Sebi agrees to settle charges against 4 entities in IPO scam

The matter relates to Sebi's investigation into irregularities in Initial Public Offers of various companies including IDFC Ltd and IL&FS Limited during 2003-2005

Market regulator Sebi has agreed to settle charges against four entities for alleged irregularities in the IPO scam of 2003-2005, after a total payment of about Rs 3.3 crore towards settlement charges and disgorgement ill-gotten gains made by them.

As per the settlement reached through regulator's consent mechanism, which allows for settling of charges after payment of certain fees and disgorgement of any illegal gains, the four entities -- Bahubali Shantilal Shah, Lok Prakashan Ltd, Shreyans S Shah and Smruti S Shah -- have collectively made the payment without admission or denial of charges, Sebi said.

The matter relates to Sebi's investigation into irregularities in Initial Public Offers of various companies including IDFC Ltd and IL&FS Limited during 2003-2005.

Sebi said the probe had found that the four entities provided funds to key operators for cornering shares reserved for retail individual investors in IDFC and IL&FS IPOs.

After its preliminary probe, Sebi had restrained the four entities in January 2006 from dealing in shares of IDFC and other ensuing IPOs till further directions.

Pursuant to further investigations, Sebi issued show-cause notices for alleged fraudulent and unfair trading activities by the concerned entities, while proposing a direction to restrain them from securities market for a further period of time and disgorgement of an amount totalling Rs 1.92 crore.

While the proceedings were in progress against them, the four entities offered a settlement of charges through Sebi's consent mechanism.

The settlement proposal was revised further in April this year, after which Sebi's High Powered Advisory Committee recommended the case for settlement on payment of Rs 1.35 crore as settlement charges and Rs 1.92 crore towards disgorgement of ill-gotten gains made by them, collectively.

Sebi said it accepted the recommendations and the four entities have collectively made the payments.

Bahubali Shantilal Shah has paid Rs 17.60 lakh as settlement charges besides Rs 25.14 lakh towards disgorgment money.

Lok Prakashan Ltd has shelled little more than Rs 1 crore to settle the charges in addition to Rs 1.43 crore as disgorgment money, Sebi said.

According to Sebi, Shreyans S Shah has reached settlement by paying Rs 8.32 lakh and another Rs 11.89 lakh as digorgement money. Further, Smruti S Shah has paid Rs 8.40 lakh for settlement and Rs 12 lakh as disgorgment money.

Sebi said that enforcement actions, including commencing or reopening of the proceedings, could be initiated if any representation made by the entities is found to be untrue.

The consent order is effective from November 1.