
8,76,53,305/- (` 61,03,07,312/- IPO proceeds after
deduction of issue expenses - ` 52,26,54,007/-) has not been accounted for or

shown as expenditure / deposit of any kind. The allegation / charge in the SCN
against Noticees is also for siphoning off funds to the tune of approx
crores.
26. Noticees have submitted that the agenda for the meetings was circulated to all
the Directors including the Independent Directors and the Independent
Directors were not in a position to attend the meetings on the scheduled dates.
However, Noticees have not placed on record any material to support their
claim viz communication by the said Independent Directors to the company
including the reasons for absence etc. Further, on a perusal of minutes of all
the 3 Board meetings, it is observed that for all the 3 Board meetings
Independent Directors have expressed their unwillingness to attend the Board
meetings.
Allegation regarding appointment of Suryamukhi

27. It was alleged in the SCN that Syal & Associates had given a quotation of
` 12.20 crores to Brooks for construction of building, however, in spite of a
lower quotation, Brooks had appointed Suryamukhi as a project contractor for
an amount of ` 15.30 crores and the said entire amount was paid in advance
to Suryamukhi for project work without the infrastructure being developed at
the project site.
28. In respect to aforesaid, Noticees submitted that around May 2011, Noticees
shortlisted Suryamukhi for carrying out the project work at the proposed
project site at JB SEZ Panoli to meet the deadline of March 31, 2012 to avail
tax benefits as proposed by the Government of India in the Annual Budget to
cut tax incentives offered on SEZs. Syal & Associates are Architects and not
project contractor and it had through letter only given an estimate for the
proposed work, which was limited and restricted to only Civil Work alone.
However, the agreement with Suryamukhi envisaged much wider gamut of
activities to be executed viz. designing of the entire facility, execution of civil
work and electrical job etc. Noticees submitted that nowhere, the name of Syal
Page 24 of 40
& Associates is coming in the offer document. Merely because, the quotation
of Syal & Associates was low, no adverse inference can be drawn for choosing
Suryamukhi in the facts and circumstances. No adverse inference can be
drawn merely because the agreement dated June 1, 2011 was not executed
on stamp paper between Suryanmukhi and Brooks. An amount of
15.30
crores was paid by Brooks (out of the ICDs) at the request of Suryamukhi for
procurement of material required for erection of plant at the proposed site in
JB SEZ.
29. It is an admitted fact that the said amount was paid to Suryamukhi in the
month of June 2011 (from the ICDs) as an advance as per request of the
Suryamukhi to complete the project on or before 31.03.2012 to avail the tax
benefits . However, no proof has been provided to show any demand notice or
invoice or request made by Suryamukhi during the period of June 2011 or
before that period. All the documents as provided by Noticees along with their
reply (viz. Annexures 'Q' & 'R' as invoice / service tax paid / Bills etc.) are
related to the period from July 2012 onwards only i.e., one year after the entire
amount was paid, which is also beyond the due date (31.03.2012) to avail the
tax benefits. Therefore, the plea that amount was paid upon the request of
Suryamukhi is factually not correct as such demand notice or invoice or
request has not been made on or before June 2011.
30. It is also noted from Noticees submission that total 6 invoices were issued by
Suryamukhi to Brooks dated July 06, 2012, May 18, 2013, June 24, 2013, July
29, 2013, October 03, 2013 and November 02, 2013 and the total amount in
all said invoices including the service tax works out to ` 14,09,82,615/-.
However, the advance amount given by Noticees in June 2011 was ` 15.30
crores which is more than the said amount.
31. Further, the plea of Noticees that ICDs amount advanced to Suryamukhi and
Neo Power was recalled by Brooks but they denied to refund the same, may
not be accepted in the absence of any supporting documents / evidence.
32. In the context of agreement between Brooks and Suryamukhi, I have perused
Annexure IV (Agreement dated June 1, 2011) and it is noted that the same
was executed on a sheet of white paper. It is difficult to accept that a contract
of such magnitude can be executed in such a fashion.
Page 25 of 40
33. It is also noted at page 70 of Offer Document that the details of building
construction and total cost of construction was stated in RHP / Prospectus as
` 12.20 crores. Thereby, through the RHP, it was conveyed to the investors
that total cost of construction is ` 12.20 crores only. However, as observed
above, Brooks had transferred / paid ` 15.30 crores to Suryamukhi as an
advance without any demand notice or invoice or request (` 3.1 crores more).
34. In light of the aforesaid observations, it is concluded that appointment of
Suryamukhi, paying whole amount of ` 15.30 crores in advance to Suryamukhi
and non disclosure of such appointment in Offer Document was done by
Noticees with a motive to round trip the funds as explained above.
Allegation regarding appointment of Neo Power
35. Further, it is observed from the available records that apart from Suryamukhi,
the funds raised by Brooks in the form of ICDs were also transferred to
another entity namely - Neo Power Universal FZ LLC, UAE (Neo Power) a
foreign company manufacturing equipment & machinery. The details of the
fund flow is as under:-
36. It is observed that ` 13.97 crores have been transferred to Neo Power by
Brooks which is detailed as under.
Date
NP110619-2
19-07-2011
20-09-2011
1,39,000.00 61,77,972.60
02-08-2011
NP110619- 4
19-07-2011
20-08-2011
9,89,000.00 4,41,25,400.80
21-07-2011
Date of
Delivery
Amount Paid
in $
Amount in `
Quotation No.
Page 26 of 40
Date of
payment
NP110619- 3
19-07-2011
20-09-2011
36,000.00 16,01,211.25
02-08-2011
NP110619- 5
19-07-2011
30-08-2011
1,64,000.00 73,13,439.55
25-07-2011
NP110617-1
17-06-2011
20-07-2011
16,06,092.50 7,17,46,390.00
05-07-2011
NP110619- 1
16-07-2011
30-08-2011
1,97,000.00 87,73,888.00
21-07-2011
$31,31,092.50
` 13,97,38,302.00
37. It was alleged in the SCN that names of Indian suppliers from whom the
quotations were received for supply of plant & machinery were disclosed in
RHP but the name of Neo Power (a foreign supplier) was not disclosed in the
list of the suppliers. Despite the fact that Brooks changed the procurement
process from indigenous suppliers to a foreign supplier and paid ` 13.97
crores in advance before the RHP dated August 03, 2011, no disclosure was
made about this important information in the Offer Document, which is
allegedly misleading in nature to investing public.
38. In respect of aforesaid allegation, Noticees submitted that Company's Core

