Sebi restricts two firms from raising funds from investors

The two firms mobilised funds from the public through RPS route which is in violation of the Companies Act

Markets regulator Sebi has barred two companies -- Arcava Enterprises and Swabhumi Real Estate -- from mobilising funds from public through the issuance of securities till further directions.

Besides, the companies and their directors are also barred from accessing the securities market till further orders.

The Securities and Exchange Board of India (Sebi) found that Arcava Enterprises and Swabhumi Real Estate had raised funds by issuing redeemable preference shares (RPS) to 344 and 141 people, respectively.

Since these shares were issued to more than 50 investors by each company, this qualifies as a public issue, which requires compulsory listing on a recognised stock exchange.

Among others, the firms were also required to file their prospectuses, which they failed to do.

In two separate orders, the regulator said there was no other alternative but to take recourse through an interim action against these two companies and their directors.

These firms, prima facie, engaged in fund mobilising activity from the public through the offer of RPS and as a result have violated the provisions of the Companies Act, Sebi's whole time member S Raman said.

Accordingly, Arcava Enterprises and Swabhumi Real Estate "shall not mobilise any fresh funds from investors through the offer of RPS or through the issuance of shares or any other securities to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions," Sebi said.

It has asked the firms and their directors not to dispose of any of the properties or alienate or encumber any of the assets owned/acquired by the firm through RPS without prior permission from the regulator.

The directions shall take "effect immediately and shall be in force until further orders," it added.