Securities market regulator SEBI has restrained 246 entities from the capital markets, in the matter of Kailash Auto Finance scrip for misuse of the stock market system in generating bogus LTCG (long-term capital gains) as this is exempt from tax.

In an ex-parte interim order on Tuesday, SEBI restrained these entities including the company Kailash Auto Finance and its promoter-related entities Sri Karani Exports Pvt Ltd, Radhashyam Dealtrade Pvt Ltd and Build Con Finance till further directions with immediate effect.

Price rigging From the preliminary examination SEBI observed that the scheme of reduction of share capital and amalgamation were the mechanism adopted by the Kailash Auto to dubiously increase its value of market capital significantly.

Subsequent to acquisition of management and control of Kailash Auto by Careful Projects Advisory Ltd (CPAL) and Panchshul Marketing Ltd (PML), the price of the Kailah Auto was rigged by 230 per cent during January 2013 to to June 4, 2013 (Patch-1). During Patch-1, the scrip was an illiquid one and there was negligible trading therein at that time.

Inducing the gullibles During this period the price was manipulated by the connected parties who traded under pre-meditated plan.

The order observed “The manipulation in the traded volume and price of the scrip by a group of connected entities as observed in this case has potential to further induce unsuspecting and gullible investors to trade in the scrip and harm them. Further, these connected parties have grossly misused the stock exchange system to generate bogus LTCG to aid and help beneficiaries to convert their unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt.”

The regulator also found it to be a fit case to be referred to other law enforcement agencies such as Income Tax Department, Enforcement Directorate and Financial Intelligence Unit for necessary action at their end as may be deemed appropriate by them.

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