sebi:WTM/GA/40/ISD/11/07
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Facts / Headnote
Confirmed the ad interim ex parte order dated April 27, 2006 against Shri Dhaval A. Mehta, prohibiting him from buying, selling or dealing in the securities market including in IPOs, directly or indirectly, till further directions
Provisions invoked
- s. 11B
- s. 19
- s. 11(4)
- s. 11
- s. 11C
- s. 12(3)
Regulations
- Reg. 3
Parties
- Shri Dhaval A. Mehta
Holding
The ad interim ex parte order dated April 27, 2006 against Shri Dhaval A. Mehta is confirmed, as he prima facie cornered IPO shares of IDFC Ltd. and Suzlon Energy Ltd. to the detriment of genuine retail investors in violation of the FUTP Regulations and DIP Guidelines.
Full text
Page 2 of 23 applications made, were either benami, name lenders or non existent. 1.2 In the above facts and circumstances, SEBI vide an ad interim ex parte
Page 3 of 23 causing to be made an enquiry and that there was nothing on record to show that the said requirement was followed in his case. According to him, under section 11 (4) of the Act, SEBI can take any of the measures specified therein either pending investigation or enquiry or on completion of such investigation or enquiry. He further contended that, no directions could be issued against him as he was not an intermediary registered with SEBI and also not associated with the securities market. He urged that no prima facie case was made out which warranted the issuance of the ad interim order which was passed in gross violation of principles of natural justice. He stated that he was doing finance business involving borrowing and lending money. He added that, he had raised funds inter alia from one Ashmi Financial Consultancy Ltd. (for short Ashmi) and the loan amount taken from the said Ashmi was disbursed among various individuals (who had applied for the allotment of shares in IPOs) at a higher rate of interest. According to him, as per the terms of understanding of the loan, the borrower had transferred certain shares to his demat account and thereafter, he had transferred the said shares to Ashmi as a security against the money borrowed from it. He added that, the said shares were ultimately sold by Ashmi as per the instructions of the individual borrowers. 2.2 According to Shri Mehta, all the individual borrowers had valid demat accounts with their respective depos
Page 4 of 23 entered into between himself, Ashmi and the various individuals (borrowers), he had received shares from the said individuals and thereafter, the said shares were transferred to Ashmi. The said Ashmi had subsequently sold the said shares and the consideration was given back to Shri Mehta after deducting the loan amount along with the interest. He claimed that the money thus received by him was returned back to the individual borrowers. In respect of the IPO of Suzlon Energy Ltd. he stated that the shares received by him as per the loan arrangement were transferred to the account of one Ms.Sheelu Lalwani as per the instructions of Ashmi. He added that, as per the advice of the borrowers, he instructed Ashmi to sell the said shares and to adjust the consideration against the money borrowed by him from the said Ashmi. He stated that he had not used any afferent accounts to obtain the IPO shares of Suzlon Energy Ltd. He claimed that the income earned by him was limited to the differential interest rates. He urged that he had not violated inter alia the provisions of the FUTP Regulations. He further requested for an opportunity of hearing. 2.3 Pursuant to the receipt of the aforesaid reply, an opportunity of hearing was granted to Shri Mehta on November 3, 2006 and the same was adjourned to February 7, 2007, as per his request. On February 7, 2007, Shri Joby Mathew, advocate appeared before me and made submission on behalf of Shri Mehta. Shri Sandeep Mehta, the brothe
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Source: SecMarx — sebi:WTM/GA/40/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.