2017 (9) TMI 1921 - Board - SEBI

Fraudulent IPO - Restraint orders - interim ex parte orders as restrained 238 and 16 entities respectively from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions - HELD THAT - Since, the prima facie findings are not observed in the Investigation reports in respect to aforementioned 216 entities at paragraph 4 the directions issued earlier vide interim orders need not be continued and hence need to be revoked In exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4) and 11B thereof, hereby revoke the directions issued vide interim orders qua aforesaid 216 entities with immediate effect. The revocation of the directions issued vide the interim orders is only in respect of the entities mentioned at paragraph 4 of this order. As regards remaining entities, violations under SEBI Act, PFUTP Regulations, SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 and Securities Contracts (Regulation) Act, 1956 were observed and SEBI shall continue its proceedings against them. A copy of this Order shall be served on the Stock Exchanges and Depositories, for necessary action.

Summary

Issues Involved:

1. Interim orders by SEBI restraining entities from accessing the securities market.
2. Investigation into the role of debarred entities in price and IPO manipulation.
3. Confirmation of interim orders with specific reliefs.
4. Revocation of directions for certain entities based on investigation findings.
5. Continuation of proceedings against remaining entities.

Issue-Wise Detailed Analysis:

1. Interim Orders by SEBI:
SEBI issued ad interim ex parte orders on June 29, 2015, and a corrigendum on January 4, 2016, restraining 238 and 16 entities respectively from accessing the securities market and buying, selling, or dealing in securities, either directly or indirectly, in any manner, till further directions. These orders were issued pending investigation into dealings in the shares of Eco Friendly Food Processing Park Limited ("Eco"), Esteem Bio Organic Food Processing Limited ("Esteem"), Channel Nine Entertainment Limited ("CNE"), and HPC Biosciences Limited ("HPC").

2. Investigation into the Role of Debarred Entities:
Subsequent to the interim orders, SEBI conducted an investigation to examine the involvement of the debarred entities in price manipulation and IPO manipulation of the scrips. The investigation aimed to determine violations of the SEBI Act, 1992, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations).

3. Confirmation of Interim Orders with Specific Reliefs:
The directions issued via the interim orders were confirmed through subsequent orders dated February 17, 2016, June 14, 2016, August 25, 2016, October 27, 2016, and June 15, 2017. However, certain specific reliefs were provided to some entities during this period.

4. Revocation of Directions for Certain Entities Based on Investigation Findings:
Upon completion of the investigation, SEBI found no violations of the SEBI Act and PFUTP Regulations for 216 entities. These entities were categorized based on their involvement as Preferential Allottees, Pre-IPO Transferees, or members of the Trading Group. The detailed list of these entities includes their PAN, name, status, and the scrip they were involved with.

5. Continuation of Proceedings Against Remaining Entities:
For the remaining entities, SEBI observed violations under the SEBI Act, PFUTP Regulations, SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009, and the Securities Contracts (Regulation) Act, 1956. Consequently, SEBI decided to continue its proceedings against these entities.

Conclusion:
SEBI, exercising its powers under section 19 of the SEBI Act, 1992, read with sections 11, 11(4), and 11B, revoked the directions issued via interim orders for the 216 entities mentioned in paragraph 4 of the order, with immediate effect. The revocation pertains only to these entities, while proceedings will continue against the others. A copy of the order was to be served on the Stock Exchanges and Depositories for necessary action.