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Order in the matter of Global Trust Bank

Jun 12, 2004
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Orders : Orders of Chairman/Members

 

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

ORDER UNDER SECTIONS 11 AND 11B READ WITH SECTION 4 (3) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND REGULATION 11 OF THE SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 2003 IN THE MATTER OF GLOBAL TRUST BANK

CO/03/ISD/06/2004

 

1.0 Background

The scrip of Global Trust Bank (hereinafter referred to as "GTB"), witnessed significant price rise accompanied with rise in volumes during the period October 11, 2000 to November 20, 2000 on The Stock Exchange, Mumbai (BSE) and The National Stock Exchange (NSE), the stock exchanges on which the share was listed. Complaints were also received during this period stating that persons/entities associated with Shri Ketan Parekh (hereinafter referred to as "KP Entities") had purchased shares from the promoter group in a synchronized manner indulged in fraudulent and unfair trade practices such as creation of artificial market for and manipulation of the price of the scrip.

 

Securities and Exchange Board of India (hereinafter referred to as "SEBI") conducted a preliminary investigation into the trading of the scrip of GTB and found that during the said period trading was concentrated among certain members. It was also observed that there was commonality in the group of top trading members on both the exchanges and a concentrated holding in excess of 5% of paid up equity capital of GTB was also noticed among certain entities. It was further found that the price of the scrip of GTB was artificially hiked by a group of clients having placed orders at prices much higher than the last traded price.

 

  1.  
    1. Based on the above preliminary findings, SEBI formally launched investigation vide its Order dated 2.3.2001 into the affairs relating to buying, selling or dealing in the shares related to GTB for the period November, 1999 to February, 2000. When the investigations were in progress, the merger of GTB with UTI Bank was announced on January 24, 2001 and therefore, the period of investigation was further extended to include the period from September 1, 2000 to March, 2001.
      2.

       

1.2 Investigations revealed that during the period October 9, 2000 to November 22, 2000 on the NSE, the following brokers accounted for 74.55% of the total Gross Purchases on the exchange:

 

  •  

       

    • Triumph Intl. Fin. Ltd. (28.92%)
      •

       

    • Credit Suisse First Boston (20.03%)

      •  

    • NH Securities Ltd. (14.95%) and

      •  

    • Woodstock Securities (10.65%)

      •  

The major clients of the said brokers were as under:

 

 

Broker 

  

Client/s 
 

Credit Suisse First Boston (I) Securities Limited
     
  • Own account
    •

     

     

  • Kallar Kahar
    •

     

     

  • Classic Credit Limited
    •

     

     

  • Panther Fincap & Management Services Limited
    •

     

     

  • Brentfield Holdings Ltd.
    •

     

     

  • Kensington Investments Ltd.
    •

     

     

  • Luminant Investment Pvt. Ltd.
    •
 
 

Hem Securities Ltd.

  

Panther Fincap Management Services Ltd.

 
 

Indsec Securities and Finance Ltd.

 

  •  
    • Vidyut Investments Ltd.
      •

       

       

    • Classic Credit Ltd.
      •

       

       

    • Coral Reef Inv.Co.Ltd.
      •

       

       

    • (Sub Account of RP&C International)
      •
 
 

Latin Manharlal Securities Limited

  

Panther Fincap Management Services Ltd.

 
 

Milan Mahendra Securities Limited

  

Panther Fincap Management Services Ltd.

 
 

N H Securities Limited

  

Panther Fincap Management Services Ltd.

 
 

Woodstock Securities Limited

 

     
  • Panther Fincap Management Services Ltd.
    •

     

     

  • Premier Finance & Trading Co. Pvt. Ltd.
    •

     

     

  • Ashok Mittal & Co
    •
 
 

Triumph Securities Ltd.

 

  •  
    • Vidyut Investments Ltd.
      •

       

       

    • Classic Credit Ltd.
      •

       

       

    • Coral Reef Inv.Co.Ltd
      •

       

       

    • Nishkalp Inv. & Trading Co. Ltd.
      •

       

       

    • Kensington Investments Ltd.
      •

       

       

    • European Investments Ltd.
      •

       

 
 

Triumph International Fin. Ltd.

 

  •  
    • Classic Credit Ltd.
      •

       

       

    • Coral Reef Inv.Co.Ltd
      •

       

       

    • Nishkalp Inv. & Trading Co. Ltd.
      •

       

       

    • Kensington Investments Ltd.
      •

       

       

    • European Investments Ltd.
      •

       

       

    • Ashok Mittal & Co.
      •

       

       

    • Brentfield Holdings Ltd.
      •

       

       

    • Far East Investments Ltd.
      •

       

       

    • Panther Fincap Management Services Ltd.
      •
 
 

C J Dalal

  

Panther Fincap Management Services Ltd.

