sebi:Order/SBM/JR/2021-22/11604-11606

SEBI · SEBI · 2016-07-04 · Suresh B Menon, Adjudicating Officer

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

Facts / Headnote

Adjudication proceedings initiated vide SCN dated December 20, 2016 disposed of; Noticees exonerated with no penalty

Provisions invoked

• s. 15
• s. 81
• s. 15H
• s. 15I

Regulations

• Reg. 3
• Reg. 3(a)
• Reg. 4(2)(a)

Parties

• Mystic Electronics Ltd. (Noticee No. 1)
• Noticee No. 2
• Noticee No. 3

Holding

The Adjudicating Officer held that there was not sufficient evidence to establish violation of Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a) and 4(2)(e) of PFUTP Regulations by Noticees 1, 2 and 3 and disposed of the proceedings initiated vide SCN dated December 20, 2016.

Full text

In the matter of Mystic Electronics Ltd. Page 2 of 17 (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) by the entities, including Noticee nos 1, 2 & 3 ( hereinafter also collectively referred to as ‘Noticees’).

In the matter of Mystic Electronics Ltd. Page 3 of 17 sanctioned by the Hon'ble Bombay High Court. The Electronics Division of Nouveau Global Ventures Ltd (referred to as 'Nouveau') was demerged into Mystic Electronics Ltd and Mukta Agriculture Ltd. As per the scheme of arrangement, 56.79 fully paid up equity shares of Rs. 10/- each of MEL were issued and allotted to the shareholders of Nouveau for every 100 fully paid up equity shares of Rs. 10/- each held by them in Nouveau. Accordingly, 1,05,36,248 equity shares of MEL were allotted to the shareholders of Nouveau. Subsequently, the shares of MEL were listed on the Bombay Stock Exchange (BSE) on March 19, 2013. It was observed that a stock split was also announced by the company during August 2014 (in the ratio of 10:1). The entire period of investigation is divided into three patches wherein during the first patch, which was the pre-split period, the scrip price of MEL had increased from Rs. 5.55 on March 19, 2013 to close at Rs. 495 on August 13, 2014. During the second patch, which was the post-split period, the scrip of MEL witnessed increase from Rs. 49.5 on August 14, 2014 to close at Rs. 64 on October 13, 2014. Thereafter, during the third patch period i.e. from October 29, 2014 to March 31, 2015, the scrip price of MEL started decreasing and finally closing at Rs. 8.2 on March 31, 2015.

In the matter of Mystic Electronics Ltd. Page 4 of 17 placing the buy orders at higher than the last traded price i.e LTP and also by absorbing the sell orders that were available in the market, which was at a higher price than LTP. Further, investigation brought out that once the scrip price of MEL reached the desired level, some of the preferential allottees exited at higher price and made substantial gain. From the investigation report, it is observed that 14 entities (who were some of the allottees in the preferential allotment of MEL) sold 86,71,828 shares of MEL during the investigation period and had allegedly made profit. Pursuant to investigations, it is alleged that the ‘connected entities’, have increased the scrip price of MEL by placing the buy orders in the scrip at a price higher than the last traded price and also by absorbing the sell orders in MEL that were available in the market.

Source: SecMarx — sebi:Order/SBM/JR/2021-22/11604-11606. 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.