Sebi today disposed of a case against REI Agro's former chairman Sanjay Jhunjhunwala and current executive director Sandip Jhunjhunwala pertaining to allotment of preferential shares of the firm.
Last year, the duo were arrested in connection with an alleged bank loan fraud of Rs 3,871 crore.
It was alleged that REI Agro made partial funding of its preferential allotment of shares to the tune of Rs 7.10 crore out of Rs 50 crore to the four preferential allottees through a connected entity.
Sanjay Jhunjhunwala and Sandip Jhunjhunwala being the chairman and managing director of REI Agro, respectively, were accountable for the alleged preferential allotment made in fraudulent manner and therefore, alleged to have violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, Sebi said.
Following this, the regulator had conducted an investigation into the dealings in the scrip of REI Agro for the period August, 2004 to September, 2005 and found that the company had allotted 38,46,154 shares on preferential basis to five entities in March 2005.
The markets watchdog noted that BSE did not give approval for listing and trading of such preference shares within the specified time period and accordingly the company cancelled the shares issued to five entities and refunded the entire amount of Rs 50 crore to allottees during February-March 2006.
"I further observe that after cancellation of shares allotment on preferential basis, entire amount of Rs 50 crore has been returned to the preferential allottees...There is also no material available on record to show that REIAL transferred amount of Rs 7.10 crore directly to the four allottees before/during the issue," Sebi Adjudicating Officer Sangeeta Rathod said.
She further said that the noticees (Sanjay and Sandip Jhunjhunwala) cannot be said to have violated the provision of PFUTP regulations and accordingly, disposed of the case without imposition of any monetary penalty.
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