blog/article-blog/Addressing Misinterpretation in alleged RoC Violation

Apr 10, 2024

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Addressing Misinterpretation in alleged RoC Violation

Clarifying Facts and Dispelling Misconceptions Regarding RoC Allegations

We would like to address the recent order issued by the Registrar of Companies (RoC)', which has misinterpreted facts regarding Planify. Through this response, Planify aims to provide clarity on the recent order issued by the Registrar of Companies on alleged violations of a couple of provisions of the Companies Act, 2013.

Adjudication:
The provision under sub-section (7) of Section 42 of the Act, no company issuing securities under this section shall release any public advertisements or utilize any media, marketing, or distribution channels or agents to inform the public at large about such an issue. The subject company has violated sub-section (7) of section 42 of the Act. The penal provision for the same is provided in sub-section (10) of Section 42 of the Act.

Section 42(7) of the Act provides the ceiling up to which a penalty can be imposed on the company, directors, and promoters. In the present case, ₹3,89,53,017 was raised by selling the shares to Planify Enterprises Private Limited, which in turn acted as a "distribution channel" for selling the shares to the investors on the Planify platform. The amount raised is more than Rs. 2 crores, so the amount of penalty cannot exceed Rs. 2 crores.

Clarification: First, let’s start by understanding Section 42.7 of the Companies Act 2013.

1. What does Section 42.7 of the Companies Act, 2013 state?

Section 42(7) of the Companies Act 2013 states that companies cannot use public advertisements or distribution channels, media, or marketing to inform the public about private placement issues.

2. Let’s divide this question into 3 parts:

a) Has Planify gone public?

We would like to provide our investors with Planify’s fundraising summary to give an idea to our investors about from where did we raise ₹3,85,50,000:


Particulars

Type

Qty

Amount (In INR)

% Age

Comments

Existing Investor

New Investor

Total Shares Issued

To Planify Enterprises Pvt Ltd

4,53,530

₹3,85,50,000

100%

Private Placement @ 85 Per Share



Shares sold to Rajesh Kumar Singla HUF

Promoter's HUF

3,51,558

₹2,98,82,430

77.52%

Promoter Entity



Shares sold to

Friends

21,800

₹18,53,000

4.81%

8 Shareholder's



Shares sold to

Relative's

21,384

₹18,17,640

4.72%

4 Shareholder's



Shares Sold to

HNI Clients - Investor's

31,130

₹26,46,050

6.86%

7 Shareholder's

4

3

Shares Sold to

Retail Existing Investors

16,475

₹14,00,375

3.63%

24 Shareholder's



Shares Sold to

Retail - New Investors

11,183

₹9,50,555

2.47%

21 Shareholder's




As one can see from the above summary, Planify has distributed almost 94% of shares among the Promoter Entity, Friends, Relatives, and HNI Client Investors. Even out of those 94%, almost 90% of shares are held by the promoter himself.

The remaining 6% shares which have been allotted through a legally followed private placement process to retail investors, totaling 27,658 shares have been allotted to 45 retail investors which is well within the limit stated under Section 42.7 i.e. 50 Retail Investors.

Among the 45 retail investors, 24 were already existing investors who had invested with Planify in PreIPO stocks. They invested ₹14,00,375.

Only 21 were new retail investors who had invested ₹9,50,555 & most of them were referrals from existing investors. None of them were a part of the general public as alleged in the order.

In other words, Planify has not gone public. All the new retail investors came to our platform & invested.

b) Has Planify used any public advertisements to inform the public about private placement issues?

Clarification: RoC showcased a research report & youtube video, alleging that Planify marketed its private placement among the general public.

First, YouTube video is not our advertisement. Let’s understand what was in the video. Planify made a video telling founders that Planify helps them raise funds through accredited investors and it's not a fundraising of the video to which they have referred.

Second, We would like to draw attention to the date of release of the video on YouTube. The aforementioned video was uploaded on June 7, 2023, which is almost 1 year after the previously said private placement took place which was in June 2022.

It's fair to say that it doesn’t make any sense for us to make a video on Private placement, 1 year after the funds were raised & shares were transferred to the investors.

For the convenience of our investors, we are attaching the screenshot of the release date & link to the Video:



Now, let’s come to the research report part. It has been alleged that Planify has provided a link to the research report which has been seen by the RoC as marketing.

Planify would like to clarify that the Research Report is also not included under marketing. Firstly, Planify provides research reports to investors as a Value-Added Service during their phase of investment to assist them in understanding the company better.


