Market watchdog Securities and Exchange Board of India (Sebi) has barred DSQ Software and its promoter Dinesh Dalmia from capital markets for seven years on charges of fraudulent trading in 1998 that had led to a sharp rise the company's stock price.
Sebi has found that DSQ and the promoter, Mr Dalmia, made misleading statements "which had the effect of inducing purchase of securities by public which in turn increased the market price of the shares of the company".
It said the percentage rise in DSQ share price was considerably higher as compared to that of other companies in the same industry. The increase in other stocks varied from 140 to 340 per cent, whereas increase in the price of the shares of DSQ was around 750 per cent during January-December, 1998.
In its order dated October 3, Sebi said it restrained "DSQ Software Ltd and Dinesh Dalmia from accessing the securities market and also prohibit them from buying, selling, and otherwise dealing in securities market, directly or indirectly, in any manner whatsoever, for a period of 7 years from the date of this order".
The market regulator observed that Mr Dalmia, being the promoter and managing director of DSQ, was responsible for reducing the free float of shares by purchasing shares through his wife, Radha Dalmia, and filing cases in the court directly and indirectly through his affiliated entities which resulted in the stay of transferability of a substantial number of shares, which equated to 28 per cent of the equity capital.
Sebi found that three cases including one against UTI Bank (Kolkata) were filed by Mr Dalmia and other entities related to him to create an artificial scarcity of floating stock.
Further, it was observed that price sensitive statements were made by the company to "create a positive sentiment" for the shares of the company in the secondary market to influence the price of the shares of the company.
These statements were found to be misleading in nature and had induced public to purchase the shares of DSQ which led to an increase in price of its scrip, the order said.
It added that the company had made misleading statement of bagging a certain contract with Japanese firm Unisia Jecs Corp and related to future opportunities for DSQ.
Sebi had conducted a probe into the trading of the shares of DSQ for the year 1998 when a sharp rise in the price of the scrip was observed.
DSQ (formerly known as Square D Software) was mainly promoted by Mr Dalmia and his group entities - Ganapati Commerce, Ganapati Combines, Lexus Exports, and Square D Exports. These firms were wholly owned by Mr Dalmia, his friends and family members.
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