Case: 1. SEBI, 2. In Re: Coronet Industries Limited Vs 1. Ahilya Commercial Private Limited. Securities and Exchange Board of India
|Party Name:||1. SEBI, 2. In Re: Coronet Industries Limited Vs 1. Ahilya Commercial Private Limited|
|Judges:||K.M. Abraham, Member|
|Judgement Date:||April 28, 2009|
|Court:||Securities and Exchange Board of India|
K.M. Abraham, Member
In the wake of unusual price movement noticed in the shares of various companies (with low market capitalization) including Coronet Industries Limited (hereinafter referred to as the company) listed on Calcutta Stock Exchange Association Limited (hereinafter referred to as CSE), during December 2004 to November 2005, Securities and Exchange Board of India (hereinafter referred to as SEBI) conducted a preliminary analysis of the trade data in respect of buying, selling and dealing in the shares of such companies. It was inter alia found that the average share price of the company increased from Rs. 7.75 /- to 270/- (an increase of 3384%) during the period between December 20, 2004 and November 24, 2005 (hereinafter referred to as the investigation period). It was prima facie observed that some of the stock brokers inter alia with the connivance of various clients executed substantial trades in the shares of the company during the investigation period and thereby prima facie created misleading appearance of trading in securities and manipulation in the share price of the company. SEBI, inter alia, observed that various stock brokers prima facie violated the provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations) and Securities and Exchange Board of India (Stock Brokers and Sub- Brokers) Regulations, 1992 (hereinafter referred to as the Broker Regulations). Thereafter, in order to protect the interest of investors, SEBI, vide an ad-interim ex-parte order dated November 30, 2005 inter alia directed various stock brokers including Ahilya Commercial Private Limited (Member, CSE) not to buy, sell or deal in securities, in any manner, either directly or indirectly, till further directions. Subsequently, after affording an opportunity of hearing to the aggrieved persons, SEBI, vide order dated May 31, 2006, confirmed the directions passed vide the ad-interim order dated November 30, 2005, as stated therein.
The investigation conducted by SEBI during the relevant period found that primarily three stock brokers namely, Ahilya Commercial Private Limited (hereinafter referred to as the Broker), M/s Murari Lal Goenka and M/s P K Agarwal & Co collectively executed substantial trades in the shares of the company at CSE during the relevant period and that their cumulative trades accounted for approximately 93% of the total volume in the shares of the company at CSE. The trades of the Broker in the shares of the company involved 3,11,900 shares which accounted for 39% of the total volume in the shares of the company traded at CSE during the relevant period. It was observed that the Broker had executed synchronized trades and cross deals in the shares of the company, which accounted for 25% and 69% respectively of its total trades in the shares of the company, during the period of investigation. The Broker traded when the share price was in the range between Rs. 22.80/- and Rs. 262.00/- and its period of trades was February 23, 2005 to September 05, 2005. It was also alleged that the Broker failed to cooperate with the investigating authority of SEBI. The above acts of the Broker were prima facie in violation of the provisions of the PFUTP Regulations and Broker Regulations.
Thereafter, vide order dated September 20, 2006 read with a subsequent order dated November 23, 2007, SEBI appointed an Enquiry Officer under the provisions of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (since repealed). When the proceedings were pending before the Enquiry Officer, SEBI vide order dated August 11, 2008, for the reasons stated therein, vacated the directions passed vide interim orders dated November 30, 2005 and May 31, 2006, as against the stock brokers. In the meanwhile, the Securities and Exchange Board of India (Procedure for Holding...
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