SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: V.K CHOPRA, WHOLE TIME MEMBER
WTM/VKC/ID-7/15/06
ORDER AGAINST M/S CYBERSPACE LTD. UNDER SECTION 11 (4) READ WITH 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND REGULATION 11 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO THE SECURITIES MARKET) REGULATIONS, 1995 IN THE MATTER OF IRREGULARITIES IN THE TRADING OF THE SHARES OF M/S. CYBERSPACE LTD.
1.0 BACKGROUND
1.1 Securities and Exchange Board of India (hereinafter referred to in short as “the Board”) had conducted an investigation into the affairs relating to buying, selling and dealing in the shares of M/s Cyberspace Ltd (The Company M/s Cyberspace Ltd is hereinafter referred to in short as ‘Noticee’) on observing unusual movement in the shares of the Noticee. Shares of the Noticee were listed on the Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE), Delhi Stock Exchange (DSE) and Uttar Pradesh Stock Exchange (UPSE). Shri Arvind Johari, Shri A.M Johari and his family members are the promoters of the Noticee. BSE, on a preliminary enquiry found that the promoters seem to be involved in activities, which may have contributed towards manipulating the price in the scrip of Noticee. There were media reports indicating some problem in relation to the scrip as also in the settlement relating to trades in the scrip. Subsequently, BSE and NSE withheld the payouts in the scrip for the settlement No. 242-246 and W 47-W50 respectively.
1.2 Both BSE and NSE have conducted investigation into the price movement of the scrip and forwarded their investigation reports to the Board. Based on the said investigation reports and taking into account the general movement in the price of the scrip, the Board conducted investigation for the period from October 1999 to March 2001.
1.3 The investigation revealed that the scrip of the Noticee was trading at around Rs. 1200/- prior to split in September, 2000 and the price was proportionally reduced to Rs. 186/- on September 26, 2000. The price moved in the range of Rs. 190/- to Rs. 147/- till February 2001. Thereafter, M/s. Century Consultants Ltd. (hereinafter referred to in short as ‘CCL’), Member of BSE,NSE and OCTEI of which Noticee is a promoter, defaulted and the price of the scrip started crashing by 16% on daily basis.
1.4 The Board had issued interim orders under Section 11 and Section 11B on April 06, 2001 restraining the directors of Noticee namely Shri Arvind Johari and his associate companies namely CCL, M/s. A K Johari & Co. (Member UPSE) and M/s. A. M. Johari & Co., member DSE from undertaking any fresh business as brokers. The Board had given an opportunity of post decisional hearing to Shri Arvind Johari and the aforesaid entities. Considering the entire facts and circumstances, Board confirmed the aforesaid interim orders vide order dated May 18, 2001.
2.0 SHOW CAUSE NOTICE & HEARING
2.1 A show cause notice dated April 06, 2005 was issued to the Noticee to show cause as to why appropriate action under Section 11(4) read with Section 11 B Securities and Exchange Board of India Act, 1992 including restraining Noticee from accessing the securities market and prohibiting Noticee to buy, sell or deal in securities, should not be passed against them for the violations specified above.
2.2 The said show cause notice was affixed at the premise of entity i.e 25, Babar Road, New Delhi – 110001 after complying with due process of law. I find that no reply to the said show cause notice has been received. However, I have granted an opportunity of hearing on September 20, 2006 at 11 a.m before passing the final order and directed Noticee to attend the hearing vide letter dated September 05, 2006. The said notice was also affixed at the premises of the entity at 25, Babar Road, New Delhi – 110001 after complying with due process of law. Neither any person has appeared on behalf of Noticee on September 20, 2006 nor any request for adjournment has been received from Noticee. Hence, I have decided to pass the final order on merit.
3.0 CONSIDERATION OF ISSUES
3.1 I have carefully examined all the materials on record. I find that the charge against Noticee is that the promoters of the Noticee along with related / associated entities have transacted the scrip of Noticee with a view to create artificial volumes and manipulating / maintaining the price. The said promoters were rotating the shares in the market to create artificial volumes by using the names of various entities and thus were responsible for creating false or misleading appearance of trading in the market. Thus, they have violated provisions of Regulation 3 and Regulation 4(a) to (d) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations 1995.
3.2 I find that the Noticee company was originally incorporated in 1984 with name M/s Greenfield Leasing and Holdings Limited and renamed as M/s Century International Finance Ltd. in 1994. Thereafter, in 1998 the company again changed its name as M/s Cyberspace Infosys Ltd. which is presently known as M/s Cyberspace Ltd. The company came out with a public issue in December 1994 and its total equity of Rs 5.74 crores was divided into 57,40,000 equity shares of Rs 10 each. The equity shares of the Noticee company are listed on DSE, UPSE, BSE and NSE. The scrip was traded in compulsory rolling settlement. As per the distribution schedule dated May 31, 2000, the promoters and group companies are holding 42.73% and public holding is 42.88%. The Noticee has been promoted by Shri Rajendra Kumar Mohta, Shri Arjun Kumar Agarwal and Shri Anil Kumar Beejawat. In 1993-94, Shri A.K Johari and Shri A.M. Johari had taken over the Noticee company.
3.3. The Noticee Company diversified its business into the business of software development and exports and claimed to have business partners such as Microsoft, Oracle and Nortel in India and tied up with Lotus International Development Corporation for setting up of National Authorised Support Centre for Lotus International Development Corporation at the Company’s Mumbai Office. In 2000, the company issued 49,30,000 shares of Rs 2/- each at a premium of Rs 184/- on preferential basis inter alia to Financial Institutions such as UTI, GIC and others.
LINKAGES AMONG NOTICEE, ITS PROMOTERS, CCL AND OTHER ENTITIES
3.4 I find that CCL is a group / associated company of Noticee having three common directors namely Shri G. N. Johari, Shri. A. K. Johari and Shri A. M. Johari. As per the annual report of Noticee for the year 1999-2000, Noticee was holding 18,63,425 shares of Noticee representing 47.22% of the paid up capital of CCL. At the same time, CCL was holding 21% of the paid up capital of Noticee. Hence, it is conclusively established that Noticee and CCL are related with each other.
