Market regulator SEBI has slapped Rs one crore fine on DLF Commercial Developers for trading in derecognised Magadh Stock Exchange.
MUMBAI: Market regulator SEBI on Tuesday imposed a fine of Rs one crore on DLF Commercial Developers (DLFCD) for trading in the shares of Bhoruka Financial Services at the de-recognised Magadh Stock Exchange Association (MSEA).
In an order issued on Tuesday, SEBI said MSEA's renewal for recognition as a stock exchange was at a proposal stage when the transaction in the BFSL scrip took place.
DLFCD is a fully owned subsidiary of realty major DLF Universal, which is in the process of launching an initial public offer to raise over Rs 10,000 crore.
It appears the company was expecting the action from SEBI and had mentioned it in the Draft Red Herring Prospectus.
"There is pending litigation under the securities laws against Bhoruka Financial Services Ltd, one of our subsidiaries... be liable to a penalty which may extend up to Rs 10 million," DLF Universal had mentioned in the DRHP.
Apart from DLF Commercial Developers, SEBI imposed a combined fine of Rs one crore on 11 others on a similar charge.
They include Vivek Agarwal, Umah Agarwal and Siddhartha Agarwal, Satyanarayan Vivek Kumar and Prabhu Securities Ltd.
"The period of trade in the BFSL scrip relates to August 1, 2005 to August 12, 2005, when the proposal to renew recognition of MSEA was still at proposal stage and was to be granted recognition from December 11 2005.
Among the 11 fined by SEBI include Satyanarayan Agarwal and Bhoruka Engineering Ind Ltd, both promoters and sellers of BFSL; Pragya Enterprises, Umah Agarwal (partner of Pragya Enterprises), Viveek Agarwal (partner of Pragya Enterprises).
Passing the order, SEBI Adjudicating Officer Amit Pradhan said: "The violation of the nature like above, involving a corporate entity like DLF... and entities like the promoters of BFSL, which is selling their own company's shares involving Rs 90 crore...the compliances and due diligence level should have been of very high standard and... as such violations need to be dealt firmly."
The entities have been directed to pay the fine within 45 days of receipt of the order.
During investigations by SEBI, it was found that the promoters of BFSL held 198,850 shares in the company, constituting 98.73 per cent of BSFL's equity.
The promoters sold their entire holding in BFSL to DLF Commercial Developers at the rate of Rs 4,490 per share for a sum of nearly Rs 90 crore.
The shares of BFSL were transacted on the MSEA under the permitted category based on application moved by member-broker Rajat Share and Stock Brokers despite being listed on the Bangalore Stock Exchange.
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