The market regulator had initiated an investigation after it noticed an outburst of short text messages (SMS) during February-March 2013, luring gullible investors to buy the scrip of SMS Techsoft (India) Ltd.
Sebi has also asked these entities to keep in an escrow account an amout totalling over Rs 6 crore "that they have earned as ill-gotten profit during the period March 13, 2013 to October 18, 2013 and any other amount that they have realised as sale proceeds of the shares allotted in the preferential allotment by the company".
The preliminary probe by Securities and Exchange Board of India (Sebi) has found that the promoters and directors of SMS Techsoft were acting in concert with one Rajesh Ranka by issuing new equity shares of the company through preferential allotment to certain connected entities without receipt of full consideration. These entities had offloaded the shares through a fraudulent manner.
Sebi in August had passed an order in a separate case where action was taken against persons luring investors through SMSes with promise of daily returns of up to Rs 75,000 through mobile messages.
While in the earlier case the investors were being lured for unauthorised investment products, the present case pertains to promoters of a listed company being involved as well with the spread of SMSes.
Besides, the Sebi probe found that the company and their promoters had violated norms related to preferential allotment of shares.
Pending detailed probe into the matter, Sebi in an interim order dated November 5 has barred SMS Techsoft, its three promoters, three independent directors, Rajesh Ranka along with 28 entities from dealing in the capital market.
Besides, the market regulator has restrained SMS Techsoft from raising additional capital through capital market, till further directions.
"The sequence of events and pattern of transactions in this case prima facie indicate that the company, its promoters/directors alongwith the Ranka Group, by falsely portraying the transactions as a genuine preferential allotment and by creating artificial volume the company, adopted fraudulent device and artifice to defraud the genuine shareholders of the company," Sebi said in the order.
Sebi had noticed that on March 15, 2012, SMS Techsoft had issued three crore shares through preferential allotment to its three promoters -- V. Jagadish, Akash Jagadish Vital and Anita Srinivasbhatt Kadsanthalai -- and also to 28 entities commonly reffered to as "Ranka Group".
It was observed that majority of the allottees in the preferential allotment were based in Ahmedabad and were connected to Rajesh Ranka, an employee with SMS Techsoft.
As per Sebi, the preferential allotment was designed merely as a book entry wherein Rajesh Ranka circulated about two crore shares of SMS Techsoft back and forth between the company and other allottees.
"The plan was a camouflage to give misleading impression that many people had subscribed to the shares of SMS Techsoft by paying the consideration to the company," Sebi said.
"In fact, the entire allotment money funded by Ranka had been returned to him in the whole plan without the company getting the proceeds of preferential allotment," it added.
Further, Sebi found that the company had misrepresented annual reports for the financial years 2011-12 and 2012-13 that the proceeds of the purported preferential allotment has been utilised to purchase land worth Rs 30 crore.
Once the lock in period for the shares allotted under purported preferential allotment expired on March 12, 2013, the Ranka group entities started creating artificial volume in the scrip by trading amongst themselves and, thereafter, offloaded these shares to common investors, Sebi said.
"The Ranka Group has, in this manner, realised a profit of Rs 6,00,11,512 till October 18, 2013," it added.