Mumbai: Sebi Friday barred RDB Rasayans and its directors from the capital market for a period of four years besides asking the firm to utilise funds raised from its initial share sale for purposes disclosed in the prospectus.
The Securities and Exchange Board of India (Sebi) found that RDB Rasayans Ltd, a company based in Kolkata, had failed to disclose certain material developments in IPO prospectus and mis-utilising the proceeds from the public issue.
In an order today, the market regulator prohibited RDB Rasayans and its directors -- Sunder Lal Dugar, Shanti Lal Baid and Sandeep Baid -- from accessing the securities market "for a period of four years".
"The period of prohibition already undergone by the Noticees pursuant to the interim order dated December 28, 2011, shall be taken into account for the purpose of computing the period of prohibition imposed in this order," it added.
The regulator has also directed the company to "utilise the funds raised in the IPO and lying in the escrow account for purposes disclosed in its prospectus".
RDB Rasayans had come out with an IPO in September, 2011.
As per the order, the objects of the RDB Rasayans' issue were to finance the capital expenditure to enhance the manufacturing capacity, to meet general corporate purpose and to meet issue expenses.
"I conclude that the noticees had failed to disclose material facts and instead made misstatements in the RHP and Prospectus of RDB," Sebi whole time member Rajeev Kumar Agarwal said in the order.
"By doing so, RDB and the noticee directors have perpetrated a fraud on the investors by routing IPO money to entities which traded on the listing day of its IPO and suffered losses, through a web of inter connected entities," he added.
Agarwal also noted that "the amount routed to...Trading clients who incurred losses on the day of listing of RDB shares was used to make payments to respective brokers of the clients on time...Thus resulting in the creation of false and misleading appearance of trading in the said scrip".
