Order against M/s Greenfield Investments Limited

Feb 05, 2008

Orders : Orders of AO

ORDER UNDER SECTION 15I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST M/S GREENFIELD INVESTMENTS LIMITED

BACKGROUND

1. I was appointed as an Adjudicating Officer by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide its order dated September 21, 2004 and order dated April 18, 2007 to inquire into and adjudge under Section 15I read with 15A of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’), the violation of Section 11C of the SEBI Act alleged to have been committed by M/S Greenfield Investments Limited (hereinafter referred to as ‘the noticee’ or ‘GIL’) by not complying with the summons issued by SEBI seeking information regarding its dealings in the scrip of M/s. DSQ Biotech Ltd. (hereinafter referred to as ‘DSQBL’).

2. The Stock Exchange, Mumbai investigated the scrip on observing a fall in the price from Rs. 223.3 on July 17, 2000 to Rs. 58.55 on October 19, 2000. Thereafter, on November 20, 2000 an alert in this scrip was generated due to large traded quantity and the price of the scrip going up from Rs.72 on October 23, 2000 to Rs.190.25 on November 20, 2000. Therefore, the period of the investigation was extended to November 17, 2000 and the details were called from the members for the additional period by The Stock Exchange, Mumbai. The scrip was not being traded at BSE till March 10, 2000 because of price difference vis-á-vis NSE. On March 10, 2000, The Stock Exchange, Mumbai adjusted the price of the scrip based on the last traded price at NSE. Thereafter, trading in the shares of DSQBL resumed at BSE. The volumes recorded in the scrip at BSE after March 10, 2000 and till April 30, 2000 were not significant. Pursuant to the above, The National Stock Exchange of India Ltd. was advised to investigate the matter of preferential allotment of shares made on March 13, 2000 at a premium of Rs. 256 per share, and to examine the trading pattern in the scrip during the period December 01, 1999 to April 30, 2000.

3. The investigation prima facie made following observations with regard to the dealing in the shares of M/s. DSQ Biotech Ltd. by the noticee:

a) An analysis of the listing documents available with the Exchange indicate that the company made a preferential allotment of 8030000 shares at a price of Rs. 275 each on March 13, 2000. However, the company did not file an application with the exchange for listing of the above shares. In a letter dated November 30, 2000, the company gave the detail of the paid-up equity capital. The details indicated that M/S Greenfield Investments Limited was one of the allottees of these shares and received 17,30,000 shares (Distinctive numbers 20776381-22506380) comprising 7.687% of the post issue capital. .

b) It appeared from the records submitted by M/s Mehta and Ajmera that Green field Investments Ltd. had also acquired 6,95,000 shares from the market prior to the preferential allotment. These shares were acquired by Greenfield Investments Ltd from Mehta & Ajmera on January 6, 2000 @ Rs 75.17.

c) Greenfield Investments Ltd transferred all the shares received by it to DSQ Holdings Ltd. on the following dates:

Date	Quantity
25.09.2000	725000
26.09.2000	275000
28.09.2000	2000000
14.10.2000	2200000

d) Information was sought from Greenfield Investments Ltd. about the preferential issue with a view to ascertain whether the due procedure and regulations relating to the preference issues were complied with especially with respect to the flow of funds from the allottees and the consequent listing of the same on the stock exchanges.

LETTERS/SUMMONS ISSUED TO THE NOTICEE AND THE REPLY

4. The details of the correspondence by the investigation department with the noticee are given below.

a) Vide letter dated August 23, 2002 following information was called from GIL, to be furnished by September 10, 2003:

Dealing in shares of DSQBL during the period August 01, 1999 to January 31, 2001 in the following format:

1.As regards dealing in the scrip of DSQBL through stock market (both purchases and sales) the information may be confirmed in the following format (please note that deliveries taken and given both in the physical form and demat form to be included in the format).

Date	Transaction details (buy/sell)	Broker/sub-broker through whom purchased sold including exchange details	Quantity	Rate

2.In case of off-market transactions i.e. transactions in the scrip not routed through stock market mechanism, the information may be submitted in the following format.

Date	Transaction details (buy/sell)	Counter party details who have bought/sold	Quantity	Rate

3.In addition to the above, please also let us know your depository account details such as beneficiary account no., name and address of your DP account as maintained by you. Please let us have all the account during the above said period.

b) A reminder letter dated September 27, 2002 was sent to GIL.

