Elitecon price manipulation case: SEBI bars promoter, others from stock market dealings

Market regulator SEBI in an ex-parte interim order restrained Elitecon International Ltd and five others from buying, selling or dealing in securities, directly or indirectly, until further orders. The individuals include promoter Vipin Sharma, non-promoter Pawan Kumar Ray and off-market transferees Gaurav Tyagi, Prabhakar Kumar and Sujit Chaturvedi.

SEBI’s interim order stated that the bank accounts of the six noticees would be impounded to the extent of unlawful gains worth Rs 51.26 crore (Rs 51,26,31,101.30). The market regulator alleged that the noticees engaged in fraudulent activities, including failure to file disclosures within stipulated timelines, as well as filing misleading and delayed disclosures, while dealing in Elitecon’s securities.

On Monday, the scrip closed at Rs 48.30, down 92.32 per cent from its adjusted 52-week high of Rs 629.55 apiece. 

“All Noticees are directed to open fixed deposit account(s) in their names so as to credit or deposit the aforesaid impounding amount as per the table with a lien marked in favour of SEBI and the amount kept therein shall not be released without permission from SEBI,” the regulator said.

SEBI added that banks holding the noticees’ accounts had been directed not to allow debits without its permission, except for transferring funds to the fixed deposit accounts.

“Noticees shall not dispose of or alienate any of their assets or properties till such time the impounded amount is credited to fixed deposit account(s), except with the prior permission of SEBI,” it said.

Besides, SEBI asked noticees not yo have any open position in any exchange traded derivative contracts, as on the date of the order. They can square off such open positions within three months from the date of order or at the expiry of such contracts, whichever is earlier, it said.

Explaining the need for an interim order, SEBI said specific disclosures related to the company were either not made, wrongly disclosed, or timed in a manner that could disrupt the orderly functioning of the securities market and allow the noticees to encash maximum gains at the expense of investors.

The regulator said the noticees devised a scheme to first consolidate shares, drive up the stock price, and then offload holdings at artificially inflated levels to retail investors. This was allegedly followed by the creation of artificial demand and information asymmetry through delayed and misleading disclosures.

“Noticees deliberately did not disclose material information relating to the company to the public at large, rather misleading disclosures were made to induce more and more investors to invest in the securities of Elitecon. Such practices have huge ramifications,” SEBI noted.

SEBI’s findings suggested that inflated revenue and profit figures, along with misleading or delayed disclosures, were used to offload shares at elevated prices. These actions were supported by aggressive publicity through press releases and high-value international contracts that prima facie appeared to misrepresent facts and generate artificial investor interest.

“The planting of this false and misleading news/information induced the retail investors to purchase securities,” it said.

The order called for a detailed investigation into violations by the noticees and other suspects, including an examination of the company’s books of accounts to present a true and fair view of its financials. SEBI also directed the appointment of a forensic auditor, with Noticee Nos. 1 and 2 required to cooperate and provide all necessary information.