Technical Committee (headed by Dr. D S Maity-Technical Director who is
Noticee No. 4 in the present proceeding) recommended the import of high
precision machineries as per the latest international standards to cater to the
highly regulated export market for pharmaceuticals. Pursuant to the
recommendation, Brooks shortlisted Neo Power for the supply of high
precision machineries. While placing orders for various machines and ancillary
items with Neo Power, Brooks instructed it to supply machines viz. first - BFS
Bottlepack 4010 (main machine) and ancillary items like modular partitions,
walkable false ceiling, clean room doors, Hepa filter housing and the remaining
machine subsequently. The said sequence of supplying machines was
indicated as the machines were to be installed at the project site at different
stages of construction. The BFS Bottlepack 4010 and ancillary items were to
be installed at the start of civil work in the manufacturing area. For the purpose
of supplying machines, based on the request of Neo Power, Brooks released a
total advance of USD 31,31,092 to expedite the procurement of machineries
keeping in mind the March 2012 deadline to avail tax benefit. The aforesaid
amount was paid as advance on the basis of a proforma invoice dated June
20, 2011, out of the ICDs raised by Brooks.
39. Noticees submitted that on acquisition of the project land, Brooks requested
Neo Power for shipping the BFS Bottle Pack 4010 and ancillary items bought
Page 27 of 40
on the Company's behalf as the same was required to be installed first during
the civil work. Neo Power shipped the machinery which was received by
Brooks on May 17, 2012. Noticees denied that order placed with Neo Power
was without any quotation and submitted that the same was based on the
interactions, discussions and presentations with Neo Power. With regard to
non-mentioning of name of Neo Power in the Offer Document, it is submitted
by Noticees that the list of suppliers and machinery was only indicative and all
the documents including the quotations were duly provided to the BRLM as
they were totally relying on the BRLM with regard to the IPO process.
40. It is admitted fact that an amount of ` 13.97 crores has been transferred to
Neo Power by Brooks during July 21, 2011 to August 02, 2011 and machinery
were received by Brooks only during May 17, 2012, which is well outside the
due date of 31.03.2012 to avail the tax benefits. Noticees have contended that
they had paid the entire amount as advance so as to avail the tax benefits but
whereas the first set of machine was delivered only in May, 2012. Further, no
evidence is provided in the instant proceedings to show that all the documents
including the quotations were duly provided to the BRLM. The important fact
cannot be ignored that despite the change of procurement process from
indigenous suppliers to a foreign supplier (Neo Power) and making payment of
entire ` 13.97 crores (substantial amount) in advance that too before the RHP
dated August 03, 2011, no disclosure was made in the Offer Document. The
plea of Noticees that list of suppliers and machinery was only an indicative, is
not factually correct as at page numbers 70 to 73 of the RHP (enclosed as
Annexure VIII of the SCN) the names of the suppliers for the entire amount of
` 19.94 crores were shown for the purpose of purchasing machineries which is
one of the objects of the Issue. Further, the same is one of the important
factors for the consideration of the investors.
41. Upon perusal of Annexure "K" of the reply of Noticees (copies of bill of entry
and bill of lading of machine dated May 06, 2012) relied upon by Noticees as
an evidence to show the receipt of imported machine "BFS Bottle Pack 4010
Machine along with Standard Accessories (Bag Filling Sealing)" from Neo
Power, it is observed that cost of the said machinery including customs duty
etc. is around
amount of
11 crores, whereas Brooks had admittedly paid a total
13.97 crores to Neo Power for purchase of the machinery. No
other bills towards the balance amount of approx.

provided by Noticees in this proceedings.
Page 28 of 40
3 crores has been
42. Noticees have submitted that Company's Core Technical Committee (headed
by Dr. D S Maity-Technical Director who is Noticee No. 4 in the present
proceeding) recommended the import of high precision machineries as per the
latest international standards to cater to the highly regulated export market for
pharmaceuticals. But Noticees have not submitted any Board resolution
authorising the Company to go ahead with the said recommendation. Even on
perusal of minutes of Board meetings dated 02.07.2011 and 21.07.2011 which
was also attended by Dr. D S Maity, it is observed that there was no mention /
discussion about the above recommendation of Company's Core Technical
Committee. In my opinion it is highly unlikely that a company can go ahead
without the approval of its Board for importing machinery of such a high value
and also paying the entire money as advance.
43. Noticees submission that all the documents including the quotations were duly
provided to the BRLM and they were totally relying on the BRLM with regard to
the IPO process and the preparation of the RHP / Prospectus is not
acceptable as a bare reading of the ICDR Regulations makes it clear that
Noticees cannot absolve their responsibility. The provisions unequivocally
states that the Issuer is responsible for prompt, true and fair disclosure of all
material developments along with BRLM.
44. Therefore, taking in to account the aforesaid observations viz. non disclosure
of appointment of Neo Power in RHP / Prospectus it is established that the
same is equivalent to suppression of facts and is misleading in nature to the
investing public.
Allegation of Non Disclosure of ICDs in RHP / Prospectus.

45. It was alleged that Brooks passed resolutions in board meetings held on May
25, 2011, July 2, 2011 and July 21, 2011 to raise funds through short term
unsecured loans to fund its capital expenditure and borrowed ` 30.40 crores
from 12 entities in the form of ICDs. However, appropriate disclosures
regarding said ICDs were not made in the RHP / Prospectus dated August 03,
2011 and August 22, 2011 respectively.
46. In respect to the said allegation, Noticees stated that they were totally relying
on the BRLM with regard to the IPO process / preparation of the Offer
Page 29 of 40
Document and all the documents pertaining to the aforesaid were duly
provided to the BRLM.
47. It is noted that Noticees vaguely submitted that all documents were provided to
the BRLM, but failed to provide any evidence in support of such contention.
Further as stated at pre para 43, Noticees cannot absolve their responsibility
from making prompt, true and fair disclosure of all material developments. Non
- disclosure in the Offer Document of such vital information of raising funds to
the tune of ` 30.40 crores is a material non disclosure and is misleading in
nature for the investors. Therefore, it is established that Noticees have failed to
disclose such vital information / material fact in the Offer Document and misled
the public / investors in taking an informed decision while investing in the IPO
of Brooks.
48. It is observed from page 77 of the Prospectus that under the heading Bridge
Loan it was stated that "We have not entered into any bridge loan facility that
will be repaid from the Issue Proceeds". Thus, it can be concluded that
Noticees have not only made non disclosure of a material fact but have also
made wrong disclosure in the Prospectus.
Allegation of Misutilization of IPO proceeds whilst dealing in the shares
of Brooks.
49. It was alleged in the SCN that out of said IPO proceeds, ` 2.50 Crores were
transferred by Brooks to Overall Financial through layers of several entities (as
shown in diagram shown at para 11 of the SCN) which was ultimately utilized
by Overall Financial to trade in the scrip of Brooks and Overall Financial had
incurred losses which were adjusted through the IPO proceeds. By transferring
such funds, Brooks / Noticees allegedly participated in fraudulent exercise
whilst dealings in the shares of Brooks.
50. In respect to the allegation, the Noticees submitted that it is SEBIs own case
that Konark & Shardaraj had lent funds of
5.50 crores and
50 lakhs
respectively, by way of ICDs in May 2011 to the Brooks and it had made
repayments of
5.50 crores and
50 lakhs to Konark & Shardaraj
respectively in Sep 2011. Noticees contended that amount involved in both the
legs of transfers is same and therefore, it cannot be alleged that Brooks
transferred its own funds to the extent of
Page 30 of 40
2.5 crores to Overall Financial
through Konark & Shardaraj. It was also stated by Noticees that as per the
Chart in the para, Overall Financial has not received any monies from the
Noticees bank account. On the contrary, Overall Financial has received
monies from some other entities.
51. Noticees also denied that they had transferred an amount of
2.50 crores to
Overall Financial out of IPO proceeds through layers of several entities as

