In the year 2018-19 there were more than 10 Initial Public Offers (IPOs) in the Indian Stock Market. Certain IPOs were marred by controversies including irregular allotment of shares. It was brought to the notice of the

The facts mentioned are similar to a case between the SEBI (Appellant) and Opee Stock-Link Ltd & Anr (Respondents) filed before the Hon'ble Supreme Court. Investigations was made by the officials of the SEBI and in pursuance of the said investigation it was revealed that in the matter of the IPO of the two companies, Jet Airways Limited and Infrastructure Development Finance Company Limited, shares which were meant for Retail Individual Investors (RIIs) had been cornered through hundreds of benami/fictitious demat account holders. As modus operandi was quite similar in applications for shares made in respect of both the companies and parties concerned are common. The reference was made to the issue of Jet Airways India Limited. It was found by the SEBI that respondent in that case in Appeal No. 20 of 2009 before the SAT had received 12,053 shares out of which 3272 shares were transferred before the day of listing of shares of the company with the stock exchange, 3598 shares on the day of listing and 5183 shares after the day of listing. The said shares were purchased through off market transactions from 553 demat account holders, who had been allotted shares of the said company. The shares of the company were listed on 14th March, 2005. The said 553 demat account holders sold the shares to the said respondent at the rate of ₹1170/- per share, though the market value of the said shares was much more than ₹1170/- per share. The said shares were thereafter sold by the said respondent at a higher price. Upon investigation, it was also found that most of those 553 demat account holders were not genuine persons. The Whole Time Member (WTM) of the SEBI came to the conclusion that the dealings of the respondents were not fair and were in violation of the Act as well as the Regulations, and imposed penalty on the respondents. On appeal, SAT set aside the order of the WTM. The SEBI thereafter, challenged the order of SAT before the Hon'ble Supreme Court. The Hon'ble Supreme Court did not find any substance in the submissions made on behalf of the respondents to the effect that the price of the shares of Jet Airways India Ltd. paid by the respondents to the demat account holders was reasonable. Even according to the submission made by the learned counsel, value of the said shares, during the said period varied from ₹1172/- to ₹1339/- and in such circumstances, nobody would believe that all the demat account holders would sell their shares at the same rate, viz. ₹1170/- per share to the respondents. These transactions are, therefore, definitely of fishy nature. The submission to the effect that no Retail Individual Investor had made any complaint to the SEBI is not at all relevant because the SEBI need not act only on the basis of a complaint received. If from its independent sources, the SEBI, after due enquiry comes to know about some illegality or irregularity, the SEBI has to act in the manner as it acted in the instant case. The fact, however, remains that because of the undue advantage which the respondents got, some small investors or RII must have not got the shares, which they ought to have been allotted. In the instant case, not one or a few, but several demat holders had given one particular address and it is also pertinent to note that upon initiation of an inquiry at the instance of the SEBI, most of the demat accounts had been closed by the demat account holders. The submission was also to the effect that the shares could have been sold before they were listed with a stock exchange and such a sale cannot be said to be an illegality. The submission made to the effect that the Tribunal is a final fact-finding authority cannot be disputed. According to the learned counsel, the facts found by the SAT should not be disbelieved by this Court. However, for coming to a definite conclusion contrary to the findings arrived at by the lower authority, the appellate authority, in the instant case, the SAT, ought to have recorded specific reasons for arriving at a different conclusion, but the Hon'ble Supreme Court did not find any sound reason for coming to a different conclusion in the impugned order. On the other hand, the Hon'ble Supreme Court found detailed discussion for coming to a particular conclusion in the order, which was passed by the Whole Time Member of the SEBI and therefore, the Hon'ble Supreme Court did not see any reason for the SAT to disturb the said finding without mentioning any strong and justifiable reason for coming to a different conclusion. Keeping in mind the outcome of the judgement of the Hon'ble Supreme Court in the above case, it can be established that the SEBI can initiate action in the manner as stated above to know about some illegality or irregularity even if SEBI comes to know from its independent sources and on the basis of evidence or submission, SEBI can take necessary steps or actions.