sebi:Order/SBM/JR/2021-22/12052

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

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Facts / Headnote

Adjudication proceedings against the Noticee disposed of; no violation found

Provisions invoked

• s. 15
• s. 15H
• s. 15I

Regulations

• Reg. 3
• Reg. 4(1)
• Reg. 3(a)
• Reg. 4(2)(a)

Parties

• Devesh Upadhyay

Holding

The Adjudicating Officer held that there is not sufficient evidence on record to establish the charge of fraud against the Noticee for alleged violations of Regulations 3(a)-(d), 4(1), 4(2)(a) and 4(2)(e) of the PFUTP Regulations, and accordingly disposed of the adjudication proceedings initiated by the SCN dated December 20, 2016.

Full text

Page 2 of 13 In the matter of Mystic Electronics Ltd. Devesh Upadhyay (hereinafter referred to as ‘Noticee’) and Shri Praveen Agarwal. It is observed from the investigations that the ‘operators’ viz. Noticee and Shri Praveen Agarwal were also allegedly assisted by other persons namely, Shri Deepak Patwari and Shri Jagadish Purohit. Therefore, it is alleged that the trading/dealing in the scrip of MEL during the investigation period had resulted in the violation of the provisions of Regulations 3(a) (b), (c), (d) and Regulations 4(1), 4(2)(a) and (e) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) by the persons/entities, including the Noticee.

Page 3 of 13 In the matter of Mystic Electronics Ltd. Rules to show cause as to why an inquiry should not be initiated against the Noticee and penalty be not imposed on him under Section 15HA of the SEBI Act for his alleged violation of the provisions of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) and (e) of the PFUTP Regulations while dealing in the scrip of MEL during the above mentioned investigation period.

Page 4 of 13 In the matter of Mystic Electronics Ltd. lock-in period till June 06, 2014 and post the lock-in period, some of the allottees in the preferential allotment sold the shares and made profit. As per the findings of the investigation, preferential allotment proceeds to the tune of Rs. 23 crore was transferred by MEL to the ‘connected entities’, who then traded in the scrip of MEL during the investigation period. Investigation has brought out that the ‘connected entities’ based at Kolkata who traded in the scrip during the investigation period increased the scrip price of MEL by consistently 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 the 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/2021-22/12052. 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.