Decided on September 19,2003



C.Achuthan, - (1.) THE present appeal is directed against the order passed by the Respondent No. 1 (SEBI) on 11.10.2002. THE operative portion of the order under challenge in the present appeal is as follows: "In view of the above, I, in the exercise of the powers conferred upon me by Sec. 4(3) and 11B of SEBI Act, 1992, direct that M/s . Gold multifab Ltd. , be prohibited from accessing the capital markets for a period of three years. It is also directed that Mr. Pradip Dingra, Mr. Alok Kalawat, Mr. Murli Manohar Modani, Priti Bhatia and Mr. Vivek Bhatia, directors of the company are debarred from dealing in securities for a period of three years. This aspect of the order shall come into force with effect from October 11th 2002. It is further directed that promoters of M/s . Gold Multifab Ltd. , shall write to all allottees/existing shareholders asking them whether they would like to remain invested (?) with the company and if allottees/existing shareholders choose to exit; they should be given an option to sell the shares to the promoters. If the shares offered are fully paid up, then the promoters should give the face value to the allottees/existing shareholders and if the shares are partly paid up, then the promoters should give the amount subscribed to the allottees/existing shareholders. It is directed that the company shall send its compliance report (giving evidence as to writing to all the allottees/existing shareholders by the promoters and purchase of shares from such allottees/existing shareholders by the promoters who choose the option) within 45 days of receipt of this order."
(2.) The Respondent No. 1 passed the said order based on the following findings arrived at by him, as recorded in the order that: "I have carefully examined the findings of investigation, submissions made from time to time and material and evidence available on record. I find that the charges levelled against the company and its directors are fully substantiated. I find that GML allotted shares to applicants who had applied much after the closure of the issue. I also notice that shares were allotted to applicants, who got stock invests cancelled and did not give/ bring any consideration. These acts of the company were in violation of SEBI Guidelines dated 2/1/92 and section 69 of the Companies Act. It was also noticed by me that share certificates refund orders were not dispatched but company /its agents provided false/misleading information to SEBI in respect to subscription received and despatch of shares. I also notice that promoters of GML /its promoters/directors arranged finance for circumventing requirement of minimum subscription. The applications were arranged with the understanding that shares once allotted and listed would be purchased back by the promoters from the issue proceeds and the financier would be paid the amount subscribed with interest. I find that GML /its promoters were involved in purchase of its own shares, in contravention of Section 77 of Companies Act, 1956. In view of above I find that there is no merit in the argument that there was no direct or indirect benefit to the company in allotting shares to these alleged 19 persons who had applied with ante-dated stock invests; and that a fraud has been perpetrated on the company and its directors by Registrars and Bankers. " (emphasis applied) Shri Vipin Kamadi, learned Counsel appearing for the Appellants referring to the charge that the Appellant Company allotted shares without receiving minimum subscription submitted that the Respondent's said contention is erroneous in as much as the Respondent has not taken into consideration the correct facts in this regard. He submitted that facts on record in fact contradicts the very basis of the said charge.
(3.) HE submitted that though the net offer to the public was 26, 50, 000 shares, subscriptions were received for 78, 27, 500 shares; that as per the Respondent's order 9, 04, 000 shares were involved in irregular allotment, that even if the said number of shares are excluded for the purpose of calculating the subscription received, still the subscription received was more than the prescribed 90% and therefore, the charge that public issue did not receive the minimum subscription of 90% is baseless. HE submitted that in fact the public issue was over subscribed by 2.95 times.;

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