sebi:17251

SEBI · SEBI · 1995-10-13 · G. N. Bajpai, Chairman, Securities and Exchange Board of India

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Facts / Headnote

Order passed prohibiting Rajesh Exports Ltd from accessing the capital market and from dealing in securities for a period of three years

Provisions invoked

• s. 11B
• s. 4(3)
• s. 69
• s. 77

Regulations

• Reg. 4
• Reg. 11

Parties

• Rajesh Exports Ltd
• Directors of Rajesh Exports Ltd

Holding

Rajesh Exports Ltd (REL) was prohibited from accessing the capital market and from dealing in securities for a period of three years for making irregular allotments of shares to applicants whose applications accompanied by antedated stockinvests were received after the closure of the Issue, and for using public issue proceeds to buy its own shares from an associate of Vishwapriya.

Full text

Investigations revealed that State Bank of India, Ashram Road, Ahmedabad had issued 200 stockinvests for an aggregate amount of Rs. 17.50 lacs. From the information/documents furnished by the bank, it has been observed that the stockinvests were issued from 2 accounts with the bank, one of Narendra Parmar and the other of Mayur N Desai & Ila Desai. The extracts from the Stockinvest Issue Register furnished by the bank, shows that while stockinvest nos. 24751 to 24808 and 24813 to 24904 were issued on 24/11/95, stockinvest nos. 011501 to 011550 were issued on 11/12/95. Since the Issue had closed for subscription on 18/11/95, all these 200 stockinvests were antedated. Hence, all applications accompanied by such stockinvests were received after the closure of the Issue and were invalid in terms of Clause 12 of the "Procedure for Payment by Stockinvest and Disposal of Application Money" of REL’s Propectus dated 13/10/95. Details of these stockinvests are as follows: Stockinvest No. Issued from account of Date of Issue Amount (Rs/ lacs) 24751-24808 Narendra Parmar 24/11/95 3.30 24813-24904 -do- 24/11/95 9.20 011501-011550 Mayur N Desai & Ila Desai 11/12/95 5.00 This aspect has also been admitted by State Bank of India in its reply to queries raised by SEBI during the course of investigations. Investigations also revealed that Tamilnadu Mercantile Bank, BVK Iyengar Road Branch, Bangalore had received 3800 applications for an aggregate of 31,20,000 shares of REL with Viswapriya Fina

stockinvests aggregating Rs. 3.90 crores through Prime Advance & Investors, their Power of Attorney holders. The stockinvests were issued against 2 FDRs taken in the name of Prime, which were opened on 1/12/95 and 5/12/95. With the issue having closed for subscription on 18/11/95, all these stockinvests were antedated and all applications accompanied by these stockinvests were received after the closure of the Issue. This aspect has been admitted by Central Bank of India in its reply to queries raised by SEBI during the course of investigations Further investigations with Central Bank of India, Adyar, Chennai, brought out that REL opened a Current Account (No. 860) with the bank on 21/11/95 i.e. 3 days after the closure of the Issue. The address of REL in the Account Opening Form is shown as "Viswapriya", No. 2, I Cross Road, KB Nagar, Chennai-20, and is introduced by VFSL. On the same date, REL issued an irrevocable Power of Attorney to Viswapriya Trading Services Ltd. (now known as Pentagon Trading Services), an associate of VFSL, to operate the Current Account with the bank. As per REL’s letter to the bank, dated 21/11/95, this PoA was irrevocable till REL discharged all its dues and obligations to VTSL and such discharge was intimated in writing to the bank by Viswapriya Trading Services Ltd. (VTSL). Again on 21/11/95, VTSL wrote to the bank seeking confirmation of bank’s recording of irrevocable PoA from REL to operate REL’s Current Account with the bank, to which the ba

Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. Pursuant to these findings and prima facie violations of Companies Act, SEBI Act, its Regulations and Guidelines, Rajesh Exports and its Directors were asked to show cause as to why suitable Directions u/s 11B of the SEBI Act, 1992 read with Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, including directions for prohibiting REL from accessing the capital market and dealing in securities for a suitable period, may not be issued. The company in its reply to the show cause has stated that they are not involved in making irregular allotments in the public issue. They have said that that there was no way in which they could have ascertained that the stock invests were ante-dated. The Company has also denied the allegation of circuitous funding levied on them. The Company was granted hearing on 03/12/2001 but they did not turn up for the hearing. They were granted another opportunity for hearing on 30/04/2002. The Company was represented by Shri Rajesh Mehta (Chairman-REL). I have considered the material and evidence available on record,

Source: SecMarx — sebi:17251. 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.