The company was engaged in fund mobilising activity through issue of Redeemable Preference Shares to more than 49 persons without complying with the provisions of the Companies Act, 1956, according to a SEBI Order on Polaris Agro Industries
SEBI passed an Order with respect to Polaris Agro Industries Limited directing that the company shall not mobilise funds from investors and that the company and its directors are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, till further orders. The company and its directors shall not dispose off any of the properties of the company and shall not divert any funds raised from the public.
The company was engaged in fund mobilising activity through issue of Redeemable Preference Shares to more than 49 persons without complying with the provisions of the Companies Act, 1956.
SEBI had received several complaints in October 2014, against Polaris Agro Industries Limited (PAIL) relating to illegal mobilisation of funds. Immediately, SEBI wrote to the company and started an investigation. Letters sent to PAIL and its directors i.e. Jafar Ali Molla and Arindam Dutta, were returned as undelivered with the remarks 'Addressee Not available/Addressee Moved'. However, the letter to Kartick Chandar Das was delivered. Subsequently, letters dated 12 January 2015 were sent by SEBI to PAIL and its directors. While the letters sent to PAIL and its Directors i.e. Jafar Ali Molla and Arindam Dutta, were again returned as undelivered with the remarks 'Refused – Return to Sender & Addressee Moved', the letter to Kartick Chandar Das was delivered. However, till date, no information has been received from PAIL or its directors.
SEBI investigated on its own and found that the Offer of Redeemable Preference Shares by PAIL, would prima facie qualify as a public issue under the first proviso to Section 67(3) of the Companies Act, 1956. In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, 1956, Section 67 of that Act, so far as it relates to issue and transfer of securities, shall also be administered by SEBI.
The SEBI Member continues by saying, “it will follow that since the Offer of Redeemable Preference Shares is a public issue of securities, such securities shall also have to be listed on a recognised stock exchange, as mandated under Section 73 of the Companies Act, 1956. In this regard, reference is made to Sections 73 of the Companies Act, 1956, of which sub-Sections (1), (2) and (3) are relevant.”
Hence, the SEBI Order infers, “In the facts of the instant case, it prima facie appears that PAIL has violated the provisions of Section 73 of the Companies Act, 1956, in respect of the Offer of Redeemable Preference Shares.”
Hence, the SEBI Order goes on to bar the company from mobilising funds from investors as indicated in the earlier paragraphs.
The SEBI Order concludes by saying, “The prima facie observations contained in this Order are made on the basis of the material available on record i.e. the abovementioned complaints received by SEBI and information obtained from the Ministry of Corporate Affairs' website i.e. MCA 21 Portal. In this context, PAIL and its abovementioned Directors are advised to show cause as to why suitable directions/prohibitions under Sections 11(1), 11(4), 11A and 11B of the SEBI Act including the following, should not be taken/imposed against them:
i. Directing them jointly and severally to refund money collected through the Offer of Redeemable Preference Shares along with interest, if any, promised to investors therein;
ii. Directing them to not issue prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, for an appropriate period;
iii. Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.”
