Sebi orders two firms to refund public money

New Delhi: Market regulator Sebi has directed two companies -- PAFL Industries and Kolkata Aryan Food Industries -- to refund the money they had illegally raised from investors and also ordered them to issue public notices regarding it.

Besides barring the firms and their directors from capital markets for four year, Securities and Exchange Board of India (Sebi) also directed these companies to pay 15 per cent interest annually to investors.

A Sebi probe found that PAFL Industries issued redeemable preference shares (RPS) worth Rs 2.13 crore to 1,439 persons, while Kolkata Aryan collected Rs 49.64 lakh from 115 persons through the same route. These funds were mobilised without complying with the 'public issue' norms.

These issues were made to more than 50 people, which under the rules, made it a public issue requiring compulsory listing on a recognised stock exchange. It was also required to file a prospectus, which they failed to do.

In similar worded orders, Sebi said the two firms and their directors have been "directed to refund the money collected by the company through issuance of RPS, with interest at the rate of 15 per cent per annum compounded at half yearly intervals and also not to access the capital market in any manner.

The companies and and their directors have also been "restrained and prohibited from buying, selling or otherwise dealing in the securities market, from the date of this order till the expiry of four years from the date of completion of refunds to investors."

In addition, they "shall issue public notice, in all editions of two national dailies (one English and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within 15 days of this order coming into effect."

In a separate order, Sebi has barred Togo Retail Marketing and its 30 officials from the securities market for illegally raising funds till further directions.

Sebi noted that the company had allegedly commenced allotment of equity shares to the public since March 2004, without complying with applicable laws.