The notice has been issued following a reference by SEBI to the exchange. The violations stem from the preferential allotment of 32 lakh equity shares to the promoters.

The Delhi high court has, however, restrained the company from allotting the shares following a petition filed by HB Leasing and HB Stockholding, which together hold 11.5 per cent stake in the company.In its showcause to the company, DSE has stated that the preferential allotment was in contravention of the provisions of Regulation 3 of SEBI (substantial acquisition of shares and takeover) Regulations, 1997.

The company has also been charged with not submitting disclosure statement as required under Regulation 6. DSE has alleged that the company has not madeproper disclosures in its audited financial results in line with Clause 41 of the listing agreement. For instance, the company did not reveal that 25 lakh warrants were extinguished by the board of directors at a meeting in July last year and 32 lakh fresh equity shares were allotted to promoters on preferential basis at a board meeting in November last year. The company has also not paid listing fee to DSE for the last two years.

In the financial results for 1997-98 released on May 28, the company did not disclose that 32 lakh shares issued on preferential basis are the subject matter of injunction order by the High Court under which the company cannot allot these shares.

In its petition before the Delhi high court, HB Leasing has alleged that the promoters of Indo Gulf had violated legal and statutory provisions, especially the provisions of the SEBI (substantial acquisition of shares takeover) Regulations, 1997 while seeking approval at a purported extra-ordinary general meeting at Gonda in MadhyaPradesh. HB had also contented that the promoters had failed to subscribe to the convertible debentures and equity shares issued on a preferential basis in 1994 and 1995.

The promoters were also alloted 25 lakh warrants on October 15, 1994 against which they were to subscribe to 25 lakh equity shares at a price of Rs 50 per share on or before October 14, 1998. HB had sought annulment of the latest preferential allotment on the ground that the promoters had failed to pay allotment money and subscribe to two previous preferential allotments besides violating various statutory provisions.