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Order in the matter of Global Trust Bank

Jun 21, 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

 

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 inter alia 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. 

      		  

      Entity 
       

      1.

      		 

      Nairutya Finstock Pvt. Ltd
       

      2.

      		  

      Niya Finstock Pvt. Ltd.
       

      3.

      		 

      Niyogi Finstock Pvt. Ltd.
       

      4.

      		 

      Premier Fin. & Trading Co. Pvt. Ltd.
       

      5.

      		 

      Sunidhi Consultancy Services Ltd

       

       
    2. The said entities were offered a post decisional hearing on 3.2.2003 and 4.2.2003. All the above entities appeared in person and also through counsel and made submissions. They also subsequently filed written submissions. The submissions made by the said entities include the following:


    3. That they are not part of the promoter group of GTB or its technical collaborators
      4.

       

    4. That they are not KP entities or connected with them and have not dealt with them or on their behalf or at their behest.


    5. That they have not been a party to any synchronised or structured deals


    6. That they have not entered into any transactions that are manipulative in nature and have not violated the provisions of the FUTP Regulations.
      7.  

3.0 Consideration of Issues

 

I have considered the submissions of the said entities and also material on record. I note that investigations have been completed as against the entities mentioned in para 2.1 supra. I find from the investigation report that there is no material available therein to establish beyond reasonable doubt that the said entities have abetted the K P entities or the promoters of GTB in manipulating price and volume of the shares of GTB. In view of the above and in view of the fact that the investigations are complete, I find that the continuation of the interim order dated 31.12.2002 as against these entities is no longer required.

  

  1.  
    1. 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:
      2.

        

  2. Order
    3.  
 

Sr.No. 

  Entity 
 

1.

 

Nairutya Finstock Pvt. Ltd
 

2.

  

Niya Finstock Pvt. Ltd.
 

3.

 

Niyogi Finstock Pvt. Ltd.
 

4.

 

Premier Fin. & Trading Co. Pvt. Ltd.
 

5.

 

Sunidhi Consultancy Services Ltd

 

This order shall come into force immediately.

 

 

 

G.N. Bajpai

Date: Jun 21, 2004

Chairman
Place: MUMBAI  SECURITIES AND EXCHANGE BOARD OF INDIA