IPO Review – Discussion until listing

Litigation against Utkarsh
Litigation against the company

1. Mr. Mahesh Kumar Upadhyay has filed a lawsuit against The Bank, accusing its branch manager, area manager, regional manager, and an IT personnel of physical assault, hostage-taking, and confiscation of his personal belongings, including his mobile phone, motorbike, and ₹20,300 from his purse. He alleges that he was forced to resign, and his salary for June 2019 and travelling allowance for April and May 2019 were withheld.In response, The Bank has denied these allegations in a written statement. They claim that Mr. Mahesh Kumar Upadhyay had embezzled ₹153,470, which he had collected from debtors, and resigned when questioned about it. The Bank states that his employment was not terminated, and the final decision regarding his salary and termination will be made following the Bank’s rules. They also mention that an FIR was filed against him for embezzlement, and a charge sheet was issued based on the investigation.The matter has been transferred to the Labour Court in Gorakhpur for further proceedings. The court will assess the evidence presented by both parties and make a decision based on the merits of the case.

2. The Bank received a show cause notice from the RBI expressing their displeasure regarding the non-compliance with certain circulars and letters related to automation processes and provisions in banks. The RBI advised the Bank to conduct an audit and submit a compliance certificate. The Bank responded by providing updated information on the compliance status and submitted an audit certificate as requested. Subsequently, the RBI conducted an on-site verification to assess the Bank’s compliance.Additionally, the Bank received a show cause notice from SEBI regarding the downselling of NCDs to multiple investors. The Bank filed a settlement application stating that they were unaware of the downselling and followed proper procedures for a private placement. They also mentioned that the RoC’s order confirmed their adherence to Companies Act provisions. However, SEBI rejected the settlement application and scheduled a personal hearing.To facilitate the early redemption of NCDs issued to Karvy Capital Limited, the Bank sought exemptions from certain regulations and obtained approval from SEBI. The RBI also provided a no-objection letter for the redemption. As a result, the Bank deposited the outstanding principal and initiated the redemption process.

3. The Bank received a show cause notice from SEBI alleging various violations of the Listing Regulations and a SEBI circular. The notice accused the Bank of non-compliance in several areas, including the appointment of a share transfer agent, submission of compliance certificates, submission of investor complaint statements, and timely disclosure of information. It also cited failures related to fundraising, board meetings, and submission of financial results.In response, the Bank filed a settlement application, acknowledging some inadvertent lapses and taking steps to rectify them. The Bank highlighted its efforts to enhance internal controls and compliance systems, as well as its engagement with advisors. It emphasized that it had met its financial obligations regarding NCDs and had not received any complaints from NCD holders. The Bank stated that its actions had no market-wide impact and did not harm investors’ interests.The Bank proposed to settle the allegations and requested SEBI to consider the settlement application favorably. The Bank assured SEBI of its commitment to comply with regulations and resolve any inadvertent errors. The settlement application aimed to address the issues raised by SEBI in a fair and lenient manner
   Matters against the director

4. A notice dated April 19, 2023, was issued under Section 91 of the Code of Criminal Procedure, 1973 against the Promoter pertaining to an FIR registered with Cantonment Police Station, Commissionerate, Varanasi for offenses under sections 419, 420, and 409 of IPC. The investigating authority alleges that the Promoter availed a ₹250 million loan from Micro Units Development & Refinance Agency Limited (“MUDRA”) and distributed the amount among themselves and their associates.In response, the Promoter submitted a reply dated May 23, 2023, stating that they had availed a ₹250 million refinance facility from MUDRA in Fiscal 2017. They further explained that the loan was extended to eligible financial institutions, and they disbursed the loans to 20,000 women beneficiaries under the Pradhan Mantri Mudra Yojana Scheme. The Promoter claimed that the refinance facilities were closed by repaying the principal and interest in full, supported by a ‘No Dues Certificate’ issued by MUDRA on March 30, 2019.To clarify the utilization of funds, the Promoter provided audited balance sheets for the financial years 2016-17, 2017-18, and 2018-19, along with the independent auditor’s report approved by the RBI.Regarding the request to furnish details of loans and customers, the Promoter asked the investigating authority to instruct, under the signature of the appropriate authority, for sharing customer details. They stated that they would be unable to disclose this information as mandated by various acts.The matter is currently pending.

5. A complaint was filed before the Labour Court, New Delhi, against the Promoter by Mr. Dev Nayak Mishra, an ex-employee, seeking full and final settlement of his dues, including encashment of earned leaves, sick leaves, casual leaves, and bonus. The complaint was filed following the termination of Mr. Mishra’s services by the Promoter on May 13, 2015.The Court issued an ex parte order on January 15, 2019, as the Promoter did not provide representation or written statements in the proceedings. The order allowed the proceedings to proceed based on ex parte evidence.The Promoter filed an application before the Court to set aside the ex parte order and requested permission to submit written statements. They claimed that the summons were served on the commercial branch of the Promoter instead of the branch responsible for legal matters.The Promoter disputed Mr. Mishra’s claims and stated that his appointment was terminated due to his actions that deviated from his assigned duties. They also mentioned issuing multiple warnings and intimation letters to Mr. Mishra before terminating his services.

6. A complaint was filed before the Labour Court, Uttar Pradesh, against the Promoter by Mr. Ved Prakash, an ex-employee. Mr. Prakash alleged that the Promoter forced him to resign and subsequently terminated his services. He claimed that the Promoter did not pay him ₹40,735 as compensation for encashed leaves, bonus, and three days’ earned salary. Mr. Prakash sought an order from the Court to direct the Promoter to pay him 10 times the amount due as compensation and litigation costs. The Promoter responded that Mr. Prakash resigned without completing the mandated two months’ notice period and refuted the claim of non-payment of three days’ salary. The Court has reserved its order in the matter.