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G.N. Bajpai, Chairman

1. Rajesh Exports Ltd. (REL) came out with a Public Issue of 20 lac equity shares of Rs. 10/- each for cash at a premium of Rs. 40/- per share aggregating Rs. 10 crores. Out of the said issue, the net offer to Resident Indian Public was of 18.5 lac shares aggregating Rs. 9.25 crores. The issue opened for public subscription on November 13, 1995 and closed on November 18, 1995. Investigations were initiated by SEBI into alleged irregularities in the Public Issue of REL. Investigations revealed that REL had made irregular allotments in the issue by allotting shares against applications received after the closure of the issue. Investigations also revealed that REL made available proceeds of the public issue for purchase of its own shares through a circuitous financing arrangement with Viswapriya Group.

2. Investigations also revealed that Tamilnadu Mercantile Bank, BVK Iyengar Road Branch, Bangalore had received 3800 applications for an aggregate of 31,20,000 shares of REL with Viswapriya Financial Services & Securities Ltd. (VFSL) as Power of Attorney holders for the applicants. These applications were accompanied with stockinvest instruments numbering 121933 to 125732. These stock invests were issued by Central Bank of India, Adyar, Chennai.

3. During the course of investigations with Central Bank of India, Adyar, Chennai, it was gathered that these stockinvests were issued on 5/12/95 and 6/12/95 to 3800 persons who had applied for stockinvests aggregating Rs. 3.90 crores through Prime Advance & Investors, their Power of Attorney holders. The stockinvests were issued against 2 FDRs taken in the name of Prime, which were opened on 1/12/95 and 5/12/95. With the issue having closed for subscription on 18/11/95, all these stockinvests were antedated and all applications accompanied by these stockinvests were received after the closure of the Issue. This aspect has been admitted by Central Bank of India in its reply to queries raised by SEBI during the course of investigations

4. Further investigations with Central Bank of India, Adyar, Chennai, brought out that REL opened a Current Account (No. 860) with the bank on 21/11/95 i.e. 3 days after the closure of the Issue. The address of REL in the Account Opening Form is shown as "Viswapriya", No. 2, I Cross Road, KB Nagar, Chennai-20, and is introduced by VFSL. On the same date, REL issued an irrevocable Power of

5. Attorney to Viswapriya Trading Services Ltd. (now known as Pentagon Trading Services), an associate of VFSL, to operate the Current Account with the bank. As per REL's letter to the bank, dated 21/11/95, this PoA was irrevocable till REL discharged all its dues and obligations to VTSL and such discharge was intimated in writing to the bank by Viswapriya Trading Services Ltd. (VTSL). Again on 21/11/95, VTSL wrote to the bank seeking confirmation of bank's recording of irrevocable PoA from REL to operate REL's Current Account with the bank, to which the bank responded confirming recording of irrevocable PoA. As informed by the bank, 2278 of these stockinvests aggregating Rs. 1.139 crores were realised on 22/12/95.