Posted On by &filed under Judgements.

Securities Appellate Tribunal
Integrated Amusement Ltd. vs Securities And Exchange Board Of … on 8 September, 2000


1. Integrated Amusement Ltd., and its directors (The Appellants) are
aggrieved by the order dated 3-2-2000 made by the Respondent, whereby
the appellants have been directed to disassociate themselves in every
respect from the capital market related activities for a period of 5 years.
They have also been debarred from associating with any of the interme-
diaries in the capital market during the said period. The present appeal is
against the said order.

2. The appellant company was incorporated as a public limited company
on 24-8-1994 and obtained the certificate for commencement of business
on 31-8-1994 from the Registrar of Companies, Gujarat. The main objects
of the appellant company, as per its Memorandum of Association are to
set up, build, construct and carry on the business of an Amusement Park,
including Water Park, Theme Park etc. The appellant company raised
Rs. 575 lakhs towards capital, by issuing 57,50,000 equity shares of Rs. 10
each for cash at part through a prospectus dated 20-3-1995. The main
object of the public issue as per the prospectus was to part finance the cost
of the project and to meet the working capital requirements of the
appellant company.

3. The background information leading into the issuance of the impugned
order has been furnished in the order itself. According to the Respondent’s
version it came to their notice that the appellants has not utilised the
money raised from the public for the purposes as disclosed in the
prospectus. Ahmedabad Stock Exchange (ASE) had reported that the
appellant company had not been complying with various clauses of listing
agreement entered into by it with them and that on physical verification
of the existence of the appellant company ASE found that it had vanished
from the registered office address given in the prospectus. On the basis of
ASE’s report the appellant company was considered as a vanishing
company and Show-Cause Notice was issued to the appellants calling
upon them to explain as to why action should not be initiated against them
under the provisions of Sections 11 and 11B of the Securities and
Exchange Board of India Act, 1992 (‘the Act’) including debarring them
from associating with any capital market activity and also prohibiting
them from accessing the capital market for a period of 5 years. The
appellant company denied the charges. It has been stated in the impugned
order that ASE vide its letter to the respondent, dated 18-8-1999 had
reported that the appellant company “which was earlier declared as
vanished has claimed its existence at the changed address and the
exchange has confirmed the existence of the company at the changed
address after physical verification”.

4. During the course of a personal hearing granted in the inquiry, the
appellant company’s Managing Director and one Shri B.P. Kananai, a
Chartered Accountant had submitted that the appellant had shifted its
registered office from the address started in the prospectus to the project
site and this change was duly notified to the Registrar of Companies and
the stock exchanges. It has been stated in the order that the respondent
informed the representatives that “from the facts and circumstances
prima facie it appears that the company and its directors had misapro-
priated and misutilised the money raised through the public issue and
entrusted to them by the public and have fraudulently induced the public
by deceiving them to subscribe to the issue of the company”. As per the
order, the appellants were “advised to clarify and submit documents in
support of the utilisation of the money raised by the company from the
public for the purposes as disclosed in the offer documents.”. According to
submit documents, annual accounts, and statement and end-use of funds
from the date of the public issue”, till the date of hearing, within 15 days
of the date of hearing (18-11-1999 was the date of hearing). It has been
stated that it was made clear to them that in case they fail to furnish these
requisite particulars, the respondent would presume that the appellants
had no explanation to give and the matter will be decided on that
assumption. The appellants failed to submit the information as promised
and in that context the respondent drew adverse inference and issued the
impugned direction. The Chairman, SEBI, who had issued the order in
exercise of the powers of the respondent, under Section 4(3) of the Act felt
that “the directors who have been entrusted with the funds have misap-
propriated the money for their own use in violation of the directions of law
and contract between the company and the investors in contravention of
law”. In this context he stated ” I observe that the State Government be
requested to initiate appropriate criminal action in the matter under the
Indian Penal Code, 1860 or any other relevant State law through the police
against the company and its directors”. He had also viewed that Shri B.P.
Kanani who had appeared for the appellant company during the personal
hearing, did not furnish the details of the account of funds despite an
undertaking given by him. He felt that Shri Kanani’s action may amount
to professional misconduct and viewed that the matter be referred to the
Institute of Chartered Accountants of India to take appropriate action
against him.

