9911796707
TMI Blog2007 (4) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (for short the company) came out with a public issue in the year 1994 and the prospectus issued contained, among others, the following statement- "Notes: (i) …….. (ii) The details of Lock-in period in respect of promoters holding is as under: No. of Shares %of the paid up Capital after issue Allotted on Lock-in Period Commencing from 290500 6.46 16.5.1992 5 years From the date of allotment in this issue or commencement of commercial production whichever is later 3 years from the date of allotment 140000 3.11 25.3.1992 5 years 533800 11.86 20.3.1992 5 years 158300 3.52 14.9.1991 5 years 39922 0.89 3.04.91 3.4.1991 A) 11,62,522 25.84 3.04.91 NIL 1,21,678 2.70 30.3.1990 NIL 4,75,658 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t due diligence and verified the aforesaid statement from the records of the company at the time when the prospectus was issued, it would have been discovered that the shares allotted to the non-promoters in the year 1992 even though had a lock -in period of five years had not been stamped as non -transferable. This default had, obviously, been committed by the company and the appellant cannot be blamed but certainly there was lack of due diligence on the part of the appellant at the time of certifying the prospectus. After the public issue, the shares of the company were listed on different stock exchanges and it was then that some of the shareholders to whom allotment had been made in the year, 1992 on private placement basis had sold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lack of due diligence and nothing more and, therefore, mere censure would be enough. We do not agree with this submission. It is true that the appellant is guilty only of lack of due diligence in the performance of its duties but that had serious consequences for some of the investors who have lost their money when they purchased the shares as stated above. To carry out due diligence is the primary responsibility of the merchant banker and since the appellant failed in discharging that duty, we are of the view that it deserves to be debarred from dealing in securities or in carrying out any activities relating to the capital market. The ends of justice, in our view, would be adequately met if the period of debarment is reduced from thre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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