SC upholds SEBI trading ban on Pyramid Saimira

The Supreme Court on Friday upheld an order by the Securities and Exchange Board of India order restraining the country's leading entertainment conglomerate, Pyramid Saimira, from accessing the securities market for seven years for alleged irregularities in issuing of shares during its initial public offer (IPO).

A three-judge bench headed by Chief Justice S H Kapadia dismissed a petition by the Madras-based company challenging the trading ban after it found that Pyramid had allotted shares earmarked for staff under its IPO to seven people masquerading as employees.

The court also declined Pyramid's plea that since SEBI had penalised its guilty directors, the ban should be lifted as it would hurt shareholders. "We do not want such a firm to continue ... This is not the first time ... earlier also I have dismissed a similar matter,'' said Justice Kapadia speaking for the bench.

On 10 November 2009, SEBI banned the firm after a probe found that Saimira Theatre, which ostensibly issued 4,22,220 shares under its IPO to employees, had allotted these shares to seven ghost employees.

During the inquiry, SEBI found that the seven employees who were allotted the shares were not employed at the company's Bangalore branch and the register did not have their name. Moreover, the shares were sold immediately after the allotment.

Senior advocate C A Sundaram on behalf of the appellant company said the seven-year ban on the firm was against the interest of its shareholders and during such period the entire business of the company would go.