The three underwriters to the issue -- Uttam Industrial Engineering, Era Construction and Prominent Securities -- have a combined commitment of over Rs 3.90 crore.

The market regulator has also directed Dewan Sugars to ensure that money is deposited in the account by the three underwriters and that not merely book entries are carried out, according to SEBI sources.

The direction follows the hearing of an appeal filed by Dewan Sugars before SEBI against the Delhi Stock Exchange (DSE) rejection of listing permission to the FCD issue.

Interestingly, the Delhi High Court had refused to admit a petition filed by the company against DSE as it had already appealed before SEBI on the issue. DSE had revoked the permission as a number ofdiscrepancies were discovered at the time of considering the grant of trading permission to the issue. The issue was not fully subscribed and had devolved on the underwriters.

It had also been observed that the underwriting obligations of VB Desai Financial Services and VLS Finance had been discharged by Uttam Industrial Engineering and Era Construction, which were suppliers of equipment and contractors of building for the project of Dewan Sugars and its associate company, Prominent Securities Ltd.

It was further contended that the underwriting obligations of the three had been discharged by a mere book entry adjusting unsecured loans. According to DSE, subscription by way of monies had never been received in discharge of the underwriting obligations, though the SEBI guidelines specifically provide for monies to be procured.

The promoters contribution of about Rs 6 crore had been brought in by other group companies -- Dewan Rubber, Dewan Steel and Dewan Tyre -- which are all widely-held listedcompanies. However, it was observed that the promoters -- V S Dewan, Anil Dewan and K R Gupta -- do not meet the criterion of holding a minimum 10 per cent equity stake in each of the three companies, as is mandatory under SEBI guidelines.

Therefore, subscription towards the promoters' contribution made by the three companies do not classify as promoters' contribution.

Though the offer document of the company states that the promoters had brought in full contribution on May 4, 1998 for the issues, which had opened on May 25, 1998, the auditor's certificate confirms that the contribution had been adjusted out of unsecured loans on May 16, 1998, resulting in a mis-statement.