Order in The Matter of Bharatiya Global Infomedia LTD

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Order in the matter of Bharatiya Global Infomedia Ltd. Page 1 of 49

WTM/RKA/IVD/ID6/97 /2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

Under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act,
1992 read with regulation 11 of the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003
and regulation 107 of the SEBI (Issuance of Capital and Disclosure Requirements)
Regulations, 2009 against:

Sl. No. Name /designation of Entity PAN
1. Bharatiya Global Infomedia Ltd AABCB8175B
2. Mr. Rakesh Bhatia (Chairman and Managing Director), AHYPB7406Q
3. Mr. Sanjeev Kumar Mittal (Executive Director) AIVVPM0122A
4. Mr. Rajeev Kumar Agarwal (Manager, Finance) AGGPA0436L

In the mater of IPO of Bharatiya Global Infomedia Limited.
________________________________________________________________________
Appearances:
For the Noticees:
1. Mr. K. K. Singh
2. Ms. Aarti Jain
3. Mr. Sanjeev Kumar Mittal
4. Mr. Kumar Pushkar
For SEBI:
1. Mr. B. Rajendran, General Manager
2. Mr. Sugadev C, Assistant General Manager
_________________________________________________________________________

1. Bharatiya Global Infomedia Limited (BGIL) came up with an Initial Public Offer ("IPO")
through the book building route in the price band of 75 to 82 for 67.2 lakh equity shares
of 10 each constituting 42.42% of its post issue paid-up capital. The issue price of BGIL's
share was 82 and the issue size was 55.104 crore. The Book Running Lead Manager for
the issue was Almondz Global Securities Limited ("Almondz / Merchant Banker"). The
allotment of shares in IPO was completed on July 21, 2011 and thereafter the shares of
BGIL were listed and admitted for dealings on National Stock Exchange of India Ltd.
(hereinafter referred to as "NSE") and Bombay Stock Exchange Ltd. (hereinafter referred
to as "BSE") on July 28, 2011.

2. It was noted that on the day of listing of shares of BGIL i.e. on July 28, 2011, on BSE, the
price of the scrip opened at 81.9, stayed between 60-70 for some time and then
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plunged to 29.90 at close. On NSE, the price of the scrip opened at 84 (days high),
stayed between 60-70 for some time and then plunged to 30.95 at close.

3. In this background, the Securities and Exchange Board of India ("SEBI") undertook
preliminary investigation in the IPO of BGIL and it prima facie observed, inter alia, that
BGIL had utilized the IPO proceeds in a substantially different manner than those
disclosed in the Red-Herring Prospectus dated June 28, 2011 ("RHP") and Prospectus
dated July 16, 2011("Prospectus"). In addition thereto, several instances of untrue, incorrect
and misleading disclosures in the RHP/Prospectus were also observed. While the
investigation in the matter were ongoing, SEBI vide an ad-interim ex-parte order dated
December 28, 2011, inter-alia, issued the following directions:

i. The company Bharatiya Global Infomedia Ltd., is prohibited from raising any further capital from
the securities market, in any manner whatsoever, till further directions.
ii. The company BGIL (PAN: AABCB8175B), its directors Rakesh Bhatia, Chairman and
Managing Director, PAN: AHYPB7406Q, Arti Bhatia, Director, PAN: AFCPB5056J,
Sanjeev Kumar Mittal, PAN: AIVVPM0122A Anil Kapoor Passport No. P USA
448486811, Sanjay Kapoor, PAN: AIXPK2530Q, Harjeet Anand, PAN: AABPA2410K,
Jaya Mishra, PAN: AAJPM6407E and its Manager (Finance) Rajeev Kumar Agarwal (PAN:
AGGPA0436L) are prohibited from buying, selling or dealing in the securities market in any manner
whatsoever, till further directions.
iii. The Company shall call back the ICDs of 12.5 crore invested by it with Nihita Financials Ltd.,
Sanjukta Vanijya Pvt. Ltd and Darshan Tradelink Pvt. Ltd., and all amounts transferred / paid
out of IPO proceeds to its directors or relatives of its directors or HUFs belonging to any of its directors
or associate or subsidiaries or group companies. These amounts together with all of the IPO proceeds
that are still lying unutilized with the company across all its bank / deposit accounts or any investments
including in mutual funds, shall be deposited in an interest bearing escrow account with a scheduled
commercial bank, till further orders. A confirmation on compliance of this direction shall be sent by the
promoters of BGIL to the stock exchanges where it is listed, within 7 days from the date of this order.

4. During the pendency of the investigation in the matter, the directions issued vide the interim
order were confirmed vide SEBI's order dated October 5, 2012 ("confirmatory order"). After
completion of investigation in the matter, vide order dated May 07,2013, the interim
directions, issued against Ms. Arti Bhatia, Mr. Anil Kapoor, Mr. Sanjay Kapoor, Mr. Harjeet
Anand and Ms. Jaya Mishra vide the ad interim ex-parte Order dated December 28, 2011 and
confirmed vide order dated October 05, 2012, were revoked.

5. The facts revealed during investigation and that are the basis of allegation/charges in the
instant proceedings are, inter alia, the following:
1) The IPO proceeds of 55.104 crore were transferred to BGILs bank account (Axis Bank
A/c no. 911020037696473) on July 27,2011. As on November 15, 2011, the available
______________________________________________________________________________

balance in the said account was 54.49 lakh only as the rest of the money was already
transferred or paid to various entities, including the funds transferred to other accounts of
BGIL, payments to promoters and group companies, etc.

2) At the relevant time, BGIL had utilized 34.70 crore out of the IPO proceeds as
described in the following table:

Table 1 : Utilization of IPO proceeds vis--vis the objets of the IPO disclosed in
RHP/Prospectus ("Fund utilization table")
in crore
S.
No.
Category To be
utilized as
per
RHP/Prosp
ectus
Utilized
as
submitted
by BGIL
Utilized
(investigati
on
findings)
Mis-
utilization/
diversion
1 Setting up its owned
corporate office at Noida
3.960 0.410 0.410 0.000
2 Relocation of branch
office
5.936 4.024 1.524 2.500
3 Up-gradation of Digital
post production studio
13.655 9.389 0.000 9.389
4 Investment in IT division 8.392 3.910 0.400 3.510
5 Expansion of R&D
Technology centre and
advance made to Avance
technologies (paid before
IPO and recovered from
IPO fund)
6.567 4.321 0.035 4.286
6 Repayment of bank
borrowing
2.697 2.931 2.931 0.000
7 Working capital
requirement
5.050 4.9106 2.396 2.515
8 General Corporate
expenses
6.500 2.115 0.855 1.260
9 Meeting the issue
expenses
2.774 2.690 2.690 0.000
Total 55.53 34.70 11.24 23.46

3) It was observed that out of the above utilization of 34.70 crore from the IPO proceeds,
only 11.24 were utilized for objects disclosed in the RHP/Prospectus and remaining
23.46 crore were mis-utilized/diverted for purposes other than those disclosed in the
RHP/Prospectus as following:

I. Mis-utilization / diversion relating to relocation of branch office.

i. BGIL had disclosed to the stock exchanges regarding utilization of IPO proceeds
that it had inter-alia spent 250 lakh for the purchase of office. The agreements
submitted by BGIL revealed that the payments of 100 lakh on July 02, 2011 and
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150 lakh on July 05, 2011 were made to Dhanmangal Developers Private Limited
(:Dhanmangal") as advance payment out of the total consideration of 500 lakh for
the purchase of an office space at Kolkata. The advance was made within 3 days of
the RHP date and before the prospectus date. However, the said transaction was
neither disclosed in the Prospectus by BGIL nor did it issue any public notice as
required by the SEBI (Issuance of Capital and Disclosure Requirements)
Regulations, 2009 ("ICDR Regulations"). Instead, BGIL had mentioned in the
RHP/Prospectus that "Except as stated in section titled 'Objects of the Issue' appearing on
page no.29 of this Prospectus, there is no property which our Company has purchased or acquired
or propose to purchase or acquire which is to be paid wholly, or in part, from the net proceeds of
the Issue or the purchase or acquisition of which has not been completed as on the date of filing of
this Prospectus with SEBI."

ii. Investigation revealed that Dhanmangal was incorporated on January 08, 2010,
with Mr. Rana Pratap Singh and Mr. Navin Kumar Sharma as directors and had
only cash and Bank balances of 3.43 lakh and loans and advances of 77.72 lakh.
Further, it did not have any fixed assets, capital work in progress, investments,
inventories or sundry debtors for both the financial years 2009-10 and 2010-11.
The agreement with Dhanmangal, submitted by BGIL, did not contain the
construction/plot address/location of the relevant property It was also revealed
that it was in the business of development of agriculture land levelling and did not
have any employees other than its directors. It was further revealed that
Dhanmangal did not undertake any real estate projects during the year 2010-11 and
2011-12 and did not have any project approval, etc. from the competent authority.
From the above, it was observed that the transaction for the purchase of the said
property by BGIL is non genuine and the IPO proceeds have been diverted for the
purposes other than that mentioned in the RHP/Prospectus. It was also observed
that BGIL knowingly concealed the transaction with Dhanmangal and intentionally
provided wrong and misleading disclosure in the prospectus.

II. Mis-utilization / diversion relating to up-gradation of Digital post production
studio and Investment in IT division.

i. Investigation revealed that BGIL did not utilize the amount as specified in the
RHP / Prospectus except the payments of 0.40 crore made to one V Kumar &
Co. for furniture and fixtures. The payments made by BGIL to various vendors
were not found to be in accordance with the disclosures made in the RHP /
Prospectus since the actual vendors to whom the payments were made by BGIL
were different from the vendors whose names were disclosed in the RHP/
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Prospectus. Thus, it was observed that the funds to the extent of 12.89 crore
were mis-utilized by BGIL.

III. Mis-utilization / diversion relating to expansion of R&D Technology centre.

i. Investigation revealed that out of the amount of 4.321 crore, claimed by BGIL to
have been incurred towards the expansion of R&D technology centre, only the
payment of 0.035 crore made to Westcon India Private Limited was in accordance
with the disclosures made in the RHP / Prospectus, and the remainder amount of
4.286 crore was mis-utilized. It was observed that advance payments of 0.14 crore,
legal expenses and travelling expenses were not as per the disclosures made in the
RHP / Prospectus. Further, it was observed that the payment of 2.65 crore made
to Avance Technologies Limited (Avance), claimed by BGIL as advance amount,
was a mere round trip transaction. As disclosed in the RHP and Prospectus, BGIL
had made an advance payment of 2.65 crore to Avance prior to IPO. In the fund
utilization table, the advance amount was not deducted and the entire cost i.e.,
6.57 crore was shown as payable to Avance from IPO Proceeds. Though BGIL
claimed that 2.65 crore was paid to Avance to expedite the timely delivery of BMS,
it was observed that BGIL paid only 50 lakh and remaining 2.15 crore was
returned back to BGIL through circuitous transfers of funds between Avance,
BGIL and Saptrishi Suppliers Private Limited ("Saptrishi"). The diagram below
draws out the fund flow in respect of the transactions of BGIL with Avance

Diagram 1 : Fund flow pertaining to the transactions of BGIL with Avance

ii. As observed from the above fund flow, except 50 lakh received by BGIL on June
08, 2011, all other funds were circuitously transferred to create artificial financial
obligation for 2.15 crore. The amount of 55 lakh received from Saptrishi by
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BGIL on June 8, 2011 was returned to Saptrishi on the same day through Avance.
Similarly, 50 lakh and 60 lakh received on June 15, 2011 were also returned on
June 16, 2011 to Saptrishi through Avance and Priority Exports. Another 50 lakh
received from Saptrishi by BGIL on June 15, 2011 was returned on the same day to
Saptrishi through Avance and Satshri Multitrade Private Ltd. In view of the above,
it was found that BGILs disclosure of 2.65 crore of advance payment made to
Avance is false and misleading and an obligation of 2.15 crore was created
artificially to siphon off of the said amount from the IPO proceeds.

IV. Mis-utilization/ diversion relating to working capital requirements.

i. BGIL had entered into an agreement with Jupiter Infraenergy Limited ("JIL") on
July 1, 2011 for various services for a consideration of 500 lakh and made the
payment of 251.50 lakh to JIL out of which 30 lakh was paid before the
prospectus date. The payment to JIL and availing services were neither disclosed in
the prospectus nor public notice was issued as required by the ICDR Regulations.
Further, it was also observed from the bank account statement of JIL that 180.75
lakh were transferred to BGIL and its group companies viz., BGIL (7.50 lakh) and
Number one Finvest Private Limited (173.25 lakh). It was also found that 32.45
lakh cash was withdrawn by JIL. The table below shows the extracts from JIL's
bank statement including the date and time of deposit and the withdrawal:

Table 2 : Extract of JIL's Bank Account

S. No Date/time
of
transaction
Branch name Particulars Debit
/
Credit
Amount
1 29/06/2011
1:28:48 pm
Electronic pay
and settlement
office Mumbai
Bharatiya global
infomedia ltd-
180200194
C 15,00,000
2 29/06/2011
3:33:13 pm
Nehru place
Delhi
Casa cheque
withdrawal
D 9,50,000
3 01/07/2011
2:44:56 pm
Nehru place
Delhi
By tr cuckoo
realtechlt
90441010014465
C 2,60,000
4 01/07/2011
2:48:10 pm
Nehru place
Delhi
Casa cheq
withdrawal
D 8,05,000
5 04/07/2011
1:47:03 pm
Electronic pay
and settlement
office Mumbai
Bharatiya global
Infomedia ltd-
185200185
C 15,00,000
6 04/07/2011
3:05:13 pm
Nehru place
Delhi
To tr bharatiya
global i
90771010001070
D 7,50,000
7 05/07/2011
2:58:37 pm
Nehru place
Delhi
Casa cheque
withdrawal
D 7,50,000
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8 01/08/2011
11:10:48 am
Electronic pay
and settlement
office Mumbai
Bharatiya global
Infomedia ltd-
213200056
C 45,00,000
9 03/08/2011
3:16:11 pm
Nehru place
Delhi
Jk metal feeders-
synbh112154567
10
D 45,00,000
10 04/08/2011
11:46:28 am
Nehru place
Delhi
To clg (rej): j k
metal
C 45,00,000
11 04/08/2011
11:46:28 am
Nehru place
Delhi
To clg j k metal D 45,00,000
12 04/08/2011
11:54:18 am
Electronic pay
and settlmnt
offce mumbai
Bharatiya global
Infomedia
limited-66392
C 1,76,50,00
0
13 04/08/2011
12:04:47 pm
Nehru place
Delhi
To tr number one
finsec
90441010015230
D 23,25,000
14 04/08/2011
12:09:49 pm
Nehru place
Delhi
To tr number one
finvest
90441010013835
D 1,50,00,00
0

ii. In addition to the above, the following facts were also revealed during the
investigation:
JIL was originally incorporated as Jupiter Capital Services Private Limited (JCSL)
in the year 1994, and Mr. Rakesh Bhatia and Ms. Arti Bhatia holding 100 shares
each out of 700 shares were the shareholders of JCSL.
During the year 2004, BGIL had become one of the major shareholder of JCSL
(24%) Mr. Rakesh Bhatia was a director till 2005. Subsequently, in the year 2008,
JCSL's name was changed to Jupiter Infraenergy Limited.
Mr. Rajeev Kumar Agarwal (Manager-Finance, BGIL) and Kartik Share Traders
(P) Ltd., a company in which Mr. Rajeev Kumar Agarwal is a director, were the
major shareholder of JIL as on September 2009 and 2010.
As on March 2012, JIL was holding more than 1.68% shares in BGIL i.e. 26,637
shares.
JIL had nil income for the years 2007-08 and 2008-09.
Mr. Narender Kumar Jena, Mr. Uma Shankar Behera and Mr. Latesh Kumar were
the directors of JIL since 2005. From BGIL's employees list, employee's
attendance details and salaries details paid for the month of October 2011, it was
observed that Mr. Narendra Jena and Mr. Uma Shanker Behera were working
with BGIL as office boy and hardware maintenance person drawing the monthly
salary of 8,450 and 17,550, respectively. Further, the website of Ministry of
Corporate Affairs showed that Mr. Narendra Jenas address as 601, Devika
Tower, Nehru Place, New Delhi, 110019, Delhi, INDIA which is the same as
BGIL's address.
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Mr. Uma Shankar Behera and Mr. Narendra Jena were also holding 7,000 shares
and 1,500 shares of BGIL respectively, prior to its IPO. Further, Mr. Narendar
Jena is also the director of Cuckoo Realtech Limited (a group company of BGIL)
which is one of the shareholders of Kriti communication private Limited, and
Number one Finvest private limited (group companies of BGIL).

iii. From the analysis of above facts, it was observed that JIL was merely a front entity
of BGIL and the funds paid to JIL by BGIL were diverted from the IPO proceeds
and JIL was only used as a conduit for the said diversion of IPO proceeds.

