2014 (12) TMI 1434 - Board - SEBI

Preferential allotment of shares - preferential allottees acting in concert with Moryo Group have misused the stock exchange system to generate fictitious LTCG so as to convert their unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt - HELD THAT - The entire scheme employed in this case is necessary to find out the role of any other entity therein including the stock brokers involved in transactions as observed in this case connection amongst the concerned entities and the ultimate owners of funds used for manipulating the price of the scrip. While SEBI would investigate into the probable violations of the securities laws the matter may also be referred to other law enforcement agencies such as Income Tax Department Enforcement Directorate and Financial Intelligence Unit for necessary action at their end as may be deemed appropriate by them. SEBI strives to safeguard the interests of a genuine investor in the Indian securities market. The acts of artificially increasing the price of scrip mislead investors and the fundamental tenets of market integrity get violated with impunity due for such acts. As prima facie find that the acts and omissions of Moryo Group and allottees as described above is inimical to the interests of participants in the securities market. Therefore allowing the entities that are prima facie found to be involved in such fraudulent unfair and manipulative transactions to continue to operate in the market would shake the confidence of the investors in the securities market. In this case it is noted that as on November 15 2014 the allottees are still holding 4032070 shares of Moryo that were allotted to them in the aforesaid preferential allotment. The price of the scrip is still around Rs.225 per share which is 9 times more than the allotment price. Unless prevented they may use the stock exchange mechanism in the same manner as aforesaid for the purposes of their dubious plans as prima facie found in this case. In my view the stock exchange system cannot be permitted to be used for any unlawful/forbidden activities. A listed company in such a fraudulent scheme plan device and artifice as prima facie found in this case as convinced that this is a fit case where pending investigation effective and expeditious preventive and remedial action is required to be taken by way of ad interim ex parte in order to protect the interests of investors and preserve the safety and integrity of the market. In order to protect the interest of the investors and the integrity of the securities market I in exercise of the powers conferred upon me in terms of section 19 read with section 11(1) section 11 (4) (b) and section 11B of the SEBI Act 1992 pending inquiry/investigation and passing of final order in the matter hereby restrain the following persons/entities from buying selling or dealing in the securities markets either directly or indirectly. The stock exchanges and the depositories are directed to ensure that all the above directions are strictly enforced. The persons/entities against whom this Order is passed may file their objections if any within twenty one days from the date of this order and if they so desire avail themselves of an opportunity of personal hearing before the Securities and Exchange Board of India on a date and time to be fixed on a specific request received from the said persons.