3.5 I find that Noticee, CCL and its promoters had acted in concert with each other along with related entities and transacted in the scrip with a view to raise the price of the scrip artificially and thereby created false market, which culminated into the present proceedings. I have examined the relationship of the entities who transacted in the scrip to create artificial volume and find that the entities namely Kamarao Plastique Ltd., Octopus Softel Pvt Ltd, Pradeepak Finance Manufacturing & Consultancy Services Pvt. Ltd., Shreeji Investments, Nucleus Soft Tel Pvt Ltd, Shivam Multi Services Pvt Ltd, Amit Inter Chemicals Pvt Ltd, Ramesh Shah, Pratik R Shah, Arihant Investments, Country Informtech Services Pvt Ltd, Shri Hitesh Ambalal Shah, Vinpark Securities, Shri Ashsih G Shah, Sipra Education Career Foundation Pvt Ltd., Calculus Soft Tel Pvt Ltd, Delta Investments, Kamal Infosys, Neelam Consultancy and Rosewood Tradelinks Pvt Ltd are related and traded in the scrip with the funds provided by Noticee, CCL and its promoters.
3.6 I find that the Noticee and its promoters along with other associated/related/connected entities were mainly responsible for creating artificial volumes in the scrip. The table bringing out the linkages among the said entities and the Noticee and CCL is given below:
|
Name of the Client
|
Signatories / directors
|
Relationship with CCL/ Noticee
|
|
Kamarao Plastique Ltd.
|
Shri Chetan Patel – Director
Signatories to MOA
Shri Rajiv Kumar Nagia and Shri Ajay Prakash
Witness to MOA is Shri R.P Tewari
|
Shri Chetan Patel is an employee of CCL. The address of the witness (R P Tewari) appearing in the MOA is same as that of the Lucknow branch office of CCL. Shri Arvind Johari used this as a front company.
|
|
Octopus Softel Pvt Ltd
|
Shri Anil Tambe –Director.
Signatories to MOA
Shri Pradeep Gupta and Smt. Sangeeta Gupta. The witness to the MOA is Shri Sachin Agrawal
|
Shri Anil Tambe and Shri Sachin Agrawal are employees of CCL.
|
|
Pradeepak Fin and Mgt Cons Pvt Ltd
|
Shri Harshad Shah and Shri Rajendra Menta – Directors
|
Unregistered sub-broker of CCL, doing trading through CCL. Shri Arvind Johari used this as a front company.
|
|
Shreeji Investments
|
Shri Rohit Shah – Proprietor
|
Employee of CCL. Shri Arvind Johari used this as a front company.
|
|
Nucleus Soft Tel Pvt Ltd
|
Shri Amit Singh – Director
Signatories to MOA
Shri Pradeep Gupta and Smt. Sangeeta Gupta. The witness to the MOA is Shri Sachin Agrawal
|
Shri Amit Singh as well as Shri Sachin Agrawal are employees of CCL. Amit Singh was personal assistant to Shri Arvind Johari
|
|
Shivam Multi Services Pvt Ltd
|
Shri Harshad shah and Shri Rajendra Mehta – Directors
|
Unregistered sub-broker of CCL, doing trading through CCL. Sri Arvind Johari used this as a front company.
|
|
Amit Inter Chemicals Pvt Ltd
|
Shri Gaurav Shah – Director
Signatories to MOA
Shri Shamsunder Shri Verma, Shri Ashok Verma, Shri Anil Verma, Shri Ajai Verma, Shri Arun Verma.
|
Shri Gaurav Shah is an employee of CCL.
|
|
Ramesh Shah
|
Individual
|
Sub broker of CCL on BSE. Shri Arvind Johari used him as a front.
|
|
Pratik R Shah
|
Individual
|
Son of Shri Ramesh Shah. Shri Arvind Johari used him as a front.
|
|
Arihant Investments
|
Shri Rakesh Giriya – Propreitor. Witness to the Member Constituent agreement is Rohit Shah
|
Shri Rakesh Giriya is a client of CCL and Rohit Shah is the employee of CCL. Sri Arvind Johari used this as a front company.
|
|
Country Informtech Services Pvt Ltd
|
Shri Raju Kapur - director.
Signatories to MOA Shri Rakesh Tandon Raju Kapoor
Prabal Mall
|
1. Shri Raju Kapur is an employee of CCL and Shri Rakesh Tandon is a relative of Shri Raju Kapoor
2. The address of the witness (Shri R P Tewari ) appearing in the MOA is same as that of the Lucknow branch office of CCL
Shri Arvind Johari used this as a front company.
|
|
Shri Hitesh Ambalal Shah
|
Individual
|
Employee of CCL Shri Arvind Johari used him as a front.
|
|
Vinpark Securities
|
Shri Parthiv Parekh
|
Client of CCL and applied for sub-broker under CCL. Shri Arvind Johari used this as a front company.
|
|
Shri Ashsih G Shah
|
Individual
|
Employee of CCL. Sri Arvind Johari used him as a front.
|
|
Sipra Education Career Foundation P Ltd.
|
Shri Anand Nathani – Director
Signatories to MOA
S/ Shri Amarendra Kumar Srivastava, Srinivas Kumar Verma
Amarkumar Sinha
|
Employee of CCL. Shri Arvind Johari used this as a front company.
|
|
Calculus Soft Tel Pvt Ltd
|
Shri Kalanath Jha – Director-
Signatories to MOA
Shri Pradeep Gupta and Smt. Sangeeta Gupta. The witness to the MOA is Shri Sachin Agrawal
|
Shri Kalanath Jha as well as Shri Sachin Agrawal are employees of CCL.
|
|
Delta Investments
|
Shri Mahesh Mistry
|
Employee of CCL. Sri Arvind Johari used this as a front company.
|
|
Neelam Consultancy
|
Shri Vijay Samat
|
As a client traded through CCL and also CCL became a client of this sub-broker of Shri R V Vakil to trade in the scrip of Noticee. Shri Arvind Johari used this as a front company.
|
|
Prabodh Artha Sanchay Pvt Ltd
|
Shri Mohan Chimanlal Gujrati, Shri Ramachandra Sadashiv Dimble,
|
No apparent relationship but financing the other clients by spot purchase of shares. Traded through a middleman.
|
|
Rosewood Tradelinks Pvt Ltd
|
Shri Rajendra Mehta – Director
Signatories to MOA
Shri Dilip Gupta
Shri Pradeep Gupta
|
Unregistered sub-broker of CCL, doing trading through CCL. Shri Arvind Johari used this as a front company.
|
|
Shri Jugal Kishore Barasia
|
Individual
|
Client of CCL only purchased through them mostly on spot basis. Financed CCL by spot payments in many cases.
|
|
Shri S G Badani
|
Individual
|
Friend of Shri J K Barasia. Client of CCL.
|
|
Mangla Capital Services Pvt Ltd
|
Shri Vinod Gupta
|
All the clients are related to CCL and acted through the middleman related to CCL. Financed the clients by channelling HDFC Instacash facility.
|
|
Shri Ajay Gupta
|
Individual
|
Middleman between CCL and Prabodh Arth Sanchay . Not traded in the scrip.
