sebi:MO/53/IVD/1/04

SEBI · SEBI · 1995-11-09 · A.K. Batra, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

SPML and its directors held guilty of contravening Regulation 6 of the FUTP Regulations, 1995 for active concealment of additional disclosures; further findings on subscription shortfall pending in excerpt

Provisions invoked

• s. 11B
• s. 12

Regulations

• Reg. 4
• Reg. 11
• Reg. 6
• Reg. 4(a)
• Reg. 18

Parties

• SPML
• Sh P C Sethi
• Sh Anil Kumar Sethi
• Mr Subhash Chand Sethi
• Mr Sushil Kumar Sethi

Holding

SPML and its directors were held guilty of actively concealing vital additional disclosures from shareholders by publishing the mandated advertisement in low-circulation Delhi newspapers on 12 November 1995, contrary to SEBI's direction to publish in widely circulated dailies before closure of the issue, thereby contravening Regulation 6 of the FUTP Regulations, 1995.

Full text

2 subscription on October 6, 1995 and closed on November 6, 1995. The issue was lead managed by M/s Hinduja Finance Corporation Ltd. and Canara Bank, Merchant Banking Division (for brevity’s sake referred to as HFCL and Canbank respectively),. As per the three day post issue monitoring reports dated November 9, 1995, submitted to SEBI by HFCL and certified by Canbank, the rights issue of equity shares was stated to be subscribed to the extent of 90.07% and debentures to the extent of 110.23%. 4. The Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) received a reference from the Income Tax Office, Calcutta in May 1996 as also a number of complaints regarding the said issue, alluding irregular subscription and price manipulation before the rights issue i.e. the possibility of applications being brought in after the closure of issue to cover up shortfall in collection and rigging of the price just before the rights issue, non- disclosure and misstatements in the letter of offer, violations of Debenture Trustee regulations, non-listing of shares etc. In view of the same, SEBI called for the price volume data of SPML from the BSE. On examining the same, it was observed that the daily volumes of SPML were quite high around the rights issue time. Further analysis of trade details from ‘CSE’, ‘DSE’, ‘BgSE’, ‘GSE’ and the ‘UPSE’ between the period April, 01, 1995 and March 31, 1996 revealed that during the relevant point of time, very thin trading was reported

3 order dated June 8, 1999, ordered the case for formal investigation. 6. Upon the completion of the same, the investigations inter-alia revealed that –

4 7. In view of the findings of the investigation, SEBI issued a notice dated August 30, 2002 to SPML and its directors viz. Sh P C Sethi, Chairman, Emertius, Sh Anil Kumar Sethi, Chairman, Mr Subhash Chand Sethi, Vice Chairman & Managing Director and Mr Sushil Kumar Sethi, Managing Director asking them to show cause as to why appropriate directions should not be issued against them under section 11B of SEBI Act, 1992 ( for brevity’s sake referred to as the Act) read with Regulations 11 & 12 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Markets) Regulations, 1995 (for brevity’s sake hereinafter referred to as ‘the Regulations’). SPML and the said entities were directed to reply to the said notice within 21 days of the receipt thereof and it was also indicated that if they failed to furnish their reply within the stipulated time, it would be presumed that they had nothing to say in the matter and SEBI would be free to take such action as deemed fit.

Source: SecMarx — sebi:MO/53/IVD/1/04. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.