5. Shri Rajendra C Dhuru, the learned Counsel for the appellants submit-
ted that the respondent has no power to define the criteria for declaring
a company to be vanishing company, that the concept has been defined
without application of mind. Further the respondent lacked authority to
regulate the manner in which the affairs of the appellant company
needed/required to be carried on. It is for the Registrar of Companies and
the shareholders to proceed against the appellants, if they felt there was
any oppression or mismanagement. According to the learned Counsel
action against vanishing company would tantamount to regulating or
prohibiting that company from carrying out its affairs in a particular
manner. Since Registrar of Companies is empowered under the Compa-
nies Act, 1956 to take action against a defaulting company, the respondent
had no role or authority to exercise those powers by usurping the same
from the Registrar. He submitted that the respondent had no jurisdiction
to issue direction in the impugned order in as much as it relates to cause
police action under IPC etc. or action for professional misconduct of
Chartered Accountant. He claimed that the requisite inquiry did not
precede issuance of direction as required under the Act. The appellants
are not persons covered under Section 11B to whom directions can be
issued, as they are not persons referred to in Section 12 or person
associated with the securities market. He submitted that the inquiry
contemplated under the Act has to be with reference to requirements
under the Act and not in relation to Securities Contracts (Regulation) Act
or Companies Act. The respondent’s power under Section 1191) to protect
the interests of investors would essentially mean to protect the interest
arising out of transactions relating to the securities effected through the
primary market or secondary market or even off market. The generality
cannot go beyond that. In the instant case the question is not related to the
transaction involving the appellant company or its directors with inves-
tors or potential investors. Since the respondent had no power to collect
financial information from listed companies, respondent cannot take
unbiased, just and proper decision as to violations committed by such
companies. The cut off date adopted for selecting companies for scrutiny,
on the basis of public issues made after 1992 is arbitrary and discrimi-
natory, that the list of companies published as vanishing companies is an
incomplete list and that it is not based on the verification made by the
respondent, but based on a study and physical verification undertaken by
the stock exchanges and hence not acceptable. According to the learned
Counsel exclusion of matters relating to deposits and loan instruments
from the purview of the task force is discriminatory.

6. The learned counsel, submitted that the appellant company had shifted
its registered office to the project site for operational reasons and that the
change had been notified to the Registrar of Companies, Gujarat. Copy of
the fees receipt issued against filing fee for the document filed in this
regard in the Registrar of Companies’ office annexed to the appeal was
referred to. It was also submitted that the appellant was filing returns and
documents with the stock exchange. In support of the fact that they are
reporting to ASE, the learned counsel relied on the copy of the
acknowledgements issued by ASE and also copies of receipts acknowl-
eding payment of listing fee. He had relied on the respondent’s own
version that the appellant is functioning from the notified address. He had
vehemently denied misappropriation of funds as alleged and pointed out
that even though it was not a charge in the SCN, they had agreed to furnish
the details to the respondent. Since one of the relatives of the Managing
Director fell ill critically and died immediately after the personal hearing,
the appellants could not furnish the details within that period and even
without giving another opportunity the impugned order was issued. He
pointed out that the order is ex parte, the appellants. The finding is based
on assumptions and presumptions and not on real facts. He submitted
that before imposing such a penalty, had the respondent waited for the
material fact, the finding would have been different. He referred to the
audited Annual Accounts of the company for the period ended 31-3-1995
the latest one for the year ended on 31-3-1995 annexed to the appeal. He
had also produced acknowledgement stated to have issued by ASE,
evidencing the filing of unaudited financial results on quarterly basis as
required. He submitted that since the appellant had been responding to
each and every query from the respondent, by no standard the appellant
company can be considered as a vanishing company. He pointed out that
if there had been any lapse on the part of the appellants, the shareholders
would not have kept quite. The fact that there was not even a complaint
from them shows the company’s bona fides.

