Description

SEBI issued an order under Sections 11(1), 11(4), 11(4A), 11A and 11B against KKP Marketing India Limited and 11 individuals for fraudulent public issue of equity shares, misappropriation of funds, and violations of securities laws.

Summary

SEBI has issued an order under Sections 11(1), 11(4), 11(4A), 11A and 11B of the SEBI Act, 1992 against KKP Marketing India Limited (CIN: U52390GJ2010PLC060882) and 11 individuals including directors and promoters. The action follows a complaint filed on August 17, 2021 alleging fraudulent public issue of equity shares in 2010, misappropriation of company funds totaling over Rs. 3 crores, fabricated AGM meetings, and failure to fulfill promises made to investors.

Key Points

  • KKP Marketing India Limited conducted a fraudulent public issue of equity shares in 2010 without complying with Companies Act, 1956 provisions
  • Company raised funds from public (primarily Patel community) at Rs. 10/- per share with promises of listing at minimum Rs. 200/- per share
  • No dividends paid to shareholders even after 11 years, and shares remain unlisted
  • Directors misappropriated Rs. 3,01,62,075/- transferred to directors’ accounts as short-term loans and advances
  • Additional Rs. 35,50,000/- to Khodiyar Foods Ltd. and Rs. 2,98,58,925/- as advances for immovable properties
  • Directors changed business from agricultural marketing to real estate without shareholder consultation
  • AGM meetings allegedly fabricated and shareholders not properly informed
  • 12 entities named as noticees including the company and 11 individuals

Regulatory Changes

This order represents enforcement of existing securities law provisions. No new regulatory changes are introduced, but it reinforces SEBI’s authority under Sections 11(1), 11(4), 11(4A), 11A and 11B of the SEBI Act, 1992 to take action against fraudulent public issues and misappropriation of investor funds by unlisted companies.

Compliance Requirements

  • Companies conducting public issues must comply with all applicable provisions of securities laws and Companies Act
  • Directors have fiduciary duty to shareholders and cannot misappropriate company funds
  • Proper conduct of AGMs and shareholder communications is mandatory
  • Promises made to investors during fund raising must be honored
  • Business activities must align with stated objects and require shareholder approval for material changes

Important Dates

  • May 24, 2010: KKP Marketing India Limited incorporated
  • 2010: Fraudulent public issue of equity shares conducted
  • August 17, 2021: Complaint filed with SEBI by Mr. Babulal Ratanshi Patel & Others
  • March 31, 2019: Balance sheet date showing Rs. 3+ crore misappropriation
  • February 3, 2026: SEBI order issued

Impact Assessment

Investor Impact: High - Public investors who purchased shares based on false promises of listing and high dividends have suffered significant losses with no returns over 11+ years. Funds totaling over Rs. 3 crores appear to have been misappropriated.

Market Impact: Medium - While KKP is an unlisted company with limited market presence, this order reinforces SEBI’s jurisdiction over public issues by unlisted entities and sends a strong deterrent message.

Regulatory Impact: High - Demonstrates SEBI’s commitment to protecting retail investors even in cases of unlisted companies that fraudulently raise public funds. Sets precedent for enforcement action against promoters and directors who misappropriate investor funds and make false promises during fund raising.

Compliance Impact: The order underscores the importance of strict compliance with securities laws during any form of public fund raising and the personal liability of directors for fraudulent activities.

Impact Justification

Major enforcement action involving fraudulent public issue, misappropriation of investor funds, and multiple regulatory violations affecting public investors