Pulling the plug on illegal mobilisation of funds by Sunplant Forgings, the market regulator said the company and its directors raised more than Rs17 crore from 6,662 investors, a clear violation of its CIS rules
Market regulator Securities and Exchange Board of India (SEBI) has barred Sunplant Forgings Ltd (SFL) and its directors from raising money by issuing securities.
Citing the Sahara case and the Supreme Court's order in this regard, SEBI said that Sunplant Forgings raised more than Rs17 crore from 6,662 investors amounted to a public offer and not a private placement.
"...SFL is prima facie engaged in fund mobilising activity from the public, through the issue of redeemable preference shares (RPS), which is a public issue made to 50 persons or more," SEBI said in its order.
The regulator has directed the company and its directors not to mobilise funds from investors through the issue of RPS or any other securities to the public.
SEBI also directed SFL to provide a full inventory of all assets and properties of the company. The company has been barred from disposing of any of its properties without prior permission from SEBI. Besides, it cannot divert any funds raised from the public which are kept in bank account(s) and/or in the custody of SFL.
The directions would take effect immediately and would be in force until further orders.
The regulator received a communication from Ministry of Corporate Affairs (MCA) saying that certain companies including SFL were collecting monies from the public through issue of debentures and redeemable preference shares allegedly allegedly in violation of the Companies Act.
SEBI noted that although the issue of redeemable preference shares is stated to have been made on a private placement basis, "yet, through the same offer, SFL circulated 11,904 application forms inviting subscription towards the issue of redeemable preference shares".
"Out of which it admittedly allotted redeemable preference shares to 6,662 investors and mobilised funds amounting to approximately Rs17.51 crore," SEBI noted. Since the offer was made beyond the limit of 49 persons as prescribed under Companies Act, the offer qualified as a public issue.
The directors of the company against whom the order has been issued are Abhinandan Kumar Singh, Sumanta Sinha and Neeraj Pathak.
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