|
TRADING DETAILS OF THE ABOVE MENTIONED RELATED ENTITIES
3.7 The details of dealings of these entities in the scrip of Noticee both at BSE and NSE during the priod of investigation are given in the table below:
|
|
|
Buy Position
|
Sale Position
|
|
Sl.No.
|
Name
|
Shares
|
%
|
Shares
|
%
|
|
1.
|
Purchases/Sales through CCL
|
40,85,516
|
11.11
|
1,39,269
|
0.38
|
|
2.
|
Ramesh C. Shah
|
28,90,011
|
7.86
|
2,32,600
|
0.63
|
|
3.
|
Rosewood Tradelinks P. Ltd.
|
12,70,325
|
3.45
|
12,50,800
|
3.41
|
|
4.
|
Shivam Mutli-Services P. Ltd.
|
11,06,750
|
3.01
|
10,50,200
|
2.86
|
|
5.
|
Tirupati Shares Registry P. Ltd.
|
10,45,001
|
2.84
|
9,26,608
|
2.52
|
|
6.
|
Country Informtech Services P. Ltd.
|
9,76,345
|
2.65
|
89,075
|
0.24
|
|
7.
|
Vandana Srivasthva
|
9,71,796
|
2.64
|
4,29,824
|
1.17
|
|
8.
|
Amit Interchemicals P. Ltd.
|
9,19,297
|
2.50
|
8,04,675
|
2.19
|
|
9.
|
Pradeepak Finance & Mgmt. Consultants P. Ltd.
|
8,53,300
|
2.32
|
7,99,100
|
2.17
|
|
10.
|
Delta Investments
|
7,30,305
|
1.99
|
4,62,550
|
1.26
|
|
11.
|
Nucleus Soft-Tel P. Ltd.
|
6,32,100
|
1.72
|
6,24,586
|
1.70
|
|
12.
|
Calculus Soft-Tel P. Ltd.
|
6,16,740
|
1.68
|
75,455
|
0.21
|
|
13.
|
A.M. Johari & Co.
|
5,67,862
|
1.54
|
8,09,536
|
2.20
|
|
14.
|
Octopus Soft-Tel P. Ltd.
|
4,65,100
|
1.26
|
55,000
|
0.15
|
|
15.
|
Pratik R. Shah
|
3,42,015
|
0.93
|
27,08,408
|
7.36
|
|
16.
|
Kamal Infosys Ltd.
|
3,34,677
|
0.91
|
6,92,285
|
1.88
|
|
17.
|
Arihant Investments
|
3,22,700
|
0.88
|
3,63,300
|
0.99
|
|
18.
|
Shreeji Investments
|
3,08,050
|
0.84
|
44,800
|
0.12
|
|
19.
|
Arvind Johari
|
3,02,260
|
0.82
|
70,550
|
0.19
|
|
20.
|
Rajnikant Shah
|
2,44,565
|
0.66
|
72,500
|
0.20
|
|
21.
|
S.G. Badani
|
1,98,100
|
0.54
|
3,67,250
|
1.00
|
|
22.
|
Jugal Kishore Barasia
|
1,71,755
|
0.47
|
7,22,800
|
1.97
|
|
23.
|
Sipra Educational Career Foundation
|
1,58,000
|
0.43
|
1,75,804
|
0.48
|
|
24.
|
M.S. Badani
|
1,40,780
|
0.38
|
6,56,278
|
1.78
|
|
25.
|
Prabodh Arth Sanchay P. Ltd.
|
1,25,100
|
0.34
|
22,02,350
|
5.99
|
|
26.
|
CCL.
|
90,000
|
0.24
|
11,54,166
|
3.14
|
|
27.
|
Kamrao Plastique
|
42,600
|
0.12
|
37,000
|
0.10
|
|
|
TOTAL
|
1,99,11,050
|
54.14
|
1,70,18,769
|
46.27
|
3.8 The following table shows a consolidated picture of the trades done by the entities related to CCL in this period.
|
|
NSE (March 5 to 14, 2001)
|
BSE (March 8 to 16,2001)
|
|
|
Gross market Volume
|
Purchase
|
(b) as % of
(a)
|
Sales
|
(c) as % of (a)
|
Gross market Volume
|
Purchase
|
(g) as % of
(f)
|
Sales
|
(i) as % of (f)
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
Trades through CCL
|
2680439
|
1859633
|
69%
|
5492
|
Negl
|
2496619
|
1905546
|
77%
|
6950
|
Negl
|
|
Trades through other members
|
634710
|
24%
|
2219405
|
83%
|
414850
|
16%
|
2306877
|
92%
|
|
Total Trades
|
2445343
|
93%
|
2494343
|
83%
|
2320396
|
93%
|
2313827
|
92%
|
3.9 I find that Prabodh Arth Sanchay purchased 41,02,320 shares out of which 13,40,300 (i.e. 32% of total purchase) were on spot basis from the clients related to CCL in the period January to March, 2001. The rest is through CCL though apparently there seemed to be no link between the CCL and Prabodh Arth Sanchay. It can be seen from the above that most of the selling clients are also appearing on the buying side dealing through various brokers. Thus the same set of clients were found to be buying as well as selling in the said scrip constituting 93% (NSE &BSE) of the gross buy and 83%(NSE) and 92%(BSE) of gross sell. It is observed that the majority of the clients or directors/proprietor of the clients are either employees or clients or sub-brokers of CCL.
3.10 I find that there was inter client transfer of shares and often spot deals were made. Often the shares were transferred to clients to meet their pay-in obligations. It has been found that in the period under investigation i.e. March 8 to 16, 2001, CCL purchased 1905546 shares of Noticee and sold 6950 shares as per details given below:-.
|
Date
|
Purchase
|
Sales
|
Gross
|
Market Volume
|
Trade as % of market volume
|
|
Mar 8 2001
|
227147
|
0
|
227147
|
397387
|
29
|
|
Mar 9 2001
|
367407
|
3450
|
363957
|
523323
|
35
|
|
Mar 12 2001
|
273150
|
500
|
272650
|
370600
|
37
|
|
Mar 13 2001
|
258568
|
2500
|
256068
|
325560
|
39
|
|
Mar 14 2001
|
331262
|
500
|
330762
|
381976
|
43
|
|
Mar 15 2001
|
|
|
|
4535
|
0
|
|
Mar 16 2001
|
448012
|
0
|
448012
|
493238
|
45
|
3.11 I find that CCL only purchased and sold very negligible quantity of shares. It is also found that the broker off-set its position by spot sales and by transferring the shares to its different front entities and then sold them through other broker.