alleged and they have no connection / relation with Overall Financial or its
Promoters, Directors employees etc. They submitted that they are not aware
that Overall Financial had utilized
2.50 crores for trading in the securities
market as alleged or that while trading Overall Financial had incurred losses
as alleged.
52. In respect of this allegation, I have noted that though no relation / connection
of Brooks with Overall Financial or its Promoters, Directors employees etc. is
established and the amount of ` 2.50 crores was not directly transferred from
the Bank account of Brooks to the account of Overall Financial, however, the
fact cannot be ignored (as observed from Annexure VII of the SCN Statements
of ICICI Bank) that an amount of ` 5.50 crores and ` 50 lakhs was transferred
by Brooks from the IPO proceeds to Konark and Shardraj respectively who in
turn transferred ` 2.50 crores to several other layers (as shown in the diagram
in the next page) and ultimately on September 05, 2011 an amount of ` 2.50
crores was transferred to Overall Financial through said layers.
Page 31 of 40
53. It is noted from the available records / investigation report that these funds
were deployed by Overall Financial for trading in the shares of Brooks. It is
noted from the available records that Overall Financial through trading
member Baba Bhoothnath had bought 6,65,000 shares on September 05,
2011 and sold 2,00,000 shares on September 07, 2011 resulting in a loss of
` 2.19 crores which was ultimately made good from the IPO proceeds of
Brooks.
54. The fact cannot be ignored that an amount of
2.5 crores alleged to have
been transferred to Overall Financial, is actually a part of round tripping /

siphoning off the funds from the IPO proceeds done by Brooks / Noticees in
connivance with Konark, Shardraj and other layers as depicted in the above
diagram has already been established in pre paras of this order. It cannot be
ignored that transferring of funds to the tune of
2.5 crores through the
entities / layers to Overall Financial as alleged is also a part of siphoning off

the funds through the said layers for which their role has already been
examined in earlier adjudication order dated December 31, 2013 and
monetary penalty has been imposed upon said layers / Overall Financial for
such fraudulent activities.
55. The case laws relied upon by Noticees in their support relates to the issue of
principle of natural justice, preciseness of the SCN, company being juristic
person and is distinct from its shareholders, synchronized trades / fictitious
trades, inference of knowledge of mischief etc. are not related to the facts and
circumstance of the present case. The SCN issued to Noticees is not vague
and principles of natural justice have been followed during the entire
proceedings.
56. Keeping in view the aforesaid detailed observations / discussions /

conclusions, all the violations alleged in the SCN are established against
Noticees which are briefly summarised as under;
(a) Brooks passed resolutions in board meetings held on May 25, 2011, July
2, 2011 and July 21, 2011 to raise funds through ICDs and shown to have
borrowed ` 30.40 crores, but failed to disclose the material information in
the Offer Document and thereby misled the investing public in IPO and
deprived them of taking a well informed decision.
Page 32 of 40
(b) Noticees have fraudulently in complicit with Suryamukhi / so called lenders

etc. indulged in round tripping of funds and ultimately siphoned off ` 8
crores from the IPO proceeds in the guise of ICDs. Thus, the Issue
proceeds were not utilised for the purpose as stated under the Objects of
the Issue as mentioned in the Offer Document.
(c) Brooks appointed Suryamukhi as a project contractor despite low

