2011 (1) TMI 1585 - AT - SEBI

Summary

Issues Involved:
1. Fraudulent transfer of shares.
2. Non-compliance with regulatory requirements.
3. Failure to replace the share transfer agent.
4. Non-disclosure of promoter shareholding.
5. Imposition of monetary penalties.

Summary:

1. Fraudulent Transfer of Shares:
The Tribunal found that Parsoli Corporation Ltd. and its directors engaged in fraudulent transfer of shares by using forged documents and signatures. The modus operandi involved retaining specimen signature cards and verifying signatures in-house, bypassing the appointed share transfer agent (RTA). The directors transferred shares to their own names or front entities and later compensated shareholders through off-market transactions when caught. The Tribunal affirmed the findings of fraudulent conduct and upheld the penalties imposed.

2. Non-Compliance with Regulatory Requirements:
Parsoli and its directors violated several regulatory provisions, including Section 11 C of the SEBI Act, 1992, Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, and Regulations 53A and 54(5) of the SEBI (Depositories and Participants) Regulations, 1996. The Tribunal noted that the fraudulent activities were part of a "carefully crafted strategy" that damaged market integrity and investor confidence.

3. Failure to Replace the Share Transfer Agent:
Despite a directive from the Board to replace the RTA within six months, Parsoli failed to comply. Consequently, the Tribunal upheld the order restraining Parsoli from accessing the securities market for six months.

4. Non-Disclosure of Promoter Shareholding:
Parsoli did not furnish the shareholding details of promoters and promoter group to BSE, violating Clause 35 of the Listing Agreement. Additionally, Parsoli failed to cooperate with the investigating officer, violating Section 11 C of the SEBI Act. The Tribunal upheld the order restraining Parsoli from accessing the securities market for one year.

5. Imposition of Monetary Penalties:
The adjudicating officer imposed substantial monetary penalties on Parsoli and its directors for the violations. The penalties included:
- Rs. 25 lakhs on Parsoli and its managing director and joint managing director u/s 15A(a) of the SEBI Act for violating Section 11C(2) and (3).
- Rs. 3 crores on the promoters' family u/s 15HA of the SEBI Act for violating Regulations 3(a) to (d), 4(1) and (2)(h) of the SEBI (FUTP) Regulations, 2003, and u/s 19G of the Depositories Act, 1996.
- Rs. 70 lakhs on the Kothawalas family u/s 15HA of the SEBI Act for similar violations.
- Rs. 10 lakhs each on other individuals involved.

The Tribunal dismissed the appeals, affirming the penalties and rejecting the argument that the penalties were excessive given the severity of the fraudulent conduct.