Augmont IPO Documents Leave Out ED Proceedings Involving Promoter Family Members

Augmont Enterprises’ initial public offering (IPO) documents do not mention Enforcement Directorate (ED) proceedings involving two relatives of its named promoters, even though Rakesh Manekchand Kothari and Prithviraj Saremal Kothari are identified as members of the company’s promoter group, according to a Moneycontrol report.

The company’s draft red herring prospectus (DRHP) and red herring prospectus (RHP) list the two men among the natural persons forming part of the wider promoter group. However, the litigation disclosures do not mention the proceedings involving them.

The omission does not by itself establish a violation of IPO disclosure rules. Augmont’s litigation disclosures mainly cover proceedings involving the company, its subsidiaries, directors, named promoters and material cases involving group companies.

What Court Records Show About Rakesh Kothari

Rakesh Kothari is the son of Augmont promoters Manakchand Kothari and Devkumari Kothari. A Gujarat High Court judgment dated August 9, 2023 records that the ED arrested him on September 1, 2014 in a case under the Prevention of Money Laundering Act (PMLA).

The case followed an investigation into companies allegedly using bogus bills of entry and invoices to make foreign remittances to entities in Dubai and Hong Kong without corresponding imports. Court records reproduced allegations by the ED that the wider network was involved in illegal transfers of around ₹5,395.75 crore.

These were allegations made by the investigating agency and not judicial findings against Rakesh. A supplementary prosecution complaint filed in October 2014 named him as Accused No. 1 along with nine others.

Rakesh challenged his arrest and detention. His bail applications were rejected at different stages before the Gujarat High Court granted him interim release in August 2015. In August 2023, the High Court rejected his habeas corpus petition and vacated the interim release order, giving him two weeks to surrender.

What Happened In Prithviraj Kothari’s Case

Prithviraj Kothari was a director of Riddisiddhi Bullions, another company in the Augmont promoter group, according to a Gujarat High Court judgment dated July 23, 2015.

He was not formally named among the 10 accused in an October 2014 complaint involving Rakesh. However, the complaint referred to Prithviraj and contained allegations concerning his role. The ED later sought a non-bailable warrant against him.

The Gujarat High Court subsequently quashed the warrant, holding that the designated court had issued it without first using summons or a bailable warrant and without recording adequate reasons. The court also noted that Prithviraj had appeared before the ED four times and had indicated his willingness to cooperate.

Importantly, the High Court said it was only examining the legality of the non-bailable warrant and did not examine the merits of the PMLA allegations.

What Augmont’s IPO Documents Say

Augmont’s RHP states that there are no outstanding criminal, material civil, statutory or regulatory proceedings against its nine named promoters. Rakesh and Prithviraj, however, are identified separately as relatives forming part of the wider promoter group.

Sources close to the promoter family, speaking on condition of anonymity, told Moneycontrol that Prithviraj was “wrongly accused and was acquitted within hours” and that there are no litigations against him. They also said Rakesh is not involved in the Augmont business and that all disclosures required under the ICDR regulations had been made.

Augmont’s ₹825-crore IPO opened on August 21 and closes on August 25. The issue comprises a ₹620-crore fresh issue and a ₹205-crore offer for sale by some promoters. The issue had been subscribed 105 times, according to stock exchange data.