The complaint, a chastened version compared to the FIR earlier filed by the CBI in the MS Shoes case, was filed under section 68 of the Companies Act, 1956 which deals with penal provisions for fraudulently inducing persons to invest money.

The Indian Express had reported on September 3 that the CVC had rejected the recommendation of the CBI, Mumbai for prosecution against Sachdeva and officers of the SEBI and SBI Caps under various sections of the IPC and Prevention of Corruption Act.

Today's complaint deals primarily with the TV advertisements prior to the Rs 699 crore Public-cum-rights issue of FCDs ofthe company in February 1995, for which SBI Caps was lead manager. According to the complaint, an MoU was signed between Pawan Sachdeva and SBI Caps after the SEBI issued the acknowledgment card on January 4, 1995.

Under the MOU, MS Shoes unequivocally undertook and declared that it would take full responsibility for any mistakes, false or misleading statements, if any in the advertisements. The company also undertook that all advertisements prepared by the ad agency (would) conform to regulations and guidelines as issued by the SEBI and instructions by the lead managers. The company undertook not to make any misleading or incorrect statements. The company also undertook to have all issue-related publicity literature vetted by the lead managers before release.

Following the MOU, it was decided between MS Shoes and SBI Caps that the company would appoint Concept Communication Limited as its only ad agency for all issue related advertising. The agency would be required to conform to all SEBI guidelines andinstructions of the lead managers from time to time, ``and it was specifically mentioned in the MoU that the company would ensure that such advertisements did not contain incorrect statements.'' All advertisements were also to be vetted by SBI Caps alone.

While the Rs 428 cr issue was to open on February 14, 1995, ads appeared on DD and Zee TV, claiming a ten-fold increase in export turnover in five years, a four thousand percent increase in profits, etc. The ads claimed a tie-up with Marubeni, Japan for a yarn unit, and went further to claim that the first five years' production was fully sold out. For these ads, the company had appointed Rediffusion Advertising Private Limited as its agency.

In the prospectus, the company had mentioned that it was setting up a yarn project with equipment and technical assistance from Kohap Limited, Korea, an associate of Marubeni Corporation, Japan, which is the third largest trading house in the world. MS Shoes had also entered into an MOU with Marubeni for buy-backof its entire production of yarn at terms and conditions to be decided closer to commercial production.

T Tomota, GM for India, Marubeni, however, later said that the MoU between Marubeni and MS Shoes was merely for assistance by Marubeni to market various types of yarn and POY at prices mutually agreed upon and there was no such buy-back agreement.

The second instance was the comparison between issue price of Rs 199 as against market price of Rs 505, which was a cum-rights price. The comparison price should have been on ex-rights basis. The complimentary terms used in the advertisement (impossible, incredible, etc) to describe performance of the company were extraneous to contents of the prospectus and did not conform to the advertising code issued by SEBI, the CBI has alleged.

The complaint also says the company concealed the fact of purchase of its own shares (worth Rs 99 cr) by a sister concern, Messers Tulip to jack up prices of the share before the issue (amounting to insider trading).

Theprospectus containing the misstatements were submitted in the office of SEBI, Mumbai for vetting and for the acknowledgement card and the advertisements were exhibited on TV, thus misleading investors, the complaint alleges.