Companies that were spooked by the market regulator’s order directing the bourses to initiate action against these ‘suspected shell entities’ asked the Securities and Exchange Board of India to withdraw the order.

SEBI, in a communication to the BSE, the NSE and the Metropolitan Stock Exchange on Tuesday, asked them to keep the 331 companies’ shares in stage six of the Graded Surveillance Mechanism (GSM) with immediate effect.

However, a few companies have raised questions about the SEBI move. The companies, in a separate exchange filings, have sought a recall of SEBI’s order, which has affected their shareholders.

J Kumar Infraprojects, SQS India BFSI, Pincon Spirit and Parsvnath Developers have denied the charges of being shell entities.

‘Misconceived’

Prakash Industries said that it has paid more than ₹675 crore in excise duty and income tax in the past three years. “It is therefore clear that the direction is misconceived.”

SQS India BFSI also said that it was shocked to find its name in the list of suspected shell companies. “We have been a dividend paying company and we do not have any pending complaints with respect to dividend payment,” it said in a statement to the bourses.

J Kumar Infraprojects is seeking legal advice on the matter and will represent its case before SEBI.

Parsvnath said: “We are not a shell company by any stretch of imagination,” and added “we have about two lakh shareholders, and our scrip is actively traded on the NSE and the BSE.”

Ready to cooperate

The companies said they will cooperate with SEBI and the exchanges during the investigation.

Market experts also say the issue could have been handled better as some of them are well-known companies with investments from mutual funds and foreign investors. “Even if investors wish to exit from these companies they may not be able to do so,” they added. Securities moved into stage six are permitted to be traded only once a month (on the first Monday of every month) and any upward price movement beyond the last traded price would not be permitted. An additional surveillance deposit of 200 per cent of the trade value would be collected from the buyers. This amount would be retained by the exchanges for five months.

A majority of these companies are apparently facing probes for alleged tax evasion and corporate frauds and have been referred by the I-T Department and SFIO.

Market experts felt that even if SEBI withdraws the notice, there will always be some doubts in the minds of investors. The damage has already been done and it will take quite a long time to get rid of these misconceptions, they said.

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