7. Ms. Poonam A Bamba, learned representative of the respondent
explained the back ground in which the respondent had identified compa-
nies as vanishing companies and the nature of action taken against them.
She invited the Tribunal’s attention to the PIL filed by an Investor’s
Association in the Allahabad High Court seeking court’s intervention to
protect the interest of investors who had been duped by those companies
which after raising funds from the public by issuing prospectus had
vanished without any trace. She submitted that many companies and
their promoters/directors which raised funds from the public through
public issues were not traceable and had disappeared without utilising the
funds raised for the purposes mentioned in the offer documents. Regu-
latory authorities like Department of Company Affairs, Reserve Bank of
India and the respondent were blamed for failing to take action against
those unscrupulous companies and their promoters/directors. In such a
scenario, Department of Company Affairs, Reserve Bank of India and the
respondent decided to take whatever action was possible and to co-
ordinate their efforts in this regard. A Central Co-ordination and Monitor-
ing Committee was set up as a joint mechanism consisting of senior
officers of the said authorities and seven task forces were also formed at
the field level. To begin with 80 companies were identified by the respon-
dent on the basis of the following criteria evolved by the said joint

“(a) Companies which did not comply with listing requirements such as
submitting various returns and reports to the stock exchange(s) for
a period of 2 years and

(b) Where no correspondence has been received by the stock exchange
for a long time

(c) No office of the company is located at the mentioned registered
office address.”

8. She submitted that the said criteria for identifying vanishing companies
had been adopted in furtherance of the statutory objects in a just fair and
reasonable manner.

9. The learned Representative submitted that the respondent has been
invested with the power to protect the interest of investors in securities
and to promote the development of, and to regulate the securities market.
In terms of Section 11 of the Act, the respondent is empowered to take
such measures as it thinks fit for achieving the objecting of the Act. She
reiterated that the respondent certainly has the power to regulate the
securities market which included regulation through prohibitory as well
as mandatory directions. It was further submitted that in order to achieve
the objective of the Act and to effectively perform its duties, the respon-
dent also has incidental powers for taking appropriate measures for the
protection of the interest of investors. She denied the appellants’ conten-
tion that the respondent is usurping the powers of other statutory
agencies and regulating the management and affairs of companies falling
under the domain of the Company Law Administration. According to her
the respondent is duty bound to regulate the securities market and is
empowered to issue directions to any person associated with the securi-
ties market as provided under Section 11B. The impugned direction under
Section 11B was issued to vanishing companies identified by the task force
and also in tune with the direction of the Allahabad High Court.

10. Explaining the scope of Section 11B, it was submitted that if the
unscrupulous companies/their promoters who raised money and did not
utilise the same for the objects, stated in the offer documents, and have
disappeared, it would seriously affect the confidence of the investors in
the market. Therefore, for an orderly development of the market, such
persons have to be declared unfit for remaining in the market. Accord-
ingly, suitable directions have been issued to such persons. She denied the
appellant’s contention that direction can be issued only in respect of the
transactions in securities. The learned representative submitted that the
respondent has power to call for information for undertaking inspection
and conducting inquiries. Countering the appellant’s charge, she stated
that decision to refer the matter to police or the Institute of Chartered
Accountants referred to in the order was not in the nature of direction and
the respondent had not taken any action under the SCR Act or under the
Companies Act. Justifying the cut off date of 1992, for identifying vanish-
ing companies, she submitted that it was the year in which the Act was
brought into force, and as such the earliest dat to be reckoned for the
purpose. It was also submitted that identification of 80 companies by the
Task Force and issuance of press release was only the beginning. Identi-
fication was an on going process and that as and when any information/
report is received and if it is found that the company had vanished,
suitable action will be taken against that company as well. She submitted
that the list of 80 companies was not final list.