quotation from other contractor and paid the entire amount of ` 15.30
crores in advance. Agreement entered into by Brooks with Suryamukhi for
such huge amount has been executed on a simple white paper and no
disclosures were also made regarding such appointment in the Offer
Document.
(d) No disclosure was made in the Offer Document by Noticees about the
change of supplier from indigenous to foreign supplier and payment of
` 13.97 crores in advance to Neo power.
(e) ` 2.50 Crores was transferred by Noticees to Overall Financial through
layers of several entities which was ultimately utilized by Overall Financial
to trade in the scrip of Brooks and Overall Financial had incurred losses
which were adjusted through the IPO proceeds resulting in misutilisation of
IPO proceeds.
(f) Wrong 'declaration' has been made by the Noticees No. 2 to 6 in the Offer
Document.
57. As regards to the role of Noticees No. 2 to 6, I have perused their respective
replies and the same is being examined as under. The said Noticees besides
explaining their individual role in the company as reflected at para 10 (li - lix)
denied that there was non-disclosure of material information in the Prospectus
or that there was misstatement in the Prospectus or that there was
misutilisation of the issue proceeds as alleged, as all acts done by them were
bona fide in nature and under the supervision and instructions of the
Management. They stated that they have a clean track record without any
history of non-compliance and they are not connected to any of the entities or
their directors as referred to in the SCN. They stated that there was nothing in
the SCN to show that they have made any gains or derived unfair advantage
and the violations as alleged in the SCN are technical, venial and
unintentional. They stated that debarment already suffered is sufficient and no
Page 33 of 40
further imposition of monetary penalty is warranted. They further stated that

the charges in the SCN are predominantly arising from the decisions taken by
the Company regarding short term finance / ICDs, appointment of project
contractor and placement of purchase orders for plant and machinery from
foreign supplier and the above decisions were taken in a bona fide manner in
the best interests of the Company.
58. It is noted from the records that Mr. Atul Ranchal (Executive Chairman), Mr.
Rajesh Mahajan (Managing Director), Mr. Durga Shankar Maity, the
Company's CEO (erstwhile Director - Technical) were part of the Board
meetings when resolutions were passed for raising funds through ICDs as
indicated in Annexure IX of the SCN. Admittedly, Mr. Durga Shankar Maity
was the Chairman of the Core Technical Committee that recommended the
import of machineries for production, quality control, etc. In addition to Mr. Atul
Ranchal, Mr. Rajesh Mahajan and Mr. Durga Shankar Maity, it is observed
that Mr. Ketan Shah, CFO (erstwhile DGM - Accounts) who was the authorized
signatory for Brooks for the contract entered into between Brooks and
Suryamukhi as project contractor, Ms. Parvinder Kaur (the erstwhile Company
Secretary), were also signatories to the Offer Document as indicated therein at
page numbers 326 & 327 respectively.
59. From the foregoing, I find that the submissions of Noticees No. 2-5 does not
hold good. Company though a legal entity cannot act by itself. It can act
through its Board / Management / Key Managerial Personnel etc. Here it would
be worthwhile to mention that in respect of allegation of round tripping /
siphoning off funds, the persons in charge of day to day affairs of the
Company viz. Directors / Management / Key Managerial Personnel (as
Noticees No. 2-4 are in this case) are certainly responsible for the fraudulent
activities.
60. Mr. Atul Ranchal, Mr. Rajesh Mahajan, Mr. Durga Shankar Maity were part of
the Board meetings when resolutions were passed for raising funds through
ICDs and were also involved in decisions of transferring the funds (siphoning
off funds), in appointing project contactor, appointing foreign supplier. Based
on the aforesaid and in view of the declaration at page numbers 326 & 327 of
the Offer Document makes them liable for fraudulent / misleading acts as
observed at pre paras of this order. Noticees No. 5 & 6 were also authorized
signatory in the Offer Document and made the following declaration in the
Offer Document. The declaration so made by Noticees No 2 to 6 is as under:
Page 34 of 40
"We certify that all relevant provisions of Companies Act, 1956 and the
guidelines issued by the Government of India or the Guidelines and the
Regulations issued by the SEBI, established under Section 3 of the Securities
and Exchange Board of India Act, 1992, as the case may be, have been
complied with and no statement made in this Prospectus is contrary to the
provisions of Companies Act, 1956, the Securities and Exchange Board of
