Order against Pink Panther and 6 others in the matter of M/s. Media Video Limited

SECURITIES AND EXCHANGE BOARD OF INDIA

WTM/TCN/IVD/ID3/98/02/2007

Background

 

1.      M/s. Media Video Ltd. (MVL) was incorporated as a public limited company on 03.12.86 and Certificate of commencement of business was obtained on 11.12.86. MVL shares were listed at the Stock Exchange, Mumbai (BSE), the National Stock Exchange (NSE), the Madras Stock Exchange (MSE) and the Delhi Stock Exchange (DSE). DSE was the regional stock exchange for the company. MVL was involved in the business of manufacturing blank and pre-recorded video cassettes. Later, MVL diversified into manufacturing of rechargeable emergency lamps, video and television games, etc.

 

2.      For the purpose of expansion, MVL came out with a public issue of 26.64 lakh equity shares at a premium of Rs.5/- aggregating Rs.3.99 crore in March, 1995. BSE as part of its surveillance mechanism and in suspicion of price manipulation in the scrip of MVL, suspended its trading indefinitely with effect from 10.01.00. Consequently, trading in the scrip was also suspended at the other exchanges. In addition to the above action, stock exchanges were advised to conduct an investigation into the trading in the scrip of MVL and forward the report to SEBI for further necessary action.

 

3.      MSE had in its report submitted that no trades were carried out in the scrip of MVL during the period 01.09.99 to 10.01.00. DSE had found nothing incriminating in relation to the transactions in the scrip of MVL during the said period. BSE had also made a similar observation as DSE in its report and had requested for revocation of earlier suspension order. However, NSE had in its report observed that some entities close to MVL had actively traded in the scrip during the reference period. Also, it was observed that the trading pattern in the scrip seemed to suggest a net buy by the aforesaid entities and creation of artificial volumes during the No Delivery period. Also, the fact that they were net buyers in the scrip after the No Delivery period seemed to suggest that the movement in the price of the scrip without any commensurate corporate development was due to the trading of the aforesaid entities.

4.      At NSE the price of the scrip during the period of investigation had gone up from Rs. 8.20 on September 1, 1999 to Rs.178.70 on December 24, 1999. The scrip was in no delivery period during settlements 1999042N to 1999045N (October 20,1999 to Nov. 16,1999). The steep rise in the price was seen after the no delivery period when the price had gone up from Rs.41.85 to Rs. 178.70 on December 14, 1999. The increase in price was also coupled with increased average volumes which have gone up from 51,938 shares in September, 1999 to 401823 shares in December, 1999.

 

5.      On receipt of the aforesaid reports, SEBI conducted an investigation into the trading in the scrip of MVL during the period of 01.09.99 to 10.01.00. Trading details were collected from the entities involved including the brokers, clients, MVL and banks. It was noted from the trading details of various brokers who had dealt in the scrip of MVL that one Shri Harvinder Kumar Bagai was a common client in the scrip of MVL and was mainly responsible for price manipulation. He had traded through three brokers namely M/s. First National Securities India Ltd. (FNS), M/s. Tees & Toes Finance and Investments Pvt. Ltd. (TTF), and M/s. Moneycare Securities & Financial Services Ltd. (MSF). From the details provided by the brokers, it was observed that Shri Bagai had commenced trading from 30.10.99.

 

6.      FNS in its submissions before SEBI admitted that Shri Bagai was introduced to them by Shri B. C. Sharma who was an employee of FNS. It was also submitted that the whereabouts of Shri. Bagai or Shri Sharma was no more available with FNS.

7.       MVL confirmed that no funds had been transferred either to or from Shri Bagai from MVL, its directors, their relatives or any associate companies at any point of time and they were not related to him in any manner. MVL also denied any knowledge about Mr. Bagai’s involvement in the trading in the scrip of MVL. However the same could not be verified as Mr. Bagai had not complied with the summons issued by SEBI and also had not submitted any information.

