Securities and exchange board of India (SEBI), the capital markets watchdog, has imposed a penalty of Rs 40 lakh on five individuals for indulging in fraudulent trading of shares of Eltrol Limited.

The regulator in orders issued on Monday said the individuals were connected to the company/directors of the company and took advantage of these connections to dupe investors. According to SEBI, they used false corporate announcements to indirectly sell the company’s shares in the capital market, thus creating artificial volume.

SERBI has ordered the five — Mangalaben Doshi, Kusum Rathod, Tarun Shah, Viral Shah and Ashwin Doshi — to pay Rs 8 lakh each as penalty.

The regulator began investigations after irregularities in prices and volumes of the company’s shares showed up between January and September 2005. The probe revealed that the price rose from Rs 0.86 per share to Rs 6.97 per share.

According to the 18-page order, “A substantial variation in the daily volumes was also observed with the lowest volume on July 1, 2005, when only one share was traded and highest being on August 26, 2005 when 1,36,70,180 shares were traded.”

The investigation also revealed that Eltrol, which had showed below-par performance in the past, had announced a significant improvement in its financial performance in the quarter ended June 2005. Around the same time, it was also observed that the company made various “misleading” favourable corporate announcements related to bonus issues and acquiring of controlling stake in Nirani Sugars, the order states.

“After taking into consideration all facts and circumstances of the case, I impose a penalty of Rs 8 lakh...on the noticee (each of the five) which will be commensurate with the violations committed by them,” SEBI’s adjudicating officer Barnali Mukherjee said in the order.