SEBI to hear J.Kumar Infraprojects on `shell company’ classification

Chennai, Aug 9 (IANS) The Securities Appellate Tribunal (SAT) on Wednesday asked the securities market regulator SEBI to hear J.Kumar Infraprojects Ltd objecting to being classified as a `shell company', said the company's attorney.

"The company had approached SAT today (Wednesday) against SEBI, NSE and BSE classifying it as a `shell company'. The SAT had asked SEBI to hear the company on Thursday and take a decision, failing which the SAT would decide the company's appeal on merits," Amit Bikram Dey, Attorney for J.Kumar Infraprojects, told IANS over phone from Mumbai.

He said J.Kumar Infraprojects had made an appeal to SEBI against its order classifying it as a `shell company'.

According to Dey, the action of Securities and Exchange Board of India (SEBI) is a follow-up of a communication from the Ministry of Corporate Affairs listing out several companies as suspected `shell companies'.

Dey said, the SEBI order/circular does not detail any evidence to indicate the companies as `shell companies'.

J.Kumar Infraprojects had listed SEBI and others as respondents in its appeal to SAT.

According to the company, it closed last fiscal with a total income of Rs 1,466.22 crore and a net profit of Rs 105.51 crore. Majority of its clients are government authorities.

Similarly, Prakash Industries Ltd also affected by the SEBI circular has approached SAT for remedy.

The SEBI has imposed trade restrictions on 331 firms which are suspected of being "shell companies".

The aforesaid securities were placed in suspended animation from Tuesday, as exchanges stated that the trade in these stocks shall be permitted only once a month.

The development comes a day after SEBI directed -- National Stock Exchange of India (NSE), Bombay Stock Exchange (BSE) and Metropolitan Stock Exchange of India -- through a letter sent late on Monday evening to initiate action against stocks of these suspected firms.

The SEBI letter forwarded a list of 331 suspected "shell companies" identified by the Ministry of Corporate Affairs.

According to the letter, trade in all the 331 listed securities shall be placed in "Stage VI of the Graded Surveillance Measure (GSM)" with immediate effect.

"If any listed company out of the said list is already identified under any stage of GSM, it shall also be moved to GSM stage VI directly," the letter said.

The stage VI of GSM framework mandates the exchange to allow trade in the identified securities only once a month under its trade-to-trade category.

The framework further mandates that any upward price movement in these securities shall not be permitted beyond the last traded price amongst additional surveillance measures.

The letter further read: "Exchanges shall initiate a process of verifying the credentials, fundamentals of such companies.

"Exchanges shall appoint an independent auditor to conduct audit of such listed companies and if necessary, even conduct forensic audit of these companies to verify its credentials, fundamentals."

Besides, the letter stated that shares held by the promoters and directors in "such listed companies" shall be allowed to be transferred by depositories only upon verification by the exchanges concerned and they shall not be allowed to transact in the security except to buy securities in the said listed company until verification of credential, fundamental by exchanges is completed.