sebi:1293179684451

SEBI · SEBI · 2001-09-18 · G N Bajpai, Chairman, SEBI

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Facts / Headnote

Company prohibited from accessing capital markets for three years; directors debarred from dealing in securities for three years, effective 15/11/2002.

Provisions invoked

• s. 11

Parties

• Baroda Agro Industries Ltd.
• Sanjay A Choksi
• Arun Choksi
• N K Patel
• Ravindra Patel
• Praful C Vin
• Parag Mehta
• Jagdish Shah
• Amit N Shah

Holding

Baroda Agro Industries Ltd. was prohibited from accessing the capital markets for three years, and its eight named directors were debarred from dealing in securities for three years, for failing to inform investors about the lock-in/non-transferable nature of promoter quota shares, which led to bad deliveries and financial losses to investors.

Full text

2 this if such shares non transferable happened to be sold in the market, the company shall take responsibility of transferring such shares in the name of bonafide purchaser or arrange for replacing them with other transferable shares. However, it was gathered during the course of investigations from the various complaints (received by SEBI) that BAIL did not inform these investors about the lock-in despite assurance to the exchange . As a result of this, when these investors sold the shares in the market in good faith the same were returned to them as bad deliveries for no fault of theirs. The investors who had sold these shares were therefore, forced to pick up shares in the ensuing auctions at much higher prices to give delivery for their obligations. As the price of scrip of BAIL was moving upward during the same period these sellers suffered financial losses. It was seen that the price of scrip of BAIL moved from Rs.35/- on 10.5.95 to Rs.90/- on 27.6.95. In view of this, it appears that this act of promoters of BAIL negated the concept of free transferability of equity shares and thereby promoters of BAIL violated the SEBI guidelines for Disclosure and Investor protection. In view of the above, a show cause notice under Sec. 11 B of SEBI Act 1992 was issued to the company and its Directors asking it and its Directors to showcause why suitable

3 in a piquant position and has negated the concept of free transferability of shares. The investors were not informed about the non transferable nature of the shares. I find that investors were led to believe that shares could be sold by them after the shares were listed and admitted for trading at the exchange. However, when these investors sold the shares in the market in good faith the same were returned to them as bad deliveries being under lock-in and consequently these investors were forced to pick up shares in the ensuing auctions at much higher prices to give delivery for their obligations. As the price of scrip of BAIL was moving upward during the same period these sellers suffered financial losses. BAIL was duty bound to replace such shares with good shares or transfer them in name of bonafide transferee. BAIL did not bother to do so. This is nothing but a fraud on investors. Despite an opportunity being given by then Chairman SEBI to rectify their mistakes, no serious intention to compensate the investors have been shown. In view of the above, I in the exercise of powers conferred upon me by Sec. 4 (3), 11 and 11 B of SEBI Act 1992 direct that M/s Baroda Agro Industries Ltd. be prohibited from accessing the capital markets for a period of three years. I also direct that Mr. Sanjay A Choksi, Mr. Arun Choksi, Mr. N K Patel, Mr. Ravindra Patel, Mr. Praful C Vin, Mr. Parag Mehta, Mr. Jagdish Shah and Mr. Amit N Shah Directors of Baroda Agro Industries Ltd. are debarre

directions should not be issued against the company and the Directors in the interest of investors. The Company vide its letter dated 18/09/2001 replied to the show cause stating that the concerned shares were issued before the applicability of SEBI Guidelines. They have stated that they have submitted the details regarding non-transferability of shares to all the concerned stock exchanges at the time of listing. They have further stated that they have circulated a circular regarding non-transferability to all share holders as they had promised to BSE. They have also stated that they have taken back or replaced the non transferable shares of all the share holders who had approached them. A hearing before the then Chairman SEBI was granted on 09/01/02. In the course of hearing, Chairman asked Mr. Sanjay Choksi (Director – BAIL) to come with a concrete proposal for compensating all the complainants who had suffered losses on account of covering their sale positions at higher prices, as shares delivered against their sale position were declared as bad delivery. BAIL was to come out with a concrete proposal latest by first week of February 2002. Mr. Sanjay Choksi agreed to come with such a proposal shortly. The company vide its letter dated 30/03/2002 requested for some more time to prepare the proposal. The Company vide its letter dated 08/04/2002 submitted a proposal for moderate compensation to the original promoters quota share holders and who have complained to SEBI and Mumb

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