Sebi levies over Rs 14 crore fine on seven entities for fraudulent trading in Sunteck Realty scrip

The matter pertains to a probe conducted by Sebi between April 2007 and August 2008 on receipt of an alert in its surveillance system with regard to the price movement and trading pattern in the scrip of Sunteck Realty.

Market regulator Sebi has slapped a total fine of over Rs 14.4 crore on five entities, an amount twice the ill-gotten gains made by them while fraudulently trading in the scrip of Sunteck Realty Ltd. Of these, the two entities– Jitendra Joshi and Shripal Shares and Securities Ltd– that have incurred losses are facing a fine of Rs 5 lakh each.

The entities have been penalised for executing circular trades among themselves, thereby violating the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) norms. By trading in the scrip of the firm, the entities made a combined profit of over Rs 7.24 crore.

The matter pertains to a probe conducted by Sebi between April 2007 and August 2008 on receipt of an alert in its surveillance system with regard to the price movement and trading pattern in the scrip of Sunteck Realty.

Sebi noted that scrip price of the realty firm rose from Rs 494.05 on April 02, 2007 to Rs 579.4 on April 30, 2007 and further increased to Rs 1,630.9 on October 31, 2007. It touched a high of Rs 1,957.1 on November 21, 2007 and closed at Rs 1,725 on December 31, 2007. The scrip closed at Rs 1,427.25 on August 31, 2008.

It found that the entities –Chiranjilal Jayaram Vyas, Namdeo H. More, Kishore Bhikaji Giri, Deendayal M. Bohara, Kishorilal Amrutlal Bissa, Jitendra Harivansh Joshi and Shripal Shares and Securities Ltd– executed circular trades among themselves.

They transferred shares through off-market route to a large number of other entities, who then sold the shares in the market so as to give an impression of widespread trading in the scrip of Sunteck. This contributed significantly to the market volume as well as price rise in the scrip, Sebi said.

“In the present case, the Noticees, which are found to be connected to each other, contributed significantly to the market volume in the scrip of Sunteck during the period of investigation, which was as high as around 75-80 per cent in four months,” it added.

Sebi noted that Chiranjilal Vyas made a profit of nearly Rs 3.53 crore, Namdeo More gained over Rs 2.69 crore, Kishore Giri gained Rs 62 lakh, Deendayal Bohara made a profit of Rs 35.4 lakh and Kishorilal Bissa gained Rs 4.47 lakh.

While imposing the fine for violating PFUTP norms, Sebi said a penalty amount twice the ill-gotten gains may be appropriate and levied a total fine of Rs 14,48,18,966.