11. She submitted that the appellant company was considered as a
vanishing company by the task force on the bass of the information
furnished by ASE. However subsequently, ASE reported that the appel-
lant company, which was declared as vanished, was found existing at its
changed address. Therefore, before the matter could be concluded on
merits it was decided to grant an opportunity of personal hearing to the
appellant company and its directors. Even though the representatives of
the appellants had submitted that funds collected have been utilised for
the purposes mentioned in the prospectus, that the project could not be
completed because of shortage of funds, they could not produce any
document in support of the submission. According to the learned repre-
sentative, during the course of hearing the respondent had asked for the
details of utilisation of the funds raised through the public issue and the
representatives at that time had submitted that the documents concern-
ing the financial affairs of the appellant were not readily available at the
time of personal hearing and gave an undertaking to submit the same
later. She submitted that even though vide letter dated 30-11-1999, the
appellant company was advised to send the details, till the issuance of the
impugned order there was no response. Thus the allegation that they were
not given opportunity to explain their case was unfounded. According to
her the appellants had failed to file reports/documents with Registrar of
Companies and stock exchange. Non-compliance of the requirements of
the listing agreement, especially failure to furnish financial data etc., is
detrimental to the interests of investors. She submitted that in the light of
the submissions made by the appellants, there existed a prima facie case
that the appellants had not made proper utilisation of the funds raised
through public issue. Reasons, if any, justifying non-utilisation or
misutilisation of funds by the appellant company could not be given by
them though ample opportunities were provided. It was made clear to the
appellants’ representatives during the personal hearing, that in case they
fail to submit the documents as per the undertaking given by them,
adverse inference will be drawn and appropriate action will follow. Since
they failed to fulfil their own assurance, the respondent was constrained
to draw an adverse inference against them and issue impugned direction,
ex parte the appellants. Referring to the applicability of Limitation Act,
1963 she submitted that the default under the facts of the instant case was
in the nature of continuing default and as such not barred by limitation

12. I have carefully considered the rival contentions put forth by the
parties before me.

13. The menace of companies raising capital from the pubic with rosy
promises and thereafter disappearing from the scene after duping the
investors has become a common feature these days. Gullible investors are
taken for a ride by the smarter persons by including them to part with their
hard earned money by way of subscription to shares in the public issue.
Authorities such as department of Company Affairs (responsible for
administering Companies Act), Reserve Bank of India and the respondent,
being primarily concerned with the investor protection, the harassed
investors often look at them for redressal of their grievances. But they
could not do much to alleviate the grievances of the investors for various
constraints. In fact they were subjected to adverse criticisms for their
inaction in booking those fly by night operators. Some of the investors’
associations even had filed Writ Petitions in the High Courts seeking
directions to authorities to do the needful. It was in this context a high level
committee consisting of the Finance Secretary to Govt. of India, Secre-
tary, Department of Company Affairs and Chairman, SEBI decided to set
up a joint mechanism for taking stringent action against the unscrupulous
companies and the promoters who duped the public. A Co-ordination and
Monitoring Committee to decide policy issues and provide broad guide-
lines and seven Task Forces at field level to identify the companies which
had disappeared after raising funds by issuing prospectus after 1992 were
set up. The concept of vanishing companies with the attributes mentioned
by the respondent was identified for functional purpose. In fact this
concept was brought to the notice of the Allahabad High Court in W.P.No.
659(MB) 1998 filed by Midas Touch Investors Association. In an
affidavit filed by the petitioner before the High Court, it has been stated
that in a meeting held between Secretary, Department of Company
Affairs and Chairman, SEBI along with their officials in order to devise a
common strategy, on 3-12-1999, it was decided that a Co-ordination and
Monitoring Committee would settle the policy issues regarding the delin-
quent companies/promoters and monitor the progress in this regard to
the action, that it was also decided that seven Task Forces would assist the
Co-ordination and Monitoring Committee and that the focus of these
groups would be to identify the companies which have disappeared or
which have misutilised the funds mobilised from the public. The informa-
tion filed with the stock exchanges pursuant to the requirements of the
listing agreements as also the various documents/returns filed with
Registrar of Companies could be the basis for initiating preliminary
exercise of identifying the delinquent companies. The High Court had
endorse the action including the criteria for identifying the companies
subject to probe, is evident from the following observations made by the
High Court in its order dated 26-3-1999.