V. Mis-utilization / diversion relating to General Corporate expenses.

i. BGIL made a disclosure at page 39 of RHP that No part of the issue proceeds, will be
paid by our company, as consideration to promoters, directors, promoter group entities and key
managerial personnel. However, investigation revealed that BGIL mis-utilized the IPO
proceeds by making payments to one of the promoters and Managing director of
BGIL, Mr. Rakesh Bhatia, his son Gaurav Bhatia, Rakesh Bhatia-HUF and the
group companies i.e. BGIL Films and Technologies Limited and Number one
Finsec Private Limited. Cash withdrawal of 60.45 lakh was also observed in the
bank statement of BGIL. The table below shows the payments made by BGIL to
the said entities:

Table 3: Payments made by BGIL to promoters and related entities

Name Relationship Amount (. in lakh)
Rakesh Bhatia Promoter 44.06
Gaurav Bhatia Son of Promoter 4.50
Rakesh Bhatia (HUF) HUF of Promoter 10.50
BGIL Films and
Technologies Ltd.
Related entity of the promoter 30.15
Number one Finsec Pvt.
Ltd.
Related entity of the promoter 36.75
Total 125.96

ii. It was found that though certain loan details were disclosed in the RHP/Prospectus,
it was not disclosed that these loans will be repaid from the IPO Proceeds. During
investigation, BGIL submitted that these payments were in respect of repayment of
the loan received from these entities. Further with respect to 2.60 lakh paid to Mr.
Gaurav Bhatia, BGIL had claimed that it was employees advance, which was
subsequently recovered. It was observed that the subsequent recovery from Mr.
Gaurav Bhatia by BGIL with interest was an afterthought after SEBI's interim order
pointing out the said amount as diversion of funds. It was also observed that BGIL
______________________________________________________________________________

had made wrong disclosure in the RHP/Prospectus and diverted the part of IPO
proceeds to promoters and promoters related entities

Mis-utilization / diversion of IPO proceeds by repaying ICD loans raised prior to the
RHP date / prospectus date without any disclosure.

4) Investigation also revealed that BGIL had taken ICD loans of 7 crore prior to RHP and
of 8 crore before the prospectus date The details of the ICD loans taken by BGIL are
given in following table:
Table 4 : ICD loans taken by BGIL

S.
No
Party Name Received Date
Amount in
crore
Prior to the date of filing of RHP
1 Krishna trade & Commerce
Pvt. Ltd.
21.6.2011 2.00
2 AachmanVanijya Pvt. Ltd. 22.6.2011 2.00
3 SajalImpex Pvt. Ltd. 22.6.2011 0.475
4 Dinosour Tradelink Pvt. Ltd. 27.6.2011 1.00
5 Divyadrishti Traders Pvt. Ltd. 27.6.2011 0.525
6 Subhshree Hirise Pvt. Ltd. 27.6.2011 1.00
After the date of filing of RHP but before the date of filing of Prospectus
7 Skylight Distributors Pvt. Ltd. 29.6.2011 1.00
8 Times tradelink Pvt. Ltd. 30.6.2011 1.00
9 Makesworth Projects
Developers Pvt. Ltd.
04.7.2011 1.00
10 Affluent Dealcom Pvt. Ltd.
04.7.2011 1.00
05.7.2011 0.5
11 Abhilasha Exports Pvt. Ltd. 06.7.2011 1.00
12
ETL Infrastructure Finance
Ltd.
05.7.2011 1.50
07.7.2011 1.00
Total

15.00

5) The above mentioned ICD loans were repaid from the IPO proceeds on the date of
receipt of IPO proceeds in the account of BGIL or the next day as described in the
following table :

Table 5 : Repayment of ICD loans out of IPO Proceeds

S.
No.
Date of
transaction
Paid to Amount in
crore
1 27-07-2011 TIMES TRADE LINK PVT. LTD. 1.00
2 27-07-2011 KRISHNA TRADE AND COMRCE PVT
LTD.
2.00
3 27-07-2011 DIVYADRISHTI TRADERS PVT. LTD. 0.525
4 27-07-2011 MAKESHWORTH PROJECTS
DEVELOPERS P. LTD.
1.00
5 27-07-2011 ETL INFRASTRUCTURE FINANCE
LTD.
2.50
______________________________________________________________________________

6 27-07-2011 DINOSOUR TRADELINK PVT. LTD 1.00
7 27-07-2011 AFFLUENT DEALCOM PVT.LTD. 1.50
8 27-07-2011 AACHMAN VANIJYA PVT. LTD. 2.00
9 27-07-2011 SUBHSHREE HIRISE PVT LTD 1.00
10 27-07-2011 SKYLIGHT DISTRIBUTORS PVT LTD 1.00
11 27-07-2011 ABHILASHA EXPORTS PVT LTD 1.00
12 28-07-2011 SAJAL IMPEX PVT LTD 0.475

6) BGIL had not disclosed the above ICD loans of 7 crore in its RHP. Further, the ICD
loans of 8 crore were neither disclosed in the prospectus nor any public notice was
issued by BGIL as required in the ICDR Regulations rather it made a misstatement and
wrong disclosure in its RHP and Prospectus to the effect that our company has not raised any
bridge loan against the proceeds of the present issue.

7) BGIL had not taken any ICD loan other than those mentioned above in the last two years
prior to filing of RHP. It was observed that there were no agreements between BGIL and
various entities from whom the ICD loans were taken. Further, the letters claimed to have
been exchanged between them, in this regard, did not mention any rate of interest and
BGIL did not pay interest on the said ICD loans. On the basis of the above, it was
observed that the letters between BGIL and various entities were created as an
afterthought when SEBI sought the agreement details in respect of ICDs from BGIL.

8) Admittedly, out of the aforesaid ICD loans of 15 crore, 13.46 crore was paid to
various entities prior to the RHP of BGIL as described in the following table:

Table 6 : Use of ICD loan amount

Payment Details

Quotation Date
Reference to Objects of
Issue
Date Paid To
Amount
( in Lac)
Purpose
claimed by
BGIL
Item Amount
02.07.2011
Dhanmangal
Developers
100.00
offices
-

Offices

989.60
05.07.2011
Dhanmangal
Developers
150.00
29.06.2011
Jupiter
Infraenergy
15.00
Working
Capital
- - -
04.07.2011
Jupiter
Infraenergy
15.00
Working
Capital
- - -
21.06.2011 Houston Tech 191.40 Machineries 20.06.2011 Studio Machines 1,075.00
23.06.2011
Quantum Hi
Tech
36.00 Machineries 20.06.2011
Office
Equipments for
IT Div.
131.15
28.06.2011
Net 4
Communicatio
130.00 Machineries 22.06.2011
Computers for
IT & Studio
244.52
1075.00
______________________________________________________________________________

ns Machines
02.07.2011
Himalayan
Times
60.00 Machineries 28.06.2011 Studio Machines 1,075.00
02.07.2011 Vivid IT 1.11 Machineries 02.07.2011
Computers for
IT Div
244.52
05.07.2011
Himalayan
Times
80.00 Machineries 28.06.2011 Studio Machines 1,075.00
05.07.2011
Net 4
Communicatio
ns
120.00 Machineries 22.06.2011
Computers for
IT & Studio
Machines
244.52
1075.00
06.07.2011
Millenium
Automation
50.00 Machineries 21.06.2011
Hardware
Equipments for
IT Div. , Office
Equipments&
two Studio
Machines
186.14 &
1075.00
06.07.2011
Millenium
Automation
50.00 Machineries 21.06.2011
08.07.2011
Millenium
Automation
100.00 Machineries 21.06.2011
Total 1346.11

9) The remaining amount was paid towards other expenses viz., rent, salary to employees,
IPO expenses, etc.

10) The above amount of 13.46 crore was paid to the above mentioned entities under three
categories of Objects of the issue:-
i. 2.50 crore to Dhanmangal for setting up of Office as mentioned above
ii. 0.30 crore to JIL for Working capital as mentioned above :
iii. 10.66 crore paid to various vendors towards purchase of machineries as shown in
the table below.

Table 7 - Details of quotations and payments in respect of vendors

S.
N
o
Supplier
Name
Quotatio
n date
Payment
date
Buy
order
date
Invoice
date
Amou
nt in
lakh
(as per
invoice
)
Total
as per
invoice
in
lakh
Amoun
t paid
in
lakh (as
per
bank
accoun
t)
Total
paid as
per
bank
accoun
t in
lakh
1 Houston
Technolo
gies Ltd.
20-Jun-11 21-Jun-11 20-Jun-11 07-Sep-11 175.94 430.07 191.4 439
2 23-Jun-11 20-Jun-11 16-Sep-11 221.77 178.6
3 24-Jun-11 20-Jun-11 12-Sep-11 32.36 69
4 Quantum
Hi-Tech
Merchand
ising Pvt.
Ltd.
20-Jun-11 23-Jun-11 - 28-Sep-11 35.14 35.14 36 36
5 Net 4
Communi
cations
Ltd.
22-Jun-11 28-Jun-11 - 12-Sep-11 134.87 245.38 130 250
6 05-Jul-11 09-Sep-11 65.89 120
7 14-Sep-11 44.62
______________________________________________________________________________

8 Vivid IT
Solutions
Pvt. Ltd.
02-Jul-11 02-Jul-11 - 04-Jul-11 1.11 1.11 1.11 1.11
9 Himalaya
n Times
Pvt. Ltd.
28-Jun-11 02-Jul-11 - 16-Sep-11 57.94 144.29 60 140
10 05-Jul-11 19-Sep-11 39.46 80
11 21-Sep-11 46.89
12 Millenniu
m
Automati
on &
Systems
Limited
21-Jun-10 06-Jul-11 02-Sep-11 02-Sep-11 17.13 233.82 50 200
13 06-Jul-11 03-Sep-11 03-Sep-11 56.5 50
14 08-Jul-11 06-Sep-11 06-Sep-11 160.19 100
Total 1089.81 1089.81 1066.11 1066.11

11) It was found that out of 14 quotations to actual vendors (to whom purchase orders were
placed and payments were made), in respect of 13 quotations, the date of quotation was
on or prior to RHP date and in respect of one entity (i.e. Vivid IT Solutions Pvt. Limited)
the quotation date was prior to the prospectus date. It was also found that 605 lakh was
paid to the vendors on or before the RHP date and 461 lakh was paid to the vendors
before the prospectus date.

12) In view of the above details, it was inferred that the vendors to whom the payments were
made by BGIL were pre-decided and the payments were made to them before the RHP
date/Prospectus date/date of allotment of securities. It was observed that BGIL had
made wrong disclosures in the RHP/Prospectus by providing names of
suppliers/vendors who were different from the actual vendors.

13) Investigation also revealed that BGIL in its RHP and Prospectus had disclosed under the
paragraph on 'Interim use of proceeds' that, Our Companys management, in accordance with
the policies established by the Board, will have flexibility in deploying the proceeds received from the Issue.
Pending utilization of the proceeds out of the Issue for the purposes described above, we intend to
temporarily invest the funds in high quality interest bearing liquid instruments including money market
mutual funds and deposits with banks. Such investments would be in accordance with the investment
policies approved by the Board from time to time.

Diversion of IPO proceeds in the garb of ICD investments.

14) In addition to above fraudulent mis-utilisation/diversion of 23.46 crore out of the IPO
proceeds, it is noted that BGIL claimed during investigation that it had temporally
invested 12.5 crore in ICDs as under:
Table 8: ICD Investments made by BGIL

S. No. Particulars Agreement
date
Transaction date Amount in crore
1 Darshan tradelink July 20, .2011 July 27, 2011 4.00
______________________________________________________________________________

Pvt. Ltd.
2 Sanjukta vanijya
Pvt. Ltd.
July 21, .2011 July 27, 2011 3.50
3 Nihita Financial
Services Pvt. Ltd.
July 23, .2011 July 28, 2011 5.00

15) As per the disclosures made by BGIL, pending utilization, the IPO proceeds should have
been invested in high quality interest bearing liquid instruments including money market mutual
funds and deposits with banks. However, BGIL, vide e-mail dated December 22, 2011
informed SEBI that we wish to confirm that there is no formal investment policy adopted in our
company. It was found during investigation that BGIL had made investments which were
not in line with the disclosures made in the Prospectus and gave loans to the above
named three entities whose reliability is not known.

16) As per the agreements of BGIL with Sanjukta Vanijiya Private Limited and Darshan
Trade link Private Ltd., the amounts paid to them were supposed to be repaid on January
26, 2012. In the case of Nihita Financial Services Private Ltd, it was supposed to be repaid
on July 19, 2012. Further, as per the agreements with these three entities, the ICDs could
be called back by BGIL at any time with a notice of 3 days. It was observed that in spite
of the direction of SEBI vide ad-interim ex-parte order dated December 28, 2011 directing
BGIL to call back the said ICD investments, BGIL did not recover the same from the
said three companies. Thus, it was observed that BGIL mis-utilized the issue proceeds by
investing the amount of 12.5 crore in the name of ICD investments in entities whose
credentials were not known.

