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SEBI v. M/s Opee Stock Link Ltd. & Anr., SC 2016, Civil Appeal No. 2252 of 2010


  • What is the status of irregularities observed with the issue of shares in the nature of IPO?


  • When there is an Initial Public Offering (IPO), the shares are made available to the general public in a specific way so that even small investors, referred to as “Retail Individual Investors” (RII) in the following, also have a good chance to buy shares of newly floated companies or shares of existing companies as and when they are made available to the general public.


  • In an oversubscribed initial public offering, Jet Airways Limited and Infrastructure Development Finance Company Limited issued specific shares. The Securities and Exchange Board of India (SEBI) was informed of this.
  • Following an investigation, SEBI inspectors discovered that hundreds of bogus demat account holders had dishonestly purchased the shares that were intended for small investors through off-market transactions.
  • The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003, Regulations 3 and 4(1), and Sections 12A(a), (b), and (c) of the SEBI Act, 1992, are all directly violated by this.
  • The SEBI investigations revealed that some shares had been illegally purchased through off-market transactions even before the date of listing without knowing the price of these shares, utilising Demat accounts, at rates much below the market price.
  • They also came to the conclusion that the Demat accounts utilized to make these purchases were fraudulent and had been operated for the benefit of whoever was funding these fictitious Demat accounts. The signatures of the account holders varied, and several of them had registered addresses.
  • This was detrimental to the interests of small investors because these shares were reserved for them. There was no explicit decision stating that the Whole Time Member and the Adjudicating Officer of the SEBI’s findings were erroneous in the appeal submitted to the Securities Appellate Tribunal (SAT). The SEBI’s Whole Time Member and Adjudicating Officer’s decision was overturned, nonetheless.


  • The Supreme Court of India noted that shares in the initial public offering (IPO) had been allocated below market value before being listed through demat accounts with identical registered addresses and multiple inconsistent signatures, depriving small investors of their allotted number of shares and leading to unjust enrichment.
  • As a result, the SAT’s order was overturned, and the SEBI’s Whole-Time Member and Adjudicating Officer’s orders were affirmed.
  • The Court further noted that the Securities Contracts (Regulation) Act, 1956 (“SCRA”), which regulates initial public offerings (“IPO”), is a special law designed to control the operation of recognised stock exchanges and prevent undesirable securities transactions; as a result, it shall take precedence over general clauses in the Contracts Act of 1872 and the Sale of Goods Act of 1930 in matters specifically covered by SCRA.