Order against Radhe Finance

ORDER IN RESPECT TO M/S RADHE FINANCE UNDER SECTION 11B OF SEBI ACT, 1992 READ WITH REGULATION 11 AND 12 OF SEBI ( PROHIBITION OF UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKETS ) REGULATIONS, 1995 IN THE CASE OF GCCL INFRASTRUCTURE AND PROJECTS LTD.

Significant rise in price and unusually high volumes were noticed in the scrip of GCCL Infrastructure and Projects Ltd. during January – June 1996 on The Stock Exchange, Mumbai ( BSE ) and Ahmedabad Stock Exchange ( ASE ). Investigations were conducted by SEBI into this alleged price rigging in the scrip of GCCL Infrastructure and Projects Ltd. (hereinafter referred to as GCCL). Investigations revealed that, the scrip of GCCL was listed on BSE on January 25, 1996 at a price of Rs.25/- and on ASE at a price of Rs.30/- on January 8, 1996. Subsequently, the price of the scrip moved up and reached to Rs.92/- on June 7, 1996. This sharp rise in the price was accompanied with significant volumes. The rise in price and volumes occurred in spite of various measures viz., imposition of special margin, suspension of trading in the scrip for a day. However the price and volume in the scrip continues to remain unusual. In view of this, the scrip was suspended indefinitely by the exchanges under the permission from SEBI. It was seen that the price rise in the scrip was not in consonance with the fundamentals of the company, GCCL.

Investigations revealed that, M/s Khandwala Finstock Pvt. Ltd., member ASE, had transacted in the scrip of GCCL in large quantities on BSE and ASE. It was seen that, M/s Khandwala Finstock Pvt. Ltd. had transacted in the scrip mainly on behalf of you i.e. M/s Radhe Finance. The details of transactions done by you in the scrip of GCCL through M/s Khandwala Finstock Pvt. Ltd. are as under :
 

It was seen that, you had purchased 1,40,000 shares of GCCL and sold 20,000 shares of GCCL on gross basis resulting in a net purchase position of 1,20,000 shares during the aforesaid settlement periods i.e. your transactions in the scrip of GCCL were in significant quantities on gross basis as well as net basis, which disturbed market equilibrium and created artificial volume in otherwise ill-liquid scrip.

In view of this, summons were issued to you to appear in person and attempts were also made to collect information in respect of transactions done by you in the scrip of GCCL. During the course of investigations, efforts were also made by issuing summons to you through your broker M/s Khandwala Finstcok Pvt. Ltd. However, neither did you appear nor furnished any information in this regard. No adjournment was sought by you in response to the summons. Other attempts to trace your whereabouts also were not fruitful. In view of this, it was seen that, the large transactions by you in the ill-liquid scrip of GCCL Infrastructure and Projects Ltd. have been done with a view to create an artificial market for the scrip and manipulate the price of the scrip of GCCL Infrastructure Ltd., which were in violation of provisions of Regulation 4(a) of the SEBI (Prohibition of Fraudulent & Unfair Trade Practices relating to the Securities Market Regulations) 1995 read with the SEBI Act, ’92.

Pursuant to investigations show-cause notice no. IES/ID2/RKK/8692002 dated January 16, 2002 was issued to you for violation of the provisions of Regulation 4(a) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. Copies of the aforesaid show-cause notice were also sent to your all the available addresses. Further, an attempt was also made to send the aforesaid show-cause notice to you through M/s. Khandwala Finstock Pvt. Ltd. brokers through whom you have dealt in the scrip of GCCL. An opportunity for personal hearing was also granted to you vide letter dated August 16, 2002 to appear on August 26, 2002. However, neither you submitted any reply to the show-cause notice nor attended the personal hearing granted to you. Thus, it was observed that, though you were given opportunity to explain your position, you did not avail the same.

I have carefully examined documents, facts and material on record. I find that the charges leveled against M/s Radhe Finance are substantiated. It is seen that, M/s Radhe Finance transacted in the in the shares of GCCL in significant quantities which resulted in disturbing market equilibrium and artificial increase in price and creation artificial volume in otherwise ill-liquid scrip. I, therefore find that, M/s Radhe Finance have violated the provisions of Regulation 4(a) of the SEBI (Prohibition of Fraudulent & Unfair Trade Practices relating to the Securities Market Regulations) 1995 read with the SEBI Act, ’92. I, therefore, in exercise of the powers conferred in terms of Sub-Section (3) of Section 4 of SEBI Act read with Section 11B of SEBI Act, 1992 read with Regulation 11 and 12 of SEBI ( Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets ) Regulations, 1995 hereby direct that M/s Radhe Finance is prohibited from accessing capital market for a period of One Year. It is further directed that, M/s Radhe Finance shall not deal in securities for a period of One Year.

The Order shall come into force with effect from October 20, 2002.
 

Place : Mumbai                 
Date : October 14, 2002                                                 

G. N. BAJPAI 
CHAIRMAN 
 SECURITIES AND EXCHANGE BOARD OF INDIA