Market regulator bans Padmini Tech directors for unfair trade practices

Market regulator Securities and Exchange Board of India has banned Padmini Technologies Limited and its whole-time directors — Vivek Nagpal, Vishnu Sarup Gupta and Praveen Kumar Jain — from associating with the capital market for a period of five years. After a detailed investigation, Sebi found that they had violated various provisions of Fraudulent and Unfair Trade Practices (FUTP) Regulations. The price of the shares of Padmini (formerly Padmini Polymers) had increased from Rs 60.95 on December 13, 1999 to Rs 266 on March 9, 2000. The probe found that there was nexus between Ketan Parekh entities and the promoter of Padmini and that Padmini and its promoters played a major role in the manipulation of the share price of Padmini. A Sebi probe into the unusual price movement found that Padmini had made preferential allotment of 20000000 equity shares for cash at par to 21 persons/entities in 1999. Padmini had allotted preferential shares to Kolkata and Delhi-based allottees without the actual receipt of the application/allotment money. “These allottees later sold the preferential shares allotted to them in off-market transactions to various entities including Ketan Parekh group consisting of Classic Credits Limited Panther Fincap and Management Services and Triumph International Finance India who had later introduced the said shares in the secondary market,” Sebi wholetime member G. Anantharaman said in his order. The funds received from KP entities and other buyers against the sale of the preferential shares were paid back by the original allottees towards the application/allotment money. Thereafter, the cheques given by the allottees for payment towards the application money were presented and realised by Padmini, Sebi said. “The unusual financial accommodation provided by Padmini to the Delhi and Kolktata based allottees indicated that they did not have their own financial standing to acquire such a large quantity of shares,” Sebi said. This was also corroborated from their bank statements that they did not have requisite funds at the time of issue of cheques for purchase of shares. According to Sebi, the said allottees had served as a temporary parking point and later as a conduit for channelising the shares to KP entities. Sebi had also found that there were delay in transfer/ demat of shares of the company. Padmini and Vivek Nagpal had not cooperated with Sebi during the investigation proceedings, it said.