SEBI found that Vamshi Chemicals had collected over Rs60 crore from more than 89,000 investors through redeemable cumulative preference shares-RCPS
Market regulator Securities and Exchange Board of India (SEBI) has barred Vamshi Chemicals Ltd from raising funds from investors through issuance of securities and also restricted the company and its directors from dealing in capital markets.
SEBI found that Vamshi Chemicals had mobilised over Rs60 crore from more than 89,000 investors through redeemable cumulative preference shares (RCPS) and "prima facie" violated various norms.
The regulator observed that the company allotted equity shares to over 50 persons, which under the rules made it a public issue of securities.
Hence, it would require a compulsory listing on a recognised stock exchange. It was also required to file a prospectus, among others, which it failed to do.
According to SEBI, Vamshi Chemicals issued shares to public but did not comply with provisions of the Companies Act.
"I am of the view that VCL (Vamshi Chemicals Ltd) is prima facie engaged in fund mobilising activity from the public through the offer of RCPS and as such violated the provisions of the Companies Act," SEBI Whole Time Member S Raman said in an interim order.
SEBI in the order said "VCL shall not mobilise funds from investors through the offer of RCPS or through the issuance of equity shares or any other securities to the public/invite subscription, in any manner whatsoever, either directly or indirectly, till further directions."
Further, the company and its directors--Kishan Pal Singh, Chhotelal Shukla, Vishwa Bandhu Vashistha, Deenanath Maurya, Mukesh Kumar Khare--are prohibited from issuing any offer documents for soliciting money from public. They are also restrained from accessing the capital markets.
The regulator has also asked the entities not to dispose any of the properties or assets acquired by that company through issue of preference shares, without prior permission from the regulator as well as not to divert the funds raised from public.
"During the financial years 2003-04 to 2006-07, 2009-10 to 2010-11, VCL allotted RCPS of Rs1,000 each to 89,005 individuals. VCL mobilised funds amounting to Rs61.49 crore through these allotments," SEBI noted.