Order against Abhilashaa Securities P ltd

 

ORDER

UNDER RULE 5(1) OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 READ WITH SECTION 15A OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992.

AGAINST

ABHILASHAA SECURITIES PRIVATE LIMITED

(INS 011209934)

 

BACKGROUND:

  

1.0 The undersigned has been appointed as Adjudicating Officer (hereinafter referred to as "AO") by the Securities and Exchange Board of India (hereinafter referred to as "SEBI") in terms of Chairman’s order dated July 24, 2003 to inquire into and adjudge under Section 15A of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'the said Act’) the alleged contravention of Section 11C (2) of the said Act by Abhilashaa Securities Private Limited. (hereinafter referred to as "the entity") having address at 9, Pushpam, 2^nd Floor, 30-E Cawasji Patel Street, Fort, Mumbai – 400 001 in the investigation of alleged price manipulation in the scrip of MOH Ltd.

2.0 MOH Granites Ltd. was incorporated on February 02, 1993 as public limited company. It came out with public issue of 67,00,000 equity shares of Rs.10 each at par in August 1996. The shares of MOH Granites Ltd. were listed on The Stock Exchange, Mumbai and Ahmedabad Stock Exchange (Regional Stock Exchange). The company changed its name to MOH Ltd. vide resolution dated May 03, 2000 and diversified into the Information Technology activity/business.

During the investigation, it was noticed that the price of the scrip of MOH Ltd. started increasing from Rs.240.50 from August 1, 2000 to a level of Rs.799 on September 19, 2000. The entity has traded in significant quantity in the said scrip.

 

SHOW CAUSE NOTICE/ REPLY:

3.0 The undersigned as per Rule 4 of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as "the Rules"), issued a notice dated October 29, 2003, calling upon the entity to show cause within 21 days as to why an inquiry should not be held against the entity in terms of the Rules. Along with the show cause notice, a copy of the statement of Shri Yezdi Master, Director of the entity (hereinafter referred to as "Master") who had appeared before SEBI during the investigation process and agreed to furnish the documents required was also forwarded to the entity.

 

1. The entity vide letter dated November 28, 2003 replied that SEBI has for the first time in the letter dated October 29, 2003 asked for certain documents and had in turn enclosed some of the documents that were required to be furnished during the investigation process. [Acknowledgement (copy of the Share Delivery book/register taken from Shri Hiten Mehta and the details of payment made to A.M.Investments.] The entity stated that the transactions were electronic transactions through Demat account and there was no physical delivery of shares and that the transactions were shown in the Ledger Account. The entity had also enclosed a photocopy of the Delivery instructions of the Demat of 164 shares which pertains to the shares transferred directly by Taniya Securities to Kantilal Mangaldas Securities Private Limited. The entity also claimed that it was victim of the dishonesty of A.M.Investments and Taniya Securities.

 

2. The entity was then given an opportunity to appear for a personal hearing in terms of provisions of sub-rule (3) of the Rule 4 of the Rules on January 8, 2004 vide letter dated December 30, 2003 which was subsequently postponed to January 12, 2004.

 

3. On January 12, 2004, Ms. Kanan Desai, Director of the entity appeared for hearing on behalf of the entity and submitted the following:

 

6.1 She submitted a copy of the minutes of the Board Meeting authorizing her to appear before SEBI. She also submitted that Master (who had earlier stated the information sought would be furnished to SEBI during the investigation process and did not furnish the same) was neither a Director of the entity nor authorized to appear and record a statement. A copy of the statement filed with the ROC dated December 3, 1999 showing the names of three original Directors was submitted, from which it is seen that Master was not a Director. Further, the copies of Form 32 (particulars of appointment of Directors and Manager and changes among them) filed with ROC dated November 25, 2002, January 13, 2003 & October 15, 2003 showing the changes in the Board of Directors was also submitted wherein Master was not a director.

6.2 The entity had shifted from 203, Elphinstone house, Marzban Road, Fort, Mumbai - 400001 on October 7, 2002 to 9 Pushpam, 30E, Cawasji Patel Street, Fort, Mumbai – 400 001 on October 15, 2002 and the entity did not have a copy of the summons issued by SEBI in 2002 which has gone to the old address.

6.3. A copy of an affidavit dated January 2, 2004 signed by Master stating that he was only a designated Director of the entity till October 7, 2002 and that he was not authorized to record a statement on oath was submitted.

6.4. Ms. Kanan Desai was then shown the letter dated October 23, 2002 signed by Master wherein he had stated that the information sought would be submitted. Ms Desai then stated that they were not aware of the letter dated October 23, 2002 submitted by Master and she requested that a copy of this letter be provided to them for contemplating appropriate legal action.

6.5. She also stated that the shares of MOH Ltd. were in compulsory demat form and there were no physical deliveries involved. Master was obviously not aware of these transaction and the methods of transfer. Hence the issue of submitting the acknowledgements does not arise.

6.6. However the copy of the demat slip for the 164 shares of MOH Ltd. sold by Taniya Securities and transferred directly to Kantilal Mangaldas Securities Private Limited would be furnished the next day i.e. January 13, 2004.

6.7. Ms.Kanan Desai also stated that they have already submitted the cheque details along with the photocopies of the cheques acquired from the bank. Behind the cheques, the details of the clearing were shown. She also stated that they would arrange to submit a copy of Abhishalaa Securities Pvt.Ltd. bank statement showing the debit transaction to A M Investments for the period January 16, 2003.

