sebi:1300693163022

SEBI · SEBI · G. N. Bajpai, Chairman, Securities and Exchange Board of India

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Facts / Headnote

Company prohibited from accessing capital markets for 3 years; five directors debarred from dealing in securities for 3 years; promoters directed to offer exit option to allottees/existing shareholders; compliance report directed within 45 days.

Provisions invoked

• s. 11B
• s. 69
• s. 77

Parties

• Gold Multifab Ltd.
• Pradip Dhingra
• Alok Kalawat
• Murli Manohar Modani
• Priti Bhatia
• Vivek Bhatia

Holding

SEBI held Gold Multifab Ltd. and its directors liable for allotting shares without receiving minimum subscription, allotting shares to late applicants with antedated/cancelled stockinvests, and using public issue proceeds to buy back its own shares, and prohibited the company from accessing capital markets for three years and debarred five directors from dealing in securities for three years.

Full text

After finalisation of the Basis of Allotment with Vadodara Stock Exchange (VSE), GML allotted 26,87,400 shares to 1794 applicants on 1/5/96. This included 5,96,600 shares allotted to late applicants who had applied with antedated stockinvests and 3,07,500 shares to applicants whose stockinvests were cancelled. These shares, for which consideration was either not received at all or was not received on time, accounted for about 34% of the shares allotted. Investigations brought out that, GML thus, allotted shares without receiving the minimum subscription. In the course of investigations it was noticed from the ledger accounts pertaining to six associates of M/s SPS International Ltd. -Registrar to the Issue (SPS) in the books of Gold Multifab Ltd., that large sums (Rs. 185.80 lacs) had been transferred from the account of GML to these entities. Almost whole of the subscription received in the public issue was transferred to associates of SPS. MD of GML also admitted to having paid these funds to associates of SPS. Details of the same are given below:

From the extracts of the Bank accounts of GML and the associates of SPS with Corporation Bank, Friends Colony, New Delhi, the following payments were noticed to have been made to Mani Investments by the associates of SPS. The amounts for making these payments to Mani were received by these entities from GML, as detailed below:

for a suitable period should not be issued against GML and its directors . GML and its directors were asked to furnish the replies with necessary supporting evidence within 15 days of the receipt of the show causes. The Company and directors have replied to the show cause stating that the issue was oversubscribed by more than 5 times. It was also contended that allotments to other allottees could have been comfortably made if the alleged defective stock invests had not been received. It was also argued that the Company or its Directors have no role to play in processing or scrutiny of applications. As regards the transfer of funds from the account of GML to associates of SPS it was stated that it was a fraud perpetrated by Registrar and Bankers on the company and its directors . An opportunity for personal hearing before me was given on 17/08/2001. No one from the company turned up for the hearing. However in their written submissions, all the allegations made against the company and its directors have been denied. It has been stated that the company did not purchase its own shares nor did it advance any loans for purchase of its own shares. It was contended that there was no direct or indirect benefit to the company/its directors in allotting shares to these alleged 19 persons who had applied with ante-dated stock invests . I have carefully examined the findings of investigation, submissions made from time to time and material and evidence available on record. I find that th

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