Genuine retail IPO allotment and lawful secondary-market transfers do not prove cornering or justify disgorgement without illegal gain.

Genuine retail IPO applicants who applied with their own funds were not shown to be mere name lenders, and subsequent off-market transfers of allotted shares did not by itself prove cornering of retail shares or a fictitious benami network. The material relied on, including common addresses, alleged signature differences, and transfer timing and price, was found insufficient to establish manipulative control or the role of key operators. As the alleged wrongful cornering and manipulative conduct were not proved, the basis for disgorgement also failed. Disgorgement requires proof of unlawful gain arising from illegal conduct, and it could not be sustained on these facts.

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Issues: (i) Whether the appellants cornered shares meant for the retail segment of the IPO and acted as key operators in a manipulative scheme; (ii) whether the directions for disgorgement of alleged unlawful gains could be sustained.

Issue (i): Whether the appellants cornered shares meant for the retail segment of the IPO and acted as key operators in a manipulative scheme.

Analysis: The record showed that the 553 demat account holders were genuine investors who had applied in the retail category with their own funds. Once genuine retail allotment had been made, the subsequent off-market transfer of shares to the appellants did not by itself establish cornering of shares in the primary market. The material relied upon by the Board, including common addresses, alleged signature differences, and the timing and price of transfers, was insufficient to prove that the account holders were mere name lenders or that the appellants controlled a fictitious or benami network. The appellants also did not fit the Board's own definition of key operators, because they had not received shares from fictitious accounts and had not transferred shares to financiers as part of the alleged scam structure.

Conclusion: The allegation of cornering of retail IPO shares and the finding that the appellants acted as key operators were not proved and were held against the Board.

Issue (ii): Whether the directions for disgorgement of alleged unlawful gains could be sustained.

Analysis: Disgorgement is available only where unlawful gain is established as the result of illegal conduct. Since the finding of wrongful cornering and manipulative conduct failed, the premise for ordering disgorgement disappeared. The appellants' purchases and sales in the secondary market, on the facts found, did not constitute unlawful conduct warranting equitable repayment of gains.

Conclusion: The disgorgement directions were unsustainable and were set aside.

Final Conclusion: The appellate challenge succeeded in full, the impugned directions were annulled, and no monetary or market-restrictive consequence survived against the appellants.

Ratio Decidendi: Genuine retail allotment followed by lawful secondary-market sale does not amount to cornering of IPO shares, and disgorgement cannot be ordered unless unlawful gain is shown to arise from proved illegality.

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