India Act, 1992 or rules made or Regulations issued there under or guidelines
issued, as the case may be. We further certify that all the statements in this
Prospectus are true and correct".
61. Such fraudulent practices / mechanism of siphoning off funds and the non
disclosure or concealment of material information viz. raising of ICDs,
appointment of said project contactor and foreign supplier and paying entire
amount as an advance to both the project contractor and the foreign supplier
were misleading in nature and can influence the decision of investors while
making investment in the IPO of Brooks. Such concealment of material
information does not amount to true, fair and adequate disclosures by
Noticees rather is fraudulent in nature depriving the investors to take an
informed investment decision. Not only Noticees failed to make true, fair and
adequate disclosures but also made wrong disclosures in the Offer Document.
62. In respect to the misleading disclosures or incorrect disclosures, it is pertinent
to note that Hon'ble Securities Appellate Tribunal in the matter of HSBC
Securities and Capital Markets (India) Private Ltd. v. SEBI, SAT Appeal
No. 99 of 2007 (decided on February 20, 2008) observed that
" an incorrect or wrong information in a letter of offer or other similar documents
issued for the benefit of investors in general could lead to serious consequences
including loss of credibility for the market operators and for the regulatory system.
This kind of failure has to be taken very seriously by the market regulator".
63. Further, Hon'ble Securities Appellate Tribunal in the matter of V. Natarajan vs.
SEBI, SAT Appeal No.104 of 2011 (order dated June 29, 2011), wherein it
was held that " we are satisfied that the provisions of Regulations 3 and 4 of the
Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Market) Regulations, 2003, were violated. These
regulations, among others, prohibit any person from employing any device, scheme or
artifice to defraud in connection with dealing in or Issue of securities which are listed
or proposed to be listed on an exchange. They also prohibit persons from engaging in
any act, practice, course of business which operates or would operate as fraud or
deceit upon any person in connection with any dealing in or issue of securities that are
listed on stock exchanges. These regulations also prohibit persons from indulging in a
fraudulent or unfair trade practice in securities which includes publishing any
information which is not true or which he does not believe to be true. Any
advertisement that is misleading or contains information in a distorted manner which
Page 35 of 40
may influence the decision of the investors is also an unfair trade practice in
securities which is prohibited. The regulations also make it clear that planting false
or misleading news which may induce the public for selling or purchasing securities
would also come within the ambit of unfair trade practice in securities"
64. It would be relevant to refer to the following observations made by the Hon'ble
Supreme Court of India in its judgment dated April 26, 2013, in the case of N.
Narayanan v. Adjudicating Officer SEBI (Civil Appeal Nos. 4112-4113 of
2013).
"SEBI, the market regulator, has to deal sternly with companies and their Directors
indulging in manipulative and deceptive devices, insider trading etc. or else they will
be failing in their duty to promote orderly and healthy growth of the Securities market.
Economic offence, people of this country should know, is a serious crime which, if not
properly dealt with, as it should be, will affect not only countrys economic growth,
but also slow the inflow of foreign investment by genuine investors and also casts a
slur on Indias securities market. Message should go that our country will not tolerate
market abuse and that we are governed by the Rule of Law. Fraud, deceit,
artificiality, SEBI should ensure, have no place in the securities market of this country
and market security is our motto."
65. Noticees have submitted that the allegations made in the SCN are vague,
lacking particulars and unintelligible. However, it is noted from the records that
at the time of hearing, the charges / offences leveled against Noticees in the
SCN were explained to the ARs and the same was understood by them.
Noticees have also submitted that the alleged violations are technical, venial
and unintentional. But as discussed in pre para 56 the violations of Noticees
are fraudulent in nature and their act of suppressing material information has
deprived the investors in taking an informed decision. Therefore, the
submission of Noticees that the alleged violations are technical, venial and
unintentional is not acceptable
66. In view of the aforesaid observations / conclusions, it is established that all

