Market regulator Sebi has directed Kolkata Weir Industries, its promoters and directors to refund the money raised from public by issuing securities.
Besides, it has barred the company and its promoters/ directors from accessing the securities market for more than three years.
Sebi said the company will have to file a certificate of refund completion with it from two independent chartered accountants, who are on the panel of a public authority, "within a period of three months" from date of the order - April 30, 2014.
Kolkata Weir Industries had mobilised about Rs 48 crore from more than one lakh investors through issuance of 'redeemable preference shares'.
According to the Securities and Exchange Board of India (Sebi), the funds raised by Kolkata Weir through the issues amounted to a public offer and not a private placement (as stated by the company).
It has directed Kolkata Weir and its directors/promoters, to "jointly and severally" refund the money.
The funds include the amounts raised by the company via issuance of shares on six occasions between 2009 and 2011 including the money collected from investors, till date, pending allotment of securities.
Sebi added that amount has to be repaid "with interest of 15 per cent per annum from the date of receipt of money from the investors till the date of repayment" and the refund would be "effected only in cash through Demand draft or pay order".
Additionally, the company's promoters and directors have also been restrained "from associating themselves with any listed public company and any public company which intends to raise money from the public, from the date of this order till expiry of three years from the date of completion of refunds to investors".
Further, Kolkata Weir and its directors/promoters have been asked not to advise or transfer the investments of investors made in the Company to any other entity.
Besides, the company would have to issue a public notice in two national dailies (one English and one Hindi) detailing the modalities for refund, including details of contact persons.
Sebi had received complaints alleging illegal mobilisation of funds by Kolkata Weir, an unlisted company.
On a preliminary examination, Sebi observed the matter was related to private placement of securities by the company.
Sebi noted that although the 'offer of redeemable preference shares' was stated to have been made on a private placement basis, yet, through the same offer, the firm had approached 1,05,809 investors and mobilised funds amounting to Rs 47.90 crore.
Since the company had made the offer to 50 persons or more, the offer qualified as a public issue and had to be listed on a recognised stock exchange, as per norms.
