Market regulator the Securities and Exchange Board of India (Sebi) today imposed a penalty of Rs 14 crore on Dushyant Natwarlal Dalal and Puloma Dushyant Dalal, the two financiers for unlawful gains made during the infamous IPO scam of 2003-05.
The two had been accused of making unlawful gains of over 4.94 crore by cornering shares of various companies meant for retail individual investors and the penalty is three times of the amount.
"Considering all the said facts, it is felt that a consolidated penalty of Rs 14 crore on the noticees (Dushyant Natwarlal Dalal and Puloma Dushyant Dalal), which is approximately three times of the unlawful gains made by them, shall be commensurate with the violations committed by them," the Securities and Exchange Board of India said in an order.
The two have been directed to pay up the penalty within 45 days either jointly or individually.
The Dalals had been charged with being financiers to two key operators -- Sugandh Estates and Investments and Purshottam Budhwani.
The key operators had allegedly opened large number of demat accounts in the name of non-existent persons or name lenders and acquired shares of various companies by making applications in fictitious names.
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The key operators subsequently transferred these shares through off-market deals to ultimate beneficiaries who had acted as financiers.
The Dalals were charged with being parties to such unlawful act of cornering shares and acting in connivance with others to make unlawful gains at the cost of other individual investors.
IPOs of major firms like IL&FS, IDFC, FSC Software Solutions, Gateway Distriparks, Provogue, MSP Steel, Nectar Lifesciences, Shoppers' Stop and Suzlon were targeted by the two key operators the Dalals had connived with.
Sebi said: "The noticees provided an aggregate of about Rs 85 crore towards subscription of these IPOs without any security and documentation. They received back the money in cash or in kind [i.e. By way of shares]."
It said that the manner and movement of shares and funds transferred clearly indicate that the transactions were not "normal lending".