Fight against black money: Sebi bars 59 entities

Last Updated 20 August 2015, 16:09 IST

In a fresh clampdown on entities misusing stock markets for evading taxes, regulator Sebi today barred 59 entities, including HNIs, from securities markets and also referred the case to the Income Tax Department for further investigations.

The banned entities include Riddisiddhi Bullions, Woodland Retails Pvt Ltd, Mahakaleshwar Mines & Metals Pvt Ltd Shir Commodities & Futures (P) Ltd, Gyandeep Khemka, Ashok Kumar Damani, Jaideep Halwasiya, Swaran Financial, Gurmeet Singh and Vision Sponge Iron.

Securities and Exchange Board of India (Sebi) found that there were several entities who consistently made significant loss and others who consistently made significant profit by executing reversal trades in stock options on the BSE.

The trading pattern of both loss-making and profit-making entities in this case fail to justify any of the normal strategies of hedging, speculation and arbitrage.

While, more than 950 entities have already been banned from capital markets by the regulator for suspected tax evasion of at least Rs 5,000-6,000 crore, Sebi chairman U K Sinha had recently said.

Following today's order, the number of barred entities in such matters has crossed 1,000. However, this the first instance of action on tax-evaders using stock options.

These large number of organised syndicates had set up 'shops' to convert black money into legitimate-looking funds through the stock market platform, he added.

In the latest order, Sebi found that "loss-making entities were deliberately making repeated loss through their reversal trades in stock options which does not make any economic sense, and the profit-making entities were facilitating them by becoming their counter-parties and were acting in concert with a common object of intended execution of these suspicious and non-genuine trades."

Sebi said that transactions were conducted to generate fictitious profits/losses for the purpose of tax evasion/ facilitating tax evasion, the matter may be referred to Income Tax Department for investigation and necessary action at their end.

It may also be referred to Financial Intelligence Unit and Enforcement Directorate for necessary action at their end. 

In its order, Sebi has directed that these 59 entities have been "restrained from buying, selling or dealing in the securities markets, either directly or indirectly, in any manner, till further directions."

"I am of the considered view that the scheme, plan, device and artifice employed in this case of executing reversal trades in illiquid stock options contracts at irrational, unrealistic and unreasonable prices" is a fraud on securities market, Sebi's Whole Time Member Rajeev Kumar Agarwal said in his 37-page order.

Besides, it is a possible tax evasion or portrayal of artificial net worth to certain entities, which could be seen by the concerned law enforcement agencies separately, he added.
Sebi had conducted a probe of the stock options segment of the BSE for the period April 1, 2014 to March 31, 2015. 

(Published 20 August 2015, 16:09 IST)

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