Noticees have violated the provisions of regulations 3 (b), (c) & (d), regulations
4 (1) and 4 (2) (f) of PFUTP Regulations read with Sections 12 A (a), (b) & (c)
of the SEBI Act. Further, Noticees No. 1 to 4 have violated regulation 57(1)
and Clauses 2 (VII) (G), 2 (XVI) (B) (2) of Part A of Schedule VIII read with
regulation 57(2) (a) of ICDR Regulations and Noticees No. 5 & 6 have violated
of Clause 2 (XVI) (B) (2) of Part A of Schedule VIII.
67. Acts of round tripping of funds / siphoning off funds from the IPO proceeds,
mis-utilisation of IPO proceeds coupled with non disclosures and wrong
Page 36 of 40
disclosure in the Offer Document, are in violation of regulations 3 (b), (c) and
(d) and regulations 4 (1) and 4 (2) (f) of PFUTP Regulations read with section
12 A (a), (b) & (c) of the SEBI Act and make Noticees liable for imposition of
monetary penalty under section 15 HA of the SEBI Act.
68. Further, non disclosures of material information of availing ICDs to the tune of
` 30.40 crores, appointing Suryamukhi as project contractor, appointment of
Neo Power as foreign supplier and making wrong declaration in the Offer
Document, are in violation of regulation 57(1) and Clauses 2 (VII) (G), 2 (XVI)
(B) (2) of Part A of Schedule VIII read with regulation 57(2) (a) of ICDR
Regulations and makes the Noticees liable for imposition of monetary penalty
under section 15 HB of the SEBI Act.
69. In the facts and circumstances of the present matter, Regulation 4 (2) (k) of
PFUTP Regulations and regulation 60 (7) (a) of ICDR Regulations are not
applicable as the provisions are related to issue of advertisement or research
report. Further facts in the present matter does not meet the criteria of
advertisement as defined under regulation 2 (b) of ICDR Regulations. In
addition to it, in the present matter regulation 60 (4) (a) of ICDR Regulations is
also not applicable since the allegations as alleged in the SCN does not
pertain to the period between the date of registering final prospectus or the red
herring prospectus, with the Registrar of Companies and the date of allotment
of securities.
70. The provisions of sections 15 HA and 15 HB of the SEBI Act is reproduced as
under;
15HA.Penaltyforfraudulentandunfairtradepractices.
Ifanypersonindulgesinfraudulentandunfairtradepracticesrelatingtosecurities,
heshallbeliabletoapenaltyoftwentyfivecrorerupeesorthreetimestheamount
ofprofitsmadeoutofsuchpractices,whicheverishigher.
15HB.Penaltyforcontraventionwherenoseparatepenaltyhasbeenprovided.
Whoever fails to comply with any provision of this Act, the rules or the regulations
madeordirectionsissuedbytheBoardthereunderforwhichnoseparatepenaltyhas
beenprovided,shallbeliabletoapenaltywhichmayextendtoonecrorerupees.
71. While determining the quantum of penalty under section 15 HA and 15 HB of
the SEBI Act, it is important to consider the factors stipulated in section 15J of
the SEBI Act, which reads as under:-
Page 37 of 40
15JFactorstobetakenintoaccountbytheadjudicatingofficer
Whileadjudgingquantumofpenaltyundersection15I,theadjudicatingofficershall
havedueregardtothefollowingfactors,namely:
(a)theamountofdisproportionategainorunfairadvantage,whereverquantifiable,
madeasaresultofthedefault;
(b)theamountoflosscausedtoaninvestororgroupofinvestorsasaresultofthe
default;
(c)therepetitivenatureofthedefault.
72. As regards to the illegal gain / unfair advantage made by Noticees and loss
caused to the investors, the amount which was siphoned off by Noticees in
collusion with other entities is an illegal gain / unfair advantage accrued to
Noticees and is a loss to investors / shareholders of Brooks. However, it is
difficult to quantify the profit / loss for the non disclosures by Noticees and no
quantifiable figures are made available on record / investigation report to
assess the disproportionate gain or unfair advantage and amount of loss
caused to an investor or group of investors as a result of Noticees non
disclosures.
73. Noticees have submiitted that in the said IPO matter, they have already been
debarred from accessing the securities market and prohibited from buying,
selling or dealing in securities market directly or indirectly vide an ad - interim
order dated December 28, 2011 u/s 11(1),11(4) and 11B of SEBI Act, 1992,
and said direction of debarment was confirmed by SEBI vide confirmatory
order dated July 09, 2013. Noticees further submitted that said debarment is
still continuing and they have kept an amount of
15, 86,30,701/- lying frozen
in the interest bearing account of State Bank of India as per the directions of
SEBI. Noticees aforesaid submissions have been taken into account /
considered while levying monetary penalty on them.
ORDER
74. In view of the above, after considering all the facts and circumstances of the
case and exercising the powers conferred upon me under Section15 I of the
SEBI Act and Rule 5 of the Adjudication Rules, I hereby, under the provisions
of sections 15 HA & 15 HB of the SEBI Act, impose penalty upon all Noticees
as mentioned in the table below:
Page 38 of 40
Name of Noticee (s)
Penalty
` 50 lakh
for violation of Regulation 3 (b), (c) and (d),
Regulations 4 (1) and 4 (2) (f) of PFUTP
Regulations read with section 12 A (a), (b) & (c) of
the SEBI Act.
Brooks Laboratories Ltd.

