SEBI Bars 24 Entities From Markets in Sulabh Engineers and Services Scrip Manipulation Case
Moneylife Digital Team 28 January 2023
Market regulator Securities and Exchange Board of India (SEBI) has barred 24 entities from the markets for three years for indulging in price manipulation in the shares of Sulabh Engineers and Services Ltd (SESL). In view of the prohibition on the sale of securities, SEBI also clarified that during the period of restraint, the existing securities holding, including units of mutual funds, of these entities will remain frozen.
Based on a reference received from Kolkata's principal director of income tax (investigation), the market regulator investigated the scrip of Sulabh Engineers and Services. 
The investigation was conducted to ascertain whether there were any violations of the provisions of SEBI Act and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations (PFUTP Regulations) by 150 entities in the scrip of SESL from 1 December 2011 to 7 January 2015.
In an order, Anita Anoop, chief general manager (CGM) of SEBI, says, "In the present case, the company had come out with two preferential allotments. Thereafter, the price of the scrip was artificially manipulated by promoter directors and connected entities, including the preferential allottees which were facilitated by the fact that substantial shares were controlled by the promoter directors and connected entities. These acts of preferential allotments, price manipulation, and subsequently selling substantial shares constitute a scheme. The company, its promoters, and connected entities, including the preferential allottees played their respective roles in order to constitute the above scheme to operate as a fraud in connection with dealing in securities which undermined the integrity of the trading system of the exchange by hampering the price discovery."
The new promoters of SESL Manoj Kumar Agarwal and Deepika Mittal had acquired 60.14% of shares of the company. Moreover, they also acquired the entire outstanding shares of the company (except for 300 shares) through connected entities and made preferential allotment on 21 March 2011 before the start of execution of trades in the scrip on 1 December 2011. Further shares were allotted on a preferential basis to 46 connected entities in March 2012. 
Since the entire free float was given to the connected entities by the promoters, no sellers came forward to sell despite huge buy orders in the scrip, SEBI says, adding the related entities traded and sold minuscule quantities on 116 trading days despite holding many shares. "But for the sell orders, the trades would not have taken place and the price would not have increased as the entire free float was held by connected entities."
After the investigation, 150 entities were sent show cause notice, and 109 were banned from the market. Of these, 68 filed appeals against the order before the Securities Appellate Tribunal (SAT). The Tribunal allowed one appeal, dismissed 31 appeals and remanded 20 appeals covering 32 entities to SEBI.
In reply to show cause notices, many contended that the net positive LTP (last trade price) due to the matching of connected trades with the related entities was too minuscule to influence the market equilibrium.
But the investigation by SEBI for 1 December 2011 to 16 August 2012, found that the price of scrip increased to Rs173.65 from Rs 11. From 17 August 2012 to 1 February 2013, the price of the scrip increased to Rs494 from Rs173.65. 
The investigation concluded that by controlling the supply in the market, selling shares in the minimum lot, and defaulting on delivery of shares on several instances, the price of the share of the company was artificially increased by the connected entities. 
After perusal of SAT orders, submissions by entities, and price rates of scrips, SEBI banned 24 people from the market for three years. These include Divya Agarwal, Geeta Mishra, Sanjay Kumar, Pranveer Singh, Praveen Kumar Mishra, Manoj Agarwal, Vinay Kumar Agarwal, Mridula Agrawal, Narender Kumar, Manisha Sharma, Seema Kapoor, Sanjeev Sanghi, Mahabir Persad Hindu undivided family (HUF), Deepak Kumar Agarwal, Sanjay Kapoor, Sapna Kapoor, Sunil Kapoor, Ashok Kumar Maheshwari, Sanjay Kumar HUF, Arun Kumar HUF, Manish Maheshwari, Mahak Maheshwari, Sajan Kumar Agarwal and Narender Kumar HUF.
These 24 people are also prohibited from buying, selling, or otherwise dealing in securities, directly or indirectly, associated with the market. 
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