MO/78/IVD/09/04
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
UNDER SECTION 11B OF THE SEBI ACT, 1992, READ WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 1992.
IN THE MATTER OF M/S ANKIT PRACHI TRADING & INVESTMENT LTD.
BACKGROUND
1. SEBI conducted investigations into the trading in the scrip of M/s Ankit Prachi Trading & Investment Ltd. (hereinafter referred to as ‘Ankit’), after a routine surveillance inspection of Calcutta Stock Exchange (CSE). An unusual price rise was noted in the scrip of Ankit, which had moved up from Rs.7.30/- to Rs.86/- during the period December 06, 1997 - February 28, 1998. Investigations revealed that certain locked-in shares were delivered in the market during the above period.
2. Ankit had come out with a public issue of 15 lacs equity shares of Rs.10/- each, aggregating to Rs.1.50 lacs, which had opened for subscription on May 28, 1996. As per the provisions of the SEBI (Disclosure and Investor Protection) Guidelines, 1992, as they existed then, certain shares held by the promoters of the company were locked-in for a period of 3/5 years. The details of the shares which were locked-in, as per the Chartered Accountant’s certificate submitted by Ankit to CSE, are given below :
|
S no.
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Date of Allotment
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No. of Shares
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Distinctive nos
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Date upto which shares shall not be sold
|
|
From
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To
|
|
1
|
20.6.96
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1,83,700
|
566301
|
750000
|
19.6.1999
|
|
2
|
20.6.96
|
7,50,000
|
750001
|
1500000
|
19.6.2001
|
3. Investigations revealed that a part of the locked-in shares mentioned above were delivered at CSE and some were traded through off-market deals. The distinctive nos. of the shares which were delivered at CSE are given below :
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Distinctive No
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No of shares
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Sett no
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Period
|
Broker
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Client
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Shares allotted to
|
|
1312301 - 1322000
|
9700
|
36/97-98
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5.12.97 to 11.12.97
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S K Khattry & Co.
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Juggonpursad Baijnath
|
Samson Mktg. Pvt. Ltd.
|
|
1257001 - 1261000
|
4000
|
47/98-98
|
20.2.98 to 26.2.98
|
Lyons Range Share Broking Pvt. Ltd.
|
Pujita Knittings (P) Ltd.
|
Samson Vincom Pvt. Ltd.
|
SHOW CAUSE NOTICE
4. SEBI (Disclosure and Investor Protection) Guidelines, 1992 [GL/IP.No.1/SEBI/PMD/92-93 dated 11th June, 1992 and amendments thereto] provide that share certificates issued to promoters, friends, relatives and associates, etc., which are under lock-in for a period of 3 or 5 years, as may be applicable, should carry the inscription ‘non-transferable’, so as to indicate their “locked-in”/”non-transferable” status.
5. As stated above at para 3, shares of Ankit which were required and stated to have been under lock-in till the year 2001, were found to have been delivered at CSE. It appeared that these shares were not carrying the inscription of ‘non-transferable’ and were hence sold in the market, in violation of the aforesaid guideline. In view of this violation, a show cause notice dated August 04, 2003 was issued to M/s Ankit Prachi Trading & Investment Ltd. and its three directors, Shri Jaiedeo Dokania, Shri Ajay Kumar Dokania and Shri Pradeep Poddar, as also to the original allottees of the said locked-in shares M/s Samson Vincom P. Ltd. and M/s Samson Marketing P. Ltd. The notice issued against M/s Samson Marketing P. Ltd was delivered. Attempts to serve notice on M/s Samson Vincom Pvt Ltd did not succeed.
REPLY
6. A reply dated September 11, 2003 was received from Ankit, wherein they pleaded ignorance in the matter. They submitted that no violation of provisions of SEBI (Disclosure and Investor Protection) Guidelines, 1992 and amendments thereto was committed by them. They also submitted that they had inscribed ‘non-transferable’ for a period of 3 or 5 years, as the case may be, on the share certificates issued to promoters, friends, relatives & associates, etc. Further, they also said that M/s Samson Vincom Pvt. Ltd. and M/s Samson Marketing Pvt. Ltd. were promoter group companies at the time of the public issues since at that time they had agreed to include their name in the list of promoter group shareholders and they had also put the shares under the lock-in period for a period of 5 years. They also said that these two entities were not associated with Ankit anymore. They submitted that they failed to understand how the shares held by these two entities were delivered in the market without carrying the inscription ‘non-transferable’. They requested for a xerox copy of the share certificates delivered in the market without the said inscription, so as to verify the facts of the case. Ankit also requested SEBI not to issue any directions under Section 11B of the SEBI Act, 1992 read with SEBI (Disclosure and Investor Protection) Guidelines, 1992 and amendments thereto.
