Aug 29, 2012, 08.38 PM IST
The Securities Appellate Tribunal (SAT) on Wednesday asked Sebi to pass final orders within two weeks in two different cases of IPO irregularities, as more than seven months have lapsed since interim penalties were imposed by the regulator in both the cases.
While one case is related to investigation by Sebi of the IPO issued by RDB Rasayans Limited , the other relates to alleged irregularities in the IPO and trading of the shares of PG Electroplast Limited .
Sebi's investigation into RDB Rasayans IPO is primarily focused on disclosures made in the offer documents, the bidding pattern, trading on first day of listing and utilisation of IPO proceeds. During its probe, Sebi prima facie found lack of due diligence on the part of RDB Rasayan IPO's merchant bankers, Chartered Capital and Investment Limited.
Consequently, Sebi through its exparte ad-interim order dated December 28, 2011, restrained the merchant bankers from >taking up any new assignment or involvement in any new public offer from the securities market till further orders.
The merchant bankers later approached SAT, stating that they had amply demonstrated that there was no merit in the allegations against them and Sebi's action of not passing the final order despite the lapse of more than seven months "calls for setting aside the impugned order".
The appellants told the Tribunal that they had filed a reply to Sebi's show-cause notice on January 14, 2012, after which a personal hearing was granted on March 16, 2012 and written submissions were filed on March 20, 2012.
"Although a period of more than five months have lapsed since the grant of a personal hearing, the respondent (Sebi) has not passed any order thereafter and the appellants are restrained from carrying out its activities under the exparte ad-interim order," the SAT order observed.
Sebi's counsel told the tribunal that the regulator is still looking into the matter, but it would pass necessary orders after considering reply of the appellants within a period of two weeks.
While observing that it might not be appropriate to intervene in the case which was still under investigation, SAT has directed Sebi to complete the investigation within two weeks.
"In case the board is not able to pass appropriate order within the stipulated time, the ex-parte ad-interim order passed against the appellants shall stand vacated," SAT order said, while disposing the appeal.
In the second matter, SAT observed that PG Electroplast came out with an IPO in September, 2011 and its shares were listed on the NSE and BSE on September 26, 2011.
During its probe into alleged irregularities in the IPO and trading of the company's shares, Sebi prima facie found that Alfa Fiscal Services Private Limited, an investment company, and its directors traded in the scrip of this company with an intention to push the share price higher.
Pending further probe, Sebi passed an ex-parte ad-interim order on December 28, 2011 against various entities including Alfa Fiscal Services and its directors, barring them from the securities market till further directions.
However, Alfa Fiscal Services and two of its directors, Hardik Bagadia and Bhavesh Sheth, later approached SAT, saying they filed a reply to Sebi's showcause notice in the matter on January 16, 2012, denying the allegations.
They also attended a personal hearing in May and later requested Sebi in July to vacate the earlier order.
The appelants told the SAT that Sebi has not taken any action so far and that they are being denied the right to trade in the market because of the interim order.
According to the appellants, they have amply demonstrated that there is no merit in the allegations and the directions against them are not required, SAT observed.
The appellants have further said that Sebi's action of not having passed a final order, despite a lapse of more than 7 months, is a major irregularity on the part of the regulator and calls for the order to be set aside, the SAT order said.
The Tribunal was also informed that Bhavesh Sheth in March requested Sebi that he be allowed to operate his demat account for time being to enable him to pay off his liabilities, on which no action has been taken so far.
Sebi's counsel told the Tribunal that there are 100 parties involved in the investigation and the regulator is still looking into the matter. However, with regard to the appellants before the Tribunal, Sebi said that it would pass its final order within a period of two weeks.
After hearing the matter, SAT observed that the matter is still at the investigation stage and it does not call for any interference by it at this stage.
"In so far as the appellants are concerned, since they have already filed their reply and a personal hearing was also granted way back on May 3, 2012, we see no reason why the Board cannot pass a final order after considering the reply filedby the appellants," the SAT order said.
The Tribunal disposed of the appeal with a direction to Sebi to pass a final order within two weeks and to also consider the request made by Bhavesh Sheth.
"In case the Board is not able to pass appropriate order within the stipulated time, the exparte ad-interim order against the appellants shall stand vacated," the Tribunal ruled.
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