INVESTIGATIONS ENFORCEMENT AND SURVELLIANCE DEPARTMENT

Investigations were conducted by SEBI into the alleged irregularities in the public issue of Gold Multifab Limited, which came out with a public issue of Rs.275 lakhs in February/March 1996. Corporation Bank, Friends Colony, New Delhi acted as one of the Bankers to the Issue. Investigations revealed that large number of applications for subscription in the public issue were accepted by the Banker much after the closure of the issue. These applications were made with ante-dated stock invests and large number of shares (comprising 22% of the total shares allotted), were allotted against these applications. It was further gathered during the course of investigations that substantial number of shares (comprising around 12% of the total shares allotted), were allotted to applicants by the issuer company without receiving any consideration. The company failed to receive the minimum subscription as required under the Companies Act and terms and conditions of the prospectus read with guidelines issued by SEBI. Separate proceedings for refund of subscription by the company are in progress. Investigations also brought out that Banker submitted the final collection report 52 days after the closure of the Issue, as against the permitted specified period of 21 days. It was also noticed that the Banker had transferred funds from Public Issue A/C (GML-Equity Issue A/c) even when the cheques were issued from GML’s Current Account. 

Pursuant to the investigation, enquiry proceedings were initiated against the Banker by SEBI under SEBI (Bankers to an Issue) Rules & Regulations, 1994 read with SEBI Act 1992. Now the enquiry proceedings have got completed in respect to the Bankers to the Issue. After completion of enquiry proceedings show cause notices were issued to the Bankers and personal hearing before the Chairman was also granted. After taking into consideration the submissions made in writing as well as during the course of personal hearing, findings of the Enquiry Officer and material and evidence available on record, it was found that the charges mentioned in the show cause notice stood substantiated. It was found that Banker accepted the applications in the public issue after the closure of the issue. The company actually did not receive the minimum subscription as required under the terms and conditions of the prospectus, SEBI Guidelines and the provisions of the Companies Act before the closure of the issue and the Banker facilitated circumvention of these provisions by accepting applications after the date of closure. The Banker also failed to observe high standards of integrity and fairness in its dealings as it was noticed that funds were transferred from the public issue account of the company even when the cheques were issued from the current account of the company. 

In view of these, Chairman, SEBI has ordered under SEBI (Bankers to the Issue) Regulations and SEBI Act that Friends Colony, New Delhi branch of the Banker would not act as Banker to an Issue for a period of six months. This order has come into force with immediate effect.