sebi:WTM/GA/38/ISD/11/07
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Facts / Headnote
Ad interim order dated April 27, 2006 confirmed against Shri Dharmesh Bhupendra M
Provisions invoked
- s. 19
- s. 11B
- s. 11
Regulations
- Reg. 3
Parties
- Shri Dharmesh Bhupendra M (also known as Shri D. B. Mehta)
Holding
The ad interim ex parte order dated April 27, 2006 prohibiting Shri Dharmesh Bhupendra M from buying, selling or dealing in the securities market including in IPOs is confirmed, as he prima facie violated the FUTP Regulations and DIP Guidelines by cornering IPO shares through fictitious/afferent accounts.
Full text
Page 2 of 16 parte order dated April 27, 2006 inter alia prohibited various key operators including Shri Dharmesh Bhupendra M and Shri D B Mehta not to buy, sell or deal in the securities market including in IPO’s, directly or indirectly till further directions as it was found that they had prima facie violated the provisions of Depositories Act, 1996, Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, Regulation 3 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (for short the FUTP Regulations) and the provisions of Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000. It was further directed to treat the said interim order as show cause notice against the entities named therein and an opportunity was also provided to the said entities to file their objections, if aggrieved. An investigation was also ordered by SEBI to look into the alleged violations of the provisions mentioned above. 2.1 Shri Dharmesh Bhupendra M vide letter dated May 09, 2006 inter alia stated that whatever he had done was as per the market practice. According to him, he would not come under the jurisdiction of SEBI as he was not an intermediary registered with SEBI. He informed that Shri Dharmesh Bhupendra M and Shri D.B.Mehta, separately mentioned as two persons in the interim order were actually one and the same. He admitted that h
Page 3 of 16 that, after the allotment of shares by various companies, he had transferred the said shares to the financiers through off market transactions at the respective IPO issue price, as per the mutual understanding. He claimed that there was no ban or prohibition or restriction from applying for IPO shares with the borrowed funds in IPOs. He added that the provisions of section 11, 11B and 11(4) (b) of the Securities and Exchange Board of India, Act 1992 (for short the Act) can be invoked only in exceptional and extra ordinary situations and that SEBI has to satisfy the need for invoking the said power. He contended that no prima facie case had been made out to warrant the issuance of such an interim order. In his reply, he stated that he had sold 57,500 shares of NTPC Ltd. through Karvy stock Broking Ltd. by way of secondary market sale and that the said transactions had nothing to do with the financing activities. He further explained that the benefit / gain of funds were shared as per the understanding with financiers and that he had transferred the allotted shares according to the proportion in which the benefit was agreed to be shared. He also relied upon the judgment of the Hon’ble Supreme Court in the matter of Ex-Naik Sardar Singh Vs. Union of India (1991 (3) SCC 213) in respect of the quantum of penalty. 2.2 Pursuant to the receipt of the aforesaid reply, an opportunity of hearing was granted to Shri Dharmesh Bhupendra M on December 7,
Page 4 of 16 January 31, 2007 informed SEBI about the change of his address as A-17, Neelkanth Dhara, 90ft. Road, Ghatkopar East, Mumbai 400077. 2.3 I have perused the reply filed by Shri Dharmesh Bhupendra M and other materials available on record. Though Shri Dharmesh Bhupendra M and Shri D. B. Mehta are mentioned as two separate persons in the interim order dated April 27, 2006, Shri Dharmesh Bhupendra M in his reply has submitted that both are one and the same person and therefore for the sake of present proceedings, both the names will represent one entity only. The only issue to be
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Source: SecMarx — sebi:WTM/GA/38/ISD/11/07. 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.