SEBI Adjudication Order on Veerkrupa Jewellers IPO Fund Transfer Violations

Authority: Adjudicating Officer, Securities and Exchange Board of India

Order Date: August 31, 2026

Order No: Order/JS/VC/2025-26/32690-32694

Case Overview

The Securities and Exchange Board of India (SEBI) conducted an investigation into Veerkrupa Jewellers Limited (VJL) regarding possible violations of SEBI regulations concerning its July 2022 Initial Public Offer (IPO) that raised ₹8.10 crore. The investigation focused on the utilization of IPO proceeds, which were intended for working capital requirements according to the prospectus.

SEBI initiated adjudication proceedings against five noticees: Mr. Chirag Arvindbhai Shah (Managing Director of VJL), First Overseas Capital Ltd. (FOCL, the lead merchant banker), Ms. Mala Soneji (ex-employee of FOCL), Mr. Rushabh Pradeep Shroff (ex-Vice President of FOCL), and Mr. Satyen Bhupendra Dalal (Managing Director of FOCL).

The principal allegations were that FOCL transferred approximately ₹7.95 crore (98.15% of net IPO proceeds) directly from the public issue escrow account to VJL's four gold vendors (Akshat Gold Private Limited, Karuna Bullion Private Limited, Navkar Gold, and Satva Gold) instead of first crediting the funds to VJL's bank account as required by regulations. These transfers were executed using Annexure A2 of the Escrow Agreement, which is specifically meant for payment of IPO-related intermediary expenses, not for vendor payments toward the objects of the issue.

Key findings from the investigation included:

  • VJL's MD provided written instructions to FOCL requesting direct payments to vendors
  • FOCL's management (Noticees 3, 4, and 5) approved these transfers
  • Ms. Mala Soneji signed the instruction forms using the incorrect Annexure A2
  • Axis Bank, the banker to the issue, processed the transactions without objection
  • Despite the improper routing, SEBI found no mis-utilization of funds as they were used for genuine gold purchases as per the IPO objects

The Adjudicating Officer rejected defenses including claims of operational convenience, industry practice, and reliance on banker's advice, emphasizing that regulatory compliance cannot be compromised even if the ultimate use of funds was proper.

Final Outcome

The Adjudicating Officer found the noticees guilty of multiple violations:

  • Noticee 1 (Mr. Chirag Shah) violated regulation 4(2)(f)(iii)(3) of LODR Regulations for failure in fiduciary duties
  • Noticee 2 (FOCL) violated regulations 271(1), 272(1) and (3) of ICDR Regulations and regulation 13 read with clause 4 of Schedule III of Merchant Bankers Regulations
  • Noticees 3 and 4 violated regulations 271(1), 272(1) and (3) of ICDR Regulations read with section 27(1) of SEBI Act and regulation 13 read with clause 4 of Schedule III of Merchant Bankers Regulations
  • Noticee 5 violated regulation 13 read with clause 4 of Schedule III of Merchant Bankers Regulations

The following monetary penalties were imposed under section 15HB of the SEBI Act:

  • Mr. Chirag Arvindbhai Shah: ₹5,00,000
  • First Overseas Capital Ltd.: ₹5,00,000
  • Ms. Mala Soneji: ₹1,00,000
  • Mr. Rushabh Pradeep Shroff: ₹2,00,000
  • Mr. Satyen Bhupendra Dalal: ₹3,00,000

The penalties must be paid within 45 days of receipt of the order, failing which recovery proceedings may be initiated.

Topics: IPO Fund Misuse, Merchant Banker Liability, Regulatory Compliance