Fresh legal setback for Sebi

The Gujarat high court on Thursday stayed the Securities and Exchange Board of India interim order barring broker Saumil Bhavnagari from dealing in the securities market.

Dharmishta Raval, former executive director in charge of legal affairs at Sebi, who represented Bhavnagari's case before the high court, said the court had upheld her client's plea that the Sebi order, issued without giving him a chance to respond to the allegations, had affected his "means of livelihood". The case will come up for hearing in third week of June.

This is the second such stay against the Sebi order since it was issued on April 27. The Andhra Pradesh High Court on Tuesday had granted an interim stay on a major portion of the Sebi directive against depository participant Karvy.

Market sources said Sebi had filed a caveat at the Bombay high court against the Andhra Pradesh high court's stay on part of its interim order against Karvy.

However, Sebi sources denied such a move and said the regulator would move the division bench of the Andhra Pradesh high court on this. Sebi also had the option of moving the Supreme Court but would move the high courts first, sources added.

Sebi had identified and documented six off-market transactions through which hundreds of thousands of shares of TCS, Sasken Communications and Suzlon Energy worth hundreds of crores of rupees were transferred to Bhavnagari's account before their listing by Roopalben Panchal, one of the prime accused in the scam.

The regulator had claimed that the transactions amounted to prima facia evidence for Bhavnagari's complicity in the illegal scheme and barred him from dealing in the securities market.

It issued the interim order barring the operators and financiers under Section 11(B) of the Sebi Act, which empowers the market regulator to take action against any entity.

According to Raval, the court also accepted her client's argument that he was not provided with a chance to reply to the allegations.

"We told the court that my client did not fund the IPO activity by Roopalben Panchal, but only acted as an investor," Raval said.