Diversion of IPO proceeds to traders.

17) Investigation further revealed that 10.53 crore out of the IPO proceeds had reached the
following entities:
7.10 crore to five entities (hereafter referred to as "GRD Group") viz., Marutinandan
Infosolutions Private Limited (MIPL), Jalan cement works Limited (Jalan), Orbit
Financial Consultants Private Limited (Orbit), GRD securities private Limited (GRD
and Swift Tie Up Private Limited (Swift). As noted above, as a part of the purported
ICD investments, BGIL had transferred 7.5 crore to Sanjukta Vanijya Private Ltd and
Darshan Tradelink Private Limited which have common directors viz., Mr. Goutam
Basotia and Mr. Santosh Kumar Sahal. Out of the said 7.5 crore, 7.10 crore reached
GRD,
3.43 crore to four entities (hereafter referred to as "Korp Group") viz., Korp
Securities Ltd (Korp), Wheelers Developers Private Limited (Wheelers), Divyadrishti
Merchants Private Ltd and Divyadrishti Traders Private Ltd. As noted above, BGIL
had made ICD loan repayments of 1 crore each to Abhilasha Exports Pvt. Ltd,
Skylight Distributors Private Limited, and Subhshree Hirise Pvt. Limited. Out of this
______________________________________________________________________________

3 crore, 2.9 crore had reached Divyadrishti Traders Private Limited. In addition to
the above, BGIL had also transferred 0.53 crore directly to Divyadrishti Traders
Private Limited. In total, 3.53 crore was received by Divyadrishti Traders Private
Limited out of which Divydrishti Traders Private Limited had transferred 0.89 crore
to Wheelers and 1.97 crore to Korp.

18) It was observed that the said two groups indulged in fraudulent and unfair trade practices
in the shares of BGIL on the listing day through various synchronized / structured trades
with one Mr. V. P. Patel ('VPP'). MIPL and VPP had executed synchronized trades for
the quantity of 3,56,791 shares through two trades with buy and sell order time difference
of 4 seconds and 2 seconds, respectively. In addition thereto, VPP also executed two
structured trades with Divyadrishti Merchants Private limited for 79,657 shares and Swift
Tie up private limited for 1,68,044 shares.

19) It was found that VPP, GRD and Korp Group had traded among themselves creating
artificial volume of 5,62,674 shares at NSE and 2,70,599 shares at BSE, without the
intention of change of ownership of BGIL shares and created false or misleading
appearance in the securities market. While carrying out the said transactions, the two
groups suffered heavy losses which were compensated by BGIL.

20) The following is the summary of GRD Group's and Korp Group's trade details and
trading loss incurred in BGIL shares on the listing day.

Table 9: GRD Group's and Korp Group's trade details

S.
No
Client Name / Exchange Buy
Quantity
Sell
Quantity
Loss
1. KORP SECURITIES LTD (Korp) 4,53,089 4,53,089 86,85,514
2. WHEELERS DEVELOPERS PRIVATE
LTD (Wheelers)
2,26,907 2,26,907 62,78,647
3. DIVYA DRISHTI MERCHANTS
PRIVATE LTD
2,00,000 2,00,000 61,21,946
4. DIVYA DRISHTI TRADERS PRIVATE
LTD
92,500 92,500 27,69,336
TOTAL 9,72,496 9,72,496 2,38,55,443
5. MARUTINANDAN INFOSOLUTIONS
PRIVATE LIMITED (MIPL)
5,00,000 5,00,000 3,17,50,000
6. JALAN CEMENT WORKS LTD. (Jalan) 4,00,000 4,00,000 2,54,20,211
7. ORBIT FINANCIAL CONSULTANTS
PRIVATE LIMITED (Orbit)
3,84,241 3,84,241 1,76,74,899
8. GRD SECURITIES PVT.LTD. (GRD) 1,22,769 1,10,169 77,56,485
9. SWIFT TIE UP PRIVATE LIMITED
(Swift)
5,00,500 5,00,500 99,11,767
TOTAL 19,07,510 18,94,910 9,25,16,160

______________________________________________________________________________

21) Further, the aforesaid two groups and VPP had provided exit to the top four allottees
through structured trades for the quantity of 5,85,541 shares i.e. 86% of the shares
allotted to top four allottees.

22) GRD Group, Korp Group and VPP also executed structured trades with Shikha Somani
for 1,85,442 shares by which 38 allottees exited by tendering their allotted shares for the
pay-in obligations of Shika Somani for these trades. They also bought substantial shares
through structured trades from Shree Bahubali International Private Limited (2,57,324
shares) and PELF Securities Limited (71,408 shares) who in turn gave exit to their own
clients (allottees) through structured trades. Shree Bahubali International Private Limited
gave exit to 137 allottees for 1,96,322 shares and PELF Securities Ltd gave exit to 124
allottees for 2,02,812 shares through structured trades. In total, the aforesaid two groups
and VPP had executed structured trades for 11,00,800 shares to give exit to various
allotees.

23) It was observed that BGIL had a prior arrangement with GRD Group, Korp Group and
VPP and the allottees and therefore BGIL had diverted 10.53 crore (i.e. 7.10 crore to
GRD Group and 3.43 crore to Korp Group) from IPO proceeds to compensate their
loss incurred in manipulating the trading in the shares of BGIL on listing day.

24) In addition to the aforesaid, it was also observed that BGIL had made wrong disclosures
in the RHP/Prospectus and suppressed material information from the investors as
described hereunder:-.

A. Wrong disclosure about placement of purchase orders.

a) BGIL also disclosed in the RHP and Prospectus that we have not yet placed orders
for 81.48% of our plant and machinery, equipments, etc, for our proposed expansion as
specified in the objects of issue." However, it was found that as on Prospectus date,
purchase orders were placed for 30.64 crore i.e. 55% of the IPO proceeds as on
prospectus date and 29% (16.03 crore) as on RHP date. The table below shows
the details of the said transactions:

Table 10 : Purchase orders placed by BGIL

S.
No.
Objects of the issue / IPO
proceeds
Advance
Paid in
crore on
or before
RHP
date
Advance
Paid in
crore on or
before
Prospectus
date
Amount to
be utilized
in Crore
1.

Purchase of office premises - Noida 2.00 - 3.96
______________________________________________________________________________

2. Purchase of office space at Kolkatta
(not mentioned in RHP)
- 0.30* 5.00
3. Up gradation of digital post
production studio and investment in
IT division
6.05 4.61 10.66
4. Expansion of R & D centre 2.65 - 6.02
5. Various critical services - 2.51 5.00
Total 10.70 9.62 30.64
*additional 2.21crore was paid on August 01 and 04, 2011

b) From the above facts, it was observed that BGIL concealed the information
regarding placement of purchase orders from the public and intentionally made
wrong and misleading disclosures in the RHP / Prospectus and also did not
inform the public through public notice about the material developments which
happened after filing of the RHP and before filing of Prospectus.

B. Non-disclosure of the transaction with Gadeo as a related party transaction.

a) It was also observed during investigation that it was disclosed in the RHP dated
June 28, 2011 and the Prospectus dated July 16, 2011, 3.96 crore were to be
paid to Gadeo Electronics ("Gadeo") out of the IPO proceeds. It was described
in the RHP and Prospectus that BGIL had entered into MoU with Gadeo to take
over the said firm having immovable property at Noida for total consideration of
5.96 crore. Out of the said sum, as part consideration of 2 crore BGIL had
allotted 2 lakh shares at a price of 100 per share to Mrs. Richa Mittal, partner
of Gadeo.

b) Gadeo is a partnership firm consisting of only two partners namely, Mrs. Richa
Mittal (95% share) and Mr. R. K. Mittal (5% share). Mrs. Richa Mittal is wife of
Mr. Rajeev Mittal (who is the brother of Mr. Sanjeev Kumar Mittal, director of
BGIL). Mr. R. K. Mittal is the father of Mr. Sanjeev Kumar Mittal.

c) While the draft offer document relating to the IPO was pending, SEBI had asked
a specific clarification from BGIL through its Merchant Banker (Almondz) as to
whether Gadeo is an entity related to BGIL/ its promoters /promoter group
companies. In response thereto, vide its letter dated February 07, 2011 BGIL
responded to Almondz that Mrs. Richa Mittal is not related to the BGIL, its promoters
/ Directors or promoter group companies..

d) In the RHP and Prospectus of BGIL, it was disclosed that:- Mrs. Richa Mittal is
wife of Mr. Rajeev Mittal and a resident of A-147-148, Sector 55, Noida, Uttar Pradesh,
and not related to our Company, our Promoters / Directors or Promoter Group Companies..

______________________________________________________________________________

e) A scrutiny of the partnership deeds of Gadeo made the following facts apparent:
The original partners of Gadeo were Mr. Sanjeev Kumar Mittal, (son of Mr.
Ram Kishan Mittal) and Mrs. Richa Mittal.
At the time of processing of RHP and prospectus in IPO of BGIL, Mrs. Richa
Mittal (wife of. Mr. Rajeev Kumar Mittal) and Mr. Ram Kishan Mittal were the
partners of the Gadeo.
Mrs. Richa Mittal and Mr. Sanjeev Kumar Mittal are having the same address at
- D-51(B), Sector-26, Noida.
The partnership deed was witnessed by the Chairman and Managing Director of
BGIL, Mr. Rakesh Bhatia and Mr. Rajeev Agarwal, Manager (Finance) of
BGIL.

f) As per Schedule I(A) read with Section 6(c) of Companies Act, 1956, father,
brother and his wife are related to the other. Further, the relationship details for
the transactions entered by the company shall be disclosed under clause (IV) (H)
(18) of para. 2 and clause VIII (B) (5)(a) (iii) and (iv) and 6(a) of Part A of
Schedule VIII of the ICDR Regulations. It was observed that BGIL failed to
make these disclosures in its RHP and Prospectus.

g) It was also observed that though BGIL had disclosed the transactions with
Gadeo in the RHP/Prospectus, it suppressed the fact that the said transaction
was related party transaction and also provided wrong details in the list of
director's relatives.

h) During the investigation when SEBI had sought derails of relatives of BGIL's
directors, BGIL did not mention the name of Mrs. Richa Mittal in the relatives
list which contained around 25 names. Thus, it was observed that this was a
deliberate attempt on part of BGIL to conceal the information from SEBI. and
to provide a wrong impression to the investors and SEBI that the purchase of
office was from the third parties.

Submission of three different versions of details pertaining to ICDs during SEBI's
investigation.

25) It was also found that during investigation that BGIL submitted to SEBI three different
versions of details of ICD loans taken and given by it. Following are the three versions
submitted by BGIL:
Version 1: When information was sought from BGIL regarding the utilization of IPO
proceeds, it informed SEBI that it had taken 12.5 crore ICDs before the IPO which
were to be repaid from the IPO proceeds.
______________________________________________________________________________

Version 2: When complete details of the ICDs were sought, BGIL submitted a table
which indicated that 5 crore ICD loan was given and 26.62 crore was paid towards
repayment of ICDs taken thereby indicating the modification of its previous response.
Version 3: When BGIL was asked to provide the copies of the ICD agreements and
highlight the inflow of these ICDs in the bank accounts, it submitted another set of
information, indicating ICDs repaid totalling 15 crore, ICDs loan given 12.5 crore,
repayment of business loan of 2.77 crore and normal business transaction of 1.35
crore.

26) It was observed that submission of three different versions regarding the ICDs was a
deliberate attempt on part of BGIL to mislead SEBI investigation.

Non-compliance with SEBI's order dated December 28, 2011.

27) In addition to the aforesaid, it was also observed that BGIL had failed to comply with
the directions of SEBI. Vide its ad-interim ex-parte order dated December 28, 2011,
SEBI had directed that. The Company shall call back the ICDs of 12.5 crore invested by it with
Nihita Financials Ltd., Sanjukta Vanijya Pvt. Ltd and Darshan Tradelink Pvt. Ltd and all
amounts transferred / paid out of IPO proceeds to its directors or relatives of its directors or HUFs
belonging to any of its directors or associate or subsidiaries or group companies. These amounts together
with all of the IPO proceeds that are still lying unutilized with the company across all its bank /
deposit accounts or any investments including in mutual funds, shall be deposited in an interest bearing
escrow account with a scheduled commercial bank, till further orders. A confirmation on compliance of
this direction shall be sent by the promoters of BGIL to the stock exchanges where it is listed, within 7
days from the date of this order. Subsequently, these directions were confirmed vide order
dated October 05, 2012.

28) In this regard, BGIL vide its letter dated January 03, 2012 informed SEBI that it had
called back the invested amounts vide their letters dated December 29, 2011. Further,
BGIL informed vide its letter dated March 17, 2012 that it had opened an escrow
account and deposited 47.37 lakh in it. However, no confirmation was given by BGIL
on the rest of the amount to be deposited in the aforesaid escrow account. The same
status was reconfirmed by BGIL vide e-mail dated November 07, 2012. BGIL vide its
letter dated November 09, 2012 submitted that "During the quarter ended 30th September,
2012 the company has already received an amount of 4.45 crore out of the total ICD's of 11.15
crore which has been utilized by the company in meeting the working capital requirements as per the
mandate of share holders obtained through postal ballot." As per the agreements, the ICDs
given to Sanjukta Vanijiya Private Limited and Darshan Trade link Private Limited were
supposed to be returned on January 26, 2012 and the same in case of Nihita Financial
Services Private Ltd, were to be returned by July 19, 2012. Further, according to the
agreements, the ICDs from these three entities could also be called back at any time
______________________________________________________________________________

with a notice of 3 days. As on the date of issuance of SCN, only 47.37 lakh was
deposited in the escrow account. From the analysis of the aforesaid facts and the
information submitted by BGIL, it was observed that SEBIs interim order dated
December 28, 2011 has not been compiled by BGIL in totality as the ICDs invested by
BGIL with Nihita Financials Ltd., Sanjukta Vanijya Private Ltd, Darshan Tradelink
Private Limited and all amounts transferred / paid out of IPO proceeds to its directors
or relatives of its directors or HUFs belonging to any of its directors or associate or
subsidiaries or group companies together with all of the IPO proceeds that were still
lying unutilized with the company across all its bank / deposit accounts or any
investments including in mutual funds, have not been deposited in the escrow account.

Failure of Mr. Rakesh Bhatia and Mr. Sanjeev Kumar Mittal to perform their role in
the Audit Committee.

29) A scrutiny of the audit committee minutes of the meetings revealed that the committee,
wherein, Mr. Rakesh Bhatia and Mr. Sanjeev Kumar Mittal were members, did not
notice the fund diversion and did also not make any recommendations to BGIL.

Role of Mr. Rakesh Bhatia, Mr. Sanjeev Kumar Mittal and Mr. Rajeev Kumar
Agarwal.

