Regulations
SEBI prohibits Shah Group of Builders from issuing share prospectus
The market regulator also barred, promoters and directors of Shah Group Builders from accessing the securities market and further prohibited them from buying, selling or otherwise dealing in securities
 
Market regulator Securities and Exchange Board of India (SEBI) has prohibited Shah Group Builders, its directors and promoters from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities.
 
Shah Group Builders was engaged in fund mobilising activity through issue of equity shares to more than 49 persons without complying with the provisions of the Companies Act, 1956, according to the SEBI Order. The company, its directors and promoters have also been restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities in any manner whatsoever, either directly or indirectly.
 
SEBI had received an investor complaint on 4 October 2013, against Shah Group Builders Limited alleging that:
a. the company has raised money through issue of shares with a promise to list the shares through IPO;
b. the company had defaulted in payment of agreed interest and has not refunded the principal amount;
c. the company has failed to call any shareholders' meeting or AGM (Annual General Meeting).
 
Shah Group Builders presently has 1,117 equity shareholders, who have contributed Rs8.92 crore. The equity shares have been issued from time to time at different prices. The face value of equity shares is Re1 each. The present equity share capital of the company is Rs5.89 crore.
 
The directors and promoters of the company are Nalin V Shah, Nirav N Shah and Neelam N Shah.
 
SEBI, based on its investigation observed, “By issuing equity shares to more than 49 persons, the Company had to compulsorily list such securities in compliance with Section 73 of the Companies Act, 1956, in order to ensure that the subscribers to the shares have a facility to approach a stock exchange for having their holdings converted into cash whenever they desire. The same also provides liquidity and exit opportunity to the investors. As per Section 73(1) and (2) of the Companies Act, 1956, a company is required to make an application to one or more recognised stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. From the material available on record, Shah Group Builders does not appear to have done so and thus, contravened the said provisions.”
 
SEBI, after prohibiting the company from approaching the securities market and from issuing prospectus/ offer document for equity shares, continued in its Order to restrain the promoters on their use of money collected: “Shah Group Builders and its promoters and directors shall not dispose off any of the properties or alienate the assets of the company or dispose off any of their properties or alienate their assets.  Shah Group Builders Limited and its promoters and directors shall not divert any funds raised from public at large through the issuance of the impugned equity shares, kept in its bank accounts and/or in the custody of the company without prior permission of SEBI until further orders.”
 
SEBI further instructed, “Shah Group Builders, its promoters and directors are also directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/ securities, if held in physical form. These directions shall come into force with immediate effect.”
 
In its concluding remarks, SEBI said, “This Order is without prejudice to the right of SEBI to take any other action including prosecution proceedings under Section 24 of the SEBI Act and Section 621 of the Companies Act, 1956 read with the relevant provisions of the Companies Act, 2013 and adjudication proceedings under the SEBI Act, against Shah Group Builders Limited and its promoters and directors.”

User

Can India review imports and duty to protect domestic steel industry?
The steel industry in India is at a disadvantage, especially while dealing with China, because the country has mastered the art of mixing low-grade iron ore with high-grade ore to make acceptable quality of steel
 
In recent months, due to the slowdown in the economy, China, it appears, has embarked on an aggressive export campaign to sell various products, particularly from the steel industry, where it has mastered the art of importing low grade iron ore and mixing it with the high grades from Brazil and Australia to produce internationally acceptable quality of steel.  India is yet to learn this technique!
 
It may be remembered that, until a couple of years ago, China used to be biggest importer of low grade iron ore fines from Goa, almost reaching a 120 million tonnes in 2009-10, and using this with high grade ores. However, once the export of Goa ores got stopped due to the illegal mining activities, China continued its production, and is one of the few countries in the world that has surplus steel capacity.  
 
In the past, primary steel exports have come traditionally from both Japan and South Korea, though others like Russia, Ukraine and others have supplied to the world markets, particularly to the Middle East, where the demand has been high.
 
Having thus created a huge surplus steel production capacity, reported to be around 200 million tonnes, China has begun to offer export incentives to its steel exporters, ranging from 13 to 28% of the export value. Indian imports from China, has gone up and the bilateral trade is in favour of China. Even today, 36% of Indian imports come from China, from toys to steel, as importers have obtained various steel products, reaching 2.8 million tonnes in 2014.  
 