No reply was received from GIL.

c) Vide summon dated March 8, 2004 the following information was called from GIL, to be furnished by March 31, 2004.

1.The details of your dealings in the scrip in the following format

Sr. No.	Date	Buy/Sell	Settl. No	Name of Exchange	Name of broker/ sub-broker	Quantity	Rate	DP ID.

2.In case of the off-market transactions i.e. transactions not routed through stock market mechanism the details of your dealings in the scrip should be submitted in the following format:-

Sr. No.	Date of transaction	Buy/Sell	Name of Broker/ counterparty	Date of payment/ delivery	Quantity	Rate	DP ID.

3.Please list out your demat beneficiary accounts giving therein the details of the account no., name and address of the DP opened with and date of operation of the account.

4.Also enclose the demat transaction statement highlighting, therein, the above transactions, serial wise.

5.In case of physical settlement, submit the extract of the scrip ledgers of the brokers, highlighting the above transactions, serial wise.

6.Please list out the Bank Accounts used for the payment of the dealings as listed in information i. & ii. above including therein the details of the account no. of the Bank branch and its address.

Letter was acknowledged by GIL vide postal acknowledgement dated March 16, 2004 but noticee did not submit any reply.

d) Vide letter dated April 8, 2004, GIL was again informed that the information is called under section 11C (3) of Securities and Exchange Board of India Act, 1992 and was again advised to submit the information by April 16, 2004. GIL was also made aware of the consequences of not submitting the required information.

Letter was acknowledged by GIL vide postal acknowledgement dated April 21, 2004 but noticee did not submit any reply.

e) Vide letter dated April 21, 2004, GIL was again advised to comply with the summons and submit the required information by April 27, 2004. However, no reply was received by the investigation department.

5. The summons required the noticee to furnish certain information to the Investigating Authority. The noticee was required to provide information/documents relating to his dealing in the shares of M/s. DSQ Biotech Ltd. The noticee did not respond to the notice. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against the noticee.

ADJUDICATION NOTICE AND REPLY

6. Two notices dated April 23, 2007 and May 15, 2007 were issued to the noticee in terms of Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the “Rules”) seeking the reply of the noticee, as to why an inquiry should not be held against the noticee for the violation alleged to have been committed by it. The notice was issued through registered AD on the following address:-

M/S Greenfield Investments Limited

Happy World House, 7^th Floor

Sir William Newton Street, Port Louis

Republic of Mauritius.

The notice returned undelivered from the Department of Post with the remark ‘left’.

7. The said notice was also hosted on the website of SEBI under the heading “Unserved Notices/ Summons”. However, the noticee failed to submit any reply to the said notice.

CONSIDERATION OF EVIDENCE AND FINDINGS

8. From the investigation report, I note that BSE while investigating clearly observed a fall in price from Rs. 223.3 on July 17, 2000 to Rs. 58.55 on October 19, 2000. In addition to this, due to large traded quantity and the steep price rise from Rs.72 on October 23, 2000 to Rs.190.25 on November 20, 2000, an alert was generated on November 20, 2000 at BSE. As a result, investigation period was extended to November 17, 2000 and the required details for additional period were called. It was observed that because of price difference vis-á-vis NSE, the scrip was not being traded at BSE until BSE adjusted the price of the scrip based on the last traded price at NSE on March 10, 2000. However, it was observed that volumes recorded in the scrip at BSE after March 10, 2000 and till April 30, 2000 were not significant. In pursuance thereof, NSE was advised to investigate the matter of preferential allotment of shares made on March 13, 2000 at a premium of Rs. 256 per share, and to examine the trading pattern in the scrip during the period December 01, 1999 to April 30, 2000. It is necessary to reiterate, observations made with regard to the dealing in the shares of M/s. DSQ Biotech Ltd. by the noticee, which are as following:-

c) Greenfield Investments Ltd transferred all the shares received by it to DSQ Holdings Ltd. on the following dates:

Date	Quantity
25.09.2000	725000
26.09.2000	275000
28.09.2000	2000000
14.10.2000	2200000

9. From the correspondence between the investigation department of SEBI and the noticee, I note that the noticee has received the letters / summons issued by SEBI and he was aware of the information sought by the SEBI.

