2007 (4) TMI 733

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....hese: M/s Baroda Agro Industries Ltd. (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 &nbs....

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.... period of five years. It is further admitted by the learned counsel for the parties that the shares in the physical form did not carry on their fact the stamp of being non-transferable for five years which is mandatory under the statutory regulations. It is, thus, clear that the statement contained in the prospectus that 5,33,800 shares stood in the name of the promoters was untrue. The appellant as a merchant banker had certified the statement as true and correct. If the appellant had carried out 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....

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....nalty should be imposed on the appellant? The Securities and Exchange Board of India has debarred the appellant from dealing in securities or associating with any of the activities in the capital market for a period of three years. This penalty, in the circumstances of the case, appears to be too harsh and disproportionate to the gravity of the default committed by the appellant. The learned counsel for the appellant, however, contends that at the most the appellant could be said to have been guilty 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 ser....