While imports of special steel products that are not manufactured or available in adequate quantities is understandable, from indigenous sources, reckless imports of even basic steel products, some of which are reported to be of poor quality, has begun to affect the indigenous industry.  Indigenous steel producers are up in arms against this, and have been demanding the government either to ban such imports or increase the import duty substantially to make imports unviable.
 
As it is, the Indian steel industry is at a disadvantage in dealing with China, because the Chinese have mastered the art of using low grade iron ore with high grade ore to make acceptable quality of steel.  To encourage the indigenous steel makers to buy domestic high grade ore, even NMDC recently reduced its prices, but cannot, unfortunately, increase its total overall production due to mining limitations, and press reports show that large quantity, estimated to be around 12 million tonnes of low grade ore are lying in ports for shipment, but this cannot be used by mills in the country.  The steel industry, therefore, needs to import the technical know-how to use our own low grade ores.
 
In these difficult circumstances, one major move that can be done, by Prime Minister Narendra Modi when he visits China, is to invite them to set up steel mills in Goa so that the low grade ores mined there could be readily consumed, as the first step.  And the second step is to offer a buy-back of the finished steel from Goa from Indo-Chinese mills that would come up, as a sequel to this proposal!
 
Until such a major development takes place, it is imperative that the government either bans the import of steel or increase the import duty to make it unviable for importers to bring in such large quantities.  
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

User

How about revisiting the idea of Gold Bank?
A change in approach to gold management can rewrite the India Growth Story to the country’s advantage
 
A brief media report posted by AFP in Monday’s newspaper gives some interesting features of the Turkish initiatives in gold management. It attracted my attention because a few years back, I broached the idea of gold deposits accounts in banks, an apex institution to manage export and import of gold and related issues. At that time, a top executive in Reserve Bank of India (RBI) queried, “Do we have a business model?” and I glossed over my ignorance by talking more about the possible activities that could be assigned to the apex gold institution.
 
Though Turkey’s development indicators are much higher in comparison to India (per capita income $14,812 compared to India’s $3,843, Human Development Index Rank: Turkey 90, India 134, Literacy: 94% against India’s 74%, People below poverty line: Only 17% against India’s 30% and so on), there are some common grounds for considering Turkey’s gold management initiative in the Indian context. Such as:
I. Gold is priced heavily in Turkey, not just for ornamentation or investment by banks but as a secure way for private individuals to hold their savings. 
 
II. Many people in Turkey keep gold as security for a ‘rainy day’ rather than products offered by banks. 
 
III. According to estimates, Turks hold some 3,500 tonnes of gold. Turkey has a population of over eight crore against India’s 125 crore. An old estimate from the World Gold Council puts India’s surface gold stock at 24,000 tonnes. Perhaps, if gold concealed in stock with private individuals or organisations are realistically accounted this estimate may get doubled, making the per capita gold holdings of the two countries comparable.
 
Banking in gold
Kuveyt Turk Bank was the first to open gold accounts to its clients in 2007. The AFP report quotes the marketing manager of the bank sharing his first day experience thus: “We bought one kilo of gold, and the demand on the first day was three kilos. It was a very good decision, so we decided to move ahead.” 
 
In 2015, the bank manages two lakh gold accounts with products allowing sales by cheque, bank transfer or mobile phone. The experiment has been successful with ATMs dispensing gold pieces weighing 1.0 or 1.5 grams and total gold reserves with Turkish banks going up to 250 tonnes now from two tonnes earlier. 
 
Indian context
Gold management in India needs a makeover. Once the government musters the political will to recognise gold as a national resource, the whole scenario of India Growth Story will change for the better. The advantages are:
1) When some banks start opening gold accounts, they will also be able to maintain more liquid assets under Section 24 of the Banking Regulation Act, 1949(the section requires banks to maintain a certain percentage of their liabilities in cash, gold or unencumbered approved securities) in gold.
 
2) Individuals and institutions will be encouraged to keep their gold stock with banks thereby reducing misuse(Now for the rich, gold is a medium to show off their wealth- Not only in the form of jewellery, but by erecting statues and flag masts in solid gold-less said about the malpractices practiced in such transactions, the better!)
 
3) Need to import gold will get considerably be reduced resulting in saving precious foreign exchange.
 
Budget 2015-16 is an appropriate medium for Modi government to think loudly on the above lines.
 
(MG Warrier is former general manager, RBI, Mumbai and author of the 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India”.)

