sebi:11202

SEBI · SEBI · 2004-02-27 · A K Batra, Whole Time Member

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Facts / Headnote

Debarment of Navrangpura Branch (Ahmedabad) of Punjab National Bank from carrying out the activities of Bankers to the Issue for a period of one month, effective on expiry of 21 days from the date of the order.

Provisions invoked

• s. 19

Regulations

• Reg. 13
• Reg. 16

Parties

• Navrangpura Branch (Ahmedabad) of Punjab National Bank

Holding

The Navrangpura Branch (Ahmedabad) of Punjab National Bank is debarred from carrying out the activities of Bankers to the Issue for a period of one month for violating Clauses 1, 2 and 7 of the Code of Conduct under Schedule III of the SEBI (Bankers to the Issue) Regulations, 1994.

Full text

SEBI conducted investigations into the public issue of M/s Growmore Solvents Limited (hereinafter referred to as "GSL" ). GSL had come out with a public issue of 84,50,000 shares for Rs.10/- at par, aggregating to Rs. 845 lacs.. The issue opened for subscription on 7th March, 1994 and closed on 19th March 1994. As per the report submitted by the post issue lead manager, the issue was stated to have been subscribed to the extent of 78,91,000 shares, being 93% of the issue size. During the course of investigations, it was observed that : 27,01,500 shares, constituting 32% of the issue size, were subscribed through Stock invests. Of this, applications for 26,00,000 shares were accompanied by Stock Invests issued and accepted by a single branch i.e. Navrangpura branch of Punjab National Bank ( PNB ). These stock invests were not en-cashed by the company, but were cancelled in May /June 1994. After adjustment for these cancellations of stock invests, the net subscription to this public issue became only 62%, which was much less than the 1. 2. 3. 1. 1. 2. 3. 4.

prescribed limit of 90%, being minimum subscription to be received in a public issue. It was also observed that the aforesaid stock invests were issued by the Bank on 30th March 1994 and 9th April 1994, although the IPO of GSL closed on 19th March 1994. Hence, it is clear that the bank had accepted the applications accompanying these stock-invests after the closure of the issue. Thus, it was observed that there were irregularities in issuance and acceptance of Stock Invests in the public issue. It was seen that PNB had acted in an inappropriate manner, thereby facilitating the listing of shares of GSL, even though its public issue did not receive the requisite statutory minimum subscription. In view of the above, Chairman SEBI, vide order dated 4th July , 2003, appointed an Enquiry Officer to enquire into the matter, under the provisions of SEBI (Procedure for Holding Enquiry and Imposing Penalty ) Regulations, 2002 ( hereinafter referred to as the " said Regulations" ). ENQUIRY PROCEEDINGS The enquiry officer, after conducting the enquiry as per the procedure laid down in the said Regulations, submitted a report dated February 27, 2004, wherein he held PNB guilty of having violated clauses 1, 2 and 7 of the Code of Conduct, as specified in Schedule III of the SEBI ( Bankers to the Issue ) Regulations, 1994, read with Regulation 16 of the same Regulations. Accordingly, the enquiry officer recommended that the Navrangpura branch of PNB be debarred from carrying out the activit

SHOW-CAUSE NOTICE AND HEARING In view of the recommendation made by the Enquiry Officer, a Show Cause Notice dated March 12, 2004 was issued to PNB, advising PNB to show cause as to why action, as considered appropriate, should not be taken against them. Shri S K Mohanty, Chief Manager, PNB, replied on behalf of the Bank, vide letter dated April 24, 2004. He submitted that the stock invests were issued by Navarangpura Branch of PNB, in violation of the Bank’s guidelines and without complying with the prescribed procedures in this regard. He admitted that there was neglect on the part of the concerned officials of the Branch, for which the bank had severely punished the concerned officials, by dismissing the concerned Branch Manager and by demoting another officer. It was stated that PNB had already de-authorised the Navrangpura Branch from undertaking any Merchant Banking business. It was also submitted that the recommended penalty seems stringent, as 10 years had elapsed since these irregularities. Hence, PNB has pleaded for a lenient view and has sought condonement of the proposed penalty. CONSIDERATION OF ISSUES AND FINDINGS I have considered the facts of the case, the findings of the Investigation, contents of the Enquiry report, Show Cause Notice issued to PNB and its reply. My findings are as under. GSL came out with a public issue of 84,50,000 shares. As per the "basis of allotment" report submitted by the post issue lead manager, the issue had received subscription fo

Source: SecMarx — sebi:11202. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.