Mumbai, Mar 20: The Securities & Exchange Board of India (Sebi) has issued a showcause notice to the promoters of Rich Paints Ltd (RPL) under Section 11 B read with regulation 11 of Sebi (Fraudulent & Unfair Trade Practices Relating to securities market) asking them to explain why they should not be barred from accessing the capital market for one year with effect from March 23, 1998.According to a order passed by Sebi, the company has been directed to refund the entire issue money with an interest of 15 per cent. The Securities and Exchange Board of India (Sebi) has also passed an order prohibiting the promoters -- Mahendra Shah, Rakesh Shah, Bharatiben Shah, Subodh Chandra Bhagat and Rashmikant B Shah -- from accessing the capital market for a period of one year.
This was pursuant to the investigations into irregularities in the public issue of 32,38,100 equity shares of Rich Paints priced at Rs 10 on April 8, 1996.
Investigations based on the complaints regarding irregularities in the public issuerevealed that the minimum subscription of 90 per cent was not received by the company for its public issue before the closure of the subscription.
Sebi's study also highlighted the fact that the promoters of the company approached a financier to arrange for subscription with the understanding that the company would buyback 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's account even for one day.
The markets regulator has also noticed that the promoters had promised to bring in Rs 1.22 crore which they never did and only book entries were made.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
