According to the show cause, Modi GBC Ltd has also not filed the offer document for vetting of the rights issue though it has fixed October 30 as the record date for the same. A company is required to file the offer document with the stock exchange for vetting and approval before proceeding ahead with the rights issue. DSE, which issued the notice on October 26, has given the company time till October 30 to submit its reply as to why action should not be taken against it for the alleged violations of the listing agreement.

DSE executive director S S Sodhi confirmed to the Financial Express that the show cause notice has been issued to Modi GBC. "The actionsof the company clearly show a disregard to the listing agreement", he added. As per the listing agreement with the stock exchange, the company is required to give to the exchange a notice in advance of at least 42 days stating the date of book closure/record date of the rights issue. The stock exchange has directed the company to fix a fresh record date by giving the stock exchange adequate notice.

Modi GBC Ltd, which is a joint venture between ModiCorp and GBC Binding Corporation, US had proposed to come out with a Rs 15 crore rights issue, at par, to meet the growing working capital requirements of the company. The company, which registered a loss of Rs 3 crore for financial year ended December 1997, is engaged in manufacture and distribution of punching & binding, lamination and shredding machines.

The company has also been charged for not providing an intimation regarding an increase in the company's share capital and also about listing its new issue of shares. The stock exchange has said that theshare capital of the company has increased steadily from Rs 3 crore to Rs 8 crore over a period of time but the company has failed to intimate the exchange about the same.

As per the listing agreement, a company listed on any stock exchange is required to list its newly issued shares and/or debentures whether right or otherwise. The show cause notice says that the company has failed to furnish the quarterly results to the exchange and also failed to inform to the exchange about the particulars of any increase in capital by way of rights issue, immediately after the meeting of the board of directors.

DSE had recently issued a show cause issued to infotech major NIIT for concealment of price sensitive information and not informing the exchange about the bonus issue recommendation, thus violating the listing agreement with the exchange.As per the listing agreement with the exchange, a company is required to keep it informed about all such information which could have any effect on its price.