The Hindu Business Line : SEBI extends ban on promoters from trading in GTB stock

THE Securities and Exchange Board of India has extended the ban on the promoters of Global Trust Bank from dealing in the GTB scrip till June 30. This ruling takes the total duration of the ban to 18 months.

This is expected to affect the proposed rights issue of GTB. Mr Sudhakar Gande, Managing Director, Global Trust Bank, had announced after a board meeting in mid-February that the bank is looking at raising Rs 500 crore-Rs 600 crore through the rights issue.

The ban also extends to the associate entities - Anjanaya Traders Pvt Ltd, Chiranjeevi Traders Pvt Ltd, Gajanan Financial Services Pvt Ltd, Gajmukh Investments Pvt Ltd, Kadrish Finance & Investments Pvt Ltd and Bombay Mahalakshmi Traders Pvt Ltd.

Between November 1999 and February 2000, the promoters and associate entities sold about 1.31 crore shares on National Stock Exchange and Bombay Stock Exchange. These shares were picked up by Ketan Parekh (KP) entities in synchronised manner. The promoters clarified to SEBI that they were not aware of who was buying the shares.

However, the SEBI Chairman noted in the ruling that "I do not agree with the reply of the entities that they were not aware of the details of the buying entities or that they did not know that the buying entities were associated with Ketan Parekh. The number of instances quoted invariably suggest that there is a prior understanding of buying and selling between the sellers and buyers. The preponderance of the probability that can be drawn is that these are synchronized and structured deals."

Remarking on the manipulation of the scrip during this period, SEBI ruled that the scrip was artificially traded with high volumes without there being a natural market for them. Manipulation of the scrip need not be in the prices but can be in the creation of artificial volumes also. "This created artificial interest in the scrip among the investors who were attracted by the high volumes. Therefore, I hold that the scrip of GTB was artificially manipulated by creating high volumes during the above period," stated the ruling.

GTB also had extended loans of over Rs 200 crore to Ketan Parekh during this period. The entities had clarified that the loan transactions were genuine.

They contended that GTB acted as a sole clearing banker for the broking entities of the KP Group and that GTB received obligation statements from NSE and BSE and on the basis of these statements they were able to monitor the unused funds.

The report observed that the reply of the entities is accepted to the extent that the funding was genuine and as per the prevailing practice.

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