Market regulator Securities and Exchange Board of India (SEBI) has barred Global Infratech and Finance Ltd (GIFL), the company directors and 12 other individuals from the securities market for their roles in a fraudulent scheme of trading in the firm's shares.
The company (GIFL) and its directors -- Pravin Sawant and Jagdish Chander Sharma -- have been restrained from the securities market for two years, while others have been barred for six months according to an order passed by SEBI’s whole time member Madhabi Puri Buch.
The other individuals who have been barred include Raj Kumar Sharma, Puspal Chandra, Rajendra Kumar Kothari, Priti Kothari, Saroj Devi Kothari, Dilip Kumar Mandal, Nishant Kothari, Anoop Jain, Anoop Jain (HUF), Ritu Jain, Ammaji Anumolu, Anumolu Harshitha.
All the entities and individuals are also restrained from associating themselves with any listed public company and any public company, which intends to raise money from the public or any intermediary registered with SEBI, during their respective period of restraint.
GIFL was promoted by Radhe Shyam Poddar and Gopal Poddar to carry out the activities of investment, leasing, bill discounting and operations of secondary market and got listed on Bombay Stock Exchange (BSE) in February 1996. In 2012, the company changed its name to Global Infratech & Finance Ltd from Asianlak Capital & Finance Ltd.
SEBI investigated the company for the period between 25 June 2012 to 4 September 2014 into the matter of buying, selling or dealing in the scrip of GIFL to ascertain possible violation of the provisions of the SEBI Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
The market regulator noted during its investigation that Global Infratech and Finance had made two preferential allotments in January and June 2012 and transferred some of its preferential allotment proceeds to three entities.
SEBI’s investigation revealed that certain connected preferential allottees, who were connected to Global Infratech, and thereby also connected to the individuals involved in price manipulation, sold their shares at the manipulated high price. The shares were sold at the inflated and manipulated price for profit.
A common show-cause notice dated 1 March 2018 was issued to all noticees - a total of 46 persons and entities.
In its order, SEBI stated that Global Infratech and its directors were also part of a scheme to manipulate the price of the shares to benefit connected preferential allottees.
“Section 11 of SEBI Act casts a duty on the Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market. For achieving such object, it has been authorised to take such measures as it thinks fit. Thus, power to take all measures necessary to discharge its duty under the statute which is a reflection of the objective disclosed in the preamble has been conferred on SEBI,” the order observed.
“Pursuant to the said objective, PFUTP Regulations have been framed. The said Regulations, apart from other things, aims to preserve and protect market integrity in order to boost investor confidence in the securities market. By executing a fraudulent scheme, as has been executed by the Noticee No. 1 to 10 and 42 to 46 in the instant matter, the price discovery system itself is affected. It also has an adverse impact on the fairness, integrity, and transparency of the stock market. In view of the same and considering the violations committed by the Noticee No. 1 to 10 and 42 to 46, I find that it becomes necessary to issue appropriate directions against them,” the SEBI order added.
“Therefore, the entities have been barred from the securities market for violation of Prohibition of Fraudulent and Unfair Trade Practices norms (PFUTP Regulations). In view of the prohibition on sale of securities, during the period of restraint, the existing holding, including units of mutual funds shall remain frozen.”
In case they have any open position in any exchange traded derivative contracts, as on the date of the order, they can close out/ square off such open positions within 3 months from the date of order or at the expiry of such contracts, whichever is earlier, the SEBI order added.
SEBI has also permitted some of the barred entities to settle the pay-in and pay-out obligations in respect of transactions, if any, which have taken place before the close of trading on the date of this order.