Continuing its crackdown on penny stocks, the Securities and Exchange Board of India on Wednesday took action against the promoters and directors of Eltrol Ltd, Digital Stocks, Ganpati Finsec and Ind Tra Deco.
Leading brokers dealing in these securities have been asked to stop doing so and the top two stock exchanges and depositories have been alerted to ensure that the Sebi directive is strictly enforced.
The Sebi order bans the directors of Eltrol - Chittarmal Sharma, Deepak Rathod, Sanjay G Tripathi and Niraj Sanghvi -- from dealing in the securities of the company till further orders.
The company has been directed not to alter its capital structure in any manner. The top 10 trading clients at the Bombay Stock Exchange, 25 "apparently connected" entities and 10 brokers have been told not to deal in the stock.
In case of Eltrol, which recently changed its name to "Shree Mahaganga Sugar Mills", Sebi has found an unprecedented increase in the price of the stock listed on the BSE. It has also found an increase in trading interest in the stock.
From March 1, 2005 to September 23, 2005, the stock gained 649 per cent. Its adjusted price (face value: Re 1) opened at Re 0.47 in the beginning of this period, touched a high of Rs 3.52 on September 1, 2005 and declined to Rs 1.85 on September 29, 2005.
Sebi found that there was no identifiable promoter of Eltrol and the directors of the company, who claimed to be professional directors, did not appear to have any knowledge about the industry in which the company was purportedly operating.
"The directors of the company are engaged in courier business, which has no apparent relation with engineering or sugar business that Eltrol is purportedly engaged in," the order said.
With another order, Sebi has banned Dheeraj Kumar Madaan, the proprietor of Punjab-based Digital Stocks, and Ganpati Finsec Pvt Ltd and its directors Devender Mittal, Ritu Mittal and KC Mittal, from dealing in the securities market.
Depositories NSDLDSL have been directed to freeze all demat accounts of Digital Stocks and Madaan maintained with them. Broking firm India Bulls Securities has been directed to freeze the trading accounts of Digital Stocks and Madaan with immediate effect.
Sebi acted on a complaint from investors against Madaan, a business associate of Ganpati Finsec, and a sub-broker of BSE member SAM Global Securities Ltd.
The Sebi order also said appropriate proceedings were being initiated against SMC Securities and SAM Global Securities for alleged irregularities in their franchisee operations. These brokers have been directed to review their systems and procedures and report to Sebi within 15 days.
In another order, Sebi banned the promoters and directors of Ind Tra Deco - Praful K Rokadia, Dipal P Rokadia, Kaushika P Rokadia, Pradeep R Shroff, Uma A Shah and Arvind M Shah -- from dealing in the securities of the company.
Sebi also slapped a similar ban on the "persons acting in concert" with the promoters, certain clients of the company and brokers JN Jhaveri, India Infoline Securities Pvt Ltd, Galaxy Broking Ltd and Fortis Securities Ltd.
The share price of Ind Tra Deco went up 390 per cent from a below-par level of Rs 5.81 on March 1, 2005 to Rs 22.65 (adjusted price for split shares) on September 1, 2005.
"The preliminary examination revealed that the company issued several announcements, including stock split in July-August, 2005 while the promoters, directors and persons acting in concert were off-loading the shares of the company during the said period. Besides, a creation of artificial volume through bulk deals and cross deals was also observed," the Sebi order said.