SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: G.ANANTHARAMAN, WHOLE TIME MEMBER
IN THE MATTER OF IPO INVESTIGATIONS
MAGNUM EQUITY SERVICES LIMITED
WTM/GA/67/ISD/05/06
DATE OF HEARING: 04.05.2006
APPEARANCES:
FOR NOTICEES: Shri Ravikumar Varanasi, Advocate
Shri Rajesh T Gala, C.M.D
Shri Dinesh H Gala, J.M.D.
FOR SEBI : Shri Ravichandran, Chief General Manager
Shri Manoj Kumar, Deputy General Manager,
ORDER
(UNDER SECTIONS 11 AND 11B OF SEBI ACT, 1992)
1.1 By an ad interim ex-parte order dated April 27, 2006 (hereinafter referred to as the ‘order’) under section 19 read with sections 11, 11b and 11(4) of the Securities and Exchange Board of India Act, 1992 and section 19 of the Depositories Act, 1996 pending enquiry and passing final Order, certain interim directions were issued against various market participants including Magnum Equity Services Limited. (MESL).
1.2 Magnum Equity Services Ltd. (MESL), a member of National Stock Exchange, was prima facie identified as one of the financiers of the master account holders and an ultimate beneficiary of the shares cornered by the key operators in various IPOs during the years 2003 to 2005. Pursuant to these preliminary finding MESL was directed not to buy, sell or deal in securities market including in IPOs, directly or indirectly, till further directions.
2.0 Findings regarding MESL in SEBI’s Ex Parte Interim Order
2.1 At para 10.9 of the order MESL was identified as a financier of Purshottam Budhwani in view of the following transaction:
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Client Id
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Client Name
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Company Name
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Name Of financier
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Dp Name
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Client Id
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No. Of Shares
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Date Of Transaction
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10093022
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Purshottam Budhwani
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Shoppers'stop Limited Equity Share
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Magnum Equity Services Limited
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Indusind Bank Ltd.
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10003221
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5000
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5/24/2005
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2.2 At para 10.10, the gain made by MESL was worked out to be Rs.6.73 lakhs as per details below:
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Client Name
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Company Name
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Name Of Financier
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No. Of Shares
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Close price on the date of listing
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Issue Price
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Gains
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Purshottam Budhwani
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Shoppers'stop Limited Equity Share
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Magnum Equity Services Limited
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5000
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372.60
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238.00
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673,000.00
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2.3 The above transactions had taken place in respect of demat accounts held with NSDL. Similar transactions in CDSL demat accounts were noticed. Upon perusal of the off market transaction details of Purshottam Budhwani, B/4, Panchsheel Building, Nath Pai Nagar, Ghatkopar (East) Mumbai 400077 in the client id 1202020000006413 held with Pratik DP (demat account opened on June 26, 2003), as obtained from CDSL, it was found that he had made off-market transfers to various entities including MESL and the details are given below:
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Scrip name
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TxnDate
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Shares
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CtrBOID
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Ctrboname
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Ctr. BO Address
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Shoppers Stop (Incorrectly mentioned in the ex-arte interim order as ‘IDFC’)
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24052005
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15000
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IN30015910003221
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Magnum Equity Services Limited
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103, Harganga Mahal, Annexe Khodadad Circle, Dadar T. Mumbai. 400014
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2.4 In view of the above transactions, MESL was identified as a financier and beneficiary of Purshottam Budhwani and ex-parte ad interim directions as mentioned above were issued against MESL.
2.5 MESL was given an opportunity for filing its objections, availing personal hearing and inspection of the relevant documents relied by the SEBI for the pupose of reaching prima facie findings against it within a period of 15 days.
3.0 Oral hearing and submissions of MESL.
3.1 MESL filed written submissions dated April 28, 2006 and May 2, 2006. Subsequently, MSEL appeared for a personal hearing before me on May 4, 2005 through Advocate Ravikumar Varanasi, Managing Directors Rajesh T Gala and Dinesh H Gala and made further submissions.
3.2 MESL clarified that the 5000 shares of ‘Shoppers Stop Ltd.’ transferred to its account by Purshottam Budhwani were sold by MESL on account of Shri Dushyant N Dalal & Family and MESL was not the ultimate beneficiary of these transactions.
3.3 In order to substantiate the above contention, MESL furnished copies of contract notes issued to Dushyant N Dalal. It is observed from the said contract notes that MESL had sold 15,000 shares, 5000 shares, 5245 shares of Shoppers Stop on behalf of Dushyant N Dalal respectively on May 23, 2005, May 24, 2005 and May 27, 2005. Based on copies of Demat Account (DP: IndusInd Bank client ID: 10003221) Transactions Statement of MESL for the period May 21 -28, 2005, as submitted by MESL, it is seen that shares in respect of the above transactions were received from the demat accounts of Purshottam Budhwani (Client IDs: 1202020000006413 with Pratik DP and 10093022 held with Anagram Stockbroking Ltd.) and the same were delivered by MESL to its NSE Pool account (client ID: 10003998 held with Indusind Bank).
3.4 Further, MESL has furnished copies of financial statement of Dushyant N Dalal in its books highlighting the transactions made on behalf of Dushyant N Dalal and indicating cheques paid to Dushyant N Dalal on account of the above transactions.
3.5 MESL informed that since Shri Dushyant N Dalal was out of India at the time of the execution of the above sale transactions, he had requested MESL to accept the shares transferred by his friend Purshottam Budhwani in respect of the above transactions. Vide letter dated May 2, 2006, as submitted by MESL, Shri Dushyant N Dalal has also confirmed the above position.
4.0 Consideration of the issues and Conclusion
4.1 Further to the above submissions received from MESL, the matter was referred to NSE for verification. NSE vide reply dated May 18, 2006 intimated that the trades in the scrip of Shoppers Stop executed by MESL were done on behalf of the client Dushyant N Dalal. NSE has also informed that Purshottam Budhwani did not appear to have traded through the trading member MESL in the scrip of Shoppers Stop during the relevant period.
4.2 In view of the above submissions of MESL duly supported by documents as well as the reply of NSE, it is evident that MESL had acted as a broker for Dushyant N Dalal in respect of the above transactions in the shares of Shoppers Stop. However, as regards MESL, I find that it had merely acted as an intermediary. The evidence produced before me indicates that the monies were credited to the account of Dushyant N Dalal while MESL was not the beneficiary of the shares cornered by Purshottam Budhwani.
5.0 Order
5.1 In view of the above, I prima facie accept the contentions of MESL that they had acted only as a broker for Dushyant N Dalal for transaction in the shares of Shoppers Stop and not as a financier and therefore, there is no need to continue interim directions against MESL as in the ad interim order dated April 27, 2006.
5.2 This order shall come into force with immediate effect.
PLACE: MUMBAI
DATE: 26.05.2006 |
G ANANTHARAMAN
WHOLE-TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA |