Manipulating prices of shares: Sebi court sentences 2 men to 4 years in jail

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IN the most severe punishment it has handed out so far, a special Securities and Exchange Board of India (Sebi) court in Mumbai sentenced two men to four years of imprisonment for rigging and manipulating share prices. Prasad Tandel and Prashant Narvekar were on Wednesday convicted under Section 24 (2) of the Sebi Act in two separate cases each. Apart from imprisonment, the men will have to pay a fine of at least Rs 10 lakh each — double the penalty they were to pay as per an earlier order by an adjudicating authority — out of which at least Rs 8 lakh will be paid to market regulator Sebi as compensation.

According to Sebi, Narvekar, through shares of companies named Shree Yaax Pharma and Cosmetics Limited, and Tandel, through Praneta Industries Limited and G Tech Info training Limited, indulged in manipulation. The Sebi, through Special Public Prosecutor Sabiha Ansari, had submitted that due to the manipulation, price of the shares increased from Rs 18.50 on January 10, 2005 to Rs 83.75 on March 14, 2005, a rise of 353 % in 44 trading days. It submitted to the court that the accused traded heavily in these shares and, the price came down to Rs 12.06 on May 12, 2005, causing heavy losses to investors.

After the offence came to light, an adjudicating authority conducted an inquiry in 2007 and found the men to have committed the manipulation and directed them to pay penalty. The two, however, did not pay up and approached other authorities, including the Securities Appellate Tribunal. “Due to the delaying tactics used by the accused, Sebi could not do justice to the investors. Therefore, heavy fine and four years imprisonment have been given to them,” special Judge MG Deshpande said.

“The economic offences, having deep-rooted conspiracies and involving huge loss of public funds, need to be viewed seriously and considered as grave offences attacking the economy of the country as a whole,” he said. The two were taken into custody. An appeal is likely to be filed by them before the High Court.