The Securities and Exchange Board of India (SEBI) on 28 September imposed a Rs. 5 lakh penalty on Madhukar Dubey and his proprietorship concern, Magnum Industrial Corporation, in connection with the alleged fraudulent funding of the initial public offering (IPO) of Channel Nine Entertainment Limited (CNE).

Adjudicating Officer Medha Sonparote passed the order, holding Dubey liable as one of eight entities that funded CNE IPO applicants as part of the alleged fraudulent scheme. She observed:

“I further note that in the absence of any police complaint, the Noticee has not demonstrated if he had taken up the issue with the bank in order to initiate the closure of the bank account/ proprietorship firms running in his name without his knowledge as per the Noticee's claims. Therefore, the Noticee's submissions are an afterthought and lack merit.”

The proceedings arose from allegations that connected entities funded the CNE IPO to ensure minimum subscription and successful listing of the scrip on the SME Exchange Platform of the Bombay Stock Exchange.

SEBI had earlier passed an adjudication order on 28 February 2022 imposing a total penalty of Rs. 8 lakh on eight noticees, including Dubey and Magnum Industrial Corporation, in connection with the CNE IPO.

Dubey challenged the order before the Securities Appellate Tribunal (SAT), claiming that his former employer, Vijay Jindal, had misused his credentials to operate Magnum Industrial Corporation and its bank accounts. SAT remitted the matter to SEBI and directed SEBI to give Dubey an opportunity to contest the allegations.

Before SEBI, Dubey denied involvement in the alleged funding transactions. He submitted that he had no financial connection with the transactions, received no money or benefit from them, and that Jindal had misused his credentials.

SEBI noted Dubey's claim that Jindal had opened and operated Magnum Industrial Corporation and N.V. Sales Corporation using his credentials was merely a statement. It also found Dubey's submission that he had attempted to lodge a police complaint against Jindal unconvincing. It observed that the alleged attempt appeared to have been made only after the adjudication order dated 29 February 2024 concerning the alleged funding of the HPC Biosciences IPO.

Further, the Board noted that Dubey had not demonstrated that he had approached the bank to initiate closure of the bank accounts or proprietorship firms allegedly being operated in his name without his knowledge.

Ultimately, it held that Dubey violated the PFUTP Regulations read with Section 12A of the SEBI Act by funding CNE IPO applicants as part of the alleged fraudulent scheme.

Accordingly, SEBI imposed a penalty of Rs. 5 lakh on Madhukar Dubey and Magnum Industrial Corporation.

Tags:    
To Read the full text of the Order CLICK HERE