July 10, 1998
PR No. 183/1998

Investigation, Enforcement & Surveillance Dept.

M/s G.S.Organics Limited (GSOL), a company based in Indore, came out with its public issue of 39,72,400 equity shares of Rs.10/- each for cash at par. The issue opened on 17.9.96 and closed on 21.9.96. inquiries were caused by the Securities and Exchange Board of India (SEBI) to probe into the allegations of serious irregularities in the public issue. 
The inquiries revealed that the issue was subscribed mainly by applications accompanied with stock invests which were marked to "Vijaya Bank A/c G.S.Organics Ltd.". Out of the 2029 applications, 99.73% of the applications (2014 applications) were through Power of Attorney holder Phi-Alpha Investments Pvt. Ltd. Only 15 applications were with cash/cheques. It was also brought out in the course of inquiries that the company did not receive the minimum subscription as stock invests worth Rs.200 lakhs comprising of 99.73% of the total issue were not encashed. These stock invests were issued against funds provided by Viswapriya Financial Services & Securities Ltd. for getting the issue subscribed. Even though in view of provisions of Section 69 of the Companies act, SEBI Guidelines on Disclosure and Investor Protection (June 18, 1992) and the terms and conditions of the Prospectus, the company cannot allot the shares unless it receives the minimum subscription, yet the company allotted shares to some of investors without receiving minimum subscription. Further, the company could get listing only at Jaipur Stock Exchange and not at the four Stock Exchanges mentioned in the Prospectus. Madhya Pradesh Stock Exchange has refused listing to this company. 
In view of these, SEBI came to the conclusion that GSOL violated the provisions of Section 69 and 73 of the Companies Act, SEBI Guidelines and the terms and conditions of the Prospectus. SEBI, therefore, in order to protect the larger interest of the investors has directed the issuer company under Section 11 B of the SEBI Act, to refund the subscription amount collected in the public issue, alongwith interest to all those to whom no shares have been allotted. The company has also been directed to refund the face value of the shares alongwith interest to those applicants who had been issued shares.