Authority: General Manager, Market Intermediaries Regulation and Supervision Department, Securities and Exchange Board of India (SEBI)

Order Date: June 05, 2025

Case Overview

SEBI has issued a show cause notice under Section 15-I(3) of the SEBI Act, 1992 to Sharepro Services (India) Private Limited (PAN: AAICS5500L, CIN: U67120MH2004PTC148994). The notice pertains to the revision of an earlier Adjudicating Officer (AO) order (No. Order/AK/GN/2024-25/31254 dated March 07, 2025) that had disposed of adjudication proceedings against Sharepro.

The original adjudication proceedings were initiated against Sharepro via a Show Cause Notice (SCN no. SEBI/EAD-08/PM/NS/10582/1-18/2022 dated March 14, 2022) for alleged violations of multiple provisions of the SEBI Act and regulations. The AO disposed of these proceedings, observing that they were covered under Section 446 of the Companies Act, 1956 and could not proceed without leave from the High Court, as the company is under the Official Liquidator.

SEBI, upon examination, has concluded this view is legally incorrect. SEBI states that the expression "suit and other legal proceedings" in Section 446(1) of the Companies Act, 1956 only concerns proceedings with a bearing on the winding-up and within the purview of the company court. SEBI asserts that its adjudication proceedings fall within its exclusive jurisdiction and do not require the High Court's leave.

The underlying allegations against Sharepro are severe, including committing fraud, falsifying records, facilitating fraudulent and unauthorized share transfers, settling investor claims through misappropriation, failing to conduct due diligence, not maintaining proper records, destroying records, failing to follow procedures, failing to redress investor grievances promptly, attempting to mislead, failing to cooperate with the SEBI investigation, not complying with summons, and providing false and misleading statements to the Investigation Authority. Specific alleged violations include Section 12A(a)(b)(c) of the SEBI Act; Regulation 2(1)(c), 3(b)(c)(d), 4(1) & (2)(p) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; multiple clauses of the Code of Conduct under Regulation 13 of the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993; Regulation 9A(e)&(f), Regulation 6(g), and Regulation 14(3)(b)&(c) of the RTA Regulations; SEBI Circular No. RTI Circular No. 1 (2000-2001) dated May 09, 2001; and Section 11C(2) and 11C(3) of the SEBI Act.

SEBI is of the opinion that the AO Order is erroneous and not in the interest of the securities market, particularly as it disposes of proceedings concerning serious non-compliances like the diversion of assets belonging to genuine shareholders, deliberate falsification of records to blur the audit trail, destruction of records, and siphoning of dividends.

Final Outcome

SEBI has proposed to revise the AO Order dated March 07, 2025. Sharepro Services is called upon to show cause within 14 days of receipt of this notice as to why penalty under Sections 15A(a) & (c), 15C, 15HA, and 15HB of the SEBI Act should not be imposed for the violations detailed in the original SCN dated March 14, 2022. Failure to reply will result in SEBI proceeding ex-parte. The company may indicate if it wishes to avail an opportunity of hearing before a Whole Time Member of SEBI.

Topics: SEBI Enforcement, Adjudication Proceedings, Legal Interpretation