2017 (9) TMI 1734 - Board - Companies Law

SEBI revokes orders against 244 entities in Kailash Auto Finance case

In Re: Kailash Auto Finance Limited

SEBI conducted a preliminary examination into the dealings of Kailash Auto Finance Limited due to unusual price movement, leading to findings of fraud and ... Price manipulation in the scrip of Kailash Auto so as to ascertain the violation of securities laws - violation of provisions of the PFUTP Regulations - Held that:- Considering the fact that there are no adverse findings against the aforementioned 244 entities with respect to their role in the manipulation of the scrip of Kailash Auto, it is of the considered view that the directions issued against them vide interim order dated March 29, 2016 and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016 and July 13, 2017 are liable to be revoked. In exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the interim order dated March 29, 2016 and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016 and July 13, 2017 qua aforesaid 244 entities (paragraph 5 above) with immediate effect. The revocation of the directions issued vide the abovementioned orders (at paragraph 7) is only in respect of the entities mentioned at paragraph 5 of this order in the matter of Kailash Auto. As regards remaining entities in the scrip of Kailash Auto, violations under SEBI Act, PFUTP Regulations, etc., were observed and SEBI shall continue its proceedings against them. Hence, the directions issued vide confirmatory order dated June 15, 2016 against the remaining 2 entities shall continue. This revocation order is without prejudice to any other action SEBI may initiate as per law Issues Involved:1. Preliminary examination by SEBI into the dealings in the scrip of Kailash Auto Finance Limited.2. Prima facie findings of fraud and violations of SEBI Act and PFUTP Regulations.3. Ad interim ex-parte order restraining 246 entities from accessing the securities market.4. Confirmatory orders confirming the interim directions against 241 entities.5. Detailed investigation by SEBI into the role of various entities in price manipulation.6. Revocation of interim and confirmatory orders against 244 entities due to lack of adverse findings.7. Continuation of proceedings against remaining entities.Issue-wise Detailed Analysis:1. Preliminary Examination by SEBI:Securities and Exchange Board of India (SEBI) conducted a preliminary examination into the dealings in the scrip of Kailash Auto Finance Limited (Kailash Auto) for the period from January 17, 2013, to December 31, 2015, due to unusual price movement and volume in the scrip on the Bombay Stock Exchange.2. Prima Facie Findings:Upon preliminary examination, SEBI prima facie found the acts of various entities of Kailash Auto Group involving fraud in connection with dealing in securities and on the securities market, violating provisions of the SEBI Act, 1992, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations).3. Ad Interim Ex-parte Order:Accordingly, SEBI passed an ad interim ex-parte order dated March 29, 2016, restraining 246 entities from accessing the securities market and buying, selling, or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions.4. Confirmatory Orders:Subsequently, five confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016, and July 13, 2017, were passed, inter-alia, confirming the directions passed in the interim order against 241 entities.5. Detailed Investigation:Pursuant to the interim order, SEBI conducted a detailed investigation into the role of various entities in price manipulation in the scrip of Kailash Auto to ascertain the violation of securities laws. Upon completion of the investigation, SEBI did not find any adverse evidence/adverse findings in respect of violation of provisions of the PFUTP Regulations in respect of 244 entities (against whom directions were issued vide the interim order and/or confirmatory orders), warranting continuation of action under Section 11B read with 11(4) of the Act.6. Revocation of Orders Against 244 Entities:Considering the fact that there are no adverse findings against the aforementioned 244 entities with respect to their role in the manipulation of the scrip of Kailash Auto, the directions issued against them vide interim order dated March 29, 2016, and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016, and July 13, 2017, are liable to be revoked.7. Continuation of Proceedings Against Remaining Entities:The revocation of the directions issued vide the abovementioned orders is only in respect of the entities mentioned in paragraph 5 of this order in the matter of Kailash Auto. As regards the remaining entities in the scrip of Kailash Auto, violations under SEBI Act, PFUTP Regulations, etc., were observed, and SEBI shall continue its proceedings against them. Hence, the directions issued vide confirmatory order dated June 15, 2016, against the remaining 2 entities shall continue.Conclusion:In view of the foregoing, the interim order dated March 29, 2016, and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016, and July 13, 2017, are revoked with immediate effect for the 244 entities mentioned. This revocation order is without prejudice to any other action SEBI may initiate as per law. A copy of this Order shall be served on the Stock Exchanges and Depositories for necessary action.