Apr 10, 2003
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Orders :
Orders of Chairman/Members
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SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER UNDER SECTION 11 B OF THE SEBI ACT, 1992 READ WITH REGULATION 11 OF SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 1995, AGAINST SHRI HIMANSHU MEHTA IN THE MATTER OF KAMAL OVERSEAS LTD
CO/ /2003/IES/FUTP
Pursuant to the investigations conducted by Securities and Exchange Board of India (hereinafter referred to as "SEBI") into the affairs relating to the irregularities noticed in preferential allotment made by M/s Kamal Overseas Ltd. (hereinafter referred to as "KOL"), in October 1994, show cause notice dt. 31.08.02 was issued to Shri Himanshu Mehta, a local non-executive director of the company. In the said show cause notice, it was alleged inter-alia that collusive trades by way of circular trading done by the entities related to Shri Himanshu Mehta, gave a misleading appearance of trading in the securities and therefore, there was an attempt to manipulate the market. It was also alleged interalia that Shri Himanshu Mehta, a director of KOL, acted in concert with stock brokers i.e. M/s Anagram, Kinglet Finlease, Rahil Investments, Prompt Investments, Shri Kalpesh Chawla, Shri. Piyush Avlani, to manipulate the market. It was further alleged that there was no intention on the part of buyer i.e. M/s Kinglet Finlease & Securities Ltd to meet pay-in obligation. It was also alleged that as the trades routed through Exchange are guaranteed by the Clearing Corporation, the trades were routed through the exchange to ensure payment to seller brokers who were acting as front entities of KOL.
A personal hearing was given to Shri Himanshu Mehta before me on 05.03.03 which was attended by him along with Shri Jayant Thakker, CA. During the said personal hearing, Shri Himanshu Mehta while referring to his reply dt. 17.09.02 to the show cause notice dt. 31.08.02 submitted that he has already replied to the charges and he does not wish to add anything further.
I have perused the show cause notice, reply of Shri Himanshu Mehta, the statement of Shri Himanshu Mehta recorded during the investigation and the findings of the Investigations Report. I have also examined the evidence adduced in support of the charges levelled against Shri Himanshu Mehta in the show cause notice.
In his statement recorded by SEBI and his reply to the show cause notice issued by SEBI Shri Himanshu Mehta interalia submitted that he was neither the buyer nor the seller of the shares of KOL. He is a trader in iron and steel business and was only a non-executive director of the company for a very limited purpose of looking after the Bombay operation of company. He has also stated that he had no stake whatsoever in the company and therefore had nothing to gain or lose in the whole affair. He further stated that he neither bought nor sold even a single share of the company and he was not having any concern or connection with any of the buyer or seller of shares of the company.
After considering the aforesaid documents, I have found that no trade was done for or on behalf of Shri Himanshu Mehta and as such he was neither a buyer, nor a seller in the transactions in question. Therefore, the charges of Circular trading, synchronized trades and market manipulation do not hold good against him in the absence of conclusive evidence suggesting abetment or direct association of Shri Himanshu Mehta in such trades. Further, in the absence of conclusive evidence, I am inclined to believe the submission of Shri Himanshu Mehta that he was only a non-executive director of the company for a very limited purpose of looking after Bombay operations. I do not find any evidence to establish that Shri Himanshu Mehta had any involvement in the trades on the exchange under investigation, wherein misuse of stock exchange machenism has been alleged. In light of these observations, I am of the view that in the absence of conclusive evidence showing otherwise, benefit of doubt may be given to Shri Himanshu Mehta.
Therefore, in exercise of the powers conferred upon me in terms of Section 4 (3) of the SEBI Act, I hereby discharge the show cause notice dt. 31.08.02 issued to Shri Himanshu Mehta and drop further proceedings against Shri Himanshu Mehta with reference to the said show cause notice dt. 31.08.2002.
G. N. Bajpai
Chairman
Securities and Exchange Board of India
Place : Mumbai
Date : April 10 , 2003