sebi:TCN/71/IVD-3/12/07
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Facts / Headnote
Show cause notice sustained; Mr. Murali Nair held guilty of violating regulations 3 and 4 of the PFUTP Regulations, 1995 and barred from accessing the capital market for six years.
Provisions invoked
- s. 21
- s. 372A
Regulations
- Reg. 11
- Reg. 3
- Reg. 4
- Reg. 2(1)(c)
- Reg. 2
Parties
- Murali Nair
Holding
Mr. Murali Nair, Executive Officer (Secretarial) of DASL and consultant to BBL, was found to have violated regulations 3 and 4 of the PFUTP Regulations, 1995 by acting as a conduit in the fraudulent allotment, dematerialization and offloading of unlisted DASL shares to innocent investors, and was directed not to access the capital market or buy, sell or deal in securities for six years.
Full text
2 subsequently to BSE was kept pending by it, as it apprehended that DASL would have committed certain violations of law in the process. c) On the basis of listing permission given by MPSE, the Central Depositories Services Ltd. (CDSL), a registered depository, dematerialized these DASL shares and credited them to the beneficial owner account of BBL. d) After the allotments were made, a major chunk of the shares allotted by DASL to BBL were offloaded by BBL through a network of entities including Coverage & Consultants Ltd. (C&C) on the trading platform of the BSE even though these shares were not listed on BSE. Such offloading was contrary to provisions of the BSE bye-laws and constituted bad delivery on the exchange. However, neither the BSE Clearing House nor any of the other parties to the trade could detect this illegality, since the shares were in the dematerialized form and thereby fungible with other legally allotted shares. As a result, a number of innocent investors who purchased such unlisted shares on the BSE were defrauded and saddled with shares which could not be legally sold on the BSE. e) When this came to the notice of SEBI and BSE, the demat account of BBL was frozen after recovering a portion of the shares that were offloaded by it. f) Upon the above coming to its notice, BSE suspended trading in the DASL’s shares from January 14, 2002. Upon instructions from SEBI, BSE also annulled all transactions in DASL shares allotted to BBL which had taken place on t
3 Petitioners. The annulment order was subsequently reversed by the Governing Board itself as they found that the interest of innocent third parties i.e investors, would otherwise be affected. g) Subsequently, investigations were initiated by SEBI to probe into the alleged malpractices committed by DASL, BBL, C&C and other entities.
4 1.4 DASL, instead of replying to the show cause notice, raised certain objections challenging SEBI’s jurisdiction and further sought inspection of certain documents vide its letters dated July 21, 2005 and August 31, 2005. SEBI, thereupon replied vide letters dated August 22, 2005 and September 19, 2005 that the jurisdictional objections, if any, might be raised before the authority conducting proceeding in relation to SCN dated June 30, 2005 issued to DASL, i.e., Whole Time Member, SEBI.
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Source: SecMarx — sebi:TCN/71/IVD-3/12/07. 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.