sebi:WTM/PS/72/CFD/FEB/2015
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Facts / Headnote
Interim directions restraining SGBL and its promoters/directors from mobilizing funds through public issue of securities, issuing offer documents, disposing of assets, diverting funds, and accessing the securities market; show-cause notice issued as to why further directions including refund should not be imposed.
Provisions invoked
- s. 11
- s. 24
- s. 19
- s. 55A
- s. 73
- s. 67(3)
- s. 67
- s. 73(2)
- s. 465
- s. 73(1)
- s. 2(36)
- s. 60
- s. 67(1)
- s. 60B
- s. 60B(9)
- s. 67(2)
- s. 73(3)
- s. 621
- s. 60B(2)
Regulations
- Reg. 200
- Reg. 107
- Reg. 111
Parties
- Shah Group Builders Limited
- Mr. Nalin V. Shah
- Mr. Nirav N. Shah
- Ms. Neelam N. Shah
Holding
SGBL's issuance of equity shares to 1,522 investors raising ₹22,50,57,190 constituted a deemed public issue under Section 67(3) of the Companies Act, 1956 (as the offer was made to fifty persons or more), and SGBL failed to comply with the applicable provisions of the Companies Act, 1956, DIP Guidelines, and ICDR Regulations. SEBI issued interim restraining directions against SGBL and its promoters/directors and issued a show-cause notice for further directions including refund.
Full text
Page 2 of 12 3. The Company, vide its letters dated December 07, 2013 and January 20, 2014, sought extension of time to furnish the above said information. Further, vide letter dated February 04, 2014, SGBL submitted the copies of financial statements for the year ended March 31, 2013, 'Articles of Association' and 'Income Tax return' of the Company for the assessment year 2013 - 14 and replied as under: i. The Company was incorporated as a private limited company on June 27, 2005 and was converted into a public limited company w.e.f. July 31, 2006. The Company is into the business of construction. ii. The authorised capital of the Company was ₹7 crore divided into 7 crore equity shares of face value of ₹1 each. The Company has raised money from time to time starting from the financial year 2008-09. The Company has issued only equity shares and has not issued convertible securities; iii. SGBL presently has 1,117 equity shareholders as on date who have contributed ₹892.57 lakhs. The equity shares have been issued from time to time at different prices. The face value of equity shares is ₹1 each. The present equity share capital of the Company is ₹589.60 lakhs. iv. Return of allotments in respect of the allotments of shares have been filed with RoC.
Page 3 of 12 and confidential'. Subscription towards the equity shares of SGBL was received during the period of April 2006 to March 2008. The Company had made 8 allotments to 1,521 allottees aggregating to ₹9.75 crore comprising of ₹2.71 crore towards share capital and ₹7.05 crore towards the share premium. ii. Share application money pending allotment was shown in the annual accounts for the year ended March 31, 2007 and March 31, 2008. After the receipt of the application money, the Company did not make any immediate allotment and gave sufficient time to the applicants to withdraw their application money. However, none of the applicants withdrew application. iii. The allotment of plot by CIDCO had materialised in May 2007 and the Company had paid about ₹3 crore as earnest money to CIDCO. SGBL paid ₹66 crore to CIDCO in August 2007 and about ₹66 in October 2010. Out of the total ₹135 crore paid to CIDCO, only ₹9.75 crore was raised by SGBL through friends, relatives and associates and balance ₹124 crore was arranged by the Company on its own; iv. The Company's promoters are providing exit opportunities to shareholder who wishes to sell his shares and the number of shareholders has come down from 1,521 to 1,031. SGBL's endeavour is to give good reward to the shareholders for the investment in the Company. The shareholder reaps benefit as the commercial and residential projects in which the Company is engaged will provide them good returns on their investments.
Page 4 of 12 c. As per the Annual Return of SGBL as on March 31, 2013, SGBL had the authorized share capital of ₹7,00,00,000 divided into 7,00,00,000 equity shares of ₹1 each. The paid up equity share capital of the Company as on March 31, 2013 was ₹5,89,59,970. d. From the Annual Return of SGBL as obtained from the 'MCA 21' Portal, it is prima facie noted that the Company has 1,522 shareholders as on March 31, 2013, holding 5,89,59,970 equity shares. The relevant details with respect to the issuance of equity shares by SGBL as obtained from Form-2/ Return of Allotments filed by the Company with MCA and obtained from 'MCA-21' Portal, are as under: Table A Date of board meeting No. of allottees No. of Equity Shares Amount raised (in ₹) 28/07/2008 44 84,60,000 84,60,000 04/08/2008 22 36,73,000 73,46,000 04/08/2008 3 2,50,000 6,25,000 06/10/2008 1,112 1,11,22,800 5,56,14,000 16/10/2008 96 8,50,000 51,00,000 26/10/2008 148 22,92,170 1,60,45,190 05/11/2008 1 1,500 12,000 15/11/2008 95 4,35,500 43,55,000 30/03/2012 1 3,18,75,000 12,75,00,000
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Source: SecMarx — sebi:WTM/PS/72/CFD/FEB/2015. 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.