Author: Mohan Kumar K P, Sathyabama Institute of Science and Technology
Headline of the Article
Ketan Parekh’s scam affected the Indian stock market in an enormous manner using the instability of the regulations pertaining to the same. The scam was so organised that no one could figure out the damages occurred to the Indian stock market. On the contrary, Ketan Parekh couldn’t handle when the market started to lose its stability when the damages started to maximize gradually. The damages to the market were intense as he had a group of companies who accompanied to do the scam with him, notably Basukinath Properties and APR Properties led to a major stumble in the stock market affecting the trust of the investors in the Indian stock market.
To the Point
Ketan Parekh was a prominent person in the financial markets and had influence to contrive a scheme that could inflate the prices of the stocks potentially leading to a market crash. He initiated to collaborate with his clients like Rohit Salgaocar and several other groups and traded in larger scale causing major problems in the market to the investors. The repeated incidents and attempt to manipulate the market made the fact clear that there should be a proper regulation to prevent the scams and to stabilise the market as there were no specific regulations during the period (late 1990s) as the financial scams were reverberating.
Use of legal jargon
Ketan Parekh’s case being a prominent one in the history, there are various legal provisions and statutes involved in it as dealt further. Regulation 11 and Regulation 4(a) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995, Section 11, 11B and 11(4)(b) of the Securities and Exchange Board of India Act, 1992. The are the provisions that are explicitly dealt in the case proceedings of Ketan Parekh V. Securities & Exchange Board of India. The provisions explicitly discussed about the powers of the SEBI prohibiting the transactions that were intended to manipulate the market prices and to temporarily restrain people accessing the market those are prevailing against the integrity.
The Proof
The scam worked really well in the stock market, the loopholes pertaining to the rules were taken as an advantage to manipulate the system. Ketan Parekh was notably a chartered accountant and gave his entry to his career in late 1980s. He was so keen on building connections with big companies to build a strong team and network to operate the scam in an organised and to gain the traction. Ketan operated the scam through companies like Basukinath Properties, APR Properties, GRD Securities and working with them in stock trading and influencing the market made him to be recognised as a prominent person in the stock market.
Abstract
This legal article outlines the scam of Ketan Parekh in the stock market and how it shaped the stock market and affected the same. Ketan Parekh’s scam was considered as one of the most prominent one in the stock market history with the other prominent scams, for instance, the scam of Harshad Mehta in manipulating the prices of the stock. Ketan Parekh, starting his career as a Chartered Accountant in the period of late 1980s, began with forming a team with a group of big companies who were his clients involved in stock trading and manipulated the market and affected the trust of the investors. The article contains a brief overview of the scam and the case of Ketan Parekh V. SEBI, demonstrating the need of stringent regulations pertaining to the stock market.
Case Laws
Delhi Development Authority v. Skipper Construction Company Pvt. Ltd. AIR 1996 SC 2005
The court in this instant case dealt about the evolvement of the corporate entities in promoting the trade and commerce, the court also emphasized that the corporate entities shall not perform illegalities with malafide intention to deceive the common people. In particular to this case, even though Tejwant Singh and his family has established multiple corporate bodies, that shall not be counted as a reason for the court to treat them as an individual body as it is controlled by Tejwant Singh and his family.
Nirmal Bang Securities Pvt. Ltd. Vs. SEBI (2003) 6 Comp. L.J. 20 (SAT)
The court in this case held that when a person or a group of persons indulge in any transactions with related to securities in an intention to deceive or to raise the price of the same artificially, maybe of direct or indirect manner and sell the same for monetary benefit would induce other investors as stock exchange is a platform of fair prices.
Conclusion
Investors like Ketan Parekh were inducing the market hassle free collaborating with top companies, involving in stock trading and manipulating the stock prices and creating fake demands and affected the trust of the investors in the stock market. The scam contributed in shaping to grow and maintain the Indian stock market and regained the trust of the investors.
FAQs
Q1. How did Ketan Parekh manage to manipulate the Indian Stock Market?
Ketan Parekh cleverly organised the scam by collaborating with the top companies by initially working with them as his client and initiated the stock trading and created fake demand and manipulated the stock prices.
Q2. How did the financial scams eradicate?
The government were so keen on making stringent regulations and were more transparent in the stock market leading to regain the trust of the investors.
Q3. What were the negative impacts to the Indian stock market?
The scam impacted the trust of the investors in the stock market due to the manipulation of the stock prices, impacted the economy of the country resulting in major loss the government and to the citizens.
