June 25, 1998
PR No. 163/1998

YOGIWARE FABRICS LIMITED

INVESTIGATION, ENFORCEMENT & SURVEILLANCE DEPARTMENT

M/s. Yogiware Fabrics Ltd. (YFL), a company based in Surat, came out with its maiden public issue for 60.49 lakhs equity shares of Rs.10/- each for cash at par. The issue opened on March 07, 1996 and closed on March 16, 1996. A complaint was received by SEBI alleging serious irregularities in the public issue of YFL. Investigations were caused by the Securities and Exchange Board of India (SEBI) to probe into these allegations. 
 
The investigations brought out that the public issue of YFL was subscribed only to the extent of 6.5% of the total public offering. YFL arranged for the remaining subscription (93%) after the closure of the issue from a financier, in order to meet the requirement of minimum subscription. The subscription was arranged with the understanding that the applications will be withdrawn before allotment. The applications for 93% of the total shares offered to the public which have been arranged by the financier were withdrawn before allotment, which was duly accepted by the issuer company. The investigations therefore concluded that if these applications (to the extent of 93% of the total public offering) obtained after the closure of the issue and which were withdrawn before allotment are not taken into account the issue fails to get the minimum subscription as required by Section 69 and 73 of the Companies Act, read with SEBI Guidelines and terms and conditions of the prospectus. Investigations also revealed that the Promoters/ Directors of the company actively concealed the fact of the issue being under-subscribed from SEBI, Stock Exchanges and general public. The promoters/directors thereby, committed a fraud under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. 
 
On completion of investigations, a show cause notice was issued to Managing Director, YFL calling upon him to show cause as to why directions u/s 11 B of SEBI Act, to refund the subscription amount collected in the public issue, should not be issued. A personal hearing was also granted to YFL as requested by them. 
 
On considering the facts on record, reply given by YFL and submissions made during personal hearing, SEBI, in order to protect the larger interest of the investors has ordered the issuer company to refund the subscription amount collected in the public issue, along with interest at the rate of 15%.