3.12 The following table shows client wise buy and sell positions for the period of March 5, 2001 to March 16, 2001 at both BSE and NSE investigation.
|
Date of the year 2001
|
Name of the Client
|
Broker
|
Qty Bought
|
Qty Sold
|
|
05/03
|
Ramesh Shah
|
India Infoline(N)
|
40000
|
|
|
07/03
|
India Infoline(N)
|
50000
|
|
|
08/03
|
India Infoline(N)
|
50000
|
|
|
08/03
|
Toshniwal & Co(N)
|
5000
|
|
|
09/03
|
India Infoline(N)
|
50010
|
|
|
12/03
|
India Infoline(N)
|
50500
|
|
|
13/03
|
Monarch Project(N)
|
|
2160
|
|
14/03
16/03
|
Monarch Project(N)
India Infoline (B)
|
|
5000
240000
|
|
08/03
|
Pratik Shah
|
Kaynet (B)
|
|
67437
|
|
12/03
|
Mangla Capital (N)
|
|
140000
|
|
|
|
|
|
|
|
05/03
|
Sipra Educational Career Foundation Pvt Ltd
|
Parikh and Shah Fin (N)
|
42500
|
|
|
07/03
|
Angel Capital (N)
|
10000
|
|
|
07/03
|
Parikh and Shah Fin (N)
|
5100
|
|
|
08/03
|
Parikh and Shah Fin (N)
|
42600
|
|
|
08/03
|
ASL Capital (N)
|
50000
|
|
|
09/03
|
Parikh and Shah Fin (N)
|
15000
|
|
|
12/03
|
Parikh and Shah Fin (N)
|
30000
|
|
|
13/03
|
Mangla Capital (N)
|
|
72500
|
|
|
|
|
|
|
|
05/03
|
Arihant Investments
|
The Omniscient(N)
|
15500
|
|
|
07/03
|
|
The Omniscient(N)
|
18500
|
|
|
08/03
08/03
09/03
|
|
The Omniscient(N)
The Omniscient(B)
The Omniscient(B)
|
15000
17500
20000
|
|
|
12/03
12/03
|
|
The Omniscient(N)
The Omniscient(B)
|
9000
5500
|
|
|
13/03
|
|
Mangla Capital (N)
|
|
150000
|
|
|
|
|
|
|
|
05/03
|
Rosewood Tradelinks P Ltd
|
Anagram Securities (N)
|
50000
|
|
|
08/03
08/03
|
Kaynet (B)
VVL Securities(B)
|
25000
16550
|
|
|
09/03
|
VVL Securities(B)
|
20000
|
|
|
12/03
|
VVL Securities(B)
|
30000
|
|
|
14/03
|
Anagram (B)
|
|
70000
|
|
16/03
|
Anagram (B)
|
|
50000
|
|
|
|
|
|
|
|
05/03
|
Calculus Soft Tel P Ltd
|
Betala Stock (N)
|
7000
|
|
|
|
Hi-Groeth(N)
|
7000
|
|
|
07/03
|
Betala Stock (N)
|
10000
|
|
|
|
Hi-Groeth(N)
|
10000
|
|
|
08/03
|
Hi-Groeth(N)
|
7500
|
|
|
|
G R Pandya (B)
|
25500
|
|
|
|
Betala Stock (N)
|
15000
|
|
|
09/03
|
Hi-Groeth(N)
|
7500
|
|
|
|
G R Pandya (B)
|
25200
|
|
|
|
Betala Stock (N)
|
10000
|
|
|
12/03
|
Hi-Groeth(N)
|
5000
|
|
|
|
G R Pandya (B)
|
15000
|
|
|
|
Betala Stock (N)
|
7000
|
|
|
13/03
|
Mangla (N)
|
|
62500
|
|
07/03
|
Shivam Multi Services P Ltd
|
Mangla Capital(N)
|
|
167000
|
|
08/03
|
Prabhudas Liladhar(N)
Prabhudas Liladhar(B)
|
|
110000
110000
|
|
09/03
|
Prabhudas Liladhar(N)
Prabhudas Liladhar(B)
|
|
160000
91500
|
|
14/03
|
Anagram(B)
|
|
50000
|
|
16/03
|
|
Anagram(B)
|
|
80000
|
|
|
|
|
|
|
|
05/03
|
Prabodh Arthsanchaya P Ltd
|
Sajag Securites(N)
|
|
53700
|
|
07/03
|
Sajag Securites(N)
|
|
55175
|
|
08/03
|
Sajag Securites(N)
Kaynet (B)
|
|
34325
25000
|
|
08/03
|
Kaynet (N)
Shailesh L Shah(B)
|
|
50000
50000
|
|
09/03
|
Sajag Securites(N)
Kaynet (B)
Shailesh L Shah(B)
|
|
87195
156100
65000
|
|
12/03
|
Sajag Securites(N)
Kaynet (B)
|
|
90000
147000
|
|
|
Kaynet (N)
|
|
35000
|
|
13/03
|
Sajag Securites(N)
Kaynet (B)
|
|
130000
245000
|
|
14/03
|
Kaynet (B)
|
|
157000
|
|
16/03
|
Kaynet (B)
|
|
83000
|
|
|
|
|
|
|
|
05/03
|
Kamrao Plastique P Ltd
|
Mangla Capital (N)
|
|
94900
|
|
08/03
09/03
|
Mangla Capital (N)
Mangla Capital (N)
|
|
43800
51000
|
|
|
|
|
|
|
|
05/03
|
Octopus Soft Tel P Ltd
|
Mangla Capital (N)
|
|
14500
|
|
07/03
|
Mangla Capital (N)
|
|
55000
|
|
09/03
|
Mangla Capital (N)
|
|
56400
|
|
12/03
|
Mangla Capital (N)
|
|
23800
|
|
|
|
|
|
|
|
05/03
|
Pradeepak Fin and Mgt Cons P Ltd
|
Mangla Capital (N)
|
|
177600
|
|
|
|
|
|
|
|
05/03
|
Shreeji Investments
|
Mangla Capital (N)
|
|
8700
|
|
|
|
|
|
|
|
07/03
|
Nucleus Soft Tel P ltd
|
Mangla Capital (N)
|
|
60700
|
|
08/03
|
Mangla Capital (N)
|
|
64400
|
|
09/03
|
Mangla Capital (N)
|
|
69200
|
|
12/03
|
Mayur M Kothari (B)
|
|
123100
|
|
12/03
|
Mangla Capital (N)
|
|
50350
|
|
13/03
|
Mayur M Kothari (B)
The Omniscient (B)
G r Pandya (B)
|
19500
10000
|
46400
|
|
14/03
|
|
The Omniscient (B)
|
19000
|
|
|
08/03
|
Amit Inter Chem P Ltd
|
Nikko Stock (B)
V Devendrakumar(B)
|
30000
|
110000
|
|
09/03
|
Nikko Stock (B)
V Devendrakumar(B)
|
15000
|
118200
|
|
12/03
|
Mangla Capital (N)
V Devendrakumar(B)
|
20000
|
79800
|
|
13/03
|
V Devendrakumar(B)
|
15000
|
|
|
14/03
|
V Devendrakumar(B)
|
19500
|
|
|
|
|
|
|
|
|
08/03
|
Country Informtech Serv P Ltd
|
Sonpankhi (B)
|
18200
|
|
|
09/03
|
|
Sonpankhi (B)
|
18400
