SECURITIES AND EXCHANGE BOARD OF INDIA
DIRECTION UNDER SECTION 11B OF SEBI ACT, 1992 READ WITH REGULATION 12 OF SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 1995 AGAINST HAKEEM AUTO LTD. AND ITS DIRECTOR SHRI NAZIR HAKEEM.
CO/ 450/IES/01/2003
1.1 Investigations were conducted in the scrip of M/s Morepen Hotels Ltd. (hereinafter referred to as MHL) by SEBI following a major spurt in the total volume and price of the scrip. From 29,400 shares during January 2000 including nil volume for the entire month of July 2000, it shot up to 11,34,200 shares during the period August to November. Further, the percentage of net quantity delivered to gross quantity traded during the period September 11 to November 17,2000 was less than 1% of the total traded volume on the Exchange. Although the brokers of BSE and NSE generated volumes in lakhs, their net delivery obligations in the scrip was however in the range of 100 to 200 shares. The price of the scrip also had gone up to a 52 week high at Rs.285/- on September 11, 2000 which was followed by a fall in price of 52 week low at Rs.154.65 on November 15, 2000.
1.2 Investigations revealed that Shri Nazir Hakeem / Hakeem Auto Ltd. had transacted in the scrip of MHL with an intention of artificially raising the price of the scrip and also for building artificial volumes in collusion with certain entities connected with it. It was also revealed during the investigation that Shri Nazir Hakeem / Hakeem Auto Ltd had acted in concert through a selected cartel of brokers of BSE and NSE and were involved in circular trading in the scrip which had pushed up the volumes to artificial levels at both NSE and BSE during the period from June 2000 to December 2000.
1.3 During investigations, it was also found that Shri Nazir Hakeem / Hakeem Auto Ltd had master minded the manipulation of the scrip of MHL and other clients related to him had only played a supporting role and had acted in concert with Shri Hakeem / Hakeem Auto Ltd
1.4 Investigations disclosed that Shri Nazir Hakeem / Hakeem Auto Ltd had been responsible in artificially raising price of the scrip of MHL, having entered into purchase and sale of securities without intending to transfer the beneficial ownership and also for the purpose of creating a false / artificial market for the scrip.
1.5 Shri Nazeer Hakeem / Hakeem Auto Ltd have been found to be acting in concert with other clients for a common purpose and objective for manipulation of scrip of MHL. From the investigation it was also found that Shri Nazir Hakeem / Hakeem Auto Ltd. had violated the provisions of Regulation 4(b) and 4(d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to) Regulations, 1995. It was also observed that Shri Nazir Hakeem / Hakeem Auto Ltd had traded heavily in another scrip, Eonour Software Ltd. which was also investigated by SEBI for price manipulation and was revealed that Shri Hakeem along with other clients was responsible for the price manipulation of Eonour Software Ltd. also.
2.1 A show cause notice dated 14.06.2002 was issued to Shri Nazir Hakeem / Hakeem Auto Ltd asking him to show cause as to why suitable directions including such directions debarring / prohibiting Shri Nazir Hakeem / Hakeem Auto Ltd from dealings in securities market for a suitable period should not be issued under Section 11B of the SEBI Act, read with Regulations 11 and 12 of SEBI (FUTP) Regulations, 1995. In the show cause notice it was also observed that Shri Nazir Hakeem / Hakeem Auto Ltd. had not co-operated with the investigation conducted by SEBI although he / it was summoned by SEBI by way of repeated letters. He was also asked to submit his reply supported by necessary records / evidences which he likes to adduce in his support within 21 days from the date of receipt of the notice failing which it was said that SEBI shall presume that he had no explanation to offer and would be constrained to pass such orders specified in terms of the SEBI Act and relevant Regulations.
3.1 Shri Nazir Hakeem had sent a reply dated 24.06.2002 on behalf of Hakeem Auto Ltd., wherein he denied the allegations made against them in the notice and said that at no stage were they involved in circular trading in the scrip of MHL and there was no question of master minding the manipulation of the scrip as alleged.
3.2 Shri Nazir Hakeem / Hakeem Auto Ltd. stated in their reply that they had purchased 6,610 shares of MHL in settlement no. 22, 23, 24, 25 and 28 which according to them were negligible as compared to the total turnover of the scrip. Also it was said that these shares have been purchased in five settlements i.e. over 1,300 shares per settlement of 5 days which was again insignificant according to them.
3.3 They had submitted in their reply that they had taken delivery of 2510 shares, which is as much as 38% (Approx) of the total purchases. According to them, the balance purchases were squared off in the same settlement with profit and their volumes were too meager to influence the movement of the scrip.
3.4 As regards trading in MHL, Shri Nazir Hakeem / Hakeem Auto Ltd. had said that they had merely acquiesced to introduce their accounts, just to enable them to earn additional income by trading in BSE/NSE and that at no stage they had control on the trading of other clients. It was entirely the prerogative of those other clients to buy or sell any scrip.
