sebi:WTM/MPB/ISD/02/2017

SEBI · SEBI · Madhabi Puri Buch, Whole Time Member

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Facts / Headnote

Interim restraint dated June 29, 2015 read with corrigendum dated January 04, 2016 confirmed against the Noticee with modifications permitting limited dealings and transfer of joint demat holdings; to remain in force till further orders pending investigation.

Provisions invoked

• s. 11
• s. 19
• s. 11(1)
• s. 12A
• s. 11(2)

Regulations

• Reg. 2(1)(c)
• Reg. 3(a)

Parties

• Nidhi Goel

Holding

The prima facie finding that Nidhi Goel as preferential allottee in HPC acted in concert with the company, Funding Group and Trading Group to misuse the stock exchange system was sustained and the interim restraint was confirmed with limited reliefs, including liberty for transfer of joint demat securities to the sole names of her husband and daughter.

Full text

Order in respect of Nidhi Goel in the matter of four scrips in SME Segment Page 2 of 21 preferential allottees (entities as defined in Interim Order) transferred their shares in the respective company to pre IPO transferees (entities as defined in Interim Order).  Thereafter, the companies came out with IPOs and the entities belonging to Funding Group funded a substantial portion of the IPOs. IPO proceeds of the respective IPO were immediately routed back to the entities of the Funding Group (entities as defined in Interim Order) by the concerned companies and allotted shares without receipt of consideration to the extent they returned the subscription monies to the Funding Group from IPO proceeds.  Once the shares were listed at the exchange, Trading Group (entities as defined in

Order in respect of Nidhi Goel in the matter of four scrips in SME Segment Page 3 of 21 with Funding Group and Trading Group have used the stock exchange system to artificially increase volume and price of the scrips for making illegal gains and to evade tax. The whole scheme could not have been possible without the involvement/ connivance of companies and their promoters and directors.  The scheme, plan, device and artifice employed in this case, apart from being a possible case of money laundering or tax evasion which could be seen by the concerned law enforcement agencies separately, is prima facie also a fraud in the securities market inasmuch as it involves, manipulative transactions in securities and misuse of the securities market.  The manipulation in the traded volume and price of the scrip by a group of connected entities in this case, has not only resulted in enabling illegal benefit to a group of entities but also has the potential to induce gullible and genuine investors to trade in the scrip and harm them.  As such the acts and omissions of companies, Funding Group, Trading Group entities, preferential allottees and pre-IPO transferees are ‘fraudulent’ as defined under regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”) and are in contravention of the provisions of Regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (c), (d), (e) and (g) thereof and

Order in respect of Nidhi Goel in the matter of four scrips in SME Segment Page 4 of 21 Hon’ble Securities Appellate Tribunal (SAT) in Appeal No. 348 of 2016 alleging that no opportunity of personal hearing was granted to her before passing the confirmatory order. Hon'ble SAT vide Order dated February 17, 2017 disposed of the Appeal with a direction to the WTM of SEBI to pass fresh order in accordance with law after hearing the appellant (Noticee). The Hon’ble SAT recorded in its order that the appellant undertook to file a representation within 3 weeks and the learned WTM shall reconsider the matter as expeditiously as possible and not beyond a period of 3 months.

Source: SecMarx — sebi:WTM/MPB/ISD/02/2017. 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.