Citing the Sahara Group case and the Supreme Court's order in this regard, the Securities and Exchange Board of India (Sebi) said Rs 47.9 crore raised by Kolkata Weir (KWIL) from over 1 lakh investors amounted to a public offer and not a private placement.
"... KWIL is prima facie engaged in fund mobilising activity from the public, through the 'offer of redeemable preference shares,' which is a public issue made to 50 persons or more," Sebi said in an order dated August 14.
Sebi has been clamping down on entities that have illegally raised money from the public. Last year, the Supreme Court asked Sahara India Real Estate Corp Ltd and Sahara Housing Investment Corp Ltd to refund through Sebi more than Rs 24,000 crore to over 3 crore bondholders, with interest.
Sebi has directed KWIL and its directors/promoters "not to collect any more money from investors through issuance of securities in any manner."
The company has been barred from disposing of any of its properties without prior permission from Sebi. It also cannot divert any funds raised from the public which are kept in bank account(s) and/or in the custody of KWIL, the order said.
Sebi had received complaints alleging illegal mobilisation of funds by KWIL, an unlisted company. On a preliminary examination, Sebi observed the matter was related to private placement of securities by the company.
As KWIL had not provided Sebi with complete information, the regulator obtained details about the firm from filings with the Registrar of Companies.
Sebi noted that although the 'offer of redeemable preference shares' was stated to have been made on a private placement basis, "yet, through the same offer, KWIL had approached 1,05,809 investors and mobilised funds amounting to Rs 47.90 crore."
Since KWIL made the offer to 50 persons or more, the offer qualified as a public issue and had to be listed on a recognised stock exchange.
The promoters/directors of the company against whom the order has been issued are Sahajahan Khan, Samsul Alam Khan, Ram Krishna Mondal, Prabir Haldar, Ratan Kumar, Ajay Kumar Srivastab, Selim Laskar, Lukaman Ansari, Chandan Chowdhury, Sahajamal Khan and Lakshmi Kanta Gayen.
Sebi said the order will also serve as a show-cause notice to which the company and its promoter/directors have to reply within 15 days.