3.5 Subsequently, an opportunity of hearing was granted on 28.10.2002 which had been communicated to Shri Nazir Hakeem / Hakeem Auto Ltd. vide letter dated 01.10.2002 . During the hearing, Shri Nazir Hakeem had also represented Hakeem Auto Ltd. and denied having indulged in any circular trading or having acted in concert with other clients. According to him, the volumes traded by him was too meager to influence the market as had been alleged by SEBI.
3.6 I have carefully considered the findings of investigation and the submissions made by Shri Nazir Hakeem and Hakeem Auto Ltd. I find that M/s. Hakeem Auto Ltd. having its correspondence office at 28, Great Western Building, 1st Floor, S. B. Road, Fort, Mumbai 23 is found to have traded in the scrip of Morepen Hotels Ltd.(MHL) alongwith certain other clients. The Director of the firm as per the information provided by brokers and the clients is Shri Nazir Hakeem. The director of the firm was summoned on various occasions by the investigating team, however he failed to appear/submit the information before/to investigating team. At least three letters along with summons were issued to Hakeem Auto Ltd and they had not responded till date.
3.7 The trading pattern of M/s. Hakeem Auto Ltd. in the scrip of Morepen Hotels Ltd. with Shilpa Stock Brokers is given as under:
|
Name of Broker
|
Sett.#
|
Purchases
|
Sales
|
Gross
|
Net
|
|
Shilpa Stock Brokers
|
22
|
10
|
100
|
110
|
-90
|
|
|
23
|
300
|
300
|
600
|
0
|
|
|
24
|
1600
|
0
|
1600
|
1600
|
|
|
25
|
3700
|
3700
|
7400
|
0
|
|
|
28
|
1000
|
0
|
1000
|
1000
|
Grand Total
|
|
6610
|
4100
|
10710
|
2510
|
4.1 The relationship / link of the clients with each other is explained in the table below:
|
Name of the client
|
Relationship/Link with other clients
|
|
Jem Fiscal Ltd.
|
a) They are/were employer of Ketan Shah (K. N. traders), Prashant Shah (Prashant Investment), Kisan Parwad (K. P. Investment), Shamshad Sheikh (S. M. Investment), Narendra Navale (N. N. Investment).
|
|
|
b) The Director of the firm, Shri Nazir Hakeem is also a Director with Hakeem Auto Ltd.
|
|
|
c) Shri Nazir Hakeem introduced the bank a/c of F. T. Traders (Prop. Fakruddin Moyiandi) with United Bank of India, Fort Branch.
|
|
|
d) Shri Prashant Shah (Prashant Investments)placed orders on behalf of Jem Fiscal with Toss Financial Services, member NSE and Varun Stock Brokers, (Sub-broker to Suresh Rathi Securities)
|
|
Hakeem Auto Ltd.
|
a) The Director, Shri Nazir Hakeem is also a director of Jem Fiscal Ltd.
|
|
|
b) Introduced the bank account of F. T. Traders with United Bank of India.
|
|
N. N. Investment
|
a) The proprietor of the firm, Shri Narendra Navale, is an employee of Jem Fiscal Ltd.
|
|
|
b) He stated that he has traded on the recommendation of his employer’s website.
|
|
|
c) Shri Prashant Shah (Prop: Prashant Investment), who also in employment with Jem Fiscal Ltd. placed the orders on behalf of N. N. Investment with Toss Financial, member NSE.
|
|
S. M. Investment
|
a) The proprietor, Shri Shamshad Sheikh, is an employee of Jem Fiscal Ltd.
|
|
|
b) The account of the firm with United Bank of India was introduced by Shri Fakruddin Moiyaddi of F. T. Traders.
|
|
|
c) He had traded in the scrip because his employer, M/s. Jem Fiscal Ltd. was also trading in the scrip.
|
|
K. N. Traders
|
a) The proprietor, Shri Ketan Shah was employed with Jem Fiscal Ltd. as Manager (Reseach).
|
|
|
b) As per information provided by Shilpa Stock Brokers, he was trading on the terminal provided to Hakeem Auto Ltd.
|
|
|
c) He had given recommendation on the web site of Jem Fiscal Ltd.
|
|
|
d) He had also recommended the scrip for trading to Prashant Shah (Prashant Investment)
|
|
Prashant Investment
|
a) The proprietor, Shri Prashant Shah, is an employee of Jem Fiscal Ltd.
|
|
|
b) He had traded in the scrip based on the recommendation on the website of his employer.
|
|
|
c) Had discussed the matter with Ketan Shah (K. N. Traders) before he started trading in the scrip
|
|
|
d) He had placed orders for Jem Fiscal Ltd. with Varun Stock Brokers (Suresh Rathi Securities Pvt. Ltd.)
