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 PIYUSH AVLANI IN THE MATTER OF M/S 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 Piyush Avlani. 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 Piyush Avlani, gave a misleading appearance of trading in the securities, and therefore, there was an attempt to manipulate the market. It was also alleged that M/s Kinglet Finlease & Securities Ltd., the buyer of the shares of KOL, did not have intention to meet its pay-in obligation, the trades were routed through the Exchange to defraud the Clearing Corporation of NSE as the trades routed through Exchange are guaranteed by the Clearing Corporation.
A personal hearing was given to Shri Piyush Avlani before me on 05.03.03 which was attended by him. During the said personal hearing, Shri Piyush Avlani submitted his reply to the said show cause notice.
In the said reply Shri Piyush Avlani 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 has no involvement in stock exchange transactions and as such he was not associated in any manner with the transactions. His whole interest and involvement in the matter was the fact that he introduced two parties to the transactions, one having interest in acquiring a listed company and the other holding large number of shares in KOL, a listed company. He further submitted that when the buyer M/s Kinglet Securities Ltd. failed to meet its pay-in obligation, he helped all the authorities and cooperated with them to enable them to see the transactions in their clear perspective.
I have perused the show cause notice, reply of Shri Piyush Avlani and the findings of the Investigations Report. I have also examined the evidence adduced in support of the charges levelled against Shri Piyush Avlani, in the show cause notice.
After considering the aforesaid documents, I have found that no trade was done for or on behalf of Shri Piyush Avlani 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 Piyush Avlani in such trades. Further, in the absence of conclusive evidence, I am inclined to believe the submission of Shri Piyush Avlani that he acted only as facilitator of the deal wherein one party wanted to acquire shares was introduced to the other party having large number of shares in KOL, a listed company. The transaction eventually did not materialise. I do not find any evidence to establish that Shri Piyush Avlani had any involvement in the trades on the exchange under investigation, wherein misuse of stock exchange machenism has been alleged. I have also noted that Shri Piyush Avlani cooperated with SEBI and NSE at every stage of their investigations. In view of the aforesaid, I am of the view that Shri Piyush Avlani has acted only as a introducer and in the absence of conclusive evidence a benefit of doubt may be given to Shri Piyush Avlani.
Therefore, in exercise of the powers conferred upon me in terms of Section 4 (3) of the SEBI Act, 1992, I hereby discharge the show cause notice dated 31.08.02 issued to Shri Piyush Avlani and drop further proceedings against Shri Piyush Avlani with reference to the said show cause notice dated 31.08.2002.
G. N. Bajpai
Chairman
Securities and Exchange Board of India
Place : Mumbai
Dated : April 10 , 2003