Secondly, our launchpad core framework was launched on 25th May 2023 while the Planify Research Report in question within it was released on July 15, 2023, which is again more than a year after the private placement of shares took place, which was in June 2022. We are also attaching the screenshots of both the launchpad framework & the research report below for verification:




c) Has Planify acted as a distribution channel?

Let’s understand this with the help of an example: Let’s assume Ram has taken Coca-Cola, the popular Soft drinks brand, distribution. He distributes its bottles to shopkeepers who in turn sell them to the final consumers. In short, it's a B2B model.

On the other hand, Planify Enterprises has transferred shares directly to investors who in turn have not distributed it to anyone else.

Now let’s see it in terms of Finance. Let’s assume Ram has taken Mutual Fund Distribution & he is getting investment done for Shyam. Shyam transfers money to a Mutual fund company & company allows them Mutual fund units & in turn Mutual fund company pays a commission to Ram.

Planify Capital has never transferred any commission to Planify Enterprises. Planify can prove this with their Form 26AS.


What has happened?

In other words, Planify Enterprises purchased shares & sold them.

Section 58 (2) of the Companies Act states without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable: Provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract.

Overall, Planify has never distributed, nor does any advertisement to the general public. Hence, an appeal against the adjudication should be dismissed.

Now let’s look at the penalties imposed on Planify.

3. Adjudication: Since this provision does not provide for a fixed penalty, the provisions of rule 3(12) of the Companies (Adjudication of Penalties) Rules, 2014 are applicable. The said provision reads as under:

"(12) While adjudging the quantum of penalty, the adjudicating officer shall
have due regard to the following factors, namely:-

(a) size of the company;
(b) nature of business carried on by the company;
(c) injury to the public interest;
(d) nature of the default;
(e) repetition of the default;
(f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; and
(g) the amount of loss caused to an investor or group of investors or creditors as a result of the default:

Provided that, in no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act."


Clarification: The thing that matters the most in adjudication should be the amount of loss incurred by the investors or whether the company has earned disproportionate gains in return.

Planify would like to clarify that neither a single investor has filed a single complaint where they have claimed even a single penny of loss by investing at Planify nor has Planify earned any disproportionate gain by getting a fundraising of ₹9,50,555. In, fact this was the first time where adjudicating officer should have seen the violation happening.

On the other hand, the maximum amount of penalty has been imposed on Planify. Planify feels very strongly that this penalty has not been imposed on merit by the adjudicating officer but on prejudice.

4. Adjudication: Now in the exercise of the powers conferred on the undersigned vide Notification dated 24th March 2015 and having considered the reply submitted by the subject company in response to the notice on 31.10.2023 and hearing in the matter held on 19.12.2023 and further reply dated 16.01.2024, hereby impose the penalty on the company and its officers in default under section 42 (10) of the Act r/w Rule 3(12) of the Companies (Adjudication of Penalties) Rules, 2014, for violation of section 42 (7) of the Companies Act, 2013 which are as follows:-



Violation

Penalty imposed on the company / director(s) / promoter(s)

Total penalty

imposed u/s 42

of the

Companies Act,

2013 in INR

A

B

C

Section 42 (7)


PLANIFY CAPITAL LIMITED

2,00,00,000

Sh. Rajesh Kumar Singla

2,00,00,000

Ms. Urmila Rani Singla

1,00,00,000

Sh. Davinder Kumar Singla

1,00,00,000

Sh. Uttam Prakash Agarwal

1,00,00,000


Clarification: Planify would like to clarify that RoC sent us a notice on 31st October 2023, which was duly replied to by Planify by 25th November 2023. Now if we estimate 90 days from the date of notice, the period ends on 31st January 2024. RoC called Planify on 29th February 2024 which was 1 month after the deadline of 90 days. For this, no justification was provided by the adjudicating officer on the reason for the delay on their behalf.

More importantly, RoC has mentioned in their notice that they had called a hearing on 19th December 2023 & 16th January 2024 which Planify completely denies as Planify never received any such hearing invitation. Planify will be showing proof that no such hearing was done on either 19th December 2023 or 16th January 2024.

Lastly, Adjudicating officer has imposed a fine under 42.10 on Promoters & Independent Directors.

We assure all our partners & investors that we will be appealing against the order as we feel that there has been a misinterpretation of the real facts and there is no merit to the order being passed. Henceforth, we feel that the verdict will be delivered in our favor & this order will be nullified.

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