Mumbai: Market regulator SEBI on Monday slapped Rs 40 lakh penalty on five individuals for fraudulent trade practices in shares of Eltrol Ltd.
In five similar-worded orders, Securities and Exchange Board of India (SEBI) imposed Rs 8 lakh fine each on - Mangalaben A Doshi, Kusum D Rathod, Tarun V Shah, Viral C Shah and Ashwin D Doshi.
The regulator has said that all of them were connected to company/directors of Eltrol and by taking advantage of certain false corporate announcements had indirectly offloaded the company's shares in the capital market thus contributing to the artificial volume and misleading the general investors.
"After taking into consideration all the facts and circumstances of the case, I impose a penalty of Rs 8 lakh... on the noticee (Tarun V Shah) which will be commensurate with the violations committed by him," SEBI's adjudicating Officer Barnali Mukherjee said.
Similar rulings were passed against the others as well. A SEBI probe in trading of Eltrol scrip revealed that the price of the shares had risen substantially from January 5 to September 30 in 2005. A substantial variation in the daily volumes was also observed during the period.
The probe found that the past financial performance of the Eltrol had been dismal. However, the company showed improvement in financial performance during the quarter ended June 2005 as announced by the company in its unaudited results.
SEBI noted that the company issued a number of misleading favourable corporate announcements related to bonus issues, acquisition of controlling stake in Nirani Sugars, diversion of funds including overstating sales and profits for the June and September 2005 quarters, among other things.
The regulator observed that during the time Eltrol was making the announcements several entities connected to the firm or its director transferred huge quantity of shares in the off-market.
"...the price rise and increased trading interest enabled the major shareholders to liquidate their holdings," SEBI said.
SEBI said that Mangalaben A Doshi had offloaded 7 lakh shares, Kusum D Rathod (18.27 lakh), Tarun V Shah (10 lakh), Viral C Shah (10 lakh) and Ashwin D Joshi (1.99 lakh) shares in the market.
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