A.S.Lamba, Member - (1.) THIS appeal has been preferred by Purshottam Budhwani (Appellant) v. Adjudication Officer, SEBI (Respondent) in the matter of alleged violation of Regulations 3(a), (b), (c) and (d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) and Section 12A(a), (b) and (c) of Securities and Exchange Board of India Act, 1992 (SEBI Act) and imposition of penalty of Rs. 1,50,00,000/ - under Section 15HA of SEBI Act.
(2.) FACTS of the case in brief are that, Appellant was "Key Operator" or "master account holder" and had opened a large number of demat accounts and bank accounts, which were in the names of non -existent persons or were benami and he acquired shares of various companies in IPOs of 13 companies during 2005, by making applications in benami names with each of the application being of such a value so as to make it eligible for allotment under the retail category. Subsequent to the allotment of shares in IPOs, shares from demat account of such benami/afferent allottees were transferred in the demat account of key operator/master account holder, before listing of such shares on stock exchanges. Key operators then transferred the shares through off -market deals to certain entity referred to as "financier". In some cases key operator retained a portion of shares for himself and thereby earned gains illegally. The entire scheme was designed to corner shares from the quota reserved for retail investors in the IPOs of 13 companies and to make profit by selling the shares. Show cause notice (SCN) No. A&E/BS/68771/2006 dated June 7, 2006 was issued a second time vide letter No. A&E/BS/84867/2007 dated January 22, 2007 through RPAD, for a reply within 15 days from receipt of notice or otherwise it was to be presumed that Appellant has no reply to submit.
(3.) IN the SCN, it is only stated that you cornered/acquired shares in various IPOs of 21 companies during 2003 -05, by making applications in category reserved for retail investors, through the medium of thousands of fictitious/benami applicants and you had opened various demat accounts in fictitious and benami names and made large number of applications in IPOs in category of retail investors in fictitious and benami names. On allotment of shares in the category of retail investors in the IPOs, you had transferred the said shares to your account.;