30) Mr. Rakesh Bhatia, Mr. Sanjeev Kumar Mittal and Mr. Rajeev Kumar Agarwal had
signed the certificate in the RHP / Prospectus stating that all disclosures made in the offer
document were true and correct. However, as mentioned in the above paragraphs, various
disclosures in the RHP/Prospectus were found to be false and misleading. Thus, it was
observed that they have given a wrong certificate in the RHP and Prospectus. It was
also observed that they were responsible for the acts and omissions of BGIL.

6. In view of the above, SEBI issued a combined show cause notice dated September 4, 2013
(hereinafter referred to as "the SCN") to BGIL, its Chairman and Managing Director -Mr.
Rakesh Bhatia, Executive Director- Mr. Sanjeev Kumar Mittal and Manager, Finance -Mr.
Rajeev Kumar Agarwal (hereinafter collectively referred to as 'the Noticees' and individually
by their respective names) calling upon them to show cause as to why suitable directions
under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India
Act, 1992 ("SEBI Act") including a direction to debar them from accessing the securities
market and prohibit them from buying, selling or dealing in securities for a particular
duration should not be issued against them. The SCN was issued to the Noticees for
allegedly contravening the provisions of section 12A (a),(b),(c) of SEBI Act read with
section 27 of SEBI Act and regulation 57 (1) and 57(2)(a)(ii) read with clauses 2 (VII)(G),
2(VIII) (B)(5)(a)(b), (6), 2(IV)(H)(18) and (XVI) (B) (2) of part A of schedule VIII,
regulation 60(4)(a) and (7)(a) of ICDR Regulations and regulations 3(a), (b), (c), (d), 4(1),
______________________________________________________________________________

4(2)(a), (d), (e), (f) and (k) of SEBI (Prohibition of Fraudulent and Unfair Trades Practices
relating to Securities Market) Regulations, 2003 ("PFUTP Regulations").

7. The following was, inter alia, alleged in the SCN:

(a) BGIL mis-utilized/diverted IPO proceeds in relation to 'Relocation of branch office',
'Up-gradation of Digital post production studio', 'Investment in IT division', 'Expansion
of R&D Technology centre', 'Working capital requirements' and 'General Corporate
expenses';
(b) BGIL mis-utilized/diverted IPO proceeds by repaying ICD loans which were raised by
it prior to the RHP date/Prospectus date without any disclosures in the
RHP/Prospectus or subsequently;
(c) BGIL mis-utilized/diverted IPO proceeds in the garb of ICD investments in companies
whose credentials were not known;
(d) BGIL failed to comply with the SEBI order dated December 28, 2011 directing it, inter
alia, to recall the purported ICD investments and payments made to its promoters/
promoter related entities;
(e) BGIL mis-utilized/diverted IPO proceeds to traders who indulged in synchronized and
artificial trading on the day of listing of the shares of BGIL;
(f) BGIL made wrong disclosure relating to purchase orders placed by it;
(g) BGIL failed to disclose the transaction with Gadeo as a related party transaction;
(h) BGIL suppressed the fact of relationship of Mrs. Richa Mittal with the director of
BGIL;
(i) BGIL attempted to conceal the correct information pertaining to ICDs by submitting
three different versions of details in that regard during SEBI's investigation;
(j) Mr. Rakesh Bhatia, Mr. Sanjeev Kumar Mittal and Mr. Rajeev Kumar Agarwal gave a
wrong certificate in the RHP and Prospectus stating that all disclosures made in the offer
document were true and correct;
(k) BGIL, Mr. Rakesh Bhatia, Mr. Sanjeev Kumar Mittal and Mr. Rajeev Kumar Agarwal
perpetrated a fraud on the investors and the securities market and mis-utilized /
diverted the IPO proceeds to the tune of 23.46 crore.

8. BGIL submitted its reply to the SCN vide letter dated October 14, 2013 while the other
Noticees vide their letters dated October 23, 2013 adopted the reply of BGIL. An
opportunity of personal hearing was granted to all the Noticees on November 19, 2013
which was adjourned at their request to December 18, 2013. On December 18, 2013,
representatives on behalf of the Noticees appeared and made oral submissions in line with
their reply on record. Pursuant to the hearing, at the request of the Noticees, details of the
diversion of IPO proceeds to the traders (including the connection between the entities)
were provided to the Noticees vide e-mail dated December 19, 2013. The Noticees
submitted their additional written submissions vide letter dated January 9, 2014 along with
______________________________________________________________________________

which they submitted the utilization of issue proceeds till January 7, 2014, details of ICDs
recovered and their utilization, details of advance received from Dhanmangal and its
utilization and their reply regarding circuitous trading as alleged in the SCN. The
submissions made by the Noticees in their reply/written submissions are summarized as
under:

a) As regards the allegation of utilization of funds in a manner different from that disclosed
in the RHP/Prospectus, BGIL submitted that merely because of change in the vendors
from whom the equipments have been purchased, it cannot be presumed that the
amount raised has not been utilized as per RHP/Prospectus. BGIL had disclosed in the
Prospectus and the RHP that We are also negotiating with several suppliers and the actual
supplier may vary from the one mentioned above. The decision for change of vendors was taken
because the final vendors offered better and cost effective terms. Moreover, had the
disclosures of these vendors been made in the Prospectus, it would not have had any
adverse impact on the informed investment decision of any investor as BGIL has merely
changed the vendors as good business judgment and in the interest of the investors. In
view of these facts, the requirements of regulation 60(4)(a) do not apply to the case of
BGIL.

b) As regards the payment made to Dhanmangal in respect of relocation of branch office of
BGIL, it submitted that the transaction with Dhanmangal was entered into keeping in
mind the objective of establishing pan-India presence for BGIL and get maximum
advantage and business opportunities for BGIL, and in turn for its shareholders. The
same was done in the best interest of BGIL and its shareholders at large. BGIL got the
same ratified by its shareholders through Postal Ballot in March 2012. As it was
mentioned in the agreement that Dhanmangal shall get the projects duly approved by the
Municipal Corporations of Bangalore and Kolkata, there is no contradiction in the
agreement. It was purely a business decision based on the representations made to BGIL
by Dhanmangal. BGIL should not be held responsible for any misrepresentations made
by Dhanmangal to BGIL before entering into the agreement, since it was a business
judgment. BGIL also submitted that since the said deployment of funds was objected in
the SEBI order, it has called back the amount and the concerned entity has already
repaid 50 lakh to BGIL and BGIL is striving hard to get the balance amount recovered
from Dhanmangal., which will be done soon. As submitted by BGIL in its reply dated
January 9, 2013, till that date it had recovered 1.05 crore from Dhanmangal.

c) As regards the allegation that a substantial part of the payment made by BGIL to
Avance was transferred back to BGIL through circuitous transactions, BGIL submitted
that BGIL, Avance and Saptrishi are independent legal entities and business
arrangements between these parties are legitimate and legal. It is implausible and in fact
______________________________________________________________________________

unreasonable to expect that every single time any Company has to deal with any
commercial party, it would have to check the debtors/creditors of other commercial
party. The advance to Avance was given under a valid agreement for purchase of
technology, as disclosed in the prospectus (on page no. 34) and hence the circuitous
routing of funds as alleged by SEBI has no grounds at all. The payment made to Avance
was against our purchase of BMS (Building Management System). Further, the payment
from Saptrishi has come to BGIL against PO given by Saptrishi and the same is in no
way connected to the payments made to Avance. Both the above said transactions are
purely business transactions and should not be interpreted as any transaction created
artificially to siphon off the IPO proceeds. Therefore, the question of artificially
siphoning of IPO funds does not arise. BGIL conducted business with both the vendors
in good faith with bona fide intentions and in the bona fide interest of BGIL as a Company.

d) As regards the payment made to JIL and transfer of funds back to BGIL and its group
company, BGIL submitted that the payment to JIL was made as normal business
transaction. The agreement was entered into with a known company and disclosure
about that was already made in the prospectus. As BGIL is dealing in sensitive IT
Business based on secrecy of agreements, patents etc. the assignment for brand building
was entrusted to a company of repute in the area. The said company is not a related party
and the dealings were in good faith and in overall interest of the company and its
shareholders. These facts were disclosed to the merchant banker and the prospectus was
finalized under the directions of the merchant banker after its due diligence. There was
no transfer / diversion of funds as alleged as JIL was an independent company and the
transactions of BGIL with JIL was genuine and without any mala fide.

e) As regards the allegation of diversion of funds to the Promoter and Promoter group
entities, BGIL submitted that the payments made to Mr. Rakesh Bhatia was towards
repayment of unsecured loans taken from him and standing in books of accounts since
June 22, 2007. As the transaction is in the nature of repayment of dues and not for an
agreement to perform any services or provide any goods, it does not fall under the
definition of word Consideration. Thus, there was no wrong disclosure regarding the
payment of any part of the IPO proceeds to the promoters.

f) As regards the variance in the names of the vendors disclosed in the RHP/Prospectus
and the actual entities to whom payments were made, BGIL submitted that merely
change in vendors will not lead to any disclosure requiring notice or advertisement in the
newspaper. The transactions are routine business transactions and proper details of items
to be purchased and budget within which the purchases have been made were duly
disclosed in the prospectus.

______________________________________________________________________________

g) As regards the allegation of non-disclosure of names of actual vendors and suppressing
of information in that regard, BGIL submitted that the details of the vendors were made
available to the Merchant Banker and it approved the said details. After scrutiny of the
quotations on the basis of financial, technical and after-sale services basis, the actual
vendors proved to be more cost effective for BGIL and its shareholders and therefore
they were given contracts in the overall interest of BGIL and its shareholders.

h) As regards the allegation pertaining to wrong disclosure of the percentage of placement
of orders by BGIL, it submitted that the disclosure regarding percentage of purchase
orders placed for equipments, etc. has been given under the heading Risk factors. The
risk factors were disclosed in the prospectus after consultation with the Merchant
Banker. BGIL had made all the documents available to the Merchant Banker as and
when sought by them during the process of due diligence. As BGIL had no role to play
in finalization of offer documents and was merely acting on the advice of the Merchant
Banker, it cannot be held responsible for any misstatement/omission/non-disclosure in
prospectus. Moreover, as the percentage disclosed in the Prospectus does not portray a
rosy picture of BGIL, but has an adverse impact on it, it should not be presumed that
the disclosure was made intentionally with the purpose of misleading and
misrepresenting to the investors at large.

i) As regards the allegation pertaining to three different versions about the ICD loans taken
and ICD investments made by BGIL, it submitted that ICDs given by BGIL amounted
to 12.5 crore and ICD Loan taken by BGIL amounted to 15 crore. The same was
clarified in the subsequent communications by BGIL to SEBI. The error in reporting the
figures crept in due to pressure and time constraint.

j) As regards the allegation pertaining to non-disclosure of bridge loans raised by BGIL, it
submitted that bridge loans are nowhere defined in ICDR Regulations. Further, the need
for ICD loans arose due to the delay in approval by SEBI of DRHP because of which
BGIL's implementation schedule got delayed by six months. It was in urgent need of
funds for taking advantage of the competitive pricing offered to it by the vendors. As the
management owes a fiduciary responsibility towards the shareholders, the decision for
taking ICD loans was taken in the best interest of BGIL and its shareholders. As regards
its disclosure in the offer document BGIL submitted that it was the responsibility of the
Merchant Banker to inform the management about its impact and disclosure in the
Prospectus. As already appreciated by the Learned Member in his order dated September
21, 2012, the Merchant Banker has failed to exercise due diligence. It would be harsh on
the part of SEBI to hold BGIL or its management responsible for the acts / omissions
and commissions conducted on the part of Merchant Banker. Further, the ICD loan
amount were actually utilized for payments to vendors for purchases made towards the
fulfillment of the objects of the issue.
______________________________________________________________________________

k) As regards the allegation pertaining to non-availability of written agreements, non-
payment of interest to lenders and non-compliance with the relevant provisions of the
ICDR Regulations, BGIL submitted that the Board of Directors had the power to
borrow ICDs within the limit of paid up share capital and free reserves under section
292 of the Companies Act, 1956 As the amount of ICD received is 15 crore which is
well within the limit of Share Capital plus Free reserves of the company i.e. 32.35
crore, as on the date of taking these ICD loans, the Board was not required to take any
specific approval or sanction for the same. Further as regards the non availability of
agreements, BGIL enjoyed such a reputation in the market that lenders were willing to
advance loans to it without entering into written agreements and thus, it should not be
taken as any contravention.

l) As regards non-disclosure of material developments under the provisions of ICDR
Regulations and wrong disclosures in the prospectus about bridge loans, BGIL reiterated
that the need for ICD loans arose due to the delay in approval by SEBI of DRHP and
the loans were taken in the interest of BGIL and is shareholders.

m) As regards compliance with the directions of SEBI to call back the ICDs, BGIL
submitted that BGIL had issued ICD recall letters to all the three parties i.e. Sanjukta
Vanijya Private Ltd, Darshan Trade Link Private Ltd and Nihita Financial Services
Private Ltd. BGIL further submitted that as on October 14, 2014 , it has recovered 5.5
Crore as a result of protracted correspondence through recall letters and legal notice and
6.00 Crore was pending recovery from Darshan Trade Link Private Ltd and Nihita
Financial Services Private Ltd. As regards the direction of SEBI to deposit the recovered
amount into an escrow account, BGIL submitted that subsequent to initiation of
investigation by SEBI and its interim order, BGIL found it difficult to raise working
capital loans from financial institutions on any terms and hence it had no option but to
utilize the funds recovered from the above stated parties towards meeting its working
capital requirements in order to ensure smooth business operations adding to its
goodwill, reputation and in overall interest of the shareholders at large.

n) As regards the non-disclosure of the transaction of BGIL with Gadeo as a related party
transaction and the relationship of Mrs. Richa Mittal with Mr. Sanjeev Kumar Mittal,
BGIL submitted that the fact that Mrs. Richa Mittal is related to Mr. Sanjeev Mittal was
disclosed to the Merchant Banker. BGIL also pointed out point No. 5 of the
Undertaking received from the Merchant Banker for signing by the Management, where
the Merchant Banker had written M/s Gadeo Electronics, a partnership formed on September 1,
2001 between Mrs. Richa Mittal, Mr. Sanjeev Mittal and Mr. R.K. Mittal. Mr. Sanjeev Mittal took
retirement w.e.f. March 31, 2008 and Mrs. Richa Mittal and Mr. R.K. Mittal entered into a fresh
partnership deed on April 1, 2008. Further, the fact that Mrs. Richa Mittal is a relative of
______________________________________________________________________________

Mr. Sanjeev Kumar Mittal was also disclosed in the Form 24AA for F.Y. 2010-11, which
was made available to the Merchant Banker during the process of due diligence. Thus,
BGIL submitted that non disclosure of her name in the list of relatives is a mistake on
the part of the Merchant Banker and cannot be attributed to BGIL and it did not have
any intention to hide the relevant information.

