SC upholds SEBI's penalty against B P Equities for violation of norms

SEBI, B.P. Equities

The Supreme Court on July 17 upheld a penalty of Rs 20 lakh imposed by the market regulator Securities Exchange Board of India (SEBI) against B P Equities Private Limited for violation of Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market Regulations (PFUTP), 2003.

In 2021, SEBI had imposed the penalty on the company after noticing that it had enabled some abnormal activities in the Ruchi Soya scrip.

Ruchi Soya Industries Ltd.  went through the resolution process in 2020 after which the share of the company was reduced by 99 percent. The new promoters of the company  got shares in the ratio of 100:1 i.e. for every 100 shares in the company prior to the resolution plan these shareholders got 1 share each. Thus, new promoters holding became 98.87 percent which were under lock in period till February 15, 2021. The remaining 1.13 percent stock was the only free float available in the market. It was an illiquid stock.

SEBI noticed abnormal activities in the scrip from January to May 2020, im these five months, SEBI noticed that while the opening price was Rs. 16.1, it went to Rs. 541.35. Upon investigation, SEBI found that B P Equities had had placed buy orders far greater than the available market float, while available free float available in the market was 0.33 crore shares, the buy order quantity added by these appellants was 10.92 crore shares. Further,  42 percent orders of  B P Equities were cancelled by the stock exchange’s system due to insufficient collateral. B P Equities had also deleted 56 percent of the order in a matter of seconds, however it was visible on the stock exchange platform for more than 5 seconds.  Therefore, it was found that all these orders were not genuine orders in these illiquid stocks.

SEBI imposed a penalty of Rs 20 lakhs on the company for such a practice in 2021, the Securities Appellate Tribunal (SAT) upheld the order of SEBI in February 2023. The company had approached Supreme Court against this penalty.

The SC dismissed B.P. Equities after noting that it would not interfere with SEBI's order.