Dhaval Mehta, allegedly the brain behind the IPO scam, on Monday moved the Supreme Court challenging the Securities Appellate Tribunal’s (SAT) verdict that upheld Sebi’s decision to bar him from trading in securities market for two years.
A Bench headed by Justice SH Kapadia while seeking to know from Mehta whether his alleged partner in fraud, Ashmi Financial Consultancy Pvt Ltd., was governed by the RBI Act, said that the matter needs to be looked into as ??this is a serious matter??. The bench adjourned the matter for two weeks to enable Mehta to get information on the query raised by it.
The market regulator had barred Mehta from trading in securities after it found that he along with the non-banking finance company had unduly enriched themselves by cornering of shares in the IPOs of Suzlon Energy and IDFC through fictitious demat accounts in the names of alleged friends and relatives sharing common addresses.
Sebi unfolded the scam in 2005 and 2006. Mehta has challenged the SAT?s judgement that confirmed the findings of the Sebi member that the finance company and Mehta had jointly made an unlawful gain of around Rs 1.44 crore from 3,870 and 719 applications in IPOs of Suzlon and IDFC, respectively.
SAT had upheld Sebi?s disgorgement orders on ill-gotten gains in the case of Dhaval Mehta (Rs 72 lakh). Disgorgement of illegal gains are ordered against those who violate the securities laws and make unlawful gains. The tribunal had also imposed a cost of Rs 1 lakh on Mehta and the finance company for indulging in fraud.
Sebi member had on October 21, 2008 held Mehta guilty of violating Sebi (Prohibition of Fradulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and Disclosure and Investor Protection Guidelines.
It had held that Mehta was mastermind in the manipulation of retail segment of Suzlon and IDFC IPOs and had distorted market integrity. Mehta and the financial company had deprived retail individual investors of their legitimate share. It had asked Mehta to disgorge the unlawful gain of Rs 72 lakh and interest thereon at the rate of 10% from August 12, 2008, the date of listing of IDFC IPO, till the date of actual disgorgement within 45 days of the passing of the order.
Sebi had alleged that Mehta along with Ashmi Financial Consultancy Pvt Ltd had opened various demat accounts in fictitious and benami names and had filed large number of applications in IPOs in the category of retail investors with a view to corner the quota for retail investors in the IPOs by the company.