sebi:WTM/RKA/EFD/123/2016

SEBI · SEBI · Rajeev Kumar Agarwal, Whole Time Member

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Facts / Headnote

Held the allotments on February 20, 2007, February 26, 2007 and March 31, 2007 were public issues made without compliance with Companies Act, 1956 and DIP Guidelines/ICDR Regulations; directed Shivalik Cotex Limited and six directors jointly and severally to refund money collected with 15% p.a. interest within three months, restrained noticees from accessing capital market and dealing in securities for four years or till refund whichever is later, and disposed the interim order-cum-show cause notice dated March 27, 2015.

Provisions invoked

• s. 19
• s. 13
• s. 73
• s. 28A
• s. 67(3)
• s. 67
• s. 56
• s. 73(2)
• s. 60
• s. 2(60)
• s. 40(3)

Regulations

• Reg. 107
• Reg. 111
• Reg. 18

Parties

• Shivalik Cotex Limited
• Mr. Subhash Chand Gupta
• Mr. Summit Gupta
• Ms. Sakshi Gupta
• Ms. Sunita Gupta
• Mr. Saurabh Gupta
• Mr. Jawahar Lal Goel
• Mr. Om Prakash Gupta
• Mr. Yatender Kumar
• Mr. Navin Gupta
• Ms. Noorie Goel

Holding

The three allotments of equity shares by Shivalik Cotex Limited in February-March 2007 to more than 49 persons were public issues in violation of the Companies Act, 1956 and DIP Guidelines/ICDR Regulations, requiring joint and several refund with 15% interest and capital-market restraint.

Full text

Order in respect of Shivalik Cotex Limited and others. Page 2 of 18 equity shares to more than 49 persons in a series of transactions as detailed in Table B, above. As per the first proviso to Section 67(3) of the Companies Act, 1956, where the “offer” or “invitation to subscribe for shares or debentures” is made to fifty persons or more, then it has to be construed as a public offer. The offer and issue of equity shares by the Company through three allotments made during the year of 2007 to 334 investors was public offer of securities.”

Order in respect of Shivalik Cotex Limited and others. Page 3 of 18 Exchange Board of India Act, 1992 (“SEBI Act”) read with the applicable provisions of ICDR Regulations, including the following, should not be taken/ imposed against them : “a. directing them jointly and severally to refund the money collected through the issue of equity shares that are impugned in this Order, along with interest at 15% per annum from the date when the refunds became due to the investors till the date of repayment; b. directing them to not to issue prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, for an appropriate period; c.

Order in respect of Shivalik Cotex Limited and others. Page 4 of 18 company. He also filed a petition before the Hon’ble Company Law Board (‘CLB’). Wherein the Hon’ble CLB had instructed the complainant to come with clean facts and dismissed the petition and held that the petitioner cannot be permitted to pursue the petition as a pressure tactics for extorting money. vii. Since the incorporation of the company, its operations were expanding fast, due to the efforts and hardwork of its then existing directors namely Mr. Subhash Chand Gupta, Ms. Sunita Gupta and Mr. Saurabh Gupta. As for the growing operations, the company needed additional funds. Hence, in the Board of Directors meeting held on March 01, 2006, a committee was formulated to oversee the funding needs of the company, either by way of equity or loans. In the board meeting, the directors also recommended the approval of up to 50,00,000 shares of `10/- each and further delegated the powers to the ‘Financing and Fund Raising Committee’ (FFR Committee) to come out with offer for allotments on private and confidential basis, from time to time, as per the needs of the company, subject to the limit of 50 lakh equity shares. The Noticees also submitted copy of the Board Resolution passed in the board meeting held on March 01, 2006. viii. Subsequently, six separate committee meetings were held on April 04, 2006, April 10, 2006, May 15, 2006, October 10, 2006, November 27, 2006 and January 31, 2007. In the meetings so held,

Source: SecMarx — sebi:WTM/RKA/EFD/123/2016. 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.