 
 

Millenium Equities Limited

  

Panther Fincap Management Services Ltd.

 

 

1.3 During the course of investigations it was prima facie revealed that the promoter group entities sold substantial no. of shares i.e. around 1,31,00,000 shares by way of synchronized / structured deals to entities owned by or associated with Shri Ketan Parekh (KP entities) around the same period. It was further prima facie found that KP entities used these shares to create artificial market and to manipulate price later during the period November 1999 to February 2000 prior to preferential allotment in March 2000. The price of the shares of Global Trust Bank Ltd. appeared to be manipulated during the period October 2000 to February 2001 i.e. prior to announcement of proposed merger of Global Trust Bank Ltd. with UTI Bank. Certain KP entities, broking entities associated with KP entities, clients of KP entities and certain other broking entities were prima facie found to have indulged in price manipulation, creation of artificial market in the scrip of Global Trust Bank Ltd and some of these entities were used to park shares to circumvent SEBI (Substantial Acquisition of shares and Takeover) Regulations, 1997

 

2.0 Interim Order 

  1.  
    1. While the investigation was in progress, considering, the seriousness of the violation, an ex-parte ad interim order dated 31.12.2002 under Section 11 B of SEBI Act, 1992 was passed directing the following entities mentioned therein not to buy, sell or transfer, pledge or dispose off or deal in any other manner in the shares of GTB either directly or indirectly till the investigations were completed:
      2.  
       

      Sr. No. 

      		  

      Promoter Group Entities 
       

      1

      		  

      Ramesh Gelli
       

      2

      		  

      Premkala Gelli
       

      3

      		  

      Jayant Madhav
       

      4

      		  

      Girrish Gelli
       

      5

      		  

      Niraj Gelli
       

      6

      		  

      Sridhar Subasri
       

      7

      		  

      Annapurna Sridhar
       

      8

      		  

      Anjanaya Traders Pvt. Ltd.
       

      9

      		  

      Chiranjeevi Traders Pvt. Ltd
       

      10

      		  

      Gajanan Financial Services Pvt. Ltd.
       

      11

      		  

      Gajmukh Investments Pvt Ltd.
       

      12

      		  

      Kadrish Finance & Investments Pvt. Ltd.
       

      13

      		  

      Bombay Mahalakshmi Traders Pvt. Ltd.

       

      		  

      KP entities  
       

      14

      		  

      Classic Credit Ltd.
       

      15

      		  

      Classic Share & Stock Brokers Ltd. 
       

      16

      		  

      KNP Securities Ltd
       

      17

      		  

      NH Securities Ltd
       

      18

      		  

      Panther Fincap & Management Services Ltd.
       

      19

      		  

      Panther Investrade Ltd.
       

      20

      		  

      Luminant Investments Pvt. Ltd.
       

      21

      		  

      Triumph International Fin. Ltd.
       

      22

      		  

      Triumph Securities Ltd.

       

      		  

      Other Entities 
       

      23

      		  

      20th Century Securities Ltd.
       

      24

      		  

      Ashok Mittal 
       

      25

      		  

      Ashok Mittal & Co.
       

      26

      		  

      Brentfield Holdings Ltd.
       

      27

      		  

      C J Dalal
       

      28

      		  

      Claridges Investment & Finance Pvt. Ltd.
       

      29

      		  

      Coral Reef Inv. Co. Ltd.

      30

      Credit Suisse First Boston (I) Securities Pvt. Ltd.

      31

      Kallar Kahar (a sub account of the FII CSFB)

      32

      European Investments Ltd.

      33

      Far East Investments Ltd.

      34

      Hem Securities Ltd.

      35

      Indsec Securities & Finance Ltd.

      36

      Kensington Investments Ltd.

      37

      Latin Manharlal Sec. Ltd.

      38

      Milan Mahendra Sec. Ltd.

      39

      Millenium Equities Ltd.

      40

      Nairutya Finstock Pvt. Ltd.

      41

      Nishkalp Investigations. & Trading Co. Ltd.

      42

      Niya Finstock Pvt. Ltd.

      43

      Niyogi Finstock Pvt. Ltd.

      44

      Phulchand Sons Investments

      45

      Premier Fin. & Trading Co. Pvt. Ltd.

      46

      RP&C International A/c Coral Reef Inv. Co. Pvt. Ltd.