“Now in view of the decision taken by the Securities and Exchange Board
of India, Department of Company Affairs and the Finance Secretary,
Govt. of India, it is clear that the Central Government, Deptt. of Company
Affairs and Securities and Exchange Board of India are already seized of
the mater and appropriate steps have been taken for putting a check
upon the defaulting companies and to watch the interest of the investors.
The work of identifying the defaulting companies has been entrusted to
seven Task Forces and thereafter as soon as the defaulting companies are
identified further action in the light of the decision referred to above will
have to be taken. We are satisfied that the action taken and the principle
enunciated therein would certainly be a step towards identifying the
defaulting companies and protecting the interest of the investors regarding
claim of their money. Besides this the defaulting companies and their
directors and promoters will also be subjected to penal consequences
under the provisions of the Indian Penal Code and the defaulting companies
can also be subjected to proceedings under the Companies Act. At this
juncture we may hope and trust that the opposite parties ( i.e., Union of
India and Another), would abide the decision taken by them and would
bring to the notice the names of the defaulting companies as envisaged in
the Supplementary Affidavit. They would also permit the petitioner and
other law abiding citizens of the society to submit a list of the defaulting
companies, if at all they can furnish and after such a list is submitted,
action as envisaged in the Supplementary Affidavit and the decision of the
SEBI, DCA and the Finance Secretary, Government of India shall be

[Emphasis Supplied]

14. In view of the above observation of the Allahabad High Curt the
appellants’ contention on the power of the respondent and criteria
adopted for declaring a company as vanishing company cannot survive.
For the reasons stated by the respondent for choosing the year 1992, the
cut off year for preparing the list, the argument that the line has been
drawn out arbitrarily excluding companies which had issued capital prior
to 1992, is also unsustainable. From the order cited above it is clear that
the list of 80 companies is not a rigid list as freedom has been given to add
names to the list if considered necessary and that the respondent had also
submitted that the identification exercise is not a one time exercise but a
continuing process. I agree with the views of the learned Representative
of the respondent that the matter under inquiry is not hit by the provisions
of the Limitation Act.

15. It is incorrect to say that by using Section 11B the respondent is
usurping the powers of Registrar of Companies or that they are interfer-
ing with the management of the company. In this context it is pertinent to
note that the Act is intended “to provide for the establishment of a Board
to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters
connected therewith or incidental thereto”. Section 11 prescribing the
powers and functions of the Board inter alia provides that subject to the
provisions of the Act, it shall be the duty of the Board to protect the
interests of investors and to promote the development of and to regulate
the securities by such measures as it thinks fit. The respondent’s power to
take suitable measures subject to the provisions of the Act has been
upheld by several High Courts SEBI v. Alka Synthetics Ltd. [1999] 19 SCL 460 (Guj.), M.Z. Khan v. SEBI AIR 1999 Delhi 164; Ramrak R Bohra v. SEBI [1999] 33 CLA (Bom.). As the Delhi High Court put in M.Z. Khan’s case, the power under Section 11 is of a very wide nature and not hedged by any

16. Section 11B enables the respondent to issue direction. Section 11B is
reproduced below:

“11B. Power to issue directions. –Save as otherwise provided in Section 11,
if after making or causing to be made an enquiry, the Board is satisfied
that it is necessary–

