Sebi modifies interim order in Lux Industries case

The latest order came after entities made requests for relaxations.

“Keeping in view the requests fervently made by the entities expressing the urgency with respect to their requests for relaxations of the directions contained in the interim order and after considering their peculiar business exigencies, I am of the view that for the time being, till the investigation in the matter reaches its logical conclusion, certain relaxation from the operation of the said interim order may be granted to entities to facilitate their business operations,” Sebi whole-time member S K Mohanty said in an order on Friday.

Therefore, taking into account the fact that the entities have already suffered restraint from the securities market for more than 4 months, it would be in the fitness of things that pending completion of investigation, the restriction imposed in the interim order thereby prohibiting the entities to deal in securities be modified and the said restraint be continued only with respect to dealing in the scrip of Lux Industries, he added.

Accordingly, the regulator modified its interim directions and allowed credit and debit of securities in the accounts of the entities except the securities of Lux Industries.

It clarified that restraint related to buying, selling or otherwise dealing in securities in respect of Lux Industries would not prohibit the credit of shares to be received on account of stock option, bonus etc. issued by the company.

Further, Sebi said that the funds deposited by entities in an interest bearing escrow account will remain in the said account with lien in favour of the regulator until further orders.

The order came after the surveillance alert system of Sebi had detected suspicious trading pattern in the scrip of Lux around the announcement dated May 25, 2021 regarding the audited financial results for the quarter and financial year ended March 31, 2021, wherein substantial increase in profits both on a quarter-on-quarter as well as a year-on-year basis was observed.

Pursuant to the announcement, the scrip of the company registered a price rise by 40.75 per cent on close to close basis within three consecutive trading days.

On an analysis of the alerts on the announcement related to financial results, Sebi had found that a group of connected/related entities were observed to have taken long positions in the scrip. Subsequently, the entities squared off the said long positions, thereby generating substantial profits.