User

COMMENTS

MG Warrier

10 months ago

The media report about government having mobilised 900 kg of gold under gold monetisation scheme, by mid-January 2016 is encouraging. The quick response from GOI and RBI to stakeholders’ sentiments make the chances of survival and success of the three gold schemes under implementation (Sovereign Gold Deposit Scheme, Gold Monetisation Scheme and Gold Coin Scheme) brighter. After decades of hesitant approach to gold management, India is now exhibiting the country’s determination to exploit the past savings idling in the lockers of families, institutions and religious centres, and bring them to the mainstream economy, to which gesture, people are responding positively.
The initiative taken by GOI to exploit the potential of domestic gold stock to country’s advantage, if pursued with will and determination, will have a great impact on the growth story of India. When credibility in the government’s ability to manage country’s resources without leakages is restored, temples and other institutions with whom large stock of the yellow metal lie idle will plough it back to mainstream economy. That is their interest also.
Centre is yet to institutionalise a system to manage country’s gold stock. Let us wait for the Budget 2016-17, for a formal announcement on this. RBI should quickly revisit the 1990’s proposal to establish a Gold Bank which can, as an apex body, coordinate the demand and supply sides of gold management professionally.
M G Warrier, Mumbai

Mahesh S Bhatt

2 years ago

Sir do you think an average Indian is so gullible.

Why forget recent NSEL scam worth Rs 5600 crores Gold went missing from ledger.

Simple every system has lacunae today's banking system is dangerously out of syn.Politicians manipulate.

We have RBI & Rajan's team saving the day by great policies.Otherwise India lead to anarchy in state.

So donot enforce same systemic ideas but let parallel systems prevail for back ups.

Man's Mind gets entrapped in systemic comfort zone & fails himself.So let other ideas remain as they are.

Gold has always been man's friend in crisis be it natural/man-made. Mahesh

SuchindranathAiyerS

2 years ago

This is a very tall order. Can an Indian trust his gold to a body that India's Government can always plunder? See what they did to the temples. The main reason why Gold is a preferred form of investment is because Indians have good reason not to trust Government. Government and Constitution remain unrepentantly totalitarian since 1949 and stand ready to expropriate from Indians all that any Government lout or thug desires from inflation to pay for profligacy and make up for extortion to notifying and denotifying land, to buying ONGC equity with Unit Trust money, to making retrospective laws and sending pillars of such banditry to relax in the Rashtra Potty Bhavan. Temple wealth was accumulated for the benefit of the congregations that accumulated them there. Yet Government has nationalized the wealth and spends temple income on Haj Pilgrimage subsidies.organizes jewellery thefts and has distributed the land and assets of the Veda Pathashalas to Non Hindus such as Dalits, Christians and Moslems:

REPLY

MG Warrier

In Reply to SuchindranathAiyerS 2 years ago

Let the debate begin. I have my views especially on the trust issue raised here.Let clarity emerge. Aiyer is not yet clear whether Non Hindus include Hindus.Wewill discuss.

SuchindranathAiyerS

2 years ago

This is a very tall order. Can an Indian trust his gold to a body that India's Government can always plunder? See what they did to the temples. The main reason why Gold is a preferred form of investment is because Indians have good reason not to trust Government. Government and Constitution remain unrepentantly totalitarian since 1949 and stand ready to expropriate from Indians all that any Government lout or thug desires from inflation to pay for profligacy and make up for extortion to notifying and denotifying land, to buying ONGC equity with Unit Trust money, to making retrospective laws and sending pillars of such banditry to relax in the Rashtra Potty Bhavan. Temple wealth was accumulated for the benefit of the congregations that accumulated them there. Yet Government has nationalized the wealth and spends temple income on Haj Pilgrimage subsidies.organizes jewellery thefts and has distributed the land and assets of the Veda Pathashalas to Non Hindus such as Dalits, Christians and Hindus.

Narendra Doshi

2 years ago

Dear Mr.Warrier,
Very impressive & achievable. Hope you from the Baking sector, would have been successful in putting to proper authorities for serious consideration.

REPLY

MG Warrier

In Reply to Narendra Doshi 2 years ago

Dear Narendra Doshiji
Thanks. The ideas here are not new. Individually, many are convinced and economists like S S Tarapore have written in the media. More public debate may convince political leadership about the advantages of working on some of the suggestions. My own perception is that present dispensation in Delhi(Central Government) and Mumbai(RBI) are not averse to taking fresh initiatives, if they will be conducive to India’s national interest and economic growth. Hope, this explains the context of this article.

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