sebi:WTM/MSS/ISD/08/2009

SEBI · SEBI · 2008-09-09 · M. S. Sahoo, Whole Time Member

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Facts / Headnote

Held noticees violated Section 12A and PFUTP Regulations 3 and 4(1); restrained from buying, selling or dealing in securities market for 45 days and directed to pay Rs.6 crore (Rs.4.05 crore disgorgement + Rs.1.95 crore interest) within 45 days, failing which further 7-year restraint without prejudice to enforcement.

Provisions invoked

• s. 11B
• s. 11
• s. 11(4)
• s. 19
• s. 12A

Regulations

• Reg. 3

Parties

• Mr. Dushyant Natwarlal Dalal
• Mrs. Puloma Dushyant Dalal

Holding

The noticees, in collusion with key operators, employed fraudulent, deceptive and manipulative practices to corner shares meant for RIIs in 10 IPOs in violation of Section 12A(a), (b), (c) and Regulations 3 and 4(1) of PFUTP Regulations, and were debarred for 45 days and directed to disgorge Rs.6 crore.

Full text

2 of 15 considering the written submissions to the show cause notice, and hearing the noticees on November 19, 2007, it confirmed the interim directions against the noticees vide order dated September 09, 2008. It did not pass any direction against Natwarlal and Rasila as they had passed away in the mean time. It, however, froze their demat accounts, which were jointly held with Dushyant, till the passing of the final order.

3 of 15 those additional documents vide letter dated January 16, 2009. The noticees asked for further additional documents vide letter dated January 22, 2009. SEBI provided those additional documents also vide letter dated February 16, 2009. The noticees sought cross- examination of Ms. Nimisha Mayur Kadakia (Nimisha) and Budhwani, who had submitted to SEBI that the profits on sale of IDFC shares were shared between them and the noticees. SEBI, vide letter dated February 19, 2009, informed the noticees that their request for cross examination would be dealt with by the competent authority at a subsequent stage of proceedings and advised them to file their reply to SCN. However, no reply to SCN was received. Vide letter dated February 27, 2009, an opportunity of personal hearing was granted to the noticees on March 19, 2009 with an advice to submit reply, if any, to the SCN at the time of hearing. However, on the said date, the noticees failed to appear for the hearing. Nor was any reply to the SCN received. Vide letter dated March 20, 2009, another opportunity of hearing was granted to the noticees on April 02, 2009 with a reminder that they had not replied to the SCN despite lapse of four months. A letter dated March 17, 2009 was received from the noticees on March 20, 2009 seeking an adjournment of hearing till 2 nd or 3 rd week of April, 2009 on account of indisposition of their Advocate. Vide email dated March 30, 2009, the noticees requested to keep the proceedings in ab

4 of 15 5. I have carefully considered the SCN, and the written submissions dated May 7, 2009 and May 18, 2009. Table A presents a summary of transactions, as borne out from the SCN, based on which allegations have been made therein. Dushyant provided exact amounts of finance from his bank account 0601000008876 with HDFC Bank to enable the KOs to make a set of applications for shares in different IPOs. The KOs transferred the shares received on allotment from applicants to four demat accounts, which are held jointly by Dushyant, as first/second/third holder, with his family members, namely, Puloma, Natwarlal and Rasila. They also transferred corresponding excess amounts, over and above the allotment money, to Dushyant. For example, Dushyant transferred a sum of Rs.5,46,87,500 by cheque to SEIPL towards application money for 1250 applications for Rs.43,750 each in the retail category of ILFS IPO. He received 19,650 shares of ILFS, valued at Rs.24,56,250 at issue price of Rs.125, from SEIPL on July 26, 2005, the day before its listing on July 27, 2005. He received a refund of Rs.46,31,250 through RTGS transfers. The balance amount of Rs.4,76,00,000 (Rs.5,46,87,500-Rs.24,56,250- Rs.46,31,250) was retained by SEIPL for use in IDFC IPO. Thus, Dushyant received back the entire money he had provided for ILFS IPO in the form of shares and cash. The noticees undertook similar transactions in respect of other IPOs and received shares around the listing date. The product of columns 6 an

Source: SecMarx — sebi:WTM/MSS/ISD/08/2009. 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.