(i) in the interest of investors, or orderly development of securities
market; or

(ii) to prevent the affairs of any intermediary or other persons referred
to in Section 12 being conducted in a manner detrimental to the
interest of investors or securities market; or

(iii) to secure the proper management of any such intermediary or
person, it may issue such direction,–

(a) to any person or class of persons referred to in Section 12, or
associated with the securities market; or

(b) to any company in respect of matters specified in Section 11A,
as may be appropriate in the interest of investors in securities
and the securities market”.

17. Sections 11 and 11B are interconnected and co-extensive as both these
sections are mainly focused on investor protection. On a perusal of the
said Section 11 it could be seen that the respondent has been in no
uncertain terms mandated to protect the interests of investors in securi-
ties by such measures as it thinks fit. The expression measure has not been
defined in the Act. So we have to go by its generally understood meaning.
According to Corpus Juris Secundum measures means “anything desired
or done with a view to the accomplishment of a purpose, a plan or course
of action intended to obtain some object, any course of action proposed
or adopted by a Government”. Measure is also understood “as a means to
an end”. Thus, measure in its generic sense is of wider amplitude. I do not
consider it necessary to go into the details of the nature of measure which
the respondent is empowered to take, for discharging its duties, for the
purpose of disposing the present appeal.

18. While Section 11 deals with the functions of the Board, Section 11B is
on the powers of the Board. Section 11B is in a sense of functional tool in
the hands of the Board. In effect 11B is one of the executive measures
available to the respondent to enforce its prime duty of investor protec-
tion. As could be seen from the text of the section reproduced above the
respondent is empowered to issue directions in the interest of investors to
any person or class of persons referred to in Section 12 of the Act or
associated with the securities market. It cannot be said that a company
having its shares listed on the exchange is out of the reach of Sections 11
and 11B. Since the company is operating through its board of directors,
the directors of that company also can be considered as persons associ-
ated with the capital market, as long as the company’s shares are listed on
the exchange. it does not stand to reason to say that a company whose
shares are traded in the securities market, is not associated with the
securities market. Trading is permitted subject to compliance of several
requirements, flowing from the listing agreement entered into between
the company and the stock exchange. Taking into consideration the scope
and reach of Sections 11 and 11B I am not inclined to agree with the view
that the respondent is lacking authority to issue direction to the
appellants. It appears that the appellant has not appreciated the scope
of observations made in the order to refer the matter to the police
authorities and the conduct of Shri B.P. Kanani to Institute of Chartered
Accountants to take appropriate action. These are mere observations
and not in the nature of an enforceable order or direction as such. Further,
the impugned direction is not one for violation of the Companies Act or
the Securities Contracts (Regulation) Act. It is issued in the interest of
investors under Section 11B, independent of the provisions of the
companies Act and the Securities Contracts (Regulation) Act. Further
referring to the reliance on ASE’s report, I do not find anything wrong in
relying on a repot submitted by an authority like stock exchange, as the
information furnished by itself is only a starting point. An inquiry there-
after follows and the concerned persons are given sufficient opportunities
to put across their views before the authorities. Similarly exclusion of
public deposits and debt instruments from the scope of inquiry cannot be
considered to be in any way discriminatory, as the matter relating to
public deposits etc., are taken care of by other regimes vested with powers
for the purpose. For these reasons, I am inclined to hold that the re-
spondent is justified in pursuing the course of action against the vanishing
companies and its promoters and directors and the Respondent is legally
invested with the requisite authority for the purpose.