|
|
|
e) He had also placed orders for Jem Fiscal Ltd. with Toss Financial, Member NSE.
|
|
|
f) He had placed orders for N. N. Investment with Toss Financial, member NSE.
|
|
K. P. Investment
|
a) He is employed with Jem Fiscal Ltd.
|
|
|
b) Has traded mainly because his employer, Jem Fiscal Ltd. was also trading/investing in the scrip.
|
|
F. T. Traders
|
a) Shri Fakruddin Moiyadi, Prop. F. T. Traders, had given the office address of Jem Fiscal Ltd. as his correspondence address.
|
|
|
b) The BOLT terminal provided by Bhupendra M. Bheda to F. T. Traders was installed at the office address of Jem Fiscal Ltd.
|
|
|
c) The account of F. T. Traders with United Bank of India, Fort Branch was introduced by Shri Nazir Hakeem, who is a Director of Jem Fiscal Ltd. and Hakeem Auto Ltd.
|
|
|
d) Shri Fakruddin Moiyadi had introduced the account of S. M. Investment (Proprietor: Shri Shamshad Sheikh, an employee of Jem Fiscal Ltd.) with United Bank of India.
|
4.2 The other indicators showing the connections of the clients are as under:
¨ FT Traders (Shri Fakruddin Moiyandi) had dealt through three members of BSE simultaneously viz. Bhupendra Bheda, Dinesh J Shah and Anantrai A Parekh
¨ Jem Fiscal Ltd dealt through two members of BSE simultaneously namely, Suresh Rathi Securities and GSB Capital Markets
¨ Prasanth Investments (Prasanth Shah) and KP Investments (Kisan Parwad) have dealt in the scrip of MHL simultaneously through two BSE members viz. Joinder Capital and MJ Doshi.
¨ Hakeem Auto shared the same address as that of FT Traders and KN Traders
¨ Both FT Traders and KN Traders have accounts with United Bank of India and their account nos were close to each other i.e 4664 and 4667.
¨ The fax no. 2818179 given by Prasanth investments (Prasanth Shah) is the same as that of Hakeem Auto and KN Traders.
¨ The telephone nos. provided by FT Traders in the client registration form to BSE member M/s DJ Shah were in the name of Smt. Hakeem Zohra who is one of the directors of Jem Fiscal Ltd
¨ The telephone numbers provided by KP investments and Prasanth Investments in their client forms were matching with the telephone nos of Hakeem Zohra who is a director of Jem Fiscals Ltd
¨ Both Narendra Navale of NN Investments and Kisan Parwad of KN Traders shared the same address viz. Ganesh Nagar, Pump House, Andheri East.
4.3 Therefore, it is observed that all the above mentioned clients appear to be connected to each other and were acting in concert with Shri.Nazir Hakeem, Director of Hakeem Auto Ltd. It was also clear from the trading pattern that these clients were involved in Circular Trading in the scrip and these clients had entered into buy and sell transactions with each other, squaring up positions and reversing trades either on the same day or during the same settlements making the net receivable/deliverable positions as either nil or shares of negligible quantities i.e about 100 to 200 shares. It is pertinent to note here that the same set of clients had acted in concert with each other and had been involved in the price manipulation of another scrip viz. Eonour Software Ltd. Thus, all the aforesaid clients had done transactions of fictitious nature through different members of NSE and BSE and had created artificial volumes in the scrip thereby affecting the market equilibrium in the scrip.
4.4 It has been found that proprietors of all the other clients trading in the scrip namely K. N. Traders, K. P. Investments, Prashant Investment, F. T. Traders, N. N. Investment etc. were all related to the main director of the firm, Hakeem Auto Ltd. i.e. Shri Nazir Hakeem who is also the promoter/director of Jem Fiscal Ltd who had master minded the entire exercise as can be seen from the facts mentioned above.
4.5 From the trading details above, it is also evident that the client, M/s Hakeem Auto Ltd. has transacted in the scrip without giving and taking any delivery and without genuine investment motive. Thus, the purpose of their dealing was not to effect transfer of beneficial ownership but to create a false and misleading appearance of trading on the securities market. Thus M/s Hakeem Auto Ltd. has been found to be guilty of violating the provisions of Regulations 4(b) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to) Regulations, 1995.
4.6 Therefore, in exercise of the powers conferred upon me under Section 4(3) of SEBI Act, 1992 read with Section 11B and Regulation 11 and12 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to in Securities Market) Regulations, 1995, I hereby prohibit Shri Nazir Hakeem and M/s Hakeem Auto Ltd. from dealing in securities for a period of three years. This order shall come into force with immediate effect.
Place : Mumbai
G. N. Bajpai
Date : January 08, 2003
Chairman
Securities & Exchange Board of India