Sebi bars over 90 entities linked to Moryo group

Regulator prima facie finds entities indulging in unfair trade practices

The Securities and Exchange Board of India (Sebi) on Thursday barred over 90 entities connected to Moryo Industries from accessing capital markets; making it one of a holistic action by Sebi against large number of entities in one order.

In the interim order the markets regulator observed that the Moryo industries, its promoters and other related entities indulged in fraudulent and manipulative market transactions to create artificial volumes by trading in the scrip.

In the ex-parte order Sebi, Whole Time Member, Rajeev Kumar Agarwal, also observed that the Moryo Group misused the stock exchange platform to reduce the income tax dues.

"Moryo Group has misused the stock exchange system to generate fictitious long term capital gains (LTCG) to convert their unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt. I prima facie find that the above modus operandi helped the concerned entities to avoid payment of taxes and to show the source of this income to be from legitimate source," said Agarwal.

The market watchdog had earlier received a reference from the Income Tax about Moryo Industries that they had used the preferential allotment route for claiming long term capital gains (LTCG).

Interestingly, during the examination period of FY 12-13 the company did not have any business activity and entire revenue of over Rs 5 crore was generated through share trading activities in the connected companies.

"The only way the share value could have increased is by way of market manipulation. The traded volume and price of the scrip increased substantially only after Moryo Group and allottees started trading in the scrip," the order stated.

As per the order the average volume increased by 3661 per cent during the examination period and the price increased by 112 per cent.

Sebi will also make a reference of the case to Income Tax department, Enforcement Directorate and Financial Intelligence Unit.