o) As regards the requirement of disclosing the relationship details under the provisions of
ICDR Regulations, BGIL submitted that the details have already been disclosed in
various parts of the prospectus i.e. Point no. 12 on page (viii) of internal risk factors,
para (a) under details of utilization proceeds on page no. 30, page no. 72 and 73 under
para Other Properties and Other agreements on page no. 85.

p) As regards the letter dated February 7, 2011 by BGIL to the Merchant Banker stating
that "Mrs. Richa Mittal is not related to the BGIL, is promoters/directors or promoter group
companies", BGIL submitted that the error was on the part of the Merchant Banker and
the letter was signed by its Chairman and Managing Director in routine having faith on
the professional expertise of the Merchant Banker.

q) As regards not providing the name of Mrs. Richa Mittal in the list of relatives of
directors (sought during the investigation by SEBI) , BGIL submitted SEBI sent a mail
to BGIL containing the list of relatives to be disclosed by it. In the said list the name of
brothers wife was not given. Instead disclosure was required to be made for Sister in law
not for brothers wife. In common parlance, Sister in law is used for Wifes sister and
hence there was a confusion on the part of BGIL and as such there was no deliberate
attempt to conceal the information as the same was already made available to Almondz.

r) As regards the payment made by BGIL to Mr. Rakesh Bhatia, his son Mr. Gaurav Bhatia
and a group company named Films & Technologies Limited out of the issue proceeds in
absence of any disclosure in that regard in the RHP/Prospectus, BGIL submitted that in
case of Gaurav Bhatia, the payment was made towards arrears of salary. Though it had
mentioned in the prospectus that it will pay salary to promoters and promoter group, but
on receiving objection from SEBI, it had already taken the amount back from him in
December 2011 along with interest. In case of Mr. Rakesh Bhatia and Number One
Finsec Private Limited. payments made to him were towards repayment of loan
(disclosed in the prospectus) and do not fall within the meaning of "consideration". As
regards the payment to BGIL Films & Technologies Ltd., the same was made against its
specific specialized services under a valid business transaction.

s) As regards the non-deduction of the advance amount made to Avance. From the total
amount payable to it, BGIL submitted that as rightly observed by SEBI in point no. 1.3.5
______________________________________________________________________________

of the Interim order, the lapse is on the part of the Merchant Banker and hence BGIL
should not be held liable for any default on the part of the Merchant Banker.

t) As regards the alleged diversion of 10.53 crore i.e. 7.10 crore to five entities (hereafter
referred as GRD Group) viz., Marutinandan Infosolutions Private Limited (MIPL), Jalan
cement works Limited (Jalan), Orbit Financial Consultants Private Limited (Orbit), GRD
securities private Limited (GRD), Swift Tie Up Private Limited (Swift) and 3.43 crore
to four entities (hereafter referred as KorpGroup) viz., Korp Securities Ltd (Korp),
Wheelers Developers Private Limited (Wheelers), Divyadrishti Merchants Private Ltd
and Divyadrishti Traders Private Ltd., BGIL submitted that it had never had any
relationships with the two groups referred to as GRD Group and Korp Group except an
ICD loan of 52.5 lakh taken from Divyadrishti Traders Pvt. Ltd which were repaid out
of the IPO proceeds. Further, its promoters, promoter group or KMPs were never
involved in or funded the trades of these entities. There was no prior arrangement of
BGIL with any of these groups. It further submitted that the mere fact that some of the
parties involved were having some business transaction- in the form of ICDs advanced
or taken from the company cannot and should not be used to allege BGILs involvement
in the circuitous trading. The ICDs given and advanced were not in any manner related
to the circuitous trading as referred and BGIL, its promoters, directors, key managerial
persons and their relatives were not in any manner involved or benefited from the
trading.

u) BGIL also drew reference to the confirmatory order dated September 21, 2012 passed by
SEBI in the mater wherein whole time member, SEBI has given adverse findings against
the Merchant Banker, Almondz and held it responsible for failing to discharge the
various responsibilities associated with the due diligence which is to be exercised by a
Merchant Banker are to be discharged with care and caution.

v) As regards the non compliance with SEBI directions regarding depositing the amount
recovered from ICD in escrow account, BGIL submitted that vide its email dated
November 9, 2012 it had intimated SEBI that it is utilizing the amount recovered from
ICDs towards objects of the issue. As it did not receive any objection from SEBI on the
same and there were pressing circumstances to keep the company running, it was forced
to utilize the amount recovered towards fulfillment of objects of the Issue.

9. I have carefully considered the SCN, the replies/written submissions of the Noticees and
the relevant material available on record. Before proceeding with the consideration of facts
on merits, I deem it necessary to refer to the provisions of the SEBI Act and Regulations
made thereunder which are alleged to be violated/ contravened by the Noticees. The said
provisions read as under:

______________________________________________________________________________

"SEBI Act, 1992

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 recognized 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;

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 there under;
(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 there under.

4. Prohibition of manipulative, fraudulent and unfair trade practices
(1)Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an
unfair trade practice in securities.
(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:-
(a) indulging in an act which creates false or misleading appearance of trading in the securities market;

(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;

______________________________________________________________________________

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, publicity materials, advertisements and research reports.
60. (1)..
(2).
(3).
(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;
(5)
(6)
(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;"

10. In the present case, the charge against BGIL is that it had committed a fraud towards the
investors and the securities market as out of 34.70 crore (claimed to have been utilized by
BGIL), it had utilized only 11.24 crore in accordance with the disclosures made in the
RHP /Prospectus and had mis- utilised /diverted 23.46 crore out of the IPO proceeds . I
note that mis-utilization/ diversion of IPO proceeds has been alleged against the Noticees
in respect of the following six categories -
i. relocation of branch office;
ii. up-gradation of Digital post production studio;
iii. investment in IT division;
iv. expansion of R&D Technology centre;
v. working capital requirement, and;
vi. general corporate expenses.
______________________________________________________________________________

11. I now proceed to deal with the alleged mis-utilization / diversion, which formed part of the
alleged fraudulent scheme devised by the Noticees.

Mis-utilization /diversion relating to relocation of branch office.

12. It is alleged in the SCN that BGIL entered into a doubtful and non-genuine transaction
with Dhanmangal and made payments of 1 crore on July 02, 2011 and 1.50 crore on July
05, 2011 to it as advance payment for the total consideration of 5 crore for the purchase of
an office space at Kolkata. The said transaction was neither disclosed in the Prospectus nor
any public notice as required by ICDR Regulations was issued by BGIL. In this regard,
BGIL submitted that the dealing with Dhanmangal was entered into keeping in mind the
objective of establishing pan-India presence for BGIL and get maximum advantage and
business opportunities for BGIL and in turn for its shareholders. BGIL got the said
transaction ratified by its shareholders through Postal Ballot in March 2012. It further
submitted that the name "Dhanmangal Developers Private Limited" reflects or gives an
impression that the Company deals with development and construction of land and
buildings, and BGIL did normal business transactions in good faith relying on the
representation made to BGIL by Dhanmangal and BGIL should not be held responsible
for any misrepresentations made by Dhanmangal before entering into the agreement, since
it was a business judgment.

13. In this regard, I note from the records that Dhanmangal has no history of handling any real
estate projects, has no approvals from the relevant authorities, has no employees and is in
the business of development of agriculture land levelling. I cannot accept the submission of
BGIL that it was misrepresented by Dhanmangal and BGIL entered into the agreement
without being aware of the basic details relating to Dhanmangal. I further note that
agreement between BGIL and Dhanmangal did not contain the construction/plot
address/location of the relevant property. I also note that the consideration payable to
Dhanmangal (i.e. 5 crore) was approximately 10% of the total issue proceeds. Even after
more than two years from the date of payments to Dhanmangal, it did not even identify any
office for BGIL. Considering the aforesaid facts, In my view any person of ordinary
prudence would not enter into any transaction of such substantial value with a company
having the profile of Dhanmangal. It is also pertinent to mention that pursuant to the order
of SEBI dated December 28, 2011, BGIL claimed to have recovered 1.05 crore from
Dhanmangal but did not submit any material to show how the balance amount of 3.95
crore was utilized by Dhanmangal towards 'purchase of office space'. At this point, I also
note that BGIL disclosed in the RHP/Prospectus that "As on the date of this Prospectus, we have
not entered into any commitment for any strategic initiatives." Also at page 73 of the Prospectus, it is
disclosed that "Except as stated in section titled Objects of the Issue appearing on page no. 29 of this
Prospectus, there is no property which our Company has purchased or acquired or propose to purchase or
______________________________________________________________________________

acquire which is to be paid wholly, or in part, from the net proceeds of the Issue or the purchase or
acquisition of which has not been completed as on the date of filing of this Prospectus with SEBI.". The
agreement of BGIL with Dhanmangal and advance payment made to it is also not in line
with the disclosures made in the RHP/Prospectus. Thus, in view of the aforesaid facts, I
find that BGIL was aware of the credentials of Dhanmangal and knowingly it entered into a
non-genuine transaction with Dhanmangal. Thus, the payments made by BGIL to
Dhanmangal in pursuance of the non-genuine transaction and in absence of any disclosure
in that regard in the RHP/Prospectus were clearly a part of the scheme or device of BGIL
to fraudulently mis-utilize/divert to the IPO proceeds for the purposes other than those
disclosed in the RHP/Prospectus.

Mis-utilization/diversion relating to up-gradation of Digital post production studio and Investment in IT
division.

14. With regard to the allegation of wrong disclosure of vendors' details and payments made to
various vendors, BGIL submitted that merely because of change in the vendors from whom
the equipments have been purchased, it cannot be presumed that the amount raised has not
been utilized as per RHP/Prospectus. BGIL also submitted that the decision for change of
vendors was taken because the final vendors offered better and cost effective terms.
Moreover, had the disclosures of these vendors been made in the Prospectus, it would not
have had any adverse impact on the informed investment decision of any investor as BGIL
has merely changed the vendors as good business judgment and in the interest of the
investors. Further as regards the allegation that BGIL did not inform the public through a
public notice about these new material developments, BGIL submitted that keeping in
mind the due disclosure of possibility of change in vendors / suppliers in the RHP and
Prospectus and in absence of any possibility of adverse impact on good business judgment
and the interest of the investors, it felt that the requirements of regulation 60(4)(a) do not
apply to the case of BGIL.

15. In this regard, I note that BGIL has attempted to take recourse to the disclosure made in
the prospectus that We are also negotiating with several suppliers and the actual supplier may vary
from the one mentioned above. I find that in the present case, there has not been a mere change
in the vendors / suppliers details, but in fact there have been wrong disclosures and
suppression of facts on the part of BGIL. In fact, the actual vendors were pre-decided and
the payments were made to these vendors before the RHP date/Prospectus date/date of
allotment of securities, and the identity of the actual vendors was concealed by BGIL from
the investors by disclosing the names of different vendors. Table 7 above [at paragraph
5(10)] depicts the actual vendors and other pertinent details:

16. It is evident from Table 7 that out of 14 instances, the date of quotations on 13 instances
were on or prior to RHP date and the date of quotations for all the 14 instances was prior
______________________________________________________________________________

to the prospectus date. One of the vendors quotations dated a year back (i.e. June 21, 2010)
and it was not disclosed in the RHP and the Prospectus. I note that a total of 10.66 crore
was paid to the vendors before the prospectus date out of which 6.05 crore was paid
before the RHP date. Further, these vendors were paid from the ICD loans of 15 crore
raised by BGIL which were also not disclosed in the RHP/Prospectus. Furthermore, the
ICD loans were repaid from the IPO proceeds. In view of the above, I find that BGIL
knowingly made misstatements in the RHP/Prospectus by giving wrong vendors' details .
Further, BGIL was wrong in assuming, on its own, that not providing the information
regarding actual vendors would not have any adverse impact on the decision making of the
investors. It is pertinent to mention that BGIL's obligations under the ICDR Regulations
was to provide fair, adequate and correct disclosures, which it failed to do in the present
case. I also do not find any merit in the contention of BGIL that the requirements of
issuing a public notice under regulating 60(4) do not arise in the present case since, in my
view, the change in the vendors, which have been disclosed in the RHP/Prospectus and to
whom a substantial amount of IPO proceeds were to be transferred, has to be treated as a
material development which may have a material effect on the issuer i.e. BGIL. In view of
the above, I reject the aforesaid submissions of BGIL and find that the payments made by
BGIL to vendors (whose names were concealed by BGIL from the investors) were mi-
utilized by BGIL.

Mis-utilization / diversion relating to Expansion of R&D Technology centre.

17. I note that out of the amount of 4.321 crore, claimed by BGIL to have been incurred
towards the expansion of R&D technology centre, only the payment of 0.035 crore made
to Westcon India Private Limited was in accordance with the disclosures made in the RHP
/ Prospectus. Further, advance payments of 0.14 crore, legal expenses and travelling
expenses were not as per the disclosures made in the RHP / Prospectus. It is also alleged
that BGIL made a false and misleading disclosure regarding advance payment of 2.65
crore to Avance. It is further alleged that an obligation of 2.15 crore has been allegedly
created artificially to siphon off the said amount from the IPO proceeds. I note that RHP
and Prospectus contained a disclosure that BGIL had made an advance payment of 2.65
crore to Avance prior to IPO but in the fund utilization table, the advance amount was not
deducted and the entire cost i.e. 6.57 crore was shown as payable to Avance from IPO
Proceeds. It is also alleged that BGIL paid only 50 lakh to Avance and remaining 2.15
crore was returned back to BGIL through circuitous transfers of funds between Avance,
BGIL and another entity named Saptrishi. In this regard, BGIL has submitted that Avance
and Saptrishi are independent legal entities and business arrangements between these parties
are legitimate and legal and the payment from Saptrishi is in no way connected to the
payments made to Avance. Further, the advance to Avance was given under a valid
______________________________________________________________________________

agreement for purchase of technology, as disclosed in the prospectus and hence the
circuitous routing of funds as alleged by SEBI has no grounds at all.

18. BGIL has claimed that it conducted business with both the vendors (i.e. Avance and
Saptrishi) in good faith with bona fide intentions and it is only the coincidence that Avance
had made payment to Saptrishi immediately on receipt of the amount from BGIL. In this
regard, I note from the above 'Diagram 1' (at paragraph 5(3)III) that on four instances
BGIL made payments to Avance and on the same day it received amounts from Saptrishi
for exactly the same amounts i.e. on June 8, 2011 (50 lakh) June 15, 2011 (55 lakh), June
15, 2011 (50 lakh) and June 15, 2011 (60 lakh). The amount of 55 lakh received from
Saptrishi by BGIL on June 8, 2011 was returned to Saptrishi on the same day through
Avance. Similarly, 50 lakh and 60 lakh received on June 15, 2011 were also returned on
June 16, 2011 to Saptrishi through Avance and Priority Exports. Another 50 lakh received
from Saptrishi by BGIL on June 15, 2011 was returned on the same day to Saptrishi
through Avance and Satshri Multitrade Private Ltd. I find that transfer of the exact amounts
on the same dates and the fact that the funds were received back by BGIL cannot be mere
coincidence. Further, BGIL has also not provided any satisfactory explanation in respect of
the aforesaid flow of funds. Thus, I reject the above contentions of BGIL.

