sebi:17067

SEBI · SEBI · 1996-12-09 · G N BAJPAI, Chairman, Securities and Exchange Board of India

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Facts / Headnote

GSO prohibited from accessing the capital markets for 3 years; three directors debarred from dealing in securities for 3 years

Provisions invoked

• s. 11
• s. 69

Parties

• G.S. Organics Ltd. (GSO)
• Mr. Yogendra Dubey
• Mr. Milind Vipra Das
• Mr. Pramod Joshi

Holding

GSO and its Directors violated Section 69 of the Companies Act, 1956, SEBI Guidelines on Disclosure and Investor Protection (June 18, 1992), and the terms of the Prospectus by allotting shares without receiving minimum subscription and without receiving consideration. GSO was prohibited from accessing the capital markets for 3 years, and three of its Directors were debarred from dealing in securities for 3 years.

Full text

Mr. Yogendra Dubey, M.D., GSO, in his statement mentioned that since the Issue had not received any subscription, GSO was advised by Premium Capital Market & Investments Ltd. (Premium), -- Lead Managers for GSO’s issue-- to get the issue subscribed through financing. An Agreement was entered into on 12/9/96 with Premium for arranging subscription of the issue. Pursuant to the aggrement , Mr. Dubey went to the office of VFSSL at Chennai on 20/9/96 alongwith Mr. S.K. Bandi and Mr. Ashok Porwal. VFSSL agreed to provide finance worth Rs. 200 lacs towards subscription in the Issue at a fee of Rs. 15 lacs as interest for 1 month. The financing was to be done through stockinvests, and GSO was asked to open a Current Account with Vijaya Bank, Adyar, Chennai, and to execute an irrevocable PoA in favour of Thamiraparani Investments Ltd. (TIL) an associate of VFSSL, for operating and closing this account with Vijaya Bank. Mr. Dubey, further stated that he signed an Agreement for the financing with VFSSL and handed over post dated signed cheques drawn on Vijaya Bank to VFSSL. He further mentioned that he also paid Rs. 2 lacs in cash to VFSSL as interest. Mr. Dubey also stated that he received a call from Mr. Bandi on 23/9/96, informing him of the receipt of 2014 stockinvests from VFSSL. He then took these stockinvests for deposit at State Bank of Hyderabad, Rajwada, Indore on 24/9/96. On pointing out by the Registrar to the issue--Vibra, that all applications with these stockinvests were

the Issue, a total of 39,75,900 shares were allotted to 2029 applicants. On 3/11/96, all allotments were made which included allotments made to all the 2014 stockinvest applicants for 39,64,900 shares. Thus, stockinvest allottees were about 99.73% of the total allottees. Investigations with the stockinvest-issuing banks also revealed that all the stockinvests were issued in the names of the various persons on the basis of applications for issue of stockinvests made by PAIL as their PoA holder. The stockinvests were issued against Fixed Deposits of PAIL and Viswapriya Financial Services & Securities Ltd. (VFSSL), Chennai. Investigations brought out that, all the stockinvests were made payable to "Vijaya Bank A/c G.S. Organics Ltd.". These 2014 stockinvests were presented for realisation on 4/11/96 by Vibra with State Bank of Hyderabad (SBH), Rajwada, Indore, Bankers to the company as also Bankers to the Issue. However, since these were marked "Vijaya Bank A/c G.S. Organics Ltd." and not simply as 'G.S. Organics Ltd.’ these stock invests were rejected by Vijaya Bank on presentation by SBH. Thus these stock invests were not realised and no subscription was received against them. Investigations with Vijaya Bank also confirmed the financing arrangement between VFSSL and Mr. Dubey of GSO. It was seen that Vijaya Bank Adyar, Chennai was Banker to VFSSL. GSO also opened a Current Account (No. 738) with Vijaya Bank on 20/9/96 and this account was introduced by VFSSL. It was observed t

and existence of the agreement between GSO and TIL. It also remarked that safety to the investors was lacking in view of the irrevocable PoA to operate current account of GSO opened with Vijaya Bank being given to TIL and opening acount for realisation of stock invests with Vijaya Bank in preference to the bankers to the issue and the bankers to the company. Investigations with Lead Manager and Registrar clearly brought out the existense of financing arrangement between GSO and VFSSL. It was seen that Premium had forwarded a letter of South India Stock Broking Services Ltd. (SISBSL), a member on the National Stock Exchange, an associate company of VFSSL Group; offering its marketing and financing services to arrange full subscription of the issue etc. The proposed arrangement ensured that GSO would be able to make payments after completion of listing. Premium, also forwarded a letter from Capital Services (India) Ltd. (CSIL), group company of the VFSSL Group requesting payment of brokerage on the 2014 applications arranged by VFSSL aggregating to Rs. 200 lacs. Investigations with Vibra revealed that a letter was written by Mr. Dubey in response to letter of Registrar seeking advice on acceptance or rejection of the 2014 stockinvests. It was stated in this letter that they were approached by a high value net worth investor who was interested in subscribing the issue and was ready to invest funds on a long-term basis and this letter also contained admission to the effect "as th

Source: SecMarx — sebi:17067. 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.