sebi:Order/GR/KG/2020-21/7563-7564

SEBI · SEBI · 2009-12-01 · G Ramar, Adjudicating Officer

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Facts / Headnote

Penalty imposed for failure to comply with disgorgement directions in SEBI order dated February 25, 2011

Provisions invoked

• s. 11(4)
• s. 15
• s. 12A
• s. 15H
• s. 15I
• s. 15J
• s. 28A

Regulations

• Reg. 3
• Reg. 3(a)

Parties

• Shri Bhargav Panchal
• Smt Hina Bhargav Panchal

Holding

The Noticees failed to comply with the disgorgement directions issued vide SEBI Order dated February 25, 2011 and are liable for monetary penalty under Section 15HB of the SEBI Act. Penalty of Rs. 45,00,000 on Shri Bhargav Panchal and Rs. 30,00,000 on Smt Hina Bhargav Panchal, payable jointly or severally, was imposed.

Full text

Page 2 of 13 2. On completion of investigations, SEBI issued a common show cause notice (SCN) dated December 01, 2009 to the aforementioned individuals including the Noticees in the present proceedings, under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”). The SCN alleged that the said entities had opened thousands of demat accounts in fictitious names (afferent accounts) and engineered applications in the retail category of several IPOs through these afferent accounts. On receipt of shares on allotment in these afferent accounts, they got the shares transferred to their own demat accounts before listing. They retained a portion of the shares themselves and transferred the balance in off-market to financiers and others. They as well as the financiers and others made unlawful gains by sale of those shares. The said entities together made an unlawful gain of Rs. 15.90 crore and facilitated financiers and others to make an unlawful gain of Rs. 28.48 Crore. The SCN further alleged that the said entities, in concert with a depository participant (DP) and financiers, employed fraudulent, deceptive and manipulative practices and cornered the shares meant for retail individual investors (RIIs) in various IPOs. These acts of the noticees were in violation of Section 12A (a), (b) and (c) of the SEBI Act, 1992, regulations 3 (a), (b), (c) and (d) and 4 (1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Secur

Page 3 of 13 3. Thereafter, after considering the replies of the entities, including the Noticees in the present proceedings, vide final order dated February 25, 2011, it was held that the said entities had acted in concert with Depository Participants to open thousands of afferent accounts. It was further held that the said entities had acted in concert with financiers to make applications under the retail category of 18 IPOs. They had opened the afferent accounts, arranged finance for making thousands of applications in the retail category of IPOs, engineered thousands of applications from afferent accounts, transferred the shares received in afferent accounts on allotment to their own demat accounts and thereby cornered shares meant for RIIs. They transferred a large portion of the shares received on allotment to financiers as per the prior understanding with them and refunded the balance money. In the process, they deprived the RIIs of their legitimate share in the allotment in the IPOs, made an unlawful gain of Rs.16.54 crore and facilitated financiers and other to make an unlawful gain of Rs.28.57 crore, to the detriment of the RIIs. The said entities were, therefore, held to have manipulated the demand for shares in the RII category of IPOs and distorted the market integrity. The Noticees were further held to have made unlawful gains by selling the shares so cornered. Hence, it was held that the said entities had violated Section 12A (a), (b) and (c) of the SEBI Act an

Page 4 of 13 securities market in any manner whatsoever or access the securities market, directly or indirectly, for three months from the date of this Order;

Source: SecMarx — sebi:Order/GR/KG/2020-21/7563-7564. 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.