In an order dated September 18, 1998, the court asked the erring company to deposit the money within six weeks or refund the entire proceeds of Rs 3.5 crore to its shareholders. Earlier, a single judge of the same court had upheld the order passed by the SEBI which was upheld by the finance ministry's Appellate Authority.

The SEBI had ordered the company to refund the entire proceeds of its public issue following an investigation which revealed that the company had committed grave irregularities while floating its public issue in December 1995.

SEBI had received complaints that Atul Shah, Managing Director of the company and oneShantilal Gandhi were involved in grey market operations in Jaltarang's scrip. It was also alleged that there was an agreement between Shah and Gandhi in which Shah had guaranteed payment of Rs 21 lakh to the latter "for grey market operations" to illegally boost the price of shares during the issue time.

In view of the serious allegations, SEBI sent notices to the company on April 16, 1996 and May 17, 1996 asking it to show cause why its public issue should not be refunded.

After the company sent its replies, the SEBI ordered it to refund the entire public issue proceeds to its shareholders. The SEBI's order was upheld by Finance Ministry's appellate authority. In fact, despite sending various notices by the appellate authority, the company promoters decided not to respond. Thus, an order was passed without taking promoter's views.

The company, later, moved the single judge of Gujarat high court praying that as the appellate authority has not heard their side of the story it should be given secondchance.

During the arguments, the Court recorded the finding that the appellant has "diverted" an amount of Rs 67.60 lakh to its sister concern -- Jaltarang Club. It also ordered the company to immediately deposit an amount of Rs 50 lakh with SEBI before making a fresh appeal to the appellate authority.

The company then moved the division bench of the Gujarat high court praying for more time to deposit the said amount. The company petition was, however, dismissed and it was given only six weeks to deposit Rs 50 lakh with the SEBI.