|
|
|
12/03
|
|
Sonpankhi (B)
|
16400
|
|
|
13/03
|
|
Mangla Capital (N)
|
|
15700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/03
|
Delta Investment
|
PSJ Securities(N)
|
4785
|
|
|
|
|
|
|
|
|
09/03
|
Jugal Kishore Barasia
|
The First Custodian(N)
|
|
50000
|
|
12/03
|
|
27100
|
|
12/03
|
ACK Capital (B)
|
|
70000
|
|
14/03
|
Nikko Stock(B)
|
|
65000
|
|
|
|
|
|
|
|
07/03
|
S G Badani
|
Nikko Capita (N)
|
|
78000
|
|
14/03
|
|
|
1135
|
|
|
|
|
|
|
|
05/03
|
Clients
|
CCL (N)
|
178558
|
3865
|
|
07/03
|
CCL (N)
|
281700
|
0
|
|
08/03
|
CCL (N)
CCL
|
236760
227147
|
0
|
|
09/03
|
CCL (N)
CCL (B)
|
305072
367407
|
1627
|
|
12/03
|
CCL (N)
CCL (B)
|
359680
273150
|
0
|
|
13/03
|
CCL (N)
CCL (B)
|
433802
258568
|
0
|
|
14/03
|
CCL (N)
CCL (B)
|
64061
331262
|
|
|
16/03
|
CCL (B)
|
448012
|
|
(B = BSE, N = NSE)
3.13 I find that in NSE and BSE most of the clients buying and selling in the said scrip during the settlements under scrutiny were related to CCL. Some entities like Prabodh Arth Sanchay, Jugal Kishore Barasia, S. G. Badani and M. S. Badani appeared to have indulged in circuitous trading of shares of the Noticee.
3.14 The records revealed that Noticee and its promoters were not only transacting in the market for creating artificial volumes but also providing finance to connected entities like Rosewood Tradelink Pvt. Ltd., Pradeepak Finance & Management Consultants Pvt. Ltd., Shivam Multi-Services Ltd., Shri Ramesh Shah, Shri Pratik Shah etc. I also observe that Noticee and its promoters have provided securities to various entities.
FUND TRANSFERS AMONG RELATED ENTITIES
3.15 I find on perusal of the bank statements of the client accounts maintained with Bank of India (Stock Exchange Branch), Mumbai that a number of instances are there showing payments/ receipts of funds from / to Noticee and its director(s) by the clients mentioned below. Inter-client transfers were also observed between the said client accounts. Some of the instances noticed by investigating team are given as under:
Nuclues Soft tel P Ltd.
· Payment of Rs.17,50,000/- and Rs.75,000/- made to Noticee on January 01, 2001and January 06, 2001.
· Receipt of Rs. 81,00,000/- from Shivam Multi-Services on 05/01/2001
· Receipt of Rs. 25,00,000/- from Octopus Softel Pvt. Ltd. on 24/01/2001
· Payment of Rs. 44,00,000/- to CCL on 13/03/2001
Calculus Soft Tel P Ltd.
· Payment of Rs. 2,75,000/- to A M Johari on March 01, 2001
· Receipt of Rs. 42,92,000/- from Octopus on 27/02/2001
Pratik R Shah
· Payment of Rs. 5,00,000/- to A M Johari on January 08, 2001
· Payment of Rs. 29,00,000/- to A M Johari on January 22, 2001
· Payment of Rs. 83,000/- to A M Johari on February 05, 2001
· Payment of Rs. 43,50,000/- to A M Johari on February 06, 2001
Amit Inter Chemicals P Ltd
· Payment of Rs. 4,00,000/- to A M Johari on March 01, 2001
· Payment of Rs. 10,50,000/- to A M Johari on March 08, 2001
· Payment of Rs. 3,25,000/- to CCL on March 12, 2001.
Kamarao Plastique P Ltd.
· Payment of Rs. 38,20,000/- and Rs. 7,75,000/-to Sipra Education Career Foundation P. Ltd. on March 05, 2001
· Payment of Rs. 46,00,000 to CCL on March 13, 2001
Sipra Educational Career Foundation P Ltd.
· Receipt of Rs. 38,20,000 from Kamarao Plastique P Ltd. on March 05, 2001
· Payment of Rs. 20,00,000/- to A M Johari on March 13, 2001.
· Payment of Rs. 20,00,000/- to CCL on March 13, 2001.
3.16 I find from some of the above cases of fund transfer that the buying of securities by the entity is immediately after its receipt of funds from other related entity. e.g. Receipt of Rs.38,20,000 by Sipra Educational Career Foundation P Ltd from Kamarao Plastique P Ltd. on March 05, 2001 is accompanied with purchase of 42500 shares on the same date, the value being approximately the same. Similarly Calculus Softtel Pvt. Ltd. had received an amount of Rs.42,92,000/- from Octopus on February 27, 2001 which was followed by purchases by Calculus Softtel Pvt. Ltd.
3.17 Thus, I find that there have been several instances of payments / receipts made to A.M Johari (Director of Noticee) and Noticee and also amongst the clients. The above clearly establishes that Noticee and its directors have not only used their employees to float companies and traded in their name but also have opened shell companies in different names to manipulate the scrip of Noticee.
