Business Standard

Sebi directs 16 entities to disgorge Rs 3-cr unlawful gains in Polytex India case


Press Trust of India New Delhi
Markets watchdog Sebi Thursday directed 16 entities to disgorge over Rs 3 crore of 'unlawful gains' made by them while dealing in the scrips of Polytex India Ltd.
In its ruling, Securities and Exchange Board of India (Sebi) has ordered the entities to disgorge the amount, along with an interest of 12 per cent per annum.
Besides, four individuals have been barred from the securities markets for seven years while one person has been banned for five years.
However, the regulator has not put any restriction on the remaining 11 entities as they have already undergone debarment for a period of more than 5 years.
These directions come after Sebi found that these entities have violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms.
The regulator, which conducted an investigation in the trading of shares of Polytex India, Gemstone Investment and KGN Enterprises during April-December 2012, observed huge rise in their traded volumes and prices of scrips.
Subsequently, the regulator had passed an interim order in May 2013 to restrain 11 of the 16 entities from accessing the securities market since they 'prima facie' violated PFUTP norms.
Further, the regulator confirmed the ban through an order passed in January 2014, while the detailed investigation in the matter was in progress.
During the detailed investigation, Sebi noted, "artificial volume was created by certain connected entities through large scale trading among themselves, without real change in ownership of shares traded among them, for the purpose of increasing volume of trading or influencing the price".
The regulator said its investigating officer has recommended that "no action has been proposed against noticees in the scrip of KGN".
Further, Sebi noted that the entities had made profit in the scrip of Polytex and loss in the scrip of Gemstone.
"The noticees cannot be allowed to set off the losses suffered in one scrip with any other scrip as the same will amount to adjustment of illegal gains against losses suffered while perpetrating the manipulation in one scrip.
"In my view, in cases involving disgorgement for manipulative trades, loss suffered cannot be allowed to be set off against the gains made in other scrip/s as the object of disgorgement will be defeated," Sebi Whole Time Member G Mahalingam said in his 27-page order on Thursday.
Accordingly, Sebi has concluded that all the 16 entities have violated provisions related to PFUTP norms and directed these entities to jointly and severally, "disgorge an amount of Rs 3.05 crore... along with interest calculated at the rate of 12 per cent per annum from December 17, 2012 onwards, till the date of payment".

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First Published: Jan 31 2019 | 7:00 PM IST

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