Market regulator the Securities and Exchange Board of India (Sebi) has restrained Empower Industries India from dealing in the securities market for six months for resorting to fraudulent and unfair trade practices.
It said the company had facilitated its promoter-director and his related entities in carrying out transactions that led to a rise in the price and volume of the scrip and thereby acted as a fraud on gullible investors.
"Therefore, taking into consideration the facts and circumstances of the case... Restrain Empower Industries India from accessing the securities market and prohibit it from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of six months," the Sebi said in an order today.
The regulator conducted an investigation of the company's scrip following an unusual rise in price and volume during February 16-March 11, 2005.
It revealed that the company had made misleading corporate announcements which led to a spurt in the volume and an increase in the price of the scrip.
It was alleged that there was a concerted effort by the company and its promoter-director, Devang Master, to raise the price of the scrip, according to the Sebi order.
It was found that false corporate announcements were made about expansion plans. Besides, unaudited quarterly results showed profits of the company as significantly higher than what was subsequently reported in its audited results.
Large quantities of the shares of the company were traded on BSE during the same time period, by certain entities that were found to be related to Master, Sebi said, adding that the promoter-director off-loaded shares at significantly higher prices soon afterwards.
"...It was alleged that the announcements by the company were intended only to create investor interest in the scrip and thereby meant to mislead investors... It was alleged that the company projected a false picture to the investors about the performance of the company," the Sebi said.
The regulator had issued show cause notice to the company in September 2009 and studied the reply sent by it.
Refuting the company's contention, Sebi said: "...During the time when the corporate announcements were made by the company certain clients were dealing in large quantities in the scrip. These entities had received/ transferred shares from/ to the promoter-director of the company, Devang Master, in off market transactions."
Sebi said that in such a circumstance it is difficult to accept Empower Industries' corporate announcements were of a bona fide nature.
"It cannot be a mere coincidence that the company made announcements of a board meeting to discuss issues that would ordinarily create interest in the scrip at the same time as related entities of the promoter-director were trading heavily in the scrip," the order said.
