The Securities and Exchange Board of India (Sebi) has suspended a New Delhi-based branch of the Corporation Bank from acting as a banker to an issue for six months following irregularities committed by it while handling the public issue of Gold Multifab Ltd in 1996.
According to a Sebi statement, the regulator has debarred the Friends Colony branch in south-Delhi of Corporation Bank for six months with immediate effect. The orders to this effect have been issued by Sebi chairman DR Mehta.
Sebi's investigations revealed that large number of applications for subscription in the public issue were accepted by the bank after the closure of the issue.
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These applications were made with ante-dated stock invests and large number of shares (comprising 22 per cent of the total shares allotted) were allotted against these applications.
It was further gathered during the course of investigations that substantial number of shares were allotted to applicants by the issuer company without receiving any consideration. The company failed to receive the minimum subscription as required under the Companies Act and terms and conditions of the prospectus read with guidelines issued by Sebi.
Separate proceedings for refund of subscription by the company are in progress. Investigations also brought out that the bank submitted the final collection report 52 days after the closure of the issue as against the permitted specified period of 21 days. The bank branch had also transferred funds from the public issue account even when the cheques were issued from the company's current account.
"The company actually did not receive the minimum subscription as required under the terms and conditions of the prospectus, Sebi guidelines and the provisions of the Companies Act before the closure of the issue and the bank facilitated circumvention of these provisions by accepting applications after the date of closure," said the Sebi statement.
"The Bank also failed to observe high standards of integrity and fairness in its dealings as it was noticed that funds were transferred from the public issue account of the company even when the cheques were issued from the current account of the company," said the statement.