Markets regulator Sebi today slapped a penalty of Rs 50 lakh on Umesh Khariwala, former director of Adam Comsof Ltd (ACL), for indulging in manipulative trading in the scrip of the firm.
"The noticee (Umesh Khariwala) has violated the provisions of... the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations," Sebi said in an order.
The latest ruling has come after the Securities Appellate Tribunal, in 2015, had set aside an earlier directive of the Securities and Exchange Board of India (Sebi) and asked it to pass a fresh one.
The regulator had conducted a probe in share trading of ACL during October 2003 to October 2004, following which it was revealed that the firm had made several corporate announcements to the BSE regarding board meetings for issuance of shares through preferential allotment and redeemable preferential shares, among others.
Khariwala was the director of ACL between October 2003 and June 2004.
Sebi noted that ACL had issued false and misleading corporate announcements in order to entice investors into buying the shares of the company which, along with the consistent buying support from the RKB group entities, led to manipulation and consequent increase in the price of the stock from Rs 6 to Rs 20.90.
The RKB group consisted of the entities linked to ACL and Rajkumar Basantani, the erstwhile director of the company.
"Taking advantage of the continued positive misleading corporate announcement, the RKB group entities offloaded the shares of the company through connected entities leading to fall in price from Rs 22.50 to Rs 2.60," Sebi said.
The regulator observed that Khariwala also received the shares of the company from the RKB group entities which he sold in the market and "made unfair gains".
According to the Sebi order, Khariwala had received 3,04,973 shares in off market without any consideration from the entities connected with the RKB group in April 2004 and sold the whole lot by the end of May 2004.
"Such pattern of transactions clearly establishes that noticee has taken undue advantage of such corporate announcement by selling shares of ACL in market and made unfair gains, at the cost of investors who were not aware of the real state of affairs of the company," the regulator said.
Accordingly, Sebi has imposed the penalty on Khariwala.
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