Sebi bars VCL; promoters from the capital mrkts for 3 yrs

Sebi has barred Vital Communications Ltd (VCL) and 23 entities including the company's promoters from a accessing the capital market up to three years for indulging in fraudulent and unfair activities.
The Securities and Exchange Board of India (Sebi) found that VCL had used its own funds indirectly for subscription of its shares in the preferential allotment, had made repeated false, misleading and distorted corporate announcements, among others.
In an order dated July 31, Sebi has barred VCL and its promoter-directors -- Vijay Jhindal, J P Madaan, Vinay Talwar -- from dealing in the capital market for a period of 3 years.

Besides, the other entities have also been barred for a period of 3 years each with the exception of one Shubha Jhindal who has been prohibited for one year.
Some of the entities barred were preferential allotees to the VCL shares and include -- Anupama Communications, Brut Finance, Chankya Apparels, Chanakya Overseas, Cosmo Corporate Services, Fashion Tech India, Flair Finance. .
"I find that VCL financed more than 20 per cent of the requisite amount for the preferential allotment of its shares to the preferential allottes connected with VCL and its promotes/directors Vijay Jhindal and Vinay Talwar," Sebi whole time member Rajeev Kumar Agarwal said in the order.

Sebi found that payments by VCL to the preferential allottees passed through various entities to finally reach the subscriber bank account and in turn to VCL in the form of application money for the preferential allotment. After the sale of shares, the sale proceeds came back to VCL through layers of entities related to Vijay Jhindal.

"I find that the whole scheme of VCL, its promoters/ directors and the preferential allottess was a ploy to defraud the investors in securities market," Agarwal said.
Among others, Agarwal also said "that the announcement of buy-back of shares was misleading and without any intention to fulfill and its subsequent withdrawal resulted in a pecuniary loss to the investors who were influenced to purchase shares on the basis of the advertisement".

Besides, certain corporate announcements made by VCL were found to have contained price sensitive information and influenced the trading behaviour in the scrip of the company.
VCL had made a preferential allotment of 72 lakh equity shares on December 14, 1999 following which the shares were listed on the exchanges between 2000 and 2001.
Sebi found that the price of the scrip during April-May 2001 had become very volatile. The price of scrip fell from Rs 33.15 on April 2, 2001 to Rs 18.40 on April 30, 2001 and then it increased to Rs 39.05 on May 18, 2001.
Accordingly, the regulator had initiated probe in to the case between the period March 28 and June 19, 2001.