8.      The trading details of the entities in  the scrip of MVL during the period of 01.06.99 to 31.01.00 are as under:

Name of the Entity	Bought	Sold	Net
Pink Panther Securities Pvt. LTd.	80,400 75,500 38,700 0 22,700	1,25,300 85,500 0 86,000 22,700	(-) 1,02,200
Tripal Star Fincap Pvt. Ltd.	83,700	1,83,700	(-) 1,00,000
Junkool Holding & Finance Pvt. Ltd.	0	25,000 25,000 22,000	(-) 72,000
S. Arun Portfolio Leasing Pvt. Ltd.	0 0 0	71,100 35,000 9,300	(-) 1,15,400
Sabhya Fincap Pvt. Ltd.	46,100 0	1,46,100 100	(-) 1,00,100
RPB Holdings & Finance Pvt. LTd.	0 0 5,000	44,500 47,000 24,200	(-) 1,10,700
Midway Investment Pvt. Ltd.	0	70,000	(-) 70,000

 

 

9.      In view of the trades carried out by these associate entities and the impact such trades had on the price and volume in scrip of MVL, it was alleged that the entities; 1) M/S. Pink Panther Securities Pvt. Ltd., 2) Triple Star Fincap Pvt. Ltd., 3) RPB Holdings & Finance Pvt. Ltd., 4) Sabhya Fincap Pvt. Ltd., 5) S. Arun Portfolio Leasing Pvt. Ltd., 6) Midway Investments Pvt. Ltd. and 7) Junkool Holdings & Finance Pvt. Ltd. (hereinafter referred to as “the associate entities”) had violated the provisions of Regulation 4 (a) and (b) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995.

 

Show Cause Notice, Reply and Hearing

 

10. Based on the above findings, a notice dated 28.12.04 was issued to these associate entities alleging that they had violated the provisions of Regulation 4 (a) and (b) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 and to show cause why suitable directions under Section 11(4) (b) read with Section 11B of SEBI Act, 1992 may not be issued against them.

 

11. The entities replied on various dates asking for extension of time by about ten weeks for enabling them to file a suitable replies to the show cause notice, as detailed in the table below:

 

 

 

12. The letters sent by SEBI as specified above and the subsequent communications fixing dates of hearing for the entities before me had been returned undelivered with the remark that the company had shifted their address. In view of the same, no replies to the show cause notice were received from any of the entities as mentioned above. But, it is apparent that the entities were aware of the issuance of a show cause notice against them by SEBI, since they had written letters to SEBI asking for extension of time as mentioned in the table above.

 

13. Thereafter, a hearing was scheduled before me on 29.05.06 for the above entities. All the entities appeared before me through their representative and made oral submissions. It was submitted that they had nothing to do with the management of MVL and they were not under the management control of MVL. They submitted that they had disposed of the shares mainly during the no delivery period and has not sold the shares on jacked up price. If they had the intention of jacking up the price, they would have off-loaded the shares at inflated price. It was also stated that these entities were floated by the erstwhile chairman of MVL, Sh. R.P.Bali to give shares of MVL to his daughters. It was further submitted that they had no relationship with Mr. Bagai. It was also submitted that during the relevant period, shares of all infotech and media companies were going up and there was nothing unusual in the price of MVL. Besides the shares sold by these entities were held by them for a long time. It was submitted that they had not violated any provisions of SEBI Act and Rules & Regulations there under, consequently they be exonerated of all the charges levied against them.

 

Consideration of Issues

 

14. I have considered the findings brought out in the investigation conducted by SEBI, the charges made out in the show cause notice and the oral submissions made before me. I have noted that the entities had though asked for an extension of time to file their reply to the show cause notice, and was  offered the same by SEBI, had not filed any reply to the show cause notice issued to them. When the entities were given an opportunity to appear before me on 29.05.06, they had made use of the opportunity and appeared through their representative and made their oral submissions. Therefore, I feel sufficient opportunity has been afforded to the entities for refuting the allegations/ charges made against them in the show cause notice and the entities have also made their oral submission though no written replies were received from them. I am of the opinion that these opportunities constitute sufficient compliance of principles of natural justice. Therefore, I now proceed to consider the charges against the entities based on the material on record and their oral submissions.

