The Securities and Exchange Board of India (Sebi) on Wednesday confirmed its interim order dated April 27, 2006 against two individuals and a brokering firm pertaining to the IPO scam for their alleged involvement in diverting shares meant for retail investors in initial public offerings (IPOs) for their gains.
Sebi whole-time director G Anantharaman’s order was against Kamal P Jhaveri, Parag P Jhaveri and Sugandh Estate and Investments Pvt Ltd (SEIPL). The April 2006 interim order directed the parties (collectively referred to as the Jhaveri group) not to buy, sell or deal in the securities market including in IPOs, directly or indirectly, invoking several securities laws.
Reeling out 10 pages of data on demat accounts used, Sebi said that 396 such accounts were used commonly by both Parag Jhaveri and SEIPL; 308 afferent accounts were commonly used by Parag and Kamal Jhaveri; and 120 afferent accounts were used commonly by Kamal Jhaveri and SEIPL for cornering the shares of some of the IPOs out of 21 examined.
Further, eight afferent accounts were commonly used by the three key operators.
From additional documents obtained by them, Sebi found that SEIPL, Parag and Kamal Jhaveri made bulk payments towards charges for maintaining numerous demat accounts.
“Thus, it appears that these demat account-holders were merely name-lenders for SEIPL, Parag and Kamal Jhaveri and the said three key operators had conceived and controlled these demat accounts which is further evidenced by the synchronised off-market transfers of IPO shares prior to listing from the afferent dematerialised accounts to the dematerialised accounts of the three key operators,” Sebi added.
Besides, the regulator found that the application money for the IPOs had been paid from the bank accounts of the three entities on behalf of the afferent dematerialised account-holders / IPO applicants.
Sebi also sought to prove Jhaveri group’s links with the Panchal group. It said, Dipakbhai Panchal and Bhargav Ranchodlal Panchal of the Panchal group and Kamal Priyakant Jhaveri of the Jhaveri group are common directors in Arth Stock Broking P Ltd, a broker of Ahmedabad Stock Exchange. Also, Arth Realty P Ltd. (which has the same address as that of SEIPL) and Devangi Dipakbhai Panchal are the two largest shareholders in Arth Stockbroking, Sebi added.