19. In view of the aforesaid facts, I find that an obligation of 2.15 crore was created by BGIL
artificially to siphon off of the said amount from the IPO proceeds. Further, as regards the
alleged mis-utilization of other payments claimed to have been made by BGIL towards the
expansion of R&D technology centre, BGIL has failed to provide satisfactory explanation.
Thus, I find that the said payments not being in accordance with the disclosures made in
the RHP/Prospectus by BGIL were clearly a part of the mis-utilization of IPO proceeds by
BGIL. I also find that regardless of the responsibility of the Merchant Banker, the issuer
and its directors cannot escape the liability in respect of wrong and misleading disclosures in
the RHP/Prospectus as they certify in the RHP/Prospectus that the contents thereof are
true, fair and adequate.

Mis-utilization / diversion relating to working capital requirements.

20. It is further alleged in the SCN that BGIL entered into an agreement with JIL on July 1,
2011 for various services for a consideration of 5 crore and made the payment of 251.50
lakh to JIL out of which 30 lakh was paid before the prospectus date. It is alleged that the
payment to JIL and availing services were neither disclosed in the RHP/prospectus nor any
public notice was issued by BGIL as required by the ICDR Regulations. Further on the
basis of a scrutiny of the bank account statement of JIL, it is alleged that 180.75 lakh have
been transferred back to BGIL and its group companies viz., BGIL - 7.50 lakh and
Number one Finvest Private Ltd. - 173.25 lakh. Further, 32.45 lakh cash was also
withdrawn by JIL. Hence, it is alleged that JIL, which was a front entity of BGIL, merely
______________________________________________________________________________

acted as conduit for the said fraudulent diversion of 251.50 lakh out of IPO proceeds for
the purposes other than those disclosed in the RHP/Prospectus.

21. According to BGIL this payment was made to JIL as normal business transaction. Further,
the agreement was entered into with JIL as a known company and disclosure about that was
already made in the prospectus. The said company was not a related party and the dealings
were in good faith and in overall interest of BGIL and its shareholders. BGIL further
submitted that these facts were disclosed to the Merchant Banker and the prospectus was
finalized under the directions of the Merchant Banker after its due diligence. In this regard,
I note that BGIL has not disputed the allegation of JIL being its front entity. In my view,
facts such as JIL holding shares in BGIL, employees of BGIL (i.e. office-boy/peon and
maintenance person) being the directors of JIL, Mr. Rakesh Bhatia and Ms Arti Bhatia
holding shares in JIL at the time of its incorporation, Mr. Rajeev Agarwal (Manager -
Finance) of BGIL holding shares in JIL, etc. clearly indicate that JIL was a front entity of
BGIL.

22. I further note that BGIL has not brought out any material before me to justify the transfer
of funds from BGIL's account to JIL and transfer of funds from JIL's account to BGIL and
its group company ( viz; Number One Finvest Private Limited). It remains unsubstantiated
as what services BGIL had availed/ had to avail for which such purported payment was
made by it to JIL from the IPO proceeds. Further, if such normal transactions, as sought to
be contended by the BGIL were in existence, they were to be disclosed in the
RHP/Prospectus. However, in the RHP/Prospectus disclosure of utilization of IPO
proceeds for such purported "normal transactions' was not made and fund utilization was
disclosed for identified purposes. In these facts and circumstances, suggestion of facts
which are not true is visible in the submissions of the BGIL. Even if it is assumed that the
transaction of BGIL with JIL was genuine and the payment to JIL was made in respect of
the services to be availed from it, the reverse transfer of funds from JIL's account to
BGIL's account and its group company's account remains unexplained. I, therefore, reject
the submissions of BGIL in this regard and find that the amount of 251.50 lakh was
fraudulently diverted by BGIL out of the IPO proceeds to JIL which was a front entity of
BGIL and was used merely as a conduit for fraudulent diversion of IPO proceeds.

Mis-utilization / diversion relating to general corporate expenses.

23. I note that it was disclosed in the RHP that No part of the issue proceeds, will be paid by our
company, as consideration to promoters, directors, promoter group entities and key managerial personnel.
Thus, BGIL was bound to ensure that it does not make any payment of any consideration
to its promoters, directors, promoter group entities and key managerial personnel. However, BGIL
made payments to its promoters and promoter related entities and thereby fraudulently
diverted the IPO proceeds. According to BGIL the payment to Mr. Gaurav Bhatia was
______________________________________________________________________________

made towards arrears of salary, which was called back pursuant to SEBI's objection in
December 2011. In case of Mr. Rakesh Bhatia and Number One Finsec Private Limited
payments were made in respect of unsecured loans which were disclosed in the prospectus.
Also these payments do not fall within the meaning of "consideration". As regards the
payment to BGIL Films & Technologies Ltd. it has claimed that the same was made
against its specific specialized services under a valid business transaction.

24. In this regard, I note that in this case, BGIL made payments, out of IPO proceeds, to the
following five promoter/promoter group entities:

i. Mr. Mr. Gaurav Bhatia,
ii. Mr. Rakesh Bhatia,
iii. Mr. Rakesh Bhatia-HUF,
iv. Number One Finsec Private Limited and
v. BGIL Films & Technologies Ltd.

25. I find that the recall of payment from Mr. Gaurav Bhatia clearly appears to be an
afterthought pursuant to the interim order of SEBI dated December 28, 2011. I further,
note that the objects of the issue do not contain any object relating to repayment of loans
other than "repayment of bank borrowings". The unsecured loans of Mr. Rakesh Bhatia
and Number One Finsec Private Limited do not fall under this disclosed object at all. The
RHP/ Prospectus did not contemplate any repayment of such unsecured loans of the
promotes/ promoter group entities out of the IPO proceeds. BGIL has failed to offer any
explanation with regard to payment of` 10.5 lakh to Rakesh Bhatia-HUF. The payment to
BGIL Films & Technologies Ltd towards services rendered by BGIL Films & Technologies
Ltd as claimed by BGIL would definitely be covered within the meaning of 'consideration'.
Therefore, as disclosed in the RHP, BGIL was estopped from making any payment to this
promoter related entity. Even otherwise, the payments made by BGIL to the promoters/
promoter group entities was not in line with the disclosed objects in the RHP/Prospectus.
In view of these findings, I reject the submissions of BGIL in this regard and find that out
of IPO proceeds, the amount of 1.26 crore was fraudulently diverted by BGIL to its
promoters/ promoter group entities.

Mis-utilization / diversion of IPO proceeds by repaying ICD loans raised prior to the RHP date / prospectus
date without any disclosure.

26. I note that before filing of the RHP (i.e. between June 21, 2011 to June 27, 2011) BGIL had
raised ICD loans to the tune of 7 crore. The RHP was filed on June 28, 2011 and after
filing of the RHP, BGIL raised further ICD loans of 8 crore between June 29, 2011 to July
7, 2011. The issue opened for subscription on July 11, 2011 and closed on July 14, 2011.
However, in the RHP / Prospectus it was disclosed that our company has not raised any bridge
______________________________________________________________________________

loan against the proceeds of the present issue. The prospectus also did not disclose these ICD
loans nor did BGIL issue any public notice under regulation 60(4) of the ICDR Regulations
in that regard after the issuance of RHP. It is pertinent to highlight here that the
subscriptions in the IPO were invited on the basis of the RHP which did not have
disclosure of the ICD loans of 7 crore and BGIL had not issued any public notice about
the liabilities by way of purported interim financing. Thus, when the IPO was open for
subscription, the investors were not aware about these liabilities of BGIL and the fact that
the liabilities would be discharged out of the IPO proceeds. Further, these ICD loans of
15 crore would have increased the total 'current liabilities' of BGIL as on March 31, 2011 by
100%. The understatement of liabilities of BGIL, by not adding the ICD loans in current
liabilities and not disclosing the same, in my view, had potential to influence the investment
decision of the investors in the IPO of BGIL. Being the liability of BGIL these ICD loans
also had the potential to materially affect BGIL and therefore, the disclosures about above
ICD loans ought to have been made in the RHP and Prospectus and also by issuing a
public notice under regulation 60(4)(a) of the ICDR Regulations.

27. BGIL has submitted that "bridge loans" are not defined in ICDR Regulations. Further,
BGIL submitted that the need for ICD loans arose due to the delay in approval of DRHP
by SEBI because of which BGIL's implementation schedule got delayed by six months. As
regards its disclosure in the offer document, BGIL submitted that it was the responsibility
of the Merchant Banker to inform the management about its impact and disclosure in the
Prospectus. In this regard, I note that the term "bridge loan" in common parlance is
understood as a short term loan and is widely used in commercial business transactions. I
note that BGIL was obligated to disclose the "sources of funds already deployed" under regulation
57(2)(a) read with (Part A) (VII) (G) of Schedule VIII of ICDR Regulations and even if the
dictionary meaning of the term "bridge loan" is taken (i.e. short term loan), the disclosure
made by BGIL turns out to be false in light of the ICD loans taken and not disclosed.
Further, BGIL cannot shift the responsibility for wrong disclosures on the Merchant
Banker since it is the primary responsibility of the issuer and the signatories to the
RHP/Prospectus to make true and correct disclosures. In the present case, BGIL raised
ICDs loans worth 15 crore and did not disclose the same at any point of time i.e. neither
at the time of filing of RHP nor at the time of filing of Prospectus and not even
subsequently by way of a public notice. Moreover, these ICDs were repaid by BGIL from
the IPO proceeds without there being any disclosure in the RHP/Prospectus regarding the
said repayment. Table 5 above [at paragraph 5(5)] shows the details of the ICDs repaid by
BGIL out of the IPO proceeds: I also note from the record that the ICD loans of 3 crore
repaid by BGIL to Abhilasha Exports Pvt. Ltd, Skylight Distributors Private Limited and
Subhshree Hirise Pvt. Limited were diverted to Korp Group which indulged in
manipulative trading on the day of listing of BGIL. In view of the above, I find that the
submissions of the Noticees in this regard are unfounded and therefore, I reject the same.
______________________________________________________________________________

28. It is also alleged in the SCN that the aforesaid ICDs were created as a ploy to divert the
IPO Proceeds as it was found that there was no agreement of BGIL with various entities
for the ICD loans taken and only memorandums in the form of letters were available. In
this regard, BGIL submitted that BGIL enjoyed such a reputation in the market that lenders
were willing to advance loans to it without entering into any written agreements, it should
not be taken as any contravention. BGIL further submitted that the Board of Directors had
the power to borrow ICDs within the limit of paid up share capital and free reserves under
section 292 of the Companies Act, 1956 Also, as the amount of ICDs received is 15
crore which is well within the limit of Share Capital plus Free reserves of BGIL i.e. 32.35
crore, as on the date of taking these ICD loans, the Board was not required to take any
specific approval or sanction for the same. In this regard, such purported interim
borrowings were not disclosed in the Prospectus at all and required public notice as per
regulation 60(4) of the ICDR Regulations was also not issued. In fact, it was disclosed
otherwise in the Prospectus that BGIL had not raised any bridge loan. It is surprising that if
at all such interim financial arrangements by way of ICD loans were existing, there should
have been documents to evidence such borrowings of high amounts to the tune of 15
crore and the same ought to have been disclosed as an object for utilization of IPO
proceeds. These facts coupled with the fact of submission of purported memorandums in
the form of letters on inquiry being made by SEBI strongly indicate that such
memorandums were an afterthought. In any case, such utilization of IPO proceeds by
BGIL was not for the objects and/or n the manner disclosed in the RHP/Prospectus. In
the facts and circumstances of this case, I am of the view that out of the IPO proceeds, this
amount of 15 crore was diverted / mis-utilized for the purposes other than those
disclosed in the RHP/Prospectus.

Diversion of IPO proceeds in the garb of ICD investments.

29. Apart from the above discussed fraudulent mis-utilisation/ diversion of 23.46 crore out of
the IPO proceeds, it is also alleged in the SCN that BGIL had temporally transferred 12.5
crore out of the IPO proceeds in the garb of ICD investments to three entities and has not
recovered the same despite SEBI's order dated December 28,2011. I note that it was
categorically disclosed in the RHP/Prospectus by BGIL that :- Our Companys management,
in accordance with the policies established by the Board, will have flexibility in deploying the proceeds received
from the Issue. Pending utilization of the proceeds out of the Issue for the purposes described above, we intend
to temporarily invest the funds in high quality interest bearing liquid instruments including money market
mutual funds and deposits with banks. Such investments would be in accordance with the investment policies
approved by the Board from time to time.

30. It has been alleged that such investments were not in conformity with this disclosure that
the IPO proceeds shall be invested in high quality interest bearing liquid instruments including money
______________________________________________________________________________

market mutual funds and deposits with banks. In this regard, BGIL has submitted that it did not
have a formal investment policy and that the decision of investment was taken on the basis
of the recommendations of the Audit Committee ratified by the Board and subsequently by
the shareholders by way of Postal Ballot.

31. I note that BGIL has failed to substantiate as to how such investments, in the companies
like the one to which such huge amounts out of IPO proceeds were transferred, were high
quality liquid instruments. I do not find the submissions of BGIL cogent as it has only
indicated the procedure of its fund transfer rather than explaining as to how such
investment could be treated to have been made in terms of the RHP/Prospectus. I note
that as per the agreements of BGIL with these three companies namely, Nihita Financials
Ltd., Sanjukta Vanijya Pvt. Ltd and Darshan Tradelink Pvt. Ltd .the said amounts could be
called back with a notice of three days. However, in spite of the recall letters of BGIL, the
said funds have not yet been returned completely. Further BGIL has not recovered those
amounts from the said three entities as on the date of its reply dated October 14, 2013
despite direction from SEBI to recall the said funds and deposit them in an escrow account.
If at all, such purported ICDs were high quality liquid investments, BGIL could have
recovered them on demand. It is pertinent to mention here that an amount of 7.1 crore
out of the purported investment of 7.5 crore given to Sanjukta Vanijya Pvt. Ltd and
Darshan Tradelink Pvt. Ltd. was diverted by them to the GRD Group which indulged in
manipulative trading in the scrip of BGIL on the day of listing as discussed in later part of
this order. In such state of affairs and facts, I am of the view that these investments by
BGIL cannot in any manner be considered as investments in 'high quality interest bearing liquid
instruments' rather the facts and circumstances indicate strong preponderance of probability
that this amount of 12.5 crore was also dishonestly diverted / mis- utilized by BGIL for
the purposes other than those disclosed in the RHP/ Prospectus.

Non-compliance with SEBI's order darted December 28, 2011.