 

1. The entity vide letter dated January 13, 2004 has submitted the following documents :

  

1.  
   1. Copy of Demat slip of 164 shares of MOH Limited transferred

    

   by Taniya Securities directly to Kanitlal Mangaldas.

    

   2. Copy of Bank statement showing debits totaling to Rs.1,20,900/- paid to A.M. Investments.

    

 

8.0 FINDINGS

1.  
    
   1. As per Clause (i) of sub-section (2) of Section 11 of the said Act, the entity is under an obligation to submit the required information as called for by the Investigating Authority.

    

   2. Master being a Chartered Accountant by profession appeared before SEBI in response to the summons dated October 21, 2002 issued to the entity. In his statement recorded on oath on October 22, 2002, he has confirmed that he is a Director of the entity.

    

   3. During the hearing on January 12, 2004, the entity submitted a copy of an affidavit of Master dated January 2, 2004. In the affidavit it is stated that "although my visiting card designated me as Director of the entity I was never a member of the Board of Director of ASPL nor was I otherwise authorized to record a statement on oath". The same fact was not disclosed to the Investigating Officer while recording his statement on October 22, 2002. The same could be corroborated from the fact that the entity when replied to the Show Cause Notice have not brought out the fact that Master was not a Director and was not authorized to record a statement on oath before SEBI. Therefore, the affidavit of Master is subsequent to the Show Cause Notice dated October 29, 2003 and thus it appears to be an afterthought.

    

   4. The statement recorded on oath and the affidavit submitted by Master, Director of the entity is contradictory in nature and is not in a manner in which a professional would conduct himself before the Regulatory Body. While recording the statement, he has stated that whatever he states would be true and correct to the best of his knowledge and that stating incorrect, lie or misleading fact is an offence and he would not do so. Having known the consequences, he submitted an affidavit after a year stating that he was not a designated Director and not authorized to record a statement which is nothing but retracting from the submissions made during the statement recorded before the Investigating authority

    

   5. Master’s claim of contacting the entity, but failed to contact the entity is unacceptable since the entity is a sub-broking firm situated in Mumbai (same area) even after shifting from their old premises i.e. Fort. Further, he had an MOU with the entity dated April 5, 2000 which was valid upto April 4, 2003. However, the entity had shifted only in October 2002 and therefore, his claim appears to be factually incorrect/misleading.

    

   6. Further, he was also a Director of ASPL upto October 7, 2002 and the summons were received by him on October 21, 2002 (i.e. a gap of 14 days). In this situation, he could have either contacted the Stock Exchange authorities/main broker to handover the summons or informed SEBI of change of address of the entity. If Master was in no way connected with the entity after October 7, 2002 as claimed by him in the affidavit, the need for responding to the summons issued by SEBI under the SEBI Act and recording a statement on oath and further submitting a letter dated October 23, 2002 stating that the details would be submitted on October 25, 2002 does not arise. All the acts of Master, Director of the entity and the entity itself gives a doubt of their intention to hoodwink the investigation team and did not furnish the details as sought by the Investigation Authority, which has hampered the progress of the investigation in the case of MOH Ltd.

    

   7. The entity has not not intimated to SEBI about the change of address.

    

   8. Ms.Kanan Desai, the other Director of the entity when appeared before the undersigned in the current adjudication proceedings requested for a copy of the letter sent by Master dated October 23, 2002 for contemplating appropriate legal action. As on date they have not communicated to me as to whether any legal action has been initiated against Master therefore, it appears that there may be a collusion between the entity and Master.

    

   9. The entity dealing with investor’s money /shares cannot be so casual in their operations especially while dealing with the Regulatory Authority.

    

   10. In view of the above findings, I am fully convinced that the entity has failed to submit the information as sought by the Investigation team and has violated Section 11C(2) of the SEBI Act.

    

 

ORDER:

 

9. a. The said violation (non-submission of information asked during the investigation of MOH Ltd.) by the entity attracts penalty as prescribed under Clause (a) of section 15A of the said Act.

b. Though Section 15 A (a) prescribes a maximum penalty of Rs.1 crore for violation of Section 11C(2), however, in view of the above facts and circumstances of the case, the findings as recorded above, and taking into account the factors as contained in Section 15 J of the said Act, I am of the view that a penalty of Rs. 1,50,000/- (Rupees One Lakh Fifty thousand) only would be commensurate and justified.

c. Therefore, I hereby, impose a penalty of Rs. 1,50,000/- (Rupees One Lakh Fifty thousand) only on Abhilashaa Securities Private Limited, SEBI Registration no. INS-011209934 for violation of Section 11 C (2) of Securities and Exchange Board of India Act, 1992, under Clause (a) of Section 15 A of Securities and Exchange Board of India Act, 1992. Abhilashaa Securities Private Limited shall pay this amount of penalty by way of crossed demand draft drawn in favour of "SEBI – Penalties Remittable to Government of India" payable at Mumbai within 45 days of receipt of this order. The said Demand draft shall be forwarded to Shri R. Mohan, General Manager, Investigations Department, SEBI, Mittal Court, B - wing, First Floor, Nariman Point, Mumbai 400021. 

Date: December 24, 2004	D.RAVI KUMAR
Place : Mumbai	ADJUDICATING OFFICER