Sebi directs two to pay Rs 2.72 crore for unlawful gains

Regulator Sebi has directed two individuals -- Shailesh S Jhaveri and Harsha M. Shah – to collectively pay Rs 2.72 crore for their involvement in fraudulent and unfair trade practices during preferential allotment of shares of Ojas Technochem Products in 2000.

"The noticees namely Shailesh S Jhaveri and Harsha M Shah shall disgorge the unlawful gain of Rs 60, 72, 000 each. In addition to the above, they shall also pay Rs 75, 31, 111 each, being the simple interest at the rate of 12 per cent per annum on the unlawful gain of Rs 60, 72, 000, for the period of January, 2000 to May, 2010," the regulator said in an order.

It has directed the duo to pay the total Rs 2, 72, 06, 222 within 45 days failing which they will be "restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly."

The Securities and Exchange Board of India (SEBI) had earlier in 2007 barred Jhaveri and Shah from the market for two years for their involvement in the case.

Pursuant to that, the regulator had issued a show cause notice in February 2008 to them asking why directions to disgorge the amount equivalent to the illegal profits should not be issued against them as a remedial measure, in order to protect the interest of the securities market and to prevent the noticees from retaining the ill-gotten gains.

The show cause notice alleged that the shares allotted to the noticees in the preferential allotment by Ojas Technochem Products (OTPL) on January 2000, were without actual infusion of funds by them as consideration.

Further, Jhaveri and Shah were found to have sold these shares subsequently at an average price of Rs 10.12 per share, making illegal profits of over Rs 1.21 crore.

After several adjourments, the two noticees filed their written submissions in December 2009 and again in March 2010.

After consideration of the submission, Sebi said that OTPL had made the preferential allotment for its 60 lakh shares in January 2000 and of these six lakh shares each were allotted to Jhaveri and Shah.

"The sequence of events show that entities/ persons viz., OTPL, the allottees in the preferential allotment, Top Cassettes Limited and M/s Rajesh N Jhaveri were maintaining their bank accounts in the same bank at the same branch and all these bank accounts bear entries of transactions in relation to the preferential allotment by OTPL," it said.