SAT upholds Sebi order against two

SAT in its order said that it cannot “find any fault with the findings of the whole-time member (of Sebi) that amount of unlawful gain in case of each appellant is Rs 60,72,000”.

Sebi had directed the two individuals to surrender the profits — of Rs 60.72 lakh each — earned by them from fraudulent trading in shares of OjasTechnochem Products. They were also asked to pay Rs 75.31 lakh each as interest.

The tribunal modified the order to the extent that the 12 per cent interest — to be levied on the gains made by each of them — would be applicable only if they fail to make the payments within 45 days of the “impugned order”.

In an order dated January 25,2012,Sebi had directed Jhaveri and Shah to disgorge unlawful gain of Rs 60.72 lakh each and also pay Rs 75.31 lakh each based on simple interest of 12 per cent per annum on the unlawful gain for the period January,2000 to May,2010.

Sebi had found that the two individuals got preferential allotment of 6 lakh shares each of OjasTechnochem Products without actual infusion of funds by them as consideration.

The two sold these shares subsequently at an average price of Rs 10.12 apiece making illegal profit of Rs 60.72 lakh each. This,according to Sebi was violation of the provisions on prohibition of fraudulent and unfair trade practices.

On completion of the proceedings,Sebi issued a fresh show-cause notice on February 29,2008 initiating disgorgement proceedings against the two entities and passed the final order in January 2012.

Later,the two approached the tribunal against Sebi’s order.

The tribunal on the issue of interest charged on Jhaveri and Shah observed that when the disgorgement proceedings itself were initiated by the issue of a show-cause notice on February 29,2008,the interest could not be charged from January,2000.

“The amount of disgorgement got crystallised only on passing of the order on January 25,2012,” SAT said.

“If any interest is to be charged,it can be charged only from the date of expiry of 45 days of the passing of the impugned order,” SAT noted.