TRANSFER OF SECURITIES AMONG THE RELATED ENTITIES
3.18 I observe that there have been the following transfers of securities among related entities which have been made to meet the delivery obligations of other clients on NSE.
|
Settlement No
|
Name of the client
|
Deliverable Position
|
Name of the transferor
|
Qty Transferred
|
|
2001049
|
Pratik Shah
|
140000
|
Nucleus Soft Tel P Ltd
|
69100
|
|
2001050
|
Sipra Educational Career Foundation P Ltd
|
72500
|
Nucleus Soft Tel P Ltd
|
17960
|
|
2001050
|
Arihant Investments
|
150000
|
Octopus Soft Tel P Ltd
|
61000
|
|
Nucleus Soft Tel P Ltd
|
25500
|
|
2001046
|
Shivam Multi Services P Ltd
|
167000
|
Delta Investments
|
21500
|
|
Country Informtech Services P Ltd
|
5400
|
|
Pradeepak Fin and Mgt Cons P Ltd
|
41000
|
|
2001045
|
Prabodh Arthasanchay
|
53700
|
Delta Investments
|
60400
|
|
2001048
|
Octopus Soft Tel P Ltd
|
56400
|
Nucleus Soft Tel P Ltd
|
4491
|
|
Amit Inter Chem P Ltd
|
4491
|
|
2001045
|
Pradeepak Fin and Mgt Cons P Ltd
|
177600
|
Amit Inter Chem P Ltd
|
1384
|
|
Delta Investments
|
68141
|
|
Rosewood Tradelinks P Ltd
|
27372
|
|
2001046
|
Nucleus Soft Tel P Ltd
|
50350
|
Delta Investments
|
8965
|
|
|
|
|
Shivam Multi Services P Ltd
|
98523
|
|
|
|
|
Amit Inter Chem P Ltd
|
23500
|
|
|
|
|
Octopus Soft Tel P Ltd
|
11750
|
|
|
|
|
Country Informtech Services P Ltd
|
5500
|
|
2001049
|
Amit Inter Chem P Ltd
|
79800
|
Delta Investments
|
9535
|
|
2001050
|
Country Informtech Services P Ltd
|
15700
|
Octopus Soft Tel P Ltd
|
13050
|
|
Amit Inter Chem P Ltd
|
5000
|
|
Arihant Investments
|
6786
|
|
2001049
|
Pratik Shah
|
140000
|
Ramesh Shah
|
66000
|
|
|
|
|
|
Nucleus Soft Tel P ltd
|
69100
|
|
|
2001050
|
Sipra Educational Career Foundation Pvt Ltd
|
72500
|
Nucleus Soft Tel P Ltd
|
17960
|
|
|
|
|
|
Mkt Del from CCL on BSE
|
54540
|
|
|
2001050
|
Arihant Investments
|
150000
|
Ramesh Shah
|
37650
|
|
|
|
|
|
Octopus
|
61000
|
|
|
|
|
|
ILFS 6244
|
11604
|
|
|
|
|
|
Nucleus
|
25500
|
|
|
|
|
|
Mkt Del CCL on NSE
|
8000
|
|
|
2001050
|
Calculus Soft Tel P Ltd
|
|
Mkt Del CCL on BSE
|
62500
|
|
|
2001046
|
Shivam Multi Services P Ltd
|
167000
|
Sipra
|
5045
|
|
|
|
|
|
Arihant
|
7100
|
|
|
|
|
|
Delta
|
21500
|
|
|
|
|
|
Country
|
5400
|
|
|
|
|
|
Pradeepak
|
41000
|
|
|
|
|
|
Recd in earlier Settl. from Pradeepak
|
92000
|
|
|
|
|
|
|
|
|
|
2001045
|
Octopus Soft Tel P Ltd
|
14500
|
Mkt Del from others on NSE
|
14500
|
|
|
2001046
|
Octopus Soft Tel P Ltd
|
55000
|
Mkt Del from CCL on NSE
|
34673
|
|
|
|
|
|
Sipra
|
20327
|
|
|
2001048
|
Octopus Soft Tel P Ltd
|
56400
|
Mkt Del from CCL NSE
|
28754
|
|
|
|
|
|
Mkt Del from CCL on BSE
|
23155
|
|
|
|
|
|
Mkt Del on BSE from others
|
6000
|
|
|
|
|
|
Nucleus
|
4491
|
|
|
|
|
|
Amit Inter
|
4491
|
|
|
2001049
|
Octopus Soft Tel P Ltd
|
23800
|
CDSL Account No 4670
|
6550
|
|
|
|
|
|
Mkt Del from CCL on NSE
|
13309
|
|
|
|
|
|
Mkt Del on NSE from others
|
5200
|
|
|
|
|
|
Mkt Del on BSE from Others
|
13050
|
|
|
2001045
|
Pradeepak Fin and Mgt Cons P Ltd
|
177600
|
Mkt Del Others NSE
|
30000
|
|
|
|
|
|
Mkt Del Others BSE
|
53500
|
|
|
|
|
|
Mkt Del CCL BSE
|
15980
|
|
|
|
|
|
Amit Inter
|
1384
|
|
|
|
|
|
Delta Investment
|
68141
|
|
|
|
|
|
Rosewood
|
27372
|
|
|
2001046
|
Nucleus Soft Tel P ltd
|
50350
|
Mkt, DEL- BSE-CCL
|
4170
|
|
|
|
|
|
Mkt DEL BSE- Others
|
28500
|
|
|
|
|
|
Mkt Del Others-NSE
|
36900
|
|
|
|
|
|
Ramesh Shah
|
35000
|
|
|
|
|
|
Delta Investments
|
8965
|
|
|
|
|
|
Sipra
|
7000
|
|
|
|
|
|
Shivam
|
98523
|
|
|
|
|
|
Amit
|
23500
|
|
|
|
|
|
Octopus
|
11750
|
|
|
|
|
|
Country
|
5500
|
|
|
2001047
|
Nucleus Soft Tel P ltd
|
69200
|
Mkt Del From CCL
|
69200
|
|
|
|
|
|
Mkt Del Others
|
18400
|
|
|
|
|
|
Mkt Del BSE
|
9500
|
|
|
|
|
|
|
|
|
|
2001048
|
Nucleus Soft Tel P ltd
|
64400
|
Mkt Del From CCL
|
64400
|
|
|
|
|
|
Mkt Del BSE
|
10500
|
|
|
2001049
|
Nucleus Soft Tel P ltd
|
60700
|
Mkt Del From CCL
|
60700
|
|
|
2001049
|
Amit Inter Chem P Ltd
|
79800
|
Mkt Del CCL NSE
|
51256
|
|
|
|
|
|
Mkt Del BSE Others
|
23500
|
|
|
|
|
|
Mkt Del NSE Others
|
5000
|
|
|
|
|
|
Delta
|
9535
|
|
|
2001050
|
Country Informtech Serv P Ltd
|
15700
|
Mkt Del CCL BSE
|
10864
|
|
|
|
|
|
Octopus
|
13050
|
|
|
|
|
|
Amit Inter
|
5000
|
|
|
|
|
|
Arihant
|
6786
|
|
| |
|
|
|
|
|
|
|
|
STATEMENTS AND ADMISSIONS OF RELATED ENTITIES.
3.19 Further, I have examined the statements of the entities recorded by the investigating authority and am fully satisfied that that the said entities are related with Noticee, CCL and its promoters. I find that the details of the said statements had been explained in the Show Cause Notice and copies of the said statements were furnished along with the said Show Cause Notice. Further, I find that some of these entities have admitted in their statement that the securities as well as the funds were provided by Noticee for manipulating the scrip. In some cases, the directors/partners/proprietors of these entities have admitted that their names were used by Noticee for transacting in the market. The said statements and some of such admissions by these related entities are explained in the succeeding paragraphs.
