sebi:WTM/PS/59/IVD/ID-03/JAN/2012
This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.
Facts / Headnote
Noticees directed to disgorge unlawful gain of ₹60,72,000 each plus interest of ₹75,31,111 each, totalling ₹2,72,06,222, payable within 45 days; implementation stayed subject to bank guarantee of ₹1,36,03,111 each.
Provisions invoked
- s. 11B
- s. 11(4)
- s. 19
Regulations
- Reg. 4(b)
Parties
- Mr. Shailesh S. Jhaveri
- Ms. Harsha M. Shah
Holding
The noticees were found to have obtained a preferential allotment of 6,00,000 shares each of OTPL without actual infusion of consideration and to have sold those shares at a profit, constituting fraudulent and unfair trade practices, and were directed to disgorge ₹60,72,000 each plus interest totalling ₹2,72,06,222.
Full text
Page 2 of 13 disgorge the amount equivalent to the illegal profits should not be issued against them as a remedial measure, in order to protect the interest of the securities market and the investors and to prevent the noticees from retaining the ill gotten gains.
Page 3 of 13 6. In pursuance of the proceedings initiated under the SCN, another opportunity of personal hearing was granted to the noticees before me on November 12,
Page 4 of 13 - The documents provided along with the SCN are insufficient and incomplete to conclude the allegation of disgorgement. The documents relied upon inter alia refers to the transactions and bank statements of the third party, for which the noticees do not have any knowledge. The noticees had no role to play in the alleged manipulation. - The preferential allotment made on January 13, 2000, was listed by the VSE on January 17, 2000, which gives the indication of acceptance of the consideration and the compliance of the statutory formalities verified by VSE and therefore no adverse conclusion can be drawn for the application money paid for acquiring the allotment of the shares. - There was credit balance in the account of the noticees with M/s Rajesh N. Jhaveri. As on April 01, 1999, Ms. Harsha M. Shah had to recover `32,29,821, while Shailesh Jhaveri had to recover `3,79,143 from M/s Rajesh N. Jhaveri. On January 12, 2000, `60,00,000 each were paid by M/s Rajesh N. Jhaveri to Ms. Harsha M. Shah and Shailesh Jhaveri. Consequently, there was an advance of `27,70,179 to Ms. Harsha M. Shah and `56,20,857 to Shailesh Jhaveri. Borrowing of funds by the noticees was to subscribe to the shares of OTPL. - The noticees had subscribed to the preferential allotment through cheques by withdrawing the credit balance and finance from M/s Rajesh N. Jhaveri. The said cheques were debited in their respective bank account on January 12, 2000 and got credited in the account of OTPL on
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Source: SecMarx — sebi:WTM/PS/59/IVD/ID-03/JAN/2012. 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.