The Securities Appellate Tribunal (SAT) has asked Sebi to look into issuance of misleading and fraudulent advertisements by a company to promote its shares, but has rejected a plea seeking compensation for losses suffered in purchase of shares due to such ads.
SAT issued this direction while hearing an appeal by two individuals against Vital Communications ltd (VCl), Sebi and the BSE, wherein they sought a compensation of Rs 51.53 lakh for losses suffered by them due to alleged misleading advertisement by this company about its shares.
The appellants said they had traded in the shares of VCl between May 23, 2002 to June 25, 2002, after seeing “misleading advertisements published in various newspapers particularly as regards issue of buy-back as well as bonus shares”.
They contended that both the schemes of buy-back and bonus shares did not materialise at all and in the process they suffered huge losses.
Rejecting their plea for the compensation, SAT said in an order dated April 30 that there is “no directive or mandate in any of the measures empowering Sebi to undertake the task of considering and granting compensation to an investor for the alleged losses he might have suffered due to certain misleading or fraudulent advertisements by a company”.
However, SAT directed the market regulator to look into the complaints about the company falsely representing its shares in print advertisements, thereby deceptively alluring the general public.