10. The preferential allotment of 17,30,000 shares to GIL, purchase of large quantity of shares of the company from the market by GIL and then transferring the shares to M/s DSQ Holdings Ltd through off-market deals, reluctance of the noticee to provide the information regarding its source of funds, shares and details of bank account etc. raises serious doubts about its involvement in the alleged manipulation in the shares of DSQBL. I note that this information sought by the investigating authority was within the realm of the noticee and could have been provided easily but the noticee chose not to do so. Under the circumstances, the details sought by the investigating authority were absolutely vital for SEBI to carry out its solemn objective of investor protection and regulation of capital markets. The timely submission of the information as prescribed in the summons by the noticee would have possibly helped the investigating authority to complete the investigation and to reveal facts of the case that establishes the alleged manipulation in the shares of DSQBL. Therefore, I conclude that the noticee has not furnished the information to the investigation officer, knowingly, to hamper the progress of investigations and to escape from the major punishments for violation of SEBI Act, Rules, Regulations, etc. Hence, non compliance of summons by the noticee can be treated as violation of Regulation 9 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 which stipulates that it shall be the duty of every person to produce to the investigating officer such books, accounts and other documents and furnish such statements and information as the investigating officer may require for the purpose of the investigation.

11. The notice issued to the noticee was also posted on SEBI website. However, noticee failed to submit any reply. On the basis of the facts of the case and on perusal of the evidence available on record, it is concluded that the noticee failed to provide the required information to the Investigating Authority.

12. In view of the facts and circumstances of the case and on the basis of the available evidence, it is concluded that the failure on the part of the noticee to submit the required information to the investigating authority of SEBI is established. On account of the failure on the part of the noticee to furnish necessary information to SEBI, the noticee is liable to the penalty prescribed under Section 15 A (a) of the SEBI Act 1992.

13. The Honorable Securities Appellate Tribunal in Appeal No. 95/04 in Mayfair Paper & Board Pvt. Ltd., v. SEBI held that failure to furnish information to the Investigating Authority of SEBI shall attract the penalty prescribed under Section 15A of the SEBI Act. In this regard Section 15A(a) of SEBI Act provides the following :

15A. Penalty for failure to furnish information, return, etc: If any person, who is required under this Act or any rules or regulations made thereunder,

“to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less”.

14. In this regard, the provisions of Section 15J of the SEBI Act, 1992 and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 requires that while adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors namely;

a) the amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of the default

b) the amount of loss caused to an investor or group of investors as a result of the default

c) the repetitive nature of the default

15. It is noted that no quantifiable figures are available to assess the disproportionate gain or unfair advantage made as a result of the default. Further, the amount of loss caused to an investor or group of investors also cannot be quantified on the basis of the available facts and data. However, having regard to the findings of the investigations suggesting the involvement of the noticee in the alleged manipulation and refusal to provide the information to the investigating authority despite being granted several opportunities to do so, indicate that the default committed by the noticee is intentional. Timely submission of information is very important in concluding investigation proceedings and non co-operation by an entity can be detrimental to the interests of the investors and the securities market. Hence, the violation committed by the noticee has to be taken seriously in view of the facts and circumstances of the case and further no mitigating circumstances are seen which warrant a lenient view in the matter.

ORDER

16. Considering the facts and circumstances of the case, it is established that M/s Greenfield Investments Limited failed to submit the required information to the Investigating Authority of SEBI. In view of the failure on the part M/s Greenfield Investments Limited to furnish necessary information to SEBI, in terms of the provisions of Section 15 A(a) of the SEBI Act 1992 and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I, hereby impose a penalty of Rs. 10,00,000/- (Rupees Ten Lacs Only) on M/s Greenfield Investments Limited. In view of the facts and circumstances of the case, I am of the view that the said penalty is commensurate with the violation committed by M/s Greenfield Investments Limited. This type of non-compliance with the summons issued, which stonewalls the investigations into the irregularities, in the larger public interest, calls for deterrent penalty, to send a signal that all those connected with the securities market with such callous and indifferent attitude will not be viewed leniently.

17. The penalty shall be paid by way of 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 P K Bindlish, Chief General Manager, Securities and Exchange Board of India, Plot No C4-A, “G” Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051.

18. In terms of the provisions of Rule 6 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995, copies of this order are sent to M/s Greenfield Investments Limited and to Securities and Exchange Board of India.

PLACE : MUMBAI

February 5, 2008

SUNIL KADAM

ADJUDICATING OFFICER