      47

      Sunidhi Consultancy Services Ltd

      48

      TCFC Securities Ltd.

      49

      Vidyut Investments Ltd.

      50

      Woodstock Securities Ltd., Member BSE & NSE.

       

    2. The said entities were offered a post decisional hearing on 3.2.2003 and 4.2.2003. All entities except one appeared in person and also through counsel and made submissions. Some of them have also subsequently filed written submissions. The oral and written submissions of the above entities were considered and the following action has been taken:
      3.

        

  1.  
    1. The promoters and associates of GTB have been prohibited from dealing in securities of GTB for a period of 18 months w.e.f. 31.12.2002 vide order dated 23.3.2004.

      2.  

    2. Orders against the "KP Entities" viz. M/s Triumph Securities, M/s Classic Shares & Stockbroking Services Ltd., M/s Classic Credit Ltd., M/s Luminant Investment Pvt. Ltd., M/s KNP Securities Ltd., Panther Fincap & Management Services, M/s Panther Investrade and M/s N.H. Securities were passed on 6.6.2003 confirming the order dated 31.12.2002 directing them not to buy, sell or transfer, pledge or dispose off or deal in any other manner the shares of GTB till the investigations are completed.

      3.  

    3. Enquiry Proceedings have been initiated against Stock Brokers involved and in many of the cases, final orders have been passed.

      4.  

    4. Adjudication proceedings were initiated against Classic Credit Limited, Panther Fincap & Management Services Limited and Vidyut Investment and the adjudicating officer has imposed penalty upon them under Chapter VIA of the SEBI Act.

      5.  

    5. In respect of the remaining entities mentioned below, proceedings under the SEBI Act and Regulations framed thereunder are being initiated and show cause notices wherever necessary are being issued:

 

1

20th Century Securities Ltd. (TCFC Securities Ltd.)

2

Ashok Mittal 

3

Ashok Mittal & Co.

4

Brentfield Holdings Ltd.

5

Claridges Investment & Finance Pvt. Ltd.

6

Coral Reef Inv. Co. Ltd.

7

Kallar Kahar (a sub account of the FII CSFB)

8

European Investments Ltd.

9

Far East Investments Ltd.

10

Kensington Investments Ltd.

11

Nishkalp Investigations. & Trading Co. Ltd.

12

Phulchand Sons Investments

13

RP&C International A/c Coral Reef Inv. Co. Pvt. Ltd.

14

Vidyut Investments Ltd.

  

  1.  
    1. I find that action has already been taken / initiated against many of the entities as above to restore the confidence of investors. The investigation though completed, the analysis of data and facts against the above entities is still underway. The final orders upon conclusion of proceedings under Section 11 (4) read with 11B of the SEBI Act, 1992 may take some more time. In the meanwhile, I note that the entities mentioned in para 2.2 (e) supra are partially prohibited from dealing in securities. In the light of the above, I find that the circumstances under which the interim order was passed have substantially changed. Thus, the continuation of the interim order dated 31.12.2002 as against these entities is no longer required. However, the culpability or otherwise of the said entities needs to be proven under appropriate proceedings as above. Therefore, the revocation of the ex-parte ad interim order shall not in any way be construed as exonerating the said entities.

    2. In view of the above, in exercise of powers conferred to me under Section 11 and 11B read with section 4(3) of the SEBI Act and Regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, I direct that the interim order dated 31.12.2002 shall henceforth cease to operate against the following entities:
      3.

        

  2. Order
    3.

     

  3.  

        

      1

      20th Century Securities Ltd. (TCFC Securities Ltd.)

      2

      Ashok Mittal 

      3

      Ashok Mittal & Co.

      4

      Brentfield Holdings Ltd.

      5

      Claridges Investment & Finance Pvt. Ltd.

      6

      Coral Reef Inv. Co. Ltd.

      7

      Kallar Kahar (a sub account of the FII CSFB)

      8

      European Investments Ltd.

      9

      Far East Investments Ltd.

      10

      Kensington Investments Ltd.

      11

      Nishkalp Investigations. & Trading Co. Ltd.

      12

      Phulchand Sons Investments

      13

      RP&C International A/c Coral Reef Inv. Co. Pvt. Ltd.

      14

      Vidyut Investments Ltd.

       

      I also direct the said entities to co-operate with the proceedings under the SEBI Act and Regulations framed thereunder against them. This order shall come into force immediately.

       

       

      G.N. Bajpai

      Date: Jun 12, 2004

      Chairman
      Place: MUMBAI  SECURITIES AND EXCHANGE BOARD OF INDIA