3.20 Shri Chetan Patel, Director of Kamarao Plastique Ltd. appeared before the investigating authority and his statement was recorded on May 04, 2001. I find that he was only 25 years at the time of recording this statement. He admitted that he was an employee of CCL since 1999 and also stated that his company itself had been floated by Shri Arvind Johari. He also informed the investigating authority that he was not aware of any transaction in the scrip of Noticee except the fact that he bought 10 shares of Noticee in February 2001. He also informed that Shri Johari used to trade on behalf of the firm. He also stated that he has no idea about trading done for his company, Kamarao Plastique Ltd. and also added that Shri Arvind Johari used to do the trading for the firm and whenever required he was told to sign the papers and blank cheques and not allowed to read the papers also.
3.21 The statement of Shri Anand Nathani, Director of Sipra Education Career Foundation P Ltd. was recorded on April 30, 2001. He admitted that he was working with CCL since 2000 as a trainee for NSE terminal operator for a salary of Rs 6,000/-. I find that he was 28 years at the time of recording the statement. He also admitted that he had not traded in his personal capacity and the trading in his name was executed by Shri Arvind Johari himself and his key staff.
3.22 Shri Ramesh Shah in his statement before the investigating authority recorded on May 03, 2001 stated that Shri Arvind Johari provided finance to the tune of Rs 6 crores in October / November, 2000 for the transactions done in his son’s name. He also admitted that he had not invested single paise for trading the scrip of Noticee
3.23 Shri Mahesh Mistry, Director of M/s. Delta Investment, who was employed with Noticee group company – CCL. – as back office staff, informed investigating authority in his statement recorded on April 30, 2001 that he was not aware of any transactions in the scrip of Noticee and that he was forced to sign blank cheques and various other documents.
3.24 Similarly, Shri Rohit Shah, Proprietor of Shreeji Investment in his statement recorded on May 02, 2001 has stated that he had joined Noticee group company – CCL – as Branch In-charge in September, 2000 and sometime in December 2000, he was asked to be proprietor of Shreeji Investments to deal in shares. Later on, Noticee asked him to sign blank cheques.
3.25 Shri Rajendra Mehta, Director of Rosewood Tradelink Pvt. Ltd., Pradeepak Finance & Management Consultants Pvt. Ltd. and Shivam Multi-Services Ltd. has admitted in his deposition recorded on April 30, 2001 that the funds used to come from the companies belonging to Mr. A. M. Johari (Director of Noticee) viz. Tirupati Share Registry Ltd., A. M. Johari & Co. Ltd., CCL etc.. He has further admitted that Noticee used to give orders on behalf of the companies in which Shri Rajendra Mehta is a director. He has also stated that his companies were used as front entities by Noticee.
3.26 Admissions of all the individuals/ entities are summarised in the Table below:
|
Name of the Clients
|
Remarks
|
|
Kamarao Plastique Ltd.
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Octopus Softel Pvt Ltd
|
Not appeared.
|
|
Pradeepak Fin and Mgt Cons Pvt. Ltd.
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Shreeji Investments
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Nucleus Soft Tel Pvt Ltd.
|
Not appeared
|
|
Shivam Multi Services Pvt Ltd.
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Amit Inter Chemicals Pvt. Ltd.
|
Not appeared.
|
|
Shri Ramesh Shah (Sub-broker)
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Shri Pratik R Shah
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Arihant Investments
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Country Informtech Services Pvt Ltd.
|
Not appeared
|
|
Calculus Soft Tel Pvt. Ltd.
|
Not appeared
|
|
Sipra Education Career Foundation P Ltd.
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Delta Investments
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Neelam Consultancy
|
Not aware of the trades through Mangla Capital but aware about other trades. Allowed Shri Arvind Johari to trade in his name for brokerage.
|
|
Shri Hitesh Ambalal Shah
|
Not aware of the trades. Shri Arvind Johari used his name.
|
|
Vinpark Securities
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Not aware of the trades. Shri Arvind Johari used his name.
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Kamal Infosys
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Not appeared
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Shri Ashsih G Shah
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Not aware of the trades. Shri Arvind Johari used his name.
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Shri Jugal K. Barasia
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Traded through middleman, done spot transactions (purchase) through CCL.
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Shri S G Badani
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Not appeared. Traded through middleman.
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Prabodh Sanchay
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Traded through middleman, Spot purchase from CCL.
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Rosewood Tradelinks Pvt. Ltd.
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Not aware of the trades. Shri Arvind Johari used his name.
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3.27 All the entities, who appeared before the investigating team, stated that they had transacted in the shares of Noticee at its promoter’s request/coercion. It appeared that since the directors of these entities were employed with Noticee /other companies in the same group, Noticee were in a position to force/coerce them to sign the papers for opening as well as operating bank and demat accounts and for carrying out transactions in the scrip of Noticee
3.28 With regard to the trading of related/ associated entities, I find that in both NSE and BSE most of the clients buying and selling the said scrip during the settlements under scrutiny were related to CCL. Some persons like Prabodh Arth Sanchay, Jugal Kishore Barasia, etc. had done large scale transactions and appeared to have made spot purchases during the period under investigation. From these trades, it appears that a majority of the trades were done by the entities related to CCL only.
ROLE OF NOTICEE /DIRECTORS IN FINANCING THE TRADES:
3.29 I find that the Noticee and its directors and associates had financed entities/individuals for trading in the scrip. The details of such instances are given hereinunder:
1. Shri Pratik Shah
· Shri Pratik Shah had traded in the scrip of Noticee through different brokers. Upon investigation, it was observed that Shri Shah is a 20 year old individual in whose names trades were executed in the scrip since October, 2000.
· As per the statement of Shri Shah, his father, Shri Ramesh Shah, was associated with Shri Arvind Johari, who told him to take computer training in the organization. Subsequently, he told him to trade in the scrip of the Noticee and to learn about the market.
· Shri Shah claimed that Shri Arvind Johari had asked him to do some trading in the stock market for learning purposes. Later on Shri Johari commenced trading in the scrip of the Noticee by using his name. He was kept totally in dark about these transactions and the financing of these trades. He was asked to sign cheques or other documents as per the instructions of Shri Johari, promoter/director of Noticee.
· Shri Johari had introduced him to the brokers and had instructed his staff to trade on his behalf. On October 18, 2000, Shri Shah’s bank account was credited with Rs. 34.50 lakh by Shri Johari and on October 25, 2000 his account was again credited by Rs. 34 lakhs.
