Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs93 lakh on eight, including promoters, chairperson and managing director (CMD) and directors, while directing three of them to disgorge Rs22.80 crore, the unlawful gains earned by manipulating the share price of Vikas Proppant and Granite Ltd (VPGL), with an interest of 12% pa (per annum). SEBI also barred these eight entities from markets for three years. Those penalised by SEBI include VPGL's CMD Bimla Devi Jindal, director Kamini Jindal and company secretary and compliance officer Praveen Bishnoi. VPGL is undergoing a corporate insolvency resolution process (CIRP) vide an order passed by national company law tribunal (NCLT) at Chandigarh on 26 August 2022.
In
an order, G Ramar, chief general manager (CGM) of SEBI, says, "The fraudulent activities of the company and its directors and promoters along with the entities connected or related to the promoters, such as making misleading and false corporate announcements by a listed company, with a view to increase the price and traded volume in the scrip coupled with the mala fide intention of facilitating the connected or related or group entities to offload their shares at a price artificially increased by the false announcements are of serious and grave in nature and are inimical to the interests of participants in the securities market... all the noticees acted as a group and conspired and connived with one another in executing the whole scheme of manipulation."
SEBI investigated buying, selling or dealing in the scrip of VPGL. The investigation revealed several irregularities, including fraudulent allotment of preferential shares to certain entities or persons, including to the company's directors, without any due consideration.
SEBI investigation further observed that the company made misleading corporate announcements and reporting of incorrect financial results or misstatements by the company and its directors or promoters, accompanied by offloading of equity capital of the company by certain connected entities and persons of the company and its directors and promoters, thereby making a profit of Rs22.80 crore at the cost of innocent investors.
Further, the company failed to make relevant disclosures regarding the change in shareholding as required by the relevant provisions of SAST Regulations.
During the investigation period (IP), the company was found to have allegedly made one preferential allotment on 28 December 2018 to Bimla Devi Jindal (noticee no1), Kamini Jindal (noticee no2), Kanta Devi (noticee no6) and Komal (noticee no7) without receiving the due consideration from them. Additionally, all the noticees except Praveen Bishnoi, the company secretary and compliance officer (noticee no8), while acquiring or holding VPGL shares during the IP, failed to make appropriate disclosures under SAST Regulations.
The other noticees were Puneet (noticee No.3), Gourav (noticee no 4) and Ekta Mittal (noticee no 5).
The entities who were charged with a fine of Rs7 lakh each are Bimla Devi Jindal, Kamini Jindal and Ekta Mittal. Puneet and Gourav was finned Rs17 lakh each. Kanta Devi and Komal were fined Rs16 lakh each, and Praveen Bishnoi (Company Secretary & Compliance) was fined Rs6 lakh.
SEBI found that VPGL made several non-genuine and misleading corporate announcements to mislead, lure or influence unsuspecting investors investment decisions to purchase or deal in the Company shares during the IP. This in turn, allowed the promoters to sell or offload a large quantity of their shares of VPGL at higher prices with due rise in demand or interest in the company scrip.
VPGL had made misrepresentations in its financial statements during the investigation period (FY18-19 and FY19-20) and thereby attracted the investors by way of non-genuine positive announcements by the company regarding its financial condition and thereby mislead the investors who invested in the shares of the company based on the published financial figures without knowing the actual financial position of the company, SEBI says.
An investigation into the scrip of VPGL based on an internal alert report received from BSE on the continuous rise and fall in the price of the scrip as well as on receipt of complaint on the SCORES platform alleging price manipulation in the scrip. The investigation was carried out from 22 June 2018 to 30 August 2019.
The price of the scrip opened at Rs1.02 on 22 June 2018 (start of IP), significantly rose and closed at Rs17.85 on 6 May 2019. Subsequently, since 7 May 2019, the price of the scrip of VPGL started to fall and closed at Rs3.76 on 30 August 2019 (end of IP).
"Further, I note from the show cause notice (SCN) that VPGL made multiple misleading and future-looking corporate announcements from 14 August 2018 to 17 April 2019 during the IP. The misleading corporate announcements were alleged as one of the major reasons for the continuous rise in the price of the scrip during the period till 5 May 2019," the SEBI CGM says.
SEBI also mentioned in its investigation that the price fell after that period owing mainly to no tangible progress in the business plans announced by the company and information regarding the disposal of almost all the shares by Bajrang Dass Aggarwal (BD Aggarwal), the main promoter of the company.
It is observed that during the IP, the total income of the company fell to Rs6.96 crore in FY19-20 from Rs52.80 crore in FY18-19. The company's gross profit also decreased to Rs5.04 crore from Rs52.68 crore during the same period.
