Case Law Details
In re Indgrowth Capital Advisors LLP (SEBI)
The question that arises for consideration is whether the Noticee can be held liable for the error in computation of “investable funds”. As explained by the Noticee, the Noticee has set off the estimated expenditure against the estimated returns derived from temporary parking/ investment of funds and therefore the estimated expenditure got reduced, and as a consequence, the “investible funds” got increased to the extent of the returns. I find that in Ugro Capital Limited, the investment is just below the 10% cap of the higher investable fund, as computed by the Noticee.
At this juncture, I have taken a look at the periodic disclosure of “corpus” & “investable fund” of the Noticee, shown in Table No. 4 above. I find that throughout the period July-Sep 2017 to Jan-March 2022, the Noticee has been disclosing the higher “investable fund” based on its own understanding, as claimed. Since the understanding of the Noticee AIF was incorrect from the inception, the disclosures made were also incorrect. The Noticee has pleaded bonafide error in this method of computation. The Noticee has also relied on certain clauses of the Private Placement Memorandum (PPM) on “Temporary Investments” under Section V: Summary of Principal Terms of the PPM stated as under:
i. SECTION V: SUMMARY OF PRINCIPAL TERMS of the PPM on page 52-53 of the PPM. The paragraph on “Temporary Investments” under SECTION V: SUMMARY OF PRINCIPAL TERMS clearly states that:
“Until Capital Contributions received by the Fund are utilized towards Fund Investments, the Investment Manager shall be entitled to invest the Capital Contribution in Temporary Investments.
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