19. Now coming to the facts specified to the present case, it is seen that ASE
had already reported the appellant’s existence at the given address.
However, the respondent claims that the appellant had not been comply-
ing with the listing requirements and the statutory requirements of filing
returns with Registrar of Companies, etc. But at the same time the
appellants have produced photo copies of filing acknowledgements stated
to have been issued by ASE and Registrar of Companies. In view of the
conflicting version it is felt that the factual position need be verified by the
respondent with reference to the original records available with stock
exchange and Registrar of Companies. The respondent will do so. In any
case it is not the respondent’s case that the company is not traceable at
present. The respondent is on a more important issue regarding fund
utilisation by the appellants, adversely affecting the investors’ interest.

20. The main reason based on which the impugned order has been issued
is an inference, in the absence of relevant material before the respondent,
that the appellants had misused the funds collected from the public for
purposes other than for which it was collected. The appellants, though
promised to furnish the requisite details did not do so. The appellants have
explained the reasons for the same as serious illness and death of a close
relative of the Managing Director. Medical papers in support have been
produced. Application of funds is matter which can be verified from the
records of the appellant company. In terms of Section 1192)(i) the respon-
dent is empowered to call for information, etc. from the appellant
company also for the reason that it is also a person associated with the
securities market. The appellants have not refused to furnish the details,
but they had put forth certain reasons which disabled them to furnish the
requisite information. During the proceedings before the Tribunal, the
appellants had expressed their willingness to produce the records/infor-
mation before the respondent. In fact the appellants have annexed copies
of the appellant company’s audited annual accounts for the years ended
on 31-3-1995, 31-3-1996, 31-3-1997, 31-3-1998 and 31-3-1999 to the appeal.
As per the appellant company’s balance sheet as on 31-3-1999, Rs. 754.22
lakhs have been shown as capital work-in-progress and fixed assets net of
depreciation has been valued at Rs. 47.33 lakhs. I am of the view that the
fund utilisation by the appellant company need be looked into with
reference to its records in the context of the charge of misuse of funds
raised from the public issue. Since the appellants have expressed their
willingness to make available the requisite information, in depth study of
the same would be useful to reach at a definite conclusion and also to
pursue the matter thereafter, if considered necessary, to protect the
interests of the investors. Since the impugned order is based on inference
and ex parte the appellants, it is felt proper that the appellants be given one
more opportunity to furnish the information to the respondent in a
reasonable time frame and the respondent in the light of that information,
will pass appropriate orders in accordance with the provisions of the law.
The department of company affairs may also be requested, if so desired,
to examine the books of account and other records of the appellant
company to ascertain the utilisation of the funds and if necessary follow
up the matter.

21. The impugned order does not in any way redress the grievances of the
persons who have already invested in the shares of the appellant com-
pany. The prohibition put in on the appellants is effective only prospec-
tively. Since the appellant have come forward to furnish the details, and
the impugned order is ex parte the appellants, it is felt that further inquiry
on the lines embarked on by the respondent as stated in the impugned
order and follow up action thereafter would be in the interests of the
investors. For the purpose it is felt that the matter need be remanded.

22. In the light of the above discussion the impugned order is set aside and
the matter is remanded with the direction to the appellants to furnish the
requisite information and all the documents and records showing the
utilization of funds raised from the pubic issue, as called for by the
respondent within the time stipulated by the respondent. The respondent
will examine the same and if any additional particulars are required from
the appellants, they will furnish the same within two weeks of calling for
the same by the respondent. The appellants will co-operate with the
inquiry and produce necessary documents and information as called for
by the respondent and the respondent thereafter will pass appropriate
order according to the law. If the appellants fail to furnish the documents
and information as called for by the respondents within the time frame, the
respondent will be at liberty to pass such order as is deemed fit, at the risk
of the appellants.

It is made clear that this order will not in any way affect the proposal of
the respondent to approach the State Government to initiate appropriate
criminal action in the matter under the Indian Penal Code or any other
State law and referring the conduct of Shri B.P. Kanani, Chartered
Accountant, to the Institute of Chartered Accountants of India, for taking
appropriate action against him.

23. The appeal is allowed by way of remand.

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