SEBI Clears Stock Manipulation by Former Promoters of Unitech Ltd.

Unitech Limited, one of the top 2000 public companies according to Forbes Global 2000, is an Indian real estate investment company. The company was founded by 5 partners Ramesh Chandra, Dr. S. P. Shrivastava, Dr. P K Mohanti, Dr. Ramesh Kapur, and Dr. Bahri. Sanjay Chandra was the former Managing Director of Unitech Ltd and was also on the board of Unitech Wireless. Sanjay Chandra, along with his brother Ajay Chandra were Unitech’s promoters.

Why did the investigation take place?

The investigation aimed to determine if the Chandra brothers engaged in fraudulent practices by routing funds through overseas accounts to manipulate the stock of their own company. The investigation was set out to fund the potential routing of funds to the securities market through the Switzerland-based bank UBS AG between April 1, 2006, and March 31, 2008. 

Investigation’s Leadings:

The investigation revealed that the employees of UBS AG communicated with the Chandra brothers, allegedly at their request, to subscribe to the Pluri Emerging Companies PCC Fund. During the investigation, SEBI examined several bank statements and communication. One peculiar credit transaction of USD 8 million from Unitech’s account with Canara Bank to Unitech Overseas Ltd.’s UBS account in Zurich in September 2008 was scrutinized. The investigation suggested that funds transferred from Unitech’s Indian accounts to its overseas subsidiaries were halted at UBS accounts and later routed to Pluri for purchasing Unitech shares. While the investigation inferred that the Chandra brothers regularly transferred funds to foreign subsidiaries, the end-use of these funds remained untraced due to a lack of documentary evidence.

Proceedings:

Referring to the Supreme Court decision SEBI held that due to an absence of a high degree of probability and substantial evidence in cases of alleged fraud and manipulation. These general allegations without specific particulars are insufficient to substantiate such serious charges. Therefore, SEBI held that the allegations against the Chandra brothers could not be established. Consequently, it held that no further action was warranted under the provisions of the SEBI Act, 1992, and the PFUTP Regulations, 2003.

Conclusion: Due to a lack of sufficient corroborative evidence on former promotors dealing indirectly with Unitech securities and employing manipulative and deceptive practices for the purchase and sale of securities, SEBI closes the probe after years of investigation.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.