SEBI Penalises 18 Entities ₹2.8 Crore For Manipulating RGRL Scrip Through Telegram Stock Tips

The Securities and Exchange Board of India has imposed penalties totalling Rs 2.8 crore on 18 noticees in the matter of Retro Green Revolution Limited (RGRL), in proceedings involving 21 noticees accused of manipulating the company's shares through Telegram stock tips and synchronized trading.

SEBI also barred eight noticees from accessing the securities market and ordered disgorgement of Rs 2.94 crore with interest from two noticees linked to the Choksi group, who were found to be the ultimate beneficiaries of the scheme.

SEBI Quasi-Judicial Authority Santosh Kumar Shukla, in an order dated March 17, held that the trades were not genuine market transactions but were carried out to create a misleading appearance of active trading in an otherwise illiquid scrip.

The order observed, “these trades were not undertaken for investment or genuine trading purpose but to allure general investors with rosy picture that the shares of RGRL were being heavily and regularly traded whereas the fact was that the entities were just trading amongst themselves.”

Retro Green Revolution Limited, a BSE-listed company engaged in agro-based projects, was originally incorporated as Jolly Tea India Company Limited in 1990. Its shareholding later changed hands, and the Choksi Group acquired a substantial stake, which reached about 42.7% by the end of the financial year 2019.

During the relevant period, directors related to Sanjay Arunkumar Choksi were part of the company's management. The order records that statutory payments of the company were routed through bank accounts linked to him and his connected entities.

SEBI conducted an investigation into trading in the scrip of RGRL for the period from September 1, 2020 to December 31, 2021. The probe was initiated to examine possible violations of the SEBI Act and the Prohibition of Fraudulent and Unfair Trade Practices Regulations after inputs were received regarding price manipulation, including circulation of stock recommendations through Telegram channels.

Following the investigation, show cause notices were issued to 21 noticees alleging that they had acted in concert to create artificial volume, manipulate the price of the scrip, and enable exit of shares held by entities belonging to the Choksi Group.

SEBI found six noticees, including Sanjay Arunkumar Choksi and entities connected to the Choksi group which was linked to the company's management and shareholding, were the main perpetrators of the scheme.

Other noticees were found to have aided the manipulation by funding trades, acting as last-traded-price contributors, or routing trades through connected accounts.

The order noted that recommendations circulated through Telegram channels led to sudden spikes in trading volume in an otherwise illiquid scrip. The regulator observed that the increase in trading took place despite the absence of any significant corporate developments during the investigation period.

Recording its finding, the authority stated, “ It is also an admitted position that the financial results of the company on a quarter on quarter basis had remained constant and no significant corporate announcements were made during the IP. Still, there was substantial and sudden increase in the trading volume in the scrip of the company as noted herein above after the above recommendations were made. This is obviously not a market driven end and cannot be achieved by independent and individual decision as contended by the Noticees. Such trend in illiquid scrip as in this case cannot be just a coincidence.”

SEBI held that the scheme enabled entities linked to the Choksi Group to offload shares to public investors by creating an artificial impression of liquidity and price movement. The order further held that several noticees had traded among themselves to generate volume and mislead investors.

Holding the violations proved, SEBI directed disgorgement of unlawful gains amounting to Rs 2.94 crore along with interest from 15 entities who were found to be the ultimate beneficiaries of the scheme.

The regulator also restrained certain noticees from accessing the securities market for periods ranging from three to five years. Monetary penalties were imposed on several noticees in varying amounts depending on their role in the scheme, while no adverse directions were passed against the remaining noticees.