The Supreme Court on Friday upheld the seven-year trading ban imposed by market regulator Sebi on Pyramid Samaira Theatre for its fraudulent initial public offer.
Rejecting a petition filed by the Chennai-based entertainment company, a bench headed by Chief Justice S H Kapadia upheld Sebi's direction to stop the company from trading after it found that the company had allotted shares earmarked for employees under its IPO to seven people masquerading as its employees.
The court also declined Pyramid Saimira's plea that since Sebi had already penalised its guilty directors, the ban should be lifted as it would hurt its 40,000 shareholders.
"We do not want such a firm to continue. This is not the first time... Earlier also I have dismissed the similar matter," said the bench which also consisted Justices K S Radhakrishnan and Swatanter Kumar.
In an order on November 10, 2009, the Securities and Exchange Board of India had banned the firm after a probe found that Saimira Theatre, which ostensibly issued 4,22,220 shares under its IPO to employees, had actually allotted these shares to seven bogus/ghost employees.
During the inquiry, Sebi found that the seven employees allotted the shares were not employed at the company's Bangalore branch and the register did not have their name.
Moreover, the shares were sold immediately after the allotment. Senior advocate C A Sundaram, appearing for the firm, submitted that the seven-year ban on the firm was against the interest of its shareholders and during that period, the entire business of the company would be gone.
He further said that the individuals who were responsible for such mess have been punished by the Sebi and they have not challenged the market regulator's order and for their act, 40,000 shareholders can not be punished. He further said the settlement process was going on in this case.
In this regard, Attorney General Goolam E Vahanvati, appearing for Sebi, said that earlier, their wholetime director of Sebi had tried for settlement, but the company had rejected it.
Rejecting this contention, the bench said, "In the matter of fraud, we do not consider settlement... We have dismissed two petitions earlier where bogus people are put just to ensure that share does not go to the people."
