Geoshine Mines 2 Metals, Directors Asked To Refund Rs71.55 Lakh Investors’ Money Collected through RPS with 15% Interest
Market regulator Securities and Exchange Board of India (SEBI) has ordered Geoshine Mines 2 Metals Ltd (GM2ML), the company directors to jointly and severally refund Rs71.55 lakh, the money collected from investors through the issuance of redeemable preference shares (RPS) in FY12-13. While barring all 17 entities from markets between two years to three months, SEBI also directed them to refund application money collected from investors pending allotment of securities, if any, with an interest of 15% pa (per annum).
Besides Geoshine Mines 2 Metals, others barred from the market are Chhotelal Shukla, Shivanand Mishra, Deena Nath Maurya, Mukesh Kumar Khare, Arvind Tiwari, Pashupati Nath Dixit, Rajesh Kumar Sharma, Ramendra Prasad Sharma, Raj Kumar Verma, Ram Vishal Prajapati, Bharat Subhash Prasad Maurya, Surendra Singh, Ram Kishor Prajapati, Rajesh Singh Yadav, Sitaram Prajapati and Vishwa Bandhu Vashistha.
In the order, Dr Anitha Anoop, chief general manager (CGM) of SEBI, emphasised that failing to adhere to the regulations governing public securities issues and repayment obligations, as stated under Section 73(2) of the Companies Act, 1956, necessitated this refund directive against Geoshine Mines 2 Metals and the company directors.
“Geoshine Mines 2 Metals has a continuing obligation to repay the amounts collected in violation of a deemed public issue. This liability falls on the directors, particularly in light of their continued non-compliance with refund responsibilities,” the CGM says.
Geoshine Mines 2 Metals, an unlisted public company established in 1997, is currently under SEBI’s scrutiny following investor complaints regarding its issuance of redeemable cumulative preference shares (RCPS). SEBI launched an investigation to determine whether the company complied with the Companies Act and the SEBI regulations.
The inquiry began after 103 investors raised concerns over 188 RCPS issued by the company during FY12-13. SEBI discovered that no related filings were found in the registrar of companies (ROC) database, raising alarms about the company’s compliance with legal requirements for public securities offerings.
In December 2020, SEBI issued a letter to Geoshine Mines 2 Metals, instructing the company to adhere to the SEBI refund procedures applicable for securities offerings targeting 50 to 200 investors. However, this letter was undelivered. Subsequent attempts to gather information from 15 company directors yielded no conclusive responses. Investor records indicated issuance dates of 17 December 2012, with redemption dates set for 2015 or 2018.
SEBI investigation confirmed that Geoshine Mines 2 Metals issued RCPS without registering a prospectus or listing the securities on any stock exchange, which violates the Companies Act.
The company’s financial troubles intensified due to proceedings under the Insolvency and Bankruptcy Code (IBC). In 2022, insolvency proceedings were initiated against the company after 132 financial creditors reported defaults on repayments for investments made in earlier schemes from FY11-12.
These creditors claimed that the company failed to meet its maturity commitments, leaving investors unable to recover their funds. The corporate insolvency resolution process (CIRP) was eventually withdrawn in November 2023, but GM2ML remains liable for its past regulatory violations.
Further, directors who served during the fundraising period Chhotelal Shukla, Shivanand Mishra, Deena Maurya and Vishwa Vashistha are categorised as ‘officers in default’, making them responsible for refunding investors, along with accrued interest. Some directors claimed their documents were misused, but SEBI says substantial evidence of forgery is required to validate such assertions. Until such evidence is presented, these directors remain accountable under SEBI’s enforcement measures, it added.
As a consequence of these findings, Geoshine Mines 2 Metals, along with Chhotelal Shukla, Shivanand Mishra, Deena Nath Maurya, and Vishwa Bandhu Vashistha, has been barred from accessing the securities market for two years. The remaining noticees, including Mukesh Khare, Arvind Tiwari, and others, have been restricted from market access for three months.
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