2. Shivam Multi Services Pvt. Ltd. / Rosewood Tradelinks Pvt. Ltd. and Pradeepak Finance Manufacturing & Consultancy Pvt. Ltd.
· Shri Rajendra Mehta, director of above referred companies stated that transactions in the shares of noticee were executed at the request of Shri Johari. These companies had commenced trading through different brokers in the month of July, 2000. The funding of purchases to the tune of Rs. 1 crore was made by the group companies of Johari. After sometime, the trading activity increased manifold and Shri Johari again financed them to the tune of Rs. 1.5 crores.
· In the middle of December, 2000 these companies started selling the shares on spot payment basis to meet their pay-in liability. These spot transactions were also arranged by the promoters of Noticee through different brokers of BSE/NSE. Shri Mehta informed that the fund flow was also organized and managed by Shri A. M. Johari and the office staff of CCL.
3. Shri Rohit Shah:
· The promoters of Noticee have also provided the funds to their employees to trade in the scrip. Shri Rohit Shah, marketing manager, was asked to be proprietor of Shreeji Investments to deal in the market by promising him good bonus in March, 2001. Shri Shah has claimed that he was not aware about any transactions executed in the firm. Shri Johari had opened the bank account and used to operate the same on behalf of the firm. Shri Shah’s role was limited to signing blank cheques and signing the documents as per instructions of the promoters. Shri Shah could not give transaction details, cash flow, DP account statement etc. as they were said to be maintained by promoters of Noticee.
4. Shri Ramesh C. Shah
· As per the oral submissions of Shri Ramesh C. Shah, promoters of Noticee used to provide finance through Noticee, CCL and other associate entities. The promoters also financed the transactions of his son, Shri Pratik Shah. Shri Johari and his staff used to place orders in the scrip and used to manage the funds.
· Shri Johari had provided finance to the tune of Rs. 6 crores in October/November, 2000 for the transactions done in his son’s name. Shri Johari built up purchase position in the scrip of noticee in his son’s name and then started selling through different brokers. The funds raised by spot sales in his son’s name were transferred to his account to fulfill his pay-in obligations. Shri Shah stated that he had not invested his money for the trades executed in the scrip of Noticee. Instead all the fund requirements were met by promoters of Noticee.
5. Shri Arvind Nathani
· Shri Arvind Nathani was working with CCL since September, 2000 as trainee for NSE terminal operator for a salary of Rs. 6000/- p.m. In December, 2000, Shri Johari asked to see him with a copy of Ration Card and Passport/driving license along with 20 passport size photographs. He was forced to sign some papers and was told that he had become director of Sipra Education Career Foundation Pvt. Ltd. A bank account was opened in the name of the company and Shri Nathani was made to sign blank cheques and DP account opening form.
· Shri Nathani also informed that following employees of Shri Johari were forced to trade in the scrip by using different entities:
i) Chetan Patel (Director- Kamarao Plastique),
ii) Anil Tambe (Accountant and Director – Octopus Softel)
iii) Rohit Shah (Director – Shreeji Investments, Arihant Investments),
iv) Amit Singh (PA to Arvind Johari and employee, Director – Nucleus Softel),
v) Gaurav Shah (Accountant and Director – Amit Inter-Chemicals)
vi) Kalnath Jha (Employee, Director – Calculuas Softel)
vii) Mahesh Mistry (Employee, Director – Delta Investment)
6. Shri Ashish G. Shah
· Shri Ashish G. Shah was employed with CCL as Back Office In-charge since December, 1997. Upon examination he confessed that he had never traded in the scrip of Noticee but trades were executed in his name by Shri Johari and associates. Shri Johari had deposited Rs. 40 lakh in his personal savings account and asked him to sign cheques for this amount in the name of brokers.
· He also informed that Shri Johari used to trade in the shares on behalf of most of the employees of corporate office of CCL and Noticee.
7. Shri Hitesh Ambalal Patel
· Shri Hitesh A. Patel was working with CCL for a salary of Rs. 10,000/- p.m. In the course of investigation, it was observed that he had transacted in huge volumes through M/s. Mangla Capital Services Ltd. However, Shri Patel denied trading through M/s. Mangla. Instead, he informed that sometime in October – November 2000, Shri Johari had forced his to sign some documents for trading in the scrip of Noticee, on his behalf and he was told that any refusal may lead to his losing the job.
3.30 I find that Noticee and its group company CCL etc. have transacted in the scrip in a fraudulent manner which is evident from the fact that CCL, has not been able to meet the pay-in obligations of the exchange.
3.31 I find one of the observation of Central Bureau of Investigations (CBI) in the matter to the effect that “the entire amount of approx. Rs. 32.09 crore released by UTI was not utilized for business as was stipulated in the offer document by Noticee, but the same was diverted to stock exchange through a circuitous route, involving large number of Banks and Bank accounts, to meet the obligations of Group Companies of Noticee, as well as for purchase of shares of Noticee, by different entities of the Johari Group i.e. Promoters of Noticee, to maintain the share price of Noticee, at higher level with a view to dispose the shares in future at a profit thus, subjecting the investors to loss.”
3.32 I find that the above facts establish that Noticee and its directors along with related/linked/associated entities have transacted in the scrip of Noticee with a view to create artificial volumes and manipulating/maintaining the price. I also find from the records that Noticee and its directors were rotating the shares in the market to create artificial volumes by using the names of various entities. In view of these, it is clearly proved that Noticee is responsible for creating false or misleading appearance of trading in the market and also entering into trades that are not genuine trade transactions. Hence I find that Noticee had violated provisions of Regulation 3 and Regulation 4 (a), 4 (b), 4 (c) and 4 (d) of SEBI (Prohibition of Fraudulent & Unfair Trade Practices relating to Securities Market) Regulations, 1995.
3.33 I find that trading in the scrip of the Noticee has been suspended from April 30, 2001 on NSE and from April 19, 2001 on BSE. The said suspension is still in force. I further find that after March 2001, the Noticee has also not accessed the securities market.
4.0 ORDER
4.1 Taking into consideration the facts and circumstances of the case, I, in exercise of the powers conferred upon me under Sections 19 of the SEBI Act read with Sections 11(4) read with 11B of Securities and Exchange Board of India Act, 1992 do hereby restrain the company M/s Cyberspace Ltd (Noticee) from buying, selling and dealing or accessing the securities market in any manner for a period of two years from the date of this Order.
4.2 This order shall come into force with immediate effect.
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Mumbai
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V. K. CHOPRA
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November 23, 2006
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WHOLE TIME MEMBER
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SECURITIES AND EXCHANGE BOARD OF INDIA
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