Mumbai: The SEBI has brought to closure its probe against five entities involved in fraudulent trades in Pyramid Saimira shares, one of the biggest insider trading cases in Indian capital markets, even as proceedings have been initiated against the main accused Nirmal Kotecha.
While all five entities have been found "facilitating, aiding and abetting principal offender Nirmal Kotecha in his nefarious securities market related activities", the SEBI said four of them have already undergone the required debarment from the securities markets for more than four years since interim orders were issued against them.
As a result, the restraining order against the four, which also includes two entities indirectly controlled by Nirmal Kotecha, have been removed.
Passing final orders against them, the SEBI however said another entity, Nirman Management Services (presently known as Teakwood Management Services), would undergo debarment from the securities market for a period of total seven years for facilitating Kotecha in his fraudulent dealings.
The period of debarment already undergone by this entity since passage of SEBI's interim order of April 23, 2009 would be taken into account for this seven-year restraint order, the regulator said.
The SEBI also said its decision to remove restrictions from four entities is "without prejudice to the proceedings which have been initiated vis-a-vis Nirmal Kotecha".
The matters relate to one of the biggest cases of insider trading and fraudulent trade. A former promoter Nirmal Kotecha sold a huge number of shares of Pyramid Saimira Theatres in December 2008 after dissemination of false information in media based on a forged SEBI letter asking promoter P S Saminathan to make an open offer.
The forged SEBI letter was alleged to have been planned and executed by Kotecha himself and persons working with him.
Taking action in the case, the SEBI had passed interim orders against more than 200 entities, including Saminathan and Kotecha, on April 23, 2009, barring them from capital markets.
The four entities, including Nirmal's mother Veena Kotecha and grandfather Manilal Kotecha, were barred from the markets at that time for permitting Nirmal Kotecha to use their bank accounts for his fraudulent funding activities.
The SEBI probe later found that Kotecha and entities associated with him, including his friends and relatives, made significant undue profit from the publication of forged letter and the consequent trading activities, which enabled them to offload substantial holdings in shares of Pyramid Saimira.
In different final orders on these four, passed on January 3, the SEBI said the four-years-and-eight-month period of ban already undergone by them will "broadly commensurate" for the the charge of aiding and abetting Nirmal Kotecha in violating PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.
In the case of Nirman Management, the SEBI said by allowing its director, Nirmal Kotecha, to use its bank account for funding activities which operated as a fraud on genuine investors, the entity had "indeed aided and abetted Nirmal Kotecha and thus violated provisions of...The PFUTP Regulations".
However, the market regulator said "the period of prohibition already undergone by Nirman Management Services pursuant to SEBI ad interim order dated April 23, 2009 shall be taken into account for the purpose of computing seven years of prohibition imposed in this order".