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SEBI bars Maharashtra minister from markets, asks Lokmangal group to refund money with interest
Market regulator Securities & Exchange Board of India (SEBI) has barred Maharashtra's minister for cooperation, marketing and textile Subhash Deshmukh, his Lokmangal group and its promoters and directors from markets for failing to adhere to guidelines. The regulator also asked these promoters and directors of Lokmangal Agro Industries Ltd to refund Rs74.82 crore with interest to about 4,751 investors.
 
S Raman, SEBI's whole time member, in an order passed on 1 August 2016, said, "I note that the Company (Lokmangal Agro) had commenced allotment of equity shares to the public since October 2011. It can reasonably be inferred that the directors and promoters of the Company namely Subhash Sureshchandra Deshmukh, Smita Subhash Deshmukh, Mahesh Satishchandra Deshmukh, Vaijnath Nagappa Lature, Anil Vasantrao Pandhare, Parag Suresh Patil, Audumber Sandipan Deshmukh, Shahaji Gulchand Pawar and Gurrana Apparao Teli were involved in the mobilisation of public funds through the issue of equity shares without complying with the applicable law, as discussed above."
 
Citing the Supreme Court judgement in the Sahara case, the SEBI order states, "Section 73(2) says that every company and every director of the company who is an officer in default, shall be jointly and severally liable to repay that money with interest at such rate, not less than 4% and not more than 15%, as may be prescribed."
 
All the promoters and directors of Lokmangal Agro are leaders from Bharatiya Janata Party (BJP) or associated with Rashtriya Swayamsevak Sangh (RSS). All except Mr Lature are based in Solapur district. 
 
SEBI said, "As per the data obtained from the MCA21 website, it is observed that the company has filed balance sheets till 31 March 2014. It is further observed that the Company has received share application monies during the year 2011, from about 3,626 farmers who supplied sugarcane to the Company's sugar factory. The company raised Rs72.52 crore from them during 1 October 2011 to 13 December 2011. Further, on perusal of the list containing the details of allotment of shares furnished by the company on 7 March 2015, it is observed that the company itself had admitted that it had collected an amount of Rs74.82 crore from 4,751 investors during 2009-2011."
 
As per the first proviso to Section 67(3) of the Companies Act, 1956, where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more, then it is construed as a public offer and the entity is required to file prospectus or information memorandum. However, SEBI observed that even though the issues of equity shares made by Lokmangal Agro were deemed public issues, the company never filed any prospectus.
 
"Having made a public issue, Lokmangal Agro was required to register a prospectus with the Registrar of Companies (RoC) under Section 60 of the Companies Act, 1956, I find that there is no evidence on record to indicate that Lokmangal Agro has complied with the provisions of Section 60 of Companies Act, 1956. It is also observed that Lokmangal Agro in their reply vide letter dated March 7, 2015 categorically mentioned that ...the company has never prepared or filed any red herring prospectus or prospectus or information memorandum," the whole time member of SEBI said in his order.
 
Commenting on the SEBI order, Mr Deshmukh, the minister told media persons that the company reply to the market regulator within stipulated time. 
 
Separately, Vishwas Utagi, Convener of All India Investors Association and Vice President of AIBEA demanded resignation from the minister. "We want the Chief Minister (of Maharashtra) to sack him (Deshmukh) till he comes clean. Mr Deshmukh must refund the money with interest within 90 days to investors. Indian Laws are inadequate to catch hold of such money launderers, as we understand almost Rs10 lakh crore is the loot in the economy. Money must be recovered with interest in first place and deterrent criminal action must be seen visible," he said in a release.

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