JML issue — Sebi directs banks to refund money

The Securities and Exchange Board of India (SEBI) has directed Union Bank of India and Bank of Baroda to refund the amount collected by them on behalf of Jaltarang Motels Limited s (JML) public issue and debarred Jaltarang Motels, its group or associate companies from accessing the capital market for a period of five years. The Sebi move follows severe lapses in its public issue. According to a Sebi release, JML came out with a public issue of 3600000 equity shares of Rs 10 each at par aggregating to Rs 36000000. The issue opened for public subscription on December 31, 1995 and closed on December 26, 1995. The issue was oversubscribed by 11.78 times. However, applications totalling to 2,11,26,300 shares were withdrawn before the allotment was made. Sebi received complaints that there was connivance of the promoters with the registrar. The promoter of the company, namely Atul Shah, had entered into an understanding to carry out grey market operations, to rig the prices of the said sharesimmediately prior to the listing in order to fraudulently induce the public to invest in the company. SEBI has directed Union Bank of India and Bank of Baroda to refund a sum of Rs 3.530000000 and Rs 40.3100000 respectively with 15% interest for releasing public issue collection money to the company accounts before listing permission was granted by the Bombay Stock Exchange (BSE). Sebi had held responsible the bankers in this case for their gross negligence and acting in a fiduciary capacity of public funds. According to Sebi, Union Bank, which acted as a banker to the public issue, transferred from the public issue collection a sum of Rs 3000000 and Rs 1.50000000 respectively to the company’s account in February 1996 and also paid Rs 2500000 to Sagar Drugs Pharmaceutical and Rs 5.2100000 to Navnitlal and Company (advertising agency). An amount of Rs one0000000 and Rs five00000 respectively were transferred in March to the company’s account even before the BSE granted permission for listing.