Ritesh Agarwal & Anr vs Securities & Exchange Board Of ...

One Surender Kumar Agarwal was shown to be a promoter in the brochure issued by the Company. However, his wife Rookprekha Agarwal and their two sons Ritesh Agarwal and Deepak Agarwal (Appellants, who were said to be minors at the relevant time) also purported to have made contributions. The Company came out with a 2 public issue of 30 lakh equity shares of Rs. 10/- each at a premium of Rs. 5/- per share aggregating to Rs. 450 lakhs. A prospectus therefor was issued. The issue opened on 12.06.1995. It closed on 22.06.1995. 15 lakh shares of Rs. 10/- each for cash at a premium of Rs. 5/- per share were reserved for firm allotment to the promoters and directors of the company and their friends and relatives. A sum of Rs. 2.25 crores (Rs. 225/- lakhs) was to be invested by the promoters. The issue went through. It later transpired that Pratha Investments, Ritesh Capital and Ritesh Agarwal asked for issuance of duplicate shares contending that the shares allotted in their favour had been misplaced. An advertisement was issued. A notice was also sent to the Stock Exchange. The Stock Exchange, however, on an enquiry made in that behalf, came to learn that the alleged lost shares had in fact been sold in the market. The trading in the scrip of the Company was suspended.

2. The matter was referred to the Securities and Exchange Board of India (for short "the Board"). In an enquiry conducted by the Board, it was discovered that only 7.96% of the public issue had been subscribed by the public till the closing date and the promoters who were required to subscribe Rs. 225/- lakhs had invested a sum of Rs. 35/- lakhs only. A large number of other irregularities were also found. 3

As the Board has noticed the said irregularities in great details, it is not necessary for us to repeat the same once over again. The Board, by its order dated 9.02.2004, directed:

The Tribunal, by reason of the impugned judgment, negatived the plea of the appellants Ritesh Agarwal and Deepak Agarwal that they were minors at the relevant time, stating:

4. The Tribunal opined that the Company and its promoters played fraud on the public and the Board was justified in debarring the 5 promoters and the Company from having access to the capital market for a period of 10 years. It also agreed with the other directions of the Board.

2.25 crores. However, they have fraudulently allotted shares worth Rs. 2.25 crores to the promoters and hence cheated the other genuine investors/ underwriters.

20. We, therefore, are of the opinion that subject to any other or further order which the Board may pass as against Shri Surender Kumar Agarwal and Smt. Rooprekha Agarwal, the impugned directions would not be binding on Ritesh Agarwal and Deepak Agarwal.

21. We do not accept the contention of Ms. Aggarwal that the offence is a continuing one.

23. We, however, uphold other directions issued by the Board including the action taken in respect of the offences purported to have been committed. We also grant liberty to the authorities to proceed against the offenders not only for other or further charges to which they made themselves liable under the SEBI Act but also under the Companies Act, 1956 and other penal statutes, if attracted.

24. For the reasons aforementioned, the appeal is allowed to the aforementioned extent. No costs.

May 13, 2008