Description

SEBI order against KKP Marketing India Limited and its directors for fraudulent public issue of equity shares, misappropriation of funds, and violation 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 of its directors/promoters. The company conducted a fraudulent public issue of equity shares in 2010, raised funds from investors (primarily from the Patel community) by making false promises of stock market listing and high returns, but failed to deliver on commitments. The directors allegedly misappropriated company funds for personal real estate purchases and never paid dividends to shareholders.

Key Points

  • KKP Marketing India Limited is a public unlisted company incorporated on May 24, 2010, with registered office in Bhuj, Gujarat
  • Company issued public equity shares at Rs. 10/- per share in 2010 without complying with Companies Act, 1956 provisions
  • Promoters and directors promised shareholders minimum share price of Rs. 200/- upon listing and high dividends at public meeting in Bhuj-Kutch
  • After 11 years, shares were never listed on any stock exchange and no dividends were paid to shareholders
  • Directors misappropriated Rs. 3,01,62,075/- transferred to director accounts under “short term loan and advances”
  • Additional funds diverted: Rs. 35,50,000/- to M/s Khodiyar Foods Ltd. and Rs. 2,98,58,925/- as advance for immovable properties
  • Company’s stated objective was marketing of agricultural products, but directors entered real estate business without shareholder consultation
  • Annual General Meetings (AGMs) allegedly fabricated with false minutes; shareholders never informed about meetings
  • Complaint filed by Mr. Babulal Ratanshi Patel & Others through constituted attorney on August 17, 2021
  • 12 noticees named: KKP Marketing India Limited and 11 individuals including directors and promoters

Regulatory Changes

This is an enforcement order rather than a circular introducing new regulatory changes. The order enforces existing provisions under:

  • SEBI Act, 1992 (Sections 11(1), 11(4), 11(4A), 11A and 11B)
  • Companies Act, 1956 (violations related to public issue procedures)

Compliance Requirements

  • Public companies issuing shares must comply with applicable provisions of Companies Act and SEBI regulations
  • Promoters and directors must fulfill commitments made to shareholders regarding listing and dividends
  • Company funds must be used for stated business objectives and cannot be misappropriated for personal use
  • AGMs must be conducted properly with genuine shareholder participation
  • Directors cannot transfer company funds to personal accounts or related entities without proper authorization
  • Companies must maintain transparency in financial dealings and property acquisitions

Important Dates

  • May 24, 2010: KKP Marketing India Limited incorporated
  • 2010: Public issue of equity shares conducted
  • March 31, 2019: Balance sheet date showing misappropriated funds
  • August 17, 2021: Complaint filed with SEBI
  • January 30, 2026: SEBI order issued

Impact Assessment

Investor Impact: Significant negative impact on investors who purchased shares based on false promises. Investors lost both principal investment value and expected returns through non-listing and zero dividends over 11+ years.

Market Impact: Limited broader market impact as this involves an unlisted company, but highlights risks in unregulated public offerings and importance of regulatory compliance for investor protection.

Regulatory Impact: Demonstrates SEBI’s enforcement reach beyond listed companies to protect investors in unlisted public companies. Reinforces consequences for fraudulent fundraising and misappropriation of investor funds.

Corporate Governance: Case highlights critical governance failures including misappropriation, fabricated AGMs, unauthorized business diversification, and breach of fiduciary duties by directors.

Community Impact: Targeted fraud against specific community (Patel community) shows vulnerability of community-based investment schemes and need for investor awareness.

Impact Justification

Enforcement action against unlisted company for fraudulent practices affecting specific investor community; limited broader market impact but highlights regulatory oversight of unlisted public issues