SC dismisses broker's petition against suspension by SEBI

NEW DELHI: The Supreme Court has dismissed a petition filed by stock broking firm PawanKumar Parmeshwarlal challenging the suspension of its registration for creating an artificial market for Prabhu Steel Industries Ltd's (PSIL) scrip.

A bench headed by Justice C K Thakker dismissed the petition filed by Pawankumar, proprietor of the broking firm, seeking to set aside a Securities and Appellate Tribunal order that upheld the two-month suspension by capital market regulator SEBI.

SEBI, in its investigation, had found promoters, directors and associated entities of PSIL acting through Rajesh Shah Group and Sarita Choudhary, wife of Pawankumar, dealt in PSIL scrip to manipulate its price by creating artificial demand.

Price of PSIL scrip had risen from Rs 34.50 on September 11, 2000 to Rs 82.50 on April 17, 2001 during trading hours.

SEBI had found BSE brokers G R Pandya Sharebroking, Pawankumar Parmeshwarlal and Manubhai Mangaldas Securities (MMS) had transacted in the scrip on behalf of their clients Rajesh Shah Group and Sarita Chaudhary.

They were found guilty for violating SEBI regulations by manipulating prices and inducing the interest of unsuspecting investors.

Rajesh Shah had given PSIL shares to MMS to sell in the markets and the same were purchased by Loco Securities, an associate of Shah. All the shares delivered and received by him and Sarita were registered in the name of Haryana Metals Ltd, which was a family concern of PSIL.

These spot trades were done to suppress the fact that Shah and Sarita were indulging in circular trades that led to price manipulation and creation of volumes. These transactions are banned by SEBI.