` 50 lakh
for violation of Regulation 57(1) and Clauses 2 (VII)
(G), 2 (XVI) (B) (2) of Part A of Schedule VIII read
with regulation 57(2) (a) of ICDR Regulations.
` 2.75 crore each
Mr. Atul Ranchal

Mr. Rajesh Mahajan
Mr. Durga Shankar Maity

the SEBI Act.
` 75 lakh each
for violation of Regulation 57(1) and Clauses 2 (VII)
(G), 2 (XVI) (B) (2) of Part A of Schedule VIII read
with regulation 57(2) (a) of ICDR Regulations.
` 5 lakh each
Mr. Ketan Shah

Ms. Parvinder Kaur

the SEBI Act.
` 10 lakh each
for violation of Clause 2 (XVI) (B) (2) of Part A of
Schedule VIII of ICDR Regulations.
` 11.80 crores
Total
75. Therefore, a consolidated penalty of ` 11.80 Crores (Rupees Eleven Crore

and Eighty Lakh only) is imposed upon all Noticees. I am of the view that the
said penalty is commensurate with the violations committed by all Noticees.
76. Noticees shall pay the said amount of penalty by way of Demand Draft in
favour of SEBI - Penalties Remittable to Government of India, payable at
Mumbai, within 45 days of receipt of this order. The Demand Draft shall be
Page 39 of 40
forwarded to the Chief General Manager, Investigation Department, Securities

and Exchange Board of India, SEBI Bhavan, Plot No.C4-A, G Block, Bandra
Kurla Complex, Bandra (East), Mumbai400 051.
77. Copy of this order is being sent to all Noticees viz. (1) Brooks Laboratories
Ltd., (2) Mr. Atul Ranchal, Chairman (3) Mr. Rajesh Mahajan, Managing
Director (4) Mr. Durga Shankar Maity, Chief Executive Officer (5) Mr. Ketan
Shah, Chief Financial Officer and (6) Ms. Parvinder Kaur, Company Secretary
and also to the Securities and Exchange Board of India, in terms of rule 6 of
the Adjudication Rules.
Date: 12.01.2015
D. RAVI KUMAR
Place: Mumbai
CHIEF GENERAL MANAGER &

ADJUDICATING OFFICER
Page 40 of 40

Adjudication Order in Respect of Brooks Laboratories Ltd. and Others in The Matter of IPO of Brooks Laboratories LTD

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Adjudication Order in Respect of Brooks Laboratories Ltd. and Others in The Matter of IPO of Brooks Laboratories LTD

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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF

Brooks Laboratories Ltd. - PAN: AACCB5316P

Mr. Atul Ranchal (Chairman) - PAN: ADMPR5359L

Mr. Rajesh Mahajan (Managing Director)- PAN: AFGPM8060D

Mr. Durga Shankar Maity (Chief Executive Officer) - PAN: AHNPM4221B

Mr. Ketan Shah (Chief Financial Officer) - PAN: BIUPS7078D

Ms. Parvinder Kaur (Company Secretary) - PAN: BNQPK5210E

(In the matter of Brooks Laboratories Ltd.)

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APPOINTMENT OF ADJUDICATING OFFICER

Unfair Trade Practices relating to

Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP

SHOW CAUSE NOTICE, REPLY AND HEARING

A. Noticee No. 1 / Brooks entered in to the capital market by way of an offer of

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Suruamukhi by Brooks, was to round trip the funds as mentioned in Para

Regulations issued by the SEBI, established under Section 3 of the Securities

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(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade

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5. Vide communiqu dated September 30, 2013, Noticees No. 1 to 5 were

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Mr. Atul Ranchal (Chairman of

Brooks) and Mr. Rajesh Mahajan (Managing Director of Brooks). The

During the hearing, the said

authorised representatives reiterated as submitted in aforesaid detailed reply

The Company is a pharmaceutical research and manufacturing services

Company has planned to enter into manufacturing of intra-venous large volume

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During February 2011, the Government of India, in the annual budget,

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On approval of DRHP, we filed RHP with SEBI. After approval of RHP on

Keeping in view the sluggish development at JB SEZ, Panoli, lack of

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Nothing has been brought on record to even remotely demonstrate as to how we

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It is denied that we had, out of IPO proceeds, transferred an amount of 2.50

We are not aware that Overall had utilized

It is denied that order as placed with Neopower without quotation as alleged. In

With regard to non-mentioning of name of Neo Power in the prospectus, it is

We have already suffered debarment for a period of more than 2 years as on

We have fully cooperated in the proceedings with SEBI. We have an impeccable

Reply of Noticees No. 2 6

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we have already suffered disproportionately for the alleged violations.

Noticee No. 6 also stated that I have resigned as a Company Secretary of

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Copy of letter written by Brooks to SEBI dated September 24, 2013.

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CONSIDERATION OF EVIDENCE AND FINDINGS

Allegation of Round Tripping and Siphoning off Funds.

Name of the entity from whom

Shital Nath Buildcon P. Ltd.

Blue Print Securities Ltd.

Konark Commerce &

5.50 June 8, 2011

Shardaraj Tradefin Ltd.

Bankebehari Commercial P. Ltd.

Dream Valley Sales P. Ltd.