Case: 1. SEBI, 2. In Re: Fine Agromatics Limited Vs Mr. S.K. Jain. Securities and Exchange Board of India
| Judges | K.M. Abraham, Member |
| Issue | Company Law |
| Judgement Date | December 18, 2009 |
| Court | Securities and Exchange Board of India |
Order:
K.M. Abraham, Member
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On the basis of certain complaints alleging public issue irregularities in respect of the public issue of Fine Agromatics Limited (hereinafter referred to as the company), the Securities and Exchange Board of India (hereinafter referred to as SEBI), initiated an investigation to find out the possible violations of securities laws. It was found that the company had came out with a public issue of 30,00,000 equity shares of Rs. 10/- each for cash at par aggregating to Rs. 3,00,000,00/-. The said issue opened on November 27, 1995 and closed on November 30, 1995 and was over subscribed by about five times. The Bankers to the issue were Canara Bank, State Bank of India and Corporation Bank and the registrar to the issue was SPS International Limited. Mr. S.K. Jain (promoter-director of SPS International Limited), one of the complainants, had inter alia stated that he was appointed by the promoters of the company to take delivery of shares purchased in grey market on 'firm' as well as 'subject to allotment basis' from various persons. He, in his subsequent correspondence had provided the names of the entities (including M/s S.S. Associates whose proprietor was Mr. S.K. Jain himself) to whom funds were transferred by the company. It was found that an amount of Rs. 1,06,00,000/- was transferred by the company to M/s S.S. Associates, immediately after allotment for purposes other than that what was stated in the prospectus, either directly or indirectly. It was found that the aforesaid amount was used for issuing account payee cheques to various parties against the purchase of shares of the company. SEBI investigation found that the bank accounts of four entities which received money from the company were opened only after the allotment of shares in the said issue. The investigation also observed that there were numerous instances of late acceptance of applications by the Share Processing Cell of Canara Bank and that a total of 1,375 applications involving 70,56,000 shares were rejected. The said bank received valid applications in respect of 1,49,00,000 shares and that as many as 268 applications in respect of 13,60,000 shares were withdrawn on the request of the applicants. Mr. S. K. Jain (hereinafter referred to as the noticee), vide letter to SEBI (during the course of investigation) admitted that he had carried out grey market operations in the shares of the company, after entering into a Memorandum of Understanding with the company. In view of the same, he was alleged to have violated Regulation 4(c) & (d) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 1995 (hereinafter referred to as the PFUTP Regulations).
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Thereafter, SEBI issued a notice dated November 29, 2004 to the noticee requiring him to show cause as to why appropriate action for his role inter alia in the public issue of the company, including directions restraining him from...
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