Valecha Engineering shares today plunged 10 per cent after capital markets regulator Sebi imposed a ban of three years on the company.
The watchdog found instances of fraud in preferential allotment of convertible warrants of Valecha Engineering (VEL) to some entities in 2005. It also charged other entities with no-genuine and fraud trade in the scrips of the company.
Following the development, shares of the company opened on a weak note at Rs 52.20 on BSE, lost further ground and touched an intra-day low of Rs 45.20, down 15.59 per cent.
At the close, it was down 10.18 per cent at Rs 48.10.
Similarly on NSE, the stock opened lower at Rs 52, then tanked 16.38 per cent to hit an intra-day low of Rs 44.65.
At the end of today's trading session, the stock quoted at Rs 48.10, down 9.92 per cent.
VEL had made a preferential allotment of 14,23,900 convertible warrants, which were to be converted into equity shares at a later date, to certain entities. VEL and all preferential allottees are connected with each other.
However, preferential allottees did not pay the full consideration for the allotment of such warrants and VEL allotted such securities to the allottees without getting actual consideration for that and "as such, was sham", Sebi said in an order.
"... Being the MD of VEL and having active role in its preferential allotment, Jagdish Valecha is liable for the acts of VEL with regard to the preferential allotment.
"The preferential allottees and other noticees who acted in concert and in league with VEL and Valecha in the whole scheme of fraudulent preferential allotment are also equally responsible for such fraudulent acts," it said.
According to Sebi, some of the entities executed sham transactions in the scrip of VEL, thereby creating artificial volumes in the company's shares.
