March 20, 1998
PR No. 59/1998


M/s. Rich Paints Ltd. (RPL) a company based in Vadodara came out with a public issue of 32,38,100 equity shares of Rs.10/- for cash at par on April 8, 1996. Various complaints regarding irregularities in the public issue of RPL were received by SEBI. In pursuance of these complaints investigations were conducted by SEBI into the affairs of RPL which revealed that minimum subscription of 90% was not received by the company for its public issue before the closure of subscription. The promoters of the company approached a financier to arrange for subscription with the understanding that the company shall buy back the shares after allotment. The stock invests accompanying the applications were encashed in a current account in Punjab National Bank which was not the authorised banker for the issue and immediately on encashment the money was transferred back to the financier. Thus the money did not remain in the company´┐Żs account even for a moment. It was also noticed that promoters were to bring in Rs.1.22 crores as contribution before the issue opened for subscription to the public. No amount was brought in but only entries were made in the books of accounts of the company. The money o SEBI found the company guilty on the above counts. On the basis of the above findings, SEBI passed the order directing the company to refund the issue with interest of 15%. SEBI also passed an order prohibiting the promoters namely - Shri Mahendra Shah, Dr. Rakesh Shah, Smt. Bharatiben Shah, Dr. Subodh Chandra Bhagat and Shri Rashmikant B. Shah from accessing the capital market for a period of one year. The order against the promoters comes into effect from March 23, 1998.