sebi:WTM/RKA/IVD/ID-08/72-95/2014
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Facts / Headnote
Violations of PFUTP Regulations and Takeover Regulations held established against VCL and connected entities; liability for fraudulent preferential allotment and misleading corporate-action advertisements determined on remand
Provisions invoked
- s. 11
- s. 19
- s. 77
- s. 11C
Regulations
- Reg. 7
- Reg. 11
- Reg. 3
- Reg. 44
- Reg. 13
- Reg. 2(1)(c)
- Reg. 4(1)
- Reg. 10
- Reg. 199
- Reg. 4(2)
- Reg. 6(a)
- Reg. 5
- Reg. 3(c)
- Reg. 3(b)
- Reg. 5(a)
Holding
SEBI held VCL, its promoters/directors and 15 connected preferential allottees executed a fraudulent scheme through a self-financed preferential allotment and misleading buyback/preferential/bonus advertisements to create artificial demand and offload shares, violating PFUTP Regulations and Takeover Regulations.
Full text
Order in the matter of Vital Communications Limited Page 2 of 47 Appearances: For the Noticees: Sl. No. Name of the entities Authorised Representative 1 VCL Mr. Bhuwanesh Bansal 2 Mr. Vijay Jhindal Self 3 Ms. Shubha Jhindal Mr. Vijay Jhindal 4 Mr. Vinay Talwar None 5 MFL Mr. Vijay Jhindal 6 Mr. J. P. Madaan Self 7 Mr. R. K. Garg
Order in the matter of Vital Communications Limited Page 3 of 47 National Stock Exchange of India Limited (NSE) on March 7, 2001. During the period April- May 2001, the price of scrip was observed to be very volatile. The price of scrip fell from `33.15/- on April 02, 2001 to `18.40/- on April 30, 2001 and then it increased to `39.05/- on May 18, 2001. Accordingly, SEBI initiated investigation into the price volatility between the period March 28, 2001 to June 19, 2001 (Investigation Period - 2).
Order in the matter of Vital Communications Limited Page 4 of 47 to Anupma. Anupma transferred `1.2 Crore to several preferential allottees. This Fund was then transferred by the preferential allottees including Anupma to VCL as call money. (8) VCL has also transferred `6.5 Lacs to two preferential allottees, namely, Rajat Stock and Cosmo Corporate on January 11, 2000. (9) VCL informed DSE it had made a preferential allotment of 72 lacs equity shares of `10/- each at a premium of `2.50/- amounting to `9 Cr. on December 14, 1999 to the 10 entities, namely, Anupama, Chankya Apparels, Cosmo Corporate, Fashion Tech, Flair Finance, Heritage Corporate, Perfect Car, Rajat Stock, Troop Trac Electrodes and Wisdom Publishing. Further, these entities were shown as suppliers to VCL though their area of enterprise varied from construction to publishing to financing and had nothing to do with the business of VCL, i.e., software development. (10) On the other hand, vide its letter dated November 21, 2002, VCL informed SEBI that it had made preferential allotment of equity shares to the following 15 entities on December 14, 1999. Table No. 1- Preferential Allotment of Shares by VCL (as informed to SEBI)
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Source: SecMarx — sebi:WTM/RKA/IVD/ID-08/72-95/2014. 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.