sebi:WTM/MSS/ISD/51/2010
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Facts / Headnote
Chandrakant found guilty; restrained from securities market for one year and directed to disgorge Rs.30,85,262 (unlawful gain of Rs.24,29,340 plus interest of Rs.6,55,922) within 45 days, with a further seven-year restraint in case of non-payment.
Provisions invoked
- s. 11B
- s. 11
- s. 11(4)
- s. 19
- s. 12A
- s. 12
- s. 11C
Regulations
- Reg. 3
- Reg. 4(1)
- Reg. 7
- Reg. 5
Parties
- Chandrakant Amratlal Parekh
Holding
Chandrakant Amratlal Parekh was found guilty of violating Section 12A(a), (b) and (c) of the SEBI Act, regulations 3 and 4(1) of the PFUTP Regulations, and the DIP Guidelines, by engineering 825 applications through 165 name lenders to corner shares in the RII category of the Suzlon IPO. He was restrained from the securities market for one year and directed to disgorge Rs.30,85,262.
Full text
Page 2 of 10 11 and Section 11B of the SEBI Act, 1992, including directions restraining him from buying, selling or dealing in securities in any manner for a suitable period and to disgorge an amount of Rs.24,29,340 and interest thereon, not be issued against him. The SCN also offered the opportunities for inspection of documents and personal hearing.
Page 3 of 10 around the date of listing. Chandrakant, in turn, sold these shares in the market immediately and made an unlawful gain of Rs.24,29,340. He paid a sum of Rs.300 for each application towards user charges for using the demat accounts of the 165 persons for making 825 applications. The SCN provides evidence for these transactions in the form of bank and demat statements of Chandrakant. Based on these transactions, the SCN alleges that Chandrakant filed 825 applications through 165 persons under the RII category of Suzlon IPO and thereby manipulated the retail segment of the IPO market and cornered 13,200 Suzlon shares to the detriment of RIIs. By selling such unlawfully acquired shares, he made an unlawful gain of Rs.24, 29,340.
Page 4 of 10 securities as evidenced by the fact that none of them has any grievance against Chandrakant. Hence Chandrakant did not violate Section 12(A) (b) and (c) of the Act as well as regulation 3 and 4(1) of the PFUTP regulations. 7.1.3 The DIP Guidelines do not have binding force of law. Further, the guidelines are meant for guidance of those who are associated with making a public issue such as Registrar to Issue (RTI) and not individuals applying pursuant to such public issue. Hence recourse to the guidelines is unwarranted. 7.2 Chandrakant essentially made multiple (825) applications in the RII category. There is no prohibition in law against multiple applications. There is an obligation on RTI to weed out multiple applications. He cannot be held liable for failure of RTI to weed out multiple applications. 7.3 It has been alleged that Chandrakant acted as ‘financier’ and ‘key operator’. These terms are not defined in securities laws. In the absence of such definition, Chandrakant cannot be termed as ‘financier’ or ‘key operator’. 7.4 The SCN has been issued under Section 11, 11 (4) and 11B of the SEBI Act 1992. These are not applicable to Chandrakant. Section 11 is general in nature which enables SEBI to prescribe measures in general for investor protection and cannot be invoked against an investor like him. Section 11 (4) deals with measures to be taken by SEBI during or on completion of investigation under Section 11C of the Act. Since Chandrakant has not been info
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Source: SecMarx — sebi:WTM/MSS/ISD/51/2010. 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.