The markets watchdog found fraud in preferential allotment of convertible warrants of Valecha Engineering Ltd (VEL) to some entities during 2005. It also charged other entities of no-genuine and fraud trade in the scrips of the company.

VEL had made preferential allotment of 14,23,900 convertible warrants, which were to be converted into equity shares at a later date to certain entities. VEL and all preferential allottees are connected with each other.

However, preferential allottees did not pay the full consideration for the allotment of such warrants and VEL allotted such securities to the allottees without getting actual consideration for that and as such was sham.

According to SEBI, some of the entities executed sham transactions in the scrip of VEL thereby creating artificial volumes in the company's shares.

Some others have allegedly indulged in financing transactions and executed sham transactions with the funds received from VEL thereby creating artificial volumes in the company's shares.

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