 

15. I have seen that the trading pattern in the scrip of MVL during the aforesaid period had led the investigation to conclude that artificial volumes were being created and price was manipulated. The price of the scrip at NSE went up during the No Delivery period (settlement 42 to 45) from Rs.29.55 to Rs.41.85.  After No Delivery period the price of the scrip witnessed sharp increase and went up to Rs.178.70 on 24.12.99. The increase in price was also coupled with increased average volumes which had gone up from 51,938 shares in September, 1999 to 401823 in December, 1999.

 

16. I have noted from the submissions of MVL that these entities were floated by its erstwhile Chairman, Shri R. P. Bali for his daughters and they had separate managements without any connections with the present management of MVL. It was submitted that the entities were not under the management control of MVL. It has also been submitted that they did not have any connection with Mr. Bagai who was instrumental in manipulation of the trading in this scrip. I find from the details of investigation that connection of these entities with Mr. Bagai has not been established conclusively. Hence I find merit in the submission made.

 

17. It has been submitted that they have not taken benefit of the jacked up price as they sold the shares mainly during the no delivery period in normal course and therefore did not violate any Rules & Regulations of SEBI. From the examination of the trading pattern of these entities , I have noted that Junkool Holding & Finance Pvt. Ltd., S Arun Portfolio Leasing Pvt. Ltd., Midway Investment Pvt. Ltd. and RPB Holding & Finance Pvt. Ltd. has only sold the shares ( except buy of 5,000 shares by RPB); hence can not be said to have created  artificial volumes. It is further noted that these entities have sold the shares mainly during the ‘no delivery period’, when the price just started moving up and has not taken benefit of manipulated price.

 

18. From the trading pattern of remaining three entities i.e. Pink Panther Securities Pvt. Ltd., Triple Star Fincap Pvt.  Ltd., and Sabhya Fincap Pvt.Ltd., I find that these entities have bought and sold the shares and have been the net sellers. It is further noted that these entities have sold the shares during the no delivery period, when the price had just started to move up and they had not taken benefit of manipulated price. I also find that the charge of creating artificial volume will also not be sustainable against these entities as the squared up volume is not substantial. This had mainly taken place during the no delivery period wherein delivery had to be necessarily on net basis.

 

19. In view of the aforesaid findings I conclude that the entities namely; 1) M/S. Pink Panther Securities Pvt. Ltd., 2) Triple Star Fincap Pvt. Ltd., 3) RPB Holdings & Finance Pvt. Ltd., 4) Sabhya Fincap Pvt. Ltd., 5) S. Arun Portfolio Leasing Pvt. Ltd., 6) Midway Investments Pvt. Ltd. and 7) Junkool Holdings & Finance Pvt. Ltd. do not appear to have violated the provisions of Regulation 4 (a) and (b) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market ) Regulations, 1995.

 

Order

 

20. Therefore, in exercise of powers conferred upon me under Section 19 of SEBI Act, 1992, read with Section 11 (4) and 11B of SEBI Act, 1992 I hereby direct that no directions need to be issued to 1) M/S. Pink Panther Securities Pvt. Ltd., 2) Triple Star Fincap Pvt. Ltd., 3) RPB Holdings & Finance Pvt. Ltd., 4) Sabhya Fincap Pvt. Ltd., 5) S. Arun Portfolio Leasing Pvt. Ltd., 6) Midway Investments Pvt. Ltd. and 7) Junkool Holdings & Finance Pvt. Ltd. The show cause notices issued to these entities are being disposed of accordingly.

 

 

Place: Mumbai	T C Nair
Date: 23.02.2007	Whole Time Member
Securities and Exchange Board of India