32. At this point, I find it relevant to refer to the allegation in the SCN that even after several
reminders, BGIL has failed to comply with the following direction of SEBI issued vide
order darted December 28, 2011:

The Company shall call back the ICDs of 12.5 crore invested by it with Nihita Financials Ltd.,
SanjuktaVanijyaPvt. Ltd and DarshanTradelinkPvt. Ltd and all amounts transferred / paid out of
IPO proceeds to its directors or relatives of its directors or HUFs belonging to any of its directors or
associate or subsidiaries or group companies. These amounts together with all of the IPO proceeds that
are still lying unutilized with the company across all its bank / deposit accounts or any investments
including in mutual funds, shall be deposited in an interest bearing escrow account with a scheduled
commercial bank, till further orders. A confirmation on compliance of this direction shall be sent by the
promoters of BGIL to the stock exchanges where it is listed, within 7 days from the date of this order.
______________________________________________________________________________

33. I note that as regards the direction of SEBI to deposit the funds recalled from the above-
named entities along with the unutilized IPO proceeds, BGIL submitted that it had only
deposited an amount of 47.37 lakh (unutilized IPO proceeds) in the escrow account.
BGIL also submitted that ssubsequent to initiation of investigation by SEBI and its interim
order, BGIL found it difficult to raise working capital loans from financial institutions on
any terms and hence BGIL had no option but to utilize the funds (i.e. 4.45 crore as on
September 30, 2012) recovered from the above-named entities towards meeting the
working capital requirements of BGIL. At this point, it is important to note the
contradictory contention of BGIL where it has contended (in relation to the non-availability
of agreements for ICDs taken by BGIL) that BGIL enjoyed such a reputation in the market
that people were willing to provide loans without any agreements, and now BGIL has
contended that BGIL found it difficult to raise working capital loans from financial
institutions on any terms because of which it was forced to utilize the funds recovered from
the above-named entities towards meeting the working capital requirements. BGIL has also
submitted in its written submissions dated January 1, 2014 that in absence of any objection
of SEBI and in view of the pressing circumstances, the funds recovered were utilized
towards fulfillment of the objects of the issue.

34. In my view, the directions issued by SEBI vide order dated December 28, 2011 were
categorical on the point that BGIL had to recall the ICDs of 12.5 crore from the three
entities and all amounts transferred / paid out of IPO proceeds to its directors or relatives of its directors
or HUFs belonging to any of its directors or associate or subsidiaries or group companies and the
recovered amount had to be deposited in an escrow account. There was no scope for any
other interpretation of these directions and therefore BGIL cannot take the defence that
SEBI did not object to their letters whereby they had informed that they were utilizing the
funds so recovered. Under any circumstances, BGIL was not entitled to utilize the
recovered funds in a manner different from as directed by SEBI. Further, BGIL has not
even provided sufficient material to show the claimed utilization of the recovered funds. I,
therefore, reject the contention of BGIL and find that BGIL mis-utilized the recovered
funds in defiance of the directions issued by SEBI. I also note that even as on the day of
filing their latest written submissions (i.e. January 9, 2014) BGIL has not fully complied
with the aforesaid directions of SEBI. As revealed during investigation, only an amount of
1.35 crore was transferred back to BGIL by Sanjukta Vanijya Private Limited after the
period of a month from the date of making the said ICD investment. In view of the above,
I find that BGIL has not recovered the remainder amount of 11.15 crore and has also
failed to comply with the directions of SEBI issued vide order dated December 28, 2011 to
deposit the recalled amounts along with unutilized IPO proceeds in an interest bearing
escrow account.

______________________________________________________________________________

Diversion of IPO proceeds to traders.

35. It is also alleged in the SCN that a part of the IPO proceeds i.e. 10.53 crore was
transferred by BGIL to two groups viz., GRD Group and Korp Group through direct and
layered bank transactions. These two groups i.e. GRD Group consisting of 5 entities and
Korp Group consisting of 4 entities allegedly received 7.10 crore and 3.43 crore,
respectively from BGIL and indulged in fraudulent and unfair trade practices in the shares
of BGIL on the listing day through various synchronized / structured trades with Mr. V. P.
Patel. BGIL has claimed that it never had any relationships with the two groups except for
an ICD loan of 52.5 lakh taken from Divyadrishti Traders Pvt. Ltd which was repaid out
of the IPO proceeds. Further, it had never made any payment of any sort to the entities
disclosed in the SCN. BGIL also submitted that the promoters, promoter group or KMPs
of BGIL were never involved in or funded the trades of these entities. Also, there was no
prior arrangement of BGIL with any of these groups. It further submitted that the mere
fact that some of the parties involved were having some business transactions, in the form
of ICDs advanced or taken from the company, cannot and should not be used to allege
BGILs involvement in the circuitous trading. In this regard, I find the following facts to be
noteworthy:
i. The GRD Group consisted of 5 entities i.e. MIPL, Jalan, Orbit, GRD and Swift, and
they were inter-connected in the following manner:

Table 11: Connection amongst GRD Group entities.
S.
No.
Name of
the client
Connection & Annual Income details
1 JALAN
Jalans' directors Mr. Dilip Kumar Piplwa and Mr.
Parmanand Drolia are also the dealers of GRD
Directors of Jalan introduced MIPL and Orbit to GRD.
2 MIPL
MIPL was introduced by Mr. Dilip Kumar Piplwa who is
one of the director of Jalan and dealer of GRD.
Directors of MIPL and Orbit have a common telephone
number (033-32929738)
3 SWIFT Swfit was introduced by Mr. Parmanand Drolia who is one
of the director of Jalan and dealer of GRD
4 ORBIT
Orbit was introduced by Mr. Parmanand Drolia who is one
of the director of Jalan and dealer of GRD .
Directors of MIPL and Orbit have a common telephone
number (033-32929738)
5 GRD Mr. Pramod Kumar Drolia and Mr. Bimal Kumar Drolia were
the directors of GRD. Mr. Pramod Kumar Drolia placed the
entire buy trades as well as sell trades of MIPL, Jalan and Orbit
on NSE

ii. The Korp Group consisted of four entities i.e. Divya Drishti Merchants Private
Limited, Divya Drishti Traders Private Limited, Wheelers and Korp and they are group
______________________________________________________________________________

companies. Mr. Rajesh Kumar Agarwal is the common director for Divya Drishti
Merchants Private Limited, Divya Drishti Traders Private Limited, and Wheelers. Mr.
Sushil Kumar Agarwal who is the director of Korp, is the brother of Mr. Rajesh Kumar
Agarwal.

iii. BGIL had transferred 7.5 crore to Sanjukta Vanijya Private Ltd and Darshan Tradelink
Private Limited which have common directors viz., Mr. Goutam Basotia and Mr.
Santosh Kumar Sahal. I note that this amount of 7.5 crore was a part of the so called
ICD investments made by BGIL. I also note that out of 7.5 crore, 7.10 crore reached
GRD, The diagram below shows the flow of funds from BGIL to GRD:

Diagram 2 : Fund Flow to GRD Group

iv. BGIL had also transferred 1 crore each to Abhilasha Exports Pvt. Ltd, Skylight
Distributors Private Limited, and Subhshree Hirise Pvt. Limited. as a part of repayment
of ICD loans taken by it. Out of 3 crore, 2.9 crore had reached to Divyadrishti
Traders Private Limited In addition to the above, BGIL had also transferred 0.53
______________________________________________________________________________

crore directly to Divyadrishti Traders Private Limited In total, 3.53 crore was received
by Divyadrishti Traders Private Limited Out of this amount, Divydrishti Traders Private
Limited had transferred 0.89 crore to Wheelers and 1.97 crore to Korp. The said
fund flow is depicted in the diagram below:

Diagram 3: Fund flow to Korp Group

v. The GRD Group, the Korp Group and Mr. V. P. Patel traded among themselves on
the day of listing of BGIL's shares i.e. July 28, 2011 on both NSE and BSE. The details
of the trading among these entities on BSE and NSE are as below:

Table 12: Details of trading at NSE

BUYER_NAME SELLER_NAME Total
V P PATEL
MARUTINANDAN
INFOSOLUTIONS PRIVATE
LIMITED 356791
V P PATEL
ORBIT FINANCIAL
CONSULTANTS PRIVATE
LIMITED 36000
V P PATEL GRD SECURITIES PVT.LTD. 5100
V P PATEL KORP SECURITIES LTD 2856
V P PATEL
DIVYA DRISHTI MERCHANTS PVT
LTD 3
DIVYA DRISHTI
MERCHANTS PVT LTD V P PATEL 79657
KORP SECURITIES LTD V P PATEL 34447
______________________________________________________________________________

KORP SECURITIES LTD GRD SECURITIES PVT.LTD. 1000
GRD SECURITIES
PVT.LTD. V P PATEL 14876
GRD SECURITIES
PVT.LTD. KORP SECURITIES LTD 2406
GRD SECURITIES
PVT.LTD.
DIVYA DRISHTI MERCHANTS PVT
LTD 2050
GRD SECURITIES
PVT.LTD. GRD SECURITIES PVT.LTD. 1634
GRD SECURITIES
PVT.LTD. JALAN CEMENT WORKS LTD. 1200
GRD SECURITIES
PVT.LTD.
WHEELERS DEVELOPERS
PVT.LTD. 1174
DIVYADRISHTI TRADERS
P LTD V P PATEL 16470
MARUTINANDAN
INFOSOLUTIONS KORP SECURITIES LTD 5000
WHEELERS DEVELOPERS
PVT.LTD.
DIVYA DRISHTI TRADERS PVT
LTD 2000
WHEELERS DEVELOPERS
PVT.LTD. GRD SECURITIES PVT.LTD. 10
Grand Total

562674

Table 13: Details of trading at BSE

BUYER NAME SELLER_NAME Total
V P PATEL
SWIFT TIE UP
PRIVATE LIMITED 168044
ORBIT FINANCIAL CONSULTANTS
PRIVATE LIMITED V P PATEL 57153
DIVYADRISHTI TRADERS P LTD V P PATEL 35221
SWIFT TIE UP PRIVATE LIMITED V P PATEL 10181
Grand Total

270599

vi. Thus GRD Group, Korp Group and Mr. V P Patel created artificial volume of
8,33,273 shares (NSE:5,62,674 + BSE:2,70,599) on the listing day.
vii. Further, these groups and Mr. V P Patel also gave exit to various IPO allotees while
they traded with various brokers on the day of listing of BGIL's shares.

36. I note that in response to the allegations against BGIL leveled on the basis of the above
facts, BGIL has submitted that it had no connection with any of the entities belonging to
the GRD Group or the Korp Group (except Divyadrishti Traders Private Limited). BGIL
has also stated that it did not make any payment to any of the entities whose names are
stated in the SCN. I find that BGIL has not provided any satisfactory explanation to the
flow of funds from its accounts to the various entities as depicted in the fund flow diagrams
2 and 3 drawn above at para 35. Further, BGIL had made the so-called ICD investments
with Sanjukta Vanijya Private Ltd and Darshan Tradelink Private Limited to the tune of
7.5 crore out of which 7.1 crore was transferred by these entities to the GRD Group.
______________________________________________________________________________

37. As noted above, despite the direction of SEBI, BGIL has failed to recover and deposit
these purported ICD investments and deposit them in an escrow account. I also note that
Divyadrishti Traders Private Limited (a part of the Korp Group), an entity from whom
BGIL had admittedly taken ICD loan, received 3.53 crore in total from BGIL and three
entities who had in turn received 1 crore each from BGIL as ICD loan repayment. It is
pertinent to note here that BGIL had not disclosed this ICD loan in the RHP/Prospectus
or through a public notice. It is also a matter of record that GRD Group and Korp Group
had traded heavily on the day of listing of BGIL's shares and that they suffered losses
because of their transactions as the price of the shares of BGIL fell sharply on the day of
listing. Further Mr. V P Patel was also connected with BGIL, GRD Group, Korp Group
and other entities with whom he traded in the scrip of BGIL on the day of listing since such
a huge number of structured /synchronized trades repeatedly (as described above) could
not have been possible without a prior understanding.

38. Thus, the above set of facts i.e. funds being transferred to GRD Group and Korp Group
from BGIL through entities with whom BGIL had dealt previously, these fund transfers
happening around the day of listing of BGIL (i.e. July 28, 2011), GRD Group and the Korp
Group entering into structured transactions and creating artificial volumes, large number of
allotees of the IPO being provided exit on the day of listing itself and the GRD Group and
the Korp Group suffering losses because of these transactions show that BGIL had a prior
arrangement with the aforesaid two groups for trading in the scrip of BGIL on the day of
its listing in order to create artificial volume and provide exit to the allotees of IPO on the
day of listing itself

Wrong disclosure relating to purchase orders placed by BGIL.

39. It was also alleged in the SCN that BGIL had made wrong disclosure with respect to the
percentage of purchase orders placed for plant and machinery, equipments, etc. I note that
BGIL had disclosed in the RHP / Prospectus that we have not yet placed orders for 81.48% of
our plant and machinery, equipments, etc, for our proposed expansion as specified in the objects of issue",
whereas, investigation revealed that purchase orders were placed for 30.64 crore i.e. 55%
of the IPO proceeds as on Prospectus date as well as the date of allotment of securities.
Further orders were placed for 29% (16.03 crore) before the RHP date. In this regard,
BGIL submitted that the disclosure regarding percentage of purchase orders placed for
equipments, etc. has been given under the heading Risk factors. The risk factors were
disclosed in the prospectus after consultation with the Merchant Banker to whom BGIL
had made all the documents available as and when sought by it during the process of due
diligence. BGIL also submitted that it cannot be held responsible for any
misstatement/omission/non-disclosure in RHP/prospectus as BGIL had no role to play in
preparation of the same and it merely acted on the advice of the Merchant Banker.
______________________________________________________________________________

40. I note that the Merchant Banker is an intermediary who advises the issuer regarding the
preparation of the draft prospectus. The contents of the offer documents are based on the
information provided by the issuer to the Merchant Banker The directors and the Chief
Executive Officer of the issuer company sign the declaration in the draft offer document /
draft prospectus certifying that the disclosures made therein are true and correct. Thus,
BGIL cannot escape its liability by shifting the burden in respect of preparation of the draft
offer document on the Merchant Banker. I also note that BGIL has not disputed the
discrepancy between the disclosed percentage of placed orders and the percentage which
was revealed in the investigation. Thus, I find that the disclosures made by BGIL in respect
of the placement of purchase orders were wrong and misleading.

Non-disclosure of transaction with Gadeo as a related party transaction.

