Market watchdog Sebi today slapped a hefty penalty of Rs 17.92 crore on Sumeet Industries and 13 other entities, including company directors and promoters, for indulging in alleged stock manipulation activities.
The Securities and Exchange Board of India (Sebi) has found that Sumeet Industries had issued misleading corporate announcements as well as in collusion with a brokerage firm manipulated stock order book.
Sumeet Industries Chairman Shankar Somani, MD Raj Kumar Somani and three directors -- Bajranglal Somani, Sumeet Kumar Somani, Mahesh Kumar Somani -- were found to be involved in the fraudulent activities. Further, Sumeet Industries' five promoter group firms and three relatives of directors have also been penalised by the market regulator in the case.
In an order today, Sebi said it has imposed a "consolidated penalty of Rs 17.92 crore against all the noticees for the violation of provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations and Sebi Act,".
Of the total penalty, Sebi has slapped Rs 2 crore on Sumeet Industries, Rs 2.25 crore on the company chairman and Rs 3.20 crore on the MD.
Sebi had conducted a probe into the trading of Sumeet Industries shares for the period October 1, 2006 to March 12, 2007 and found that Sumeet Industries made eighteen corporate announcements out of which three were not implemented.
These three announcements pertained to preferential allotment to promoters, further acquisition of 200 acres of land in Bhuj and preferential allotment of shares to Bennett Coleman and Co Ltd and Vishwas Infrastructure.
Noting that Sumeet Industries had not informed the investors regarding its decision of non-implementation of the corporate announcements, Sebi said that this clearly suggests that these "were misleading corporate announcements".
Besides, it was found that the company and its directors acted in concert with SIC Stocks and Services to manipulate the price and volume of the company scrip so as to enable the promoters, directors and related entities to offload their shares at higher prices.
"...For the allegation with regard to manipulation of Order Book, the role of those natural person(s) becomes very important who have also made profit out of this fraudulent/ manipulative practices, therefore higher penalty is warranted against the natural person(s), ie the promoters/directors of SIL (Sumeet Industries Ltd)," Sebi said in the order.
The market regulator also stated that the directors had produced fabricated contract notes during the quasi judicial proceedings by Sebi in the matter.
A contract note which is issued by the brokers is the primary evidence to confirm as to whether any trades were carried out on the stock exchange or not.
