SEBI Vs. PUNJAB NATIONAL BANK SHAHIBAUG BRANCH
SECURITIES APPELLATE TRIBUNAL
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(1.) PUNJAB National Bank (hereinafter referred to as 'PNB') is a SEBI registered Bankers to an Issue. PNB acted as Bankers to an Issue in the public issue of Maha Chemicals Ltd. (hereinafter referred to as 'MCL') SEBI conducted investigation into the irregularities in the public issue of MCL and violation of inter alia the provisions of SEBI (Bankers to an Issue) Regulations, 1994 and other regulations.
(2.) During the course of investigation, based on the findings it was inferred that Punjab National Bank, Shahibaugh, Ahmedabad Branch (hereinafter referred to as 'the Branch') accepted the applications accompanied by stock invests, which were dated much after the closure of the issue. Further, the investigation, revealed, interalia, the following :
2.1 Shares were issued under the public category to Superior Chemicals Limited (SCL), a sister concern of MCL. It was noted from the list of cheque applications collected by PNB that SCL had submitted an application no.1206777 for 5 lakh shares amounting to 16% of the issue size accompanied by cheque no. 088341 drawn on the Branch only after the closure of the issue.
2.2 Applications to the tune of 17% by way of stock invests and 16% by way of cheque were brought in much after the closure of the issue. If these late applications are excluded, the issue would have been subscribed only to the extent of 67% and would be deemed to have failed.
2.3 The Branch had handed over the original applications along with stock invests to MCL, whereas as per procedure laid down they are required to send the applications to the Registrars to the Issue. This despite the fact that the Registrars, Nipar Financial Services Pvt. Ltd. (Nipar), was having a branch office in the same city itself. By handing over the stockinvests to MCL, it was possible for the stockinvests to be cancelled without realisation. By accepting applications after closure of issue from persons apparently connected to the promoters and from sister concern of MCL, the bank had enabled the issue to be deemed fully subscribed and get listed, and enabled the promoters to garner a larger chunk of shares in the public issue.
Based on the findings of the investigation, SEBI vide order dated 22nd March, 2001 appointed an Enquiry Officer to enquire into the affairs of the Branch in the alleged irregularities committed by it in the public issue of Maha Chemicals Ltd. and possible violations of the provisions of inter alia the following :
a) Securities and Exchange Board of India Act, 1992;
b) Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994.
(3.) THE Enquiry Officer submitted his report on 18.12.2002. EO, in the said report found that the Branch failed to exercise due diligence and ensure proper care which is in violation of clause (2) of the Code of Conduct which mandates that "a banker to an issue shall exercise due diligence, ensure proper care" and recommended that the Branch may be debarred from carrying out the activities as a Banker to an Issue for a period of 2 months.;
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