41. It is alleged in the SCN that though BGIL disclosed the transactions with Gadeo in the
RHP/Prospectus, it suppressed the fact that the said transaction was a related party
transaction. This allegation has been leveled on the basis of the requirements of clause (IV)
(H) (18) of para. 2 and clause VIII (B) (5)(a) (iii), (iv) and 6(a) of Part A of Schedule VIII
of the ICDR Regulations in terms of which the RHP and prospectus should disclose-
(a) "relationship, if any, of the entities from whom the issuer has acquired land or proposes to acquire land,
with any of the promoters or directors of the issuer along with the relevant details." (clause (IV) (H)
(18) of para. 2)
(b) Clause VIII (B) (5)(a)
(iii) the nature of the title or interest in such property acquired or to be acquired by the issuer;
(iv) short particulars of every transaction relating to the property completed within the two preceding
years, in which any vendor of the property to the issuer or any person who is, or was at the time of the
transaction, a promoter, or a director or proposed director of the issuer had any interest, direct or
indirect, specifying the date of the transaction and the name of such promoter, director or proposed
director and stating the amount payable by or to such vendor, promoter, director or proposed director in
respect of the transaction.
(c) Section VIII (B) (6)(a)
(a) The names of the entities from whom the land has been acquired/ proposed to be acquired
alongwith the cost of acquisition, along with the relation, if any, of such entities to any promoter or
director of the issuer."

42. I note that the above provision of clause (IV) (H) (18) of para. 2 deals with the disclosure of
'risk factors' in the RHP and Prospectus. It requires the disclosure of relationship of the
entities from whom the issuer has acquired the land or proposes to acquire land with its
promoters or directors along with relevant details. The words 'relative' or 'relationship' have
not been defined in the ICDR Regulations. Therefore, for the purpose of this clause, in
terms of regulation 2(2) of the ICDR Regulations, definition of these words as given under
______________________________________________________________________________

the Companies Act, 1956 shall apply. I note that in terms of section 6 read with Schedule
IA of the Companies Act, 1956, 'father', 'brother' and 'brother's wife' are included in the
definition of relatives and they are related to each other. I, therefore, am of the view that
such relationship of the entities from whom the issuer has acquired the land or proposes to
acquire the land, with promoters or directors of the issuer should be disclosed in the RHP
and Prospectus as risk factors in terms of the provisions of above mentioned clause (IV)
(H) (18) of para. 2 of Schedule VIII of the ICDR Regulations.

43. I further note that in addition to the disclosure of relationship of seller of the land with any
promoter or director of the issuer as risk factor in terms of clause (IV) (H) (18) of para. 2 of
Part A of Schedule VIII, the specific disclosures of the nature of title or interest of a
director in such property/land, details of such transactions where the director has interest
and his direct or indirect relation with the seller or vendor is also required to be made in the
RHP under the head "About the issuer", in terms of clause 5(a) (iii), (iv), and 6(a) of Part A
of Schedule VIII of the ICDR Regulations. In this case, however, these disclosures with
regard to the transaction between BGIL and Gadeo wherein Mrs. Richa Mittal, sister in-
law of Mr. Sanjeev Kumar Mittal and his father Mr. R.K. Mittal were the only partners,
were not made in the RHP and the Prospectus of BGIL. Instead, it was disclosed that: "our
Company has not purchased any property in which any Directors, have any direct or indirect interest in any
payment made thereof." In view of the above, I find that in the present case, BGIL failed to
make the disclosures under clauses 2 (IV) (H)18 and 2(VIII)(B) 5(a)(iii), (iv) and 6(a) of Part
A of Schedule VIII of the ICDR Regulations in respect of the purchase of land / property
from Gadeo.

44. Furthermore, in terms of clause IX(B)(12) of Part A of Schedule VIII of the ICDR
Regulations, the disclosures of details of related party transactions should be made in
accordance with AS -18. In this case, the partners in Gadeo at the relevant time were Mrs.
Richa Mittal and Mr. R. K. Mittal. Mrs. Richa Mittal is sister-in-law and Mr. R. K. Mittal is
father of Mr. Sanjeev Kumar Mittal, the director of BGIL. I note that in terms of clause
10.9 of AS-18, though sister-in-law is not included in the definition of "relative", father is
included. According to clause 3(d) and (e) of AS-18, the relationships of key management
personnel and their relatives, and an enterprise over which such key management personnel
or his/her relative is able to exercise significant influence, are covered for the purpose of
related party disclosure under AS-18. In the present case, admittedly, Gadeo is a firm having
only two partners and Mr. Ram Kishan Mittal, father (covered within the definition of
'relative' under clause 10.9 of AS-18) of Mr. Sanjeev Kumar Mittal, is one of them. The
other partner is Mrs. Richa Mittal who is also relative of Mr. Sanjeev Kumar Mittal as per
section 6 of the Companies Act. Therefore, in my view, in facts of this case, irrespective of
the individual share of the said two partners in Gadeo the transaction between BGIL and
Gadeo would be covered under AS-18 read with clause IX(B)(12) of Part A of Schedule
______________________________________________________________________________

VIII of the ICDR Regulations and the same ought to have been disclosed as a related party
transaction in the RHP/Prospectus of BGIL.

45. In this regard, BGIL has contended that the Merchant Banker was solely responsible for
the said non-disclosures as it is an expert and BGIL merely relied on its judgment. At this
point, I find it necessary to reiterate that issuer and the signatories of the RHP/Prospectus
cannot escape their liability in respect of the disclosures made in the RHP/ Prospectus
because they are obligated under the ICDR Regulations to make true and correct
disclosures. The signatories to the prospectus cannot abdicate their responsibility by
pointing out the lack of due diligence by the Merchant Banker. I therefore, find that BGIL
was responsible for the non-disclosure of the transaction with Gadeo as a "related party
transaction".

Suppression of the fact of relationship of Mrs. Richa Mittal with the director of BGIL.

46. It is also alleged that BGIL suppressed the fact of relationship of Mrs. Richa Mittal with the
director of BGIL (i.e. Mr. Sanjeev Kumar Mittal) by not disclosing her name in the list of
relatives provided by it to SEBI. As noted above 'brother's wife' is covered under the
definition of 'relative' under section 6(c) of the Companies Act, 1956 and therefore BGIL
was obligated to disclose her name in the list of relatives to SEBI. In my view, BGIL cannot
attribute the said default on its part to the Merchant Banker as the information was directly
provided by BGIL itself during SEBI's investigation and not by the Merchant Banker.
Further, I note that vide letter dated February 7, 2011, BGIL informed the Merchant
Banker that:-Mrs. Richa Mittal is wife of Mr. Rajeev Mittal and a resident of A-147-148, Sector 55,
Noida, Uttar Pradesh. She is not in any manner related to Bharatiya Global Infomedia Limited its
Promoters / Directors or Promoter Group Companies." I find that BGIL has not been able to
provide any satisfactory explanation for the misstatement and has merely stated that the
Chairman and Managing Director of the Company signed the said letter in routine I find
that BGIL was at all times aware of the relationship of Mrs. Richa Mittal with Mr. Sanjeev
Kumar Mittal and it intentionally concealed the fact of Mrs. Richa Mittal's relationship with
Mr. Sanjeev Kumar Mittal.

Submission of three different versions of details pertaining to ICDs during SEBI's investigation.

47. I note that during SEBI investigation, BGIL submitted three different versions of the
details pertaining to ICD loans taken and the so called ICD investments. It is alleged that
BGIL attempted to conceal the material information from SEBI investigation by providing
these three different versions of ICD loans and investments BGIL in response to these
allegations submitted that ICDs given by BGIL amounted to 12.5 crore and ICD loan
taken by BGIL amounted to 15 crore and the same was clarified by BGIL in its
subsequent communications to SEBI. The error in reporting the figures was clerical and
______________________________________________________________________________

crept in due to pressure and time constraint. I find the said contention of BGIL to be
without any basis. I note that BGIL has given three versions of their ICDs at different
points of time and all these versions are substantially different from each other. Moreover,
no disclosures were made by BGIL in the RHP / Prospectus in respect of any of these
versions. The argument of BGIL that the error was merely clerical could have been more
justifiable had there been minor variations in the versions submitted by BGIL but in the
present case the three versions submitted by BGIL were substantially different from each
other. In my view, the shifting stands of BGIL in relation to the ICDs (which were not
disclosed in the RHP/Prospectus) indicate and corroborate the mala fide intent of BGIL. I,
therefore, find that the submission of different versions of ICDs by BGIL during the SEBI
investigation was clearly an attempt on part of BGIL to suppress the correct information
and mislead SEBI investigation.

48. In view of the foregoing, I conclude the following:
BGIL fraudulently mis-utilized/ diverted the IPO proceeds to the tune of 23.46 crore
for the proposes and/or in the manner other than those disclosed in the
RHP/Prospectus.
BGIL fraudulently mis-utilized/ diverted the IPO proceeds to the tune of 12.5 crore
in the garb of ICD investments in Sanjukta Vanijiya Private Ltd, Darshan Trade link
Private Ltd. and Nihita Financial Services Private Ltd out which 11.15 crore remains
to be recovered by BGIL from three companies as directed by the interim order dated
December 28,2011.
BGIL entered into transactions with vendors which were pre-decided and provided
false information in the RHP/Prospectus about the vendors.
BGIL mis-utilized IPO proceeds by making payments to promoter / promoter related
entities without there being any disclosure in the RHP/ Prospectus regarding such
payments.
BGIL intentionally concealed the information relating to the ICD loans taken by it prior
to filing of RHP and after filing of RHP but before the filing of prospectus, and also did
not disclose the same to the public by way of a public notice.
BGIL repaid the ICD loans out of the IPO proceeds without making any disclosure in
the RHP/Prospectus in that regard.
BGIL diverted the IPO proceeds by transferring funds to traders who indulged in
synchronized and artificial trading on the day of listing of the shares of BGIL.
BGIL made wrong disclosures regarding percentage of purchase order placed by it.
BGIL entered into a related party transaction with Gadeo but deliberately did not disclose
the same as a related party transaction in the RHP/ Prospectus. BGIL also concealed the
information regarding the relationship of Mrs. Richa Mittal with Mr. Sanjeev Kumar
Mittal.
______________________________________________________________________________

BGIL mislead the SEBI investigation by providing three different versions of ICD
loans and investments.
BGIL failed to comply with the SEBI order dated December 28, 2011 directing it to call
back payments made to its promoters / promoter related entities ;
BGIL failed to call back 11.15 crore out of the purported ICD investments of 12.5
crore as directed vide SEBI order dated December 28, 2011.
BGIL also willfully disobeyed SEBI's order by not depositing the unutilized IPO
proceeds and ICD investments recovered by it in an interest bearing escrow account
and mis-utilized the amounts so recovered in the garb of working capital requirements.

49. In light of the above observations, I find that the acts / omissions described hereinabove,
in totality, show that BGIL actively concealed material information, suggested untrue facts,
made false and inadequate disclosures in the RHP/Prospectus and mis-utilized / diverted
the IPO proceeds. The said acts and omissions of BGIL, apart from being in violation of
the requirements of the ICDR Regulations, also show a fraudulent scheme or device on
part of BGIL to mis-utilize/ divert the IPO proceeds. Such scheme or device falls within
the ambit of regulation 2(1)(c) of the PFUTP Regulations and is therefore in violation of
the provisions of section 12A of the SEBI Act and regulations 3 and 4 of the PFUTP
Regulations alleged in the SCN.

50. I note that Mr. Rakesh Bhatia (Chairman and Managing Director of BGIL), Mr. Sanjeev
Kumar Mittal (Executive Director of BGIL) and Mr. Rajeev Kumar Agarwal (Manager,
Finance of BGIL) were in charge of the day to day affairs of BGIL at the relevant time and
also owed a fiduciary duty towards BGIL. Further, they signed the declaration in the
prospectus certifying that all the statements in the prospectus are true and correct.
However, as described above, various disclosures in the RHP/Prospectus have been found
to be false and misleading. I also note that the audit committee meetings wherein, Mr.
Rakesh Bhatia and Mr. Sanjeev Kumar Mittal were members, had failed to notice the fund
mis-utilization / diversion and did not make any recommendations to BGIL which showed
their complicity in the mis-utilization /diversion of IPO proceeds by BGIL. In view of the
above, I find that Mr. Rakesh Bhatia, Mr. Sanjeev Kumar Mittal and Mr. Rajeev Kumar
Agarwal gave a wrong certificate in the RHP / Prospectus and were also responsible for the
acts and omissions of BGIL as described above.

51. Considering the above findings, I find that the charges levelled against the Noticees in the
SCN dated September 4, 2012 regarding violation of the provisions of section 12A
(a),(b),(c) of SEBI Act read with section 27 of SEBI Act and regulation 57 (1) and
57(2)(a)(ii) read with clause 2 (VII)(G), 2(VIII) (B)(5)(a)(b), (6), 2(IV)(H)(18) and (XVI) (B)
(2) of part A of schedule VIII, regulation 60(4)(a) and (7)(a) of ICDR Regulations, and
______________________________________________________________________________

regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (d), (e), (f) and (k) of PFUTP Regulations are
established.

52. I, therefore, in order to protect the interest of investors and the integrity of the securities
market, in exercise of the powers conferred upon me by virtue of section 19 read with
sections 11, 11A and 11B of SEBI Act read with regulation 11 of PFUTP Regulations and
regulation 107 of ICDR Regulations hereby issue the following directions:

(i) BGIL shall, within six months from the date of this order, call back-
(a) 23.46 crore which were mis-utilized/diverted as found in this order; and
(b) 11.15 crore (out of 12.5 crore which were mis-utilized/diverted in the garb of
ICD investments in three companies as found in this order) that remains to be
recovered by BGIL from Sanjukta Vanijiya Private Ltd, Darshan Trade link Private
Ltd. and Nihita Financial Services Private Ltd;
(ii) The Board of directors of BGIL shall ensure compliance of the above direction and submit
a monthly progress report in that regard to SEBI. Further, the Board of directors shall also
furnish to SEBI a Compliance Report duly certified by an independent SEBI registered
Merchant Banker, other than the one who managed the IPO of BGIL, within two weeks of
the date of compliance of above direction.
(iii) Subject to the applicable provisions of Companies Act, 1956 and Companies Act, 2013,
as the case may be, BGIL shall utilize the funds raised in the IPO for purposes
disclosed in the Prospectus dated July 16, 2011.
(iv) BGIL, Mr. Rakesh Bhatia, Mr. Sanjeev Kumar Mittal and Mr. Rajeev Kumar Agarwal
are debarred from accessing the securities market and are also prohibited from buying,
selling, and otherwise dealing in securities market, directly or indirectly, in any manner
whatsoever, for a period of five years from the date of this order.

53. The period of prohibition already undergone by BGIL, Mr. Rakesh Bhatia, Mr. Sanjeev
Kumar Mittal and Mr. Rajeev Kumar Agarwal, pursuant to the interim order dated
December 28, 2011, shall be taken into account for the purpose of computing the period of
prohibition imposed in para. 52(iv) of this Order.

54. This order shall come into force with immediate effect. A copy of this order shall be served
on the Noticees, all the recognized stock exchanges and depositories for ensuring due
compliance with the above directions.

Date: August 8
th
, 2014 RAJEEV KUMAR AGARWAL
Place: Mumbai WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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