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2016 (3) TMI 1321 - Board - Companies LawFraud under SEBI - unusual price movement and volume in the scrip of Kailash Auto Finance Ltd. - Share retransfers amongst chosen interconnected parties, unrealistic increase of liquidity in shares of Kailsah Auto held by shareholders of CPAL and PML pursuant to scheme of amalgamation - Held that:- In the instant case, prima facie, find that the entire gamut of events commencing from the typical gambit of allotment of shares by CPAL and PML to a select coterie, running through the maze of funds/shares transfers and retransfers amongst chosen interconnected parties, unrealistic increase of liquidity in shares of Kailsah Auto held by shareholders of CPAL and PML pursuant to scheme of amalgamation is a classic example of touch-me-not distancing through intermediations and culminating in the final denouement wherein connected parties with all their manipulative assemblage came to the fore setting a seal on their machinations of fraudulent, manipulative and deceptive dealings to the detriment of unsuspecting investors. The whole picture on the canvass suggests tell- tale strands of how each one of the connected entities at various sequences in the chain has catalysed the routing of funds and shares, in a web of make believe transfers/transactions meant to mislead and obfuscate, to the final confluence in the market amidst artificial volume and price rise entrapping the unsuspecting and gullible investors. The manipulation in the traded volume and price of the scrip by a group of connected entities as observed in this case has potential to further induce unsuspecting and gullible investors to trade in the scrip and harm them. These connected parties have grossly misused the stock exchange system to generate bogus LTCG to aid and help beneficiaries to convert their unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt. SEBI strives to safeguard and protect the interests of a genuine investor in the Indian securities market. The fraudulent, manipulative and deceptive acts, device, plan and artifice employed by the connected parties acting in league in this case have wider impact on the securities market and should be dealt with sternly and post- decisional hearing will be sufficient compliance of procedure, in the facts and circumstances of this case. Considering the facts and circumstances of this case and the indulgence of a listed company in such fraudulent, manipulative and deceptive plan, device and artifice as prima facie found in this case, I am convinced that this is a fit case where, pending investigation, effective preventive and remedial action is required to be taken by way of ad interim ex-parte order to protect the interests of investors and preserve the safety and integrity of the securities market. In order to protect the interest of the investors and safeguard the integrity of the securities market, I, in exercise of the powers conferred upon me in terms of section 19 read with section 11(1), section 11 (4) and section 11B of the SEBI Act, 1992, pending investigation in the matter, hereby restrain the persons/entities from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions. This order shall come into force with immediate effect. The stock exchanges and the depositories shall ensure that the above directions are strictly enforced.
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