Markets regulator, Securities and Exchange Board of India (SEBI) Thursday barred Moryo Industries Ltd, its promoters and others totaling 91 entities from dealing in securities for converting black money into white through trading in the bourses.
According to SEBI during preliminary examination, it noticed huge rise in trading volumes and price off the Moryo stock between Jan 15, 2013 and Aug 31, 2014.
It said few individuals and entities have misused the stock exchange system to generate fictitious long term capital gains (LTCG) so as to convert their unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt.
"The funds were brought in the company through preferential allotment and invested in the shares of connected companies by way of purported loans to a group of companies connected with Moryo and for purposes other than those disclosed," SEBI said.
SEBI said the the preferential allotment route resulted in tax free, ill-gotten gains to the tune of Rs.141 crore based upon the facts available on record.
The whole modus operandi of raising money through preferential allotment, splitting the shares to increase liquidity and then providing exit to preferential allottees (at a prices much higher than that supported by company fundamentals) was a well-devised scheme to convert illegitimate money into legitimate money by misusing the stock exchange mechanism, the regulator said.
Till final orders are passed on the case, SEBI has barred 91 suspected entities from buying, selling or dealing in the securities market - directly or indirectly.