The Securities and Exchange Board of India (SEBI) on Tuesday, 30 June issued an ex-parte interim order against the promoters and associates of Darjeeling Industriies Limited, alleging they engineered a coordinated scheme involving circular funding, misuse of preferential issue proceeds, and suspected stock price manipulation. In a striking finding, the regulator said it could not verify the company's physical existence at either of its declared registered office addresses.

Key Allegations Against the Promoters

SEBI's 62-page interim order names ten noticees, identifying Managing Director Ashok Dilipkumar Jain as the alleged 'mastermind' of the arrangement. The other named parties are Viha Ashok Jain, Dilip Sanklecha, Sonali Parmar, Abhishek Prakash Jain, Kirti Ravi Kothari, Kalidas Magar, Joy Banerjee, Punyah Sachin Jain, and director Pradeep Sutodiya. The regulator emphasised that all findings are prima facie and subject to further investigation, with noticees entitled to present their defence.

The Circular Funding Trail

According to the order, Darjeeling Industriies raised ₹11.76 crore through convertible warrants allotted to ten non-promoter investors, who initially subscribed ₹2.94 crore. SEBI alleged that at least ₹1.71 crore — more than 58% of that amount — was directly or indirectly funded by Ashok Jain through family members and connected entities, casting serious doubt on whether the allottees were genuinely independent investors.

The regulator further alleged that the entire ₹2.94 crore was transferred back to Ashok Jain shortly after receipt, before being routed through multiple entities in transactions SEBI characterised as circular funding. A substantial portion was allegedly diverted to businesses with no apparent link to the company's stated agricultural trading business, including ₹3.09 crore to baby-care products manufacturer Lifeway Hygiene LLP, approximately ₹1 crore to scrap recycler Shree Adhyashakti Metals Pvt. Ltd., more than ₹1.28 crore to Antala Industries, ₹40 lakh to Le Lavoir Ltd. — where Ashok Jain is also a director — and another ₹40 lakh to newly incorporated Ghantiram Foods. Investigators noted that a significant portion of funds transferred to Ghantiram Foods was withdrawn in cash shortly after receipt.

Company's Physical Presence Questioned

During inspections, SEBI investigators found that Darjeeling Industriies was not operating from its disclosed Mumbai registered office, which was reportedly occupied by an unrelated finance company that had purchased the premises. Despite this, the company allegedly continued to disclose the address for board meetings. A visit to its declared Rajkot office found the premises locked, with no signage or evidence of any business activity. The company's disclosed website was also found to be non-functional.

WhatsApp Chats and the Sunshine Capital Link

The order also drew on evidence recovered during a separate investigation involving Surendra Jain, who is being probed in the Sunshine Capital case. SEBI said WhatsApp conversations allegedly linked Ashok Jain with Surendra Jain, covering discussions on Darjeeling Industriies, shareholder lists, company expenses, and market operations. The regulator said these chats, read alongside the fund trail and trading patterns, pointed to a coordinated arrangement to manipulate the company's shares.

Why SEBI Acted Urgently

SEBI said it moved on an urgent basis because the lock-in period for a substantial portion of the preferentially allotted shares was due to expire on 30 June. The regulator expressed concern that the noticees could have offloaded their holdings and booked alleged wrongful gains at the expense of public investors. It estimated that shares held by Ashok Dilipkumar Jain and connected entities could have fetched as much as ₹29.05 crore at prevailing market prices. Pending completion of its investigation, SEBI has imposed immediate market restrictions on all named noticees.