The issue went through and later it transpired that Partha Investments, Ritesh Capital and Ritesh Agarwal (one of the promoter and said to be minor at the relevant time) asked for issuance of duplicate shares contending that the shares allotted in their favour had been misplaced. An advertisement was issued and a notice was sent to the stock exchange. However, an enquiry carried out by the exchange revealed that the alleged lost shares had in fact been sold in the market. The trading in the stock was then suspended.
The matter was then referred to the Securities and Exchange Board of India (Sebi), which conducted its own enquiry. Sebi discovered that only 7.96% of the IPO was subscribed by the public till the closing date and the promoters who were required to bring in Rs 2.25 crore against firm allotment had brought in only Rs 35 lakh. There were a large number of other irregularities as well.
Sebi, in its February 2004 order exercised its power under section 11B and directed Ritesh Poly, its promoters SK Agarwal, Roop Rekha Agarwal, Ritesh Agarwal and Deepak Agarwal to dissociate themselves from the capital market in every respect and not to access the capital market for a period of 10 years. Sebi also asked the promoters of the company to buy back the shares allotted to public in the IPO at the allotted price and delist the shares from the exchanges.
The promoters challenged Sebi's order in the Securities Appellate Tribunal (SAT) which opined that the company and the promoters has actually committed a fraud on the public and Sebi was justified in debarring the promoters and the company from having access to the capital market for a period of 10 years. It also agreed with the other Sebi directions.