7. Reply dated 4.03.2004 was received from Samson Marketing Pvt Ltd wherein they enclosed copy of the Balance Sheet of the company (for the year that ended on 31.03.1998). They submitted that the shares of Ankit Prachi were with them during such period.
HEARING AND WRITTEN SUBMISSIONS
8. An opportunity for personal hearing was afforded on December 17, 2003 to M/s Ankit Prachi Trading & Investment Ltd., Shri Jaiedeo Dokania, Shri Ajay Kumar Dokania, and Shri Pradeep Poddar. On the said date, Shri Vijay Kumar Chandak, Chartered Accountant, who was authorized to appear on behalf of Ankit, appeared and made oral submissions. He submitted that the shares were duly inscribed with the tag ‘non-transferable’. He also submitted that as per the records of Ankit, the shares were not transferred during the lock-in period.
FINDINGS
9. The distinctive number of shares locked in along with the names of persons holding such locked-in-shares were provided by Ankit’s letter dated 28th October 1999. The same is reproduced hereunder:-
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Folio No.
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Name of the Share Holders
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No. of shares
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Distinctive Nos.
|
|
014
|
Vivog Commercial (P) Ltd.
|
30000
|
1470001-15000007
|
|
046
|
Sajal Commercial (P) Ltd.
|
141000
|
948501-1089500
|
|
049
|
Samson Marketing (P) Ltd.
|
130000
|
1280001-1410000
|
|
009
|
Dawson Fabtrade (P) Ltd.
|
66300
|
750001-816300
|
|
013
|
Strik Marketing (P) Ltd.
|
50000
|
1089501-1139500
|
|
047
|
Span Commercial (P) Ltd.
|
75500
|
1139501-1215000
|
|
048
|
Samson Vincom (P) Ltd.
|
65000
|
1215001-1280000
|
|
050
|
Sukanya Trading & Finance Ltd.
|
50000
|
1410001-1460000
|
|
044
|
Liza Vincom (P) Ltd.
|
47500
|
891001-938500
|
|
042
|
Eynthia Tie-Up (P) Ltd.
|
40000
|
816301-856300
|
|
043
|
Goenka Business & Finance (P) Ltd.
|
34700
|
856301-891000
|
|
051
|
Umang Commotrades (P) Ltd.
|
10000
|
1460001-1470000
|
10. From the above, it can be seen that the shares bearing distinctive nos. 1312301–1322000 and 1257001-261000, which were delivered by Juggonpursad Baijnath and Pujita Knittings respectively, were allotted to and standing in the name of Samson Marketing Pvt. Ltd. and Samson Vincom Pvt. Ltd. (collectively called Samsons) respectively, promoter group companies as on the date of the public issue of the company. The same was confirmed by present Whole Time director of Ankit, Shri S K Agarwala, in his statement recorded on 28th January, 2003. As such, Samsons should have been aware that the shares allotted to them were locked-in, even if the share certificates apparently did not bear any such inscription. Summons to compel for production of documents sent to Samson Vincom P Ltd., calling for information regarding allotment / sale of shares and how the locked-in shares were delivered in the market by third parties, was returned undelivered with the reason ‘not known’. A further notice is issued on Samson Vincom recently through the regional office of SEBI.
11. I note that Ankit had submitted before SEBI that the shares under lock-in were duly inscribed ‘non-transferable’ by them, as regards the period for which the shares were non-transferable. The only other entity against whom guilt could be alleged in respect of the circulation of locked-in shares, is the registrar and share transfer agent, which, in the instant case, was M/s Niche Technologies Pvt. Ltd. (hereinafter referred to as ‘Niche’). I have seen that a detailed enquiry was conducted against Niche and it was found that they were not responsible for non-inscription of the tag “non-transferable” on the share certificate. The relevant portion of the Enquiry Report submitted on February 06, 2004 is extracted hereunder :
“I find from the copy of the computer data-sheet presented before me that the list of initial and post-issue shares of the promoters having the flag of ‘lock-in’ wherever required. NTPL(Niche) contented that these were the only data based on the basis of which share certificates were printed. Once the share certificates were dispatched to the shareholders by the registrar, they lost all sorts of control on the scrips. All statistics about conception of blank share certificates and details of blank share certificates were handed-over to the company in 1998. The NTPL(Niche) by no means would be benefited by not inscribing the phrase on share certificates relating to lock-in nor did they trade in the scrip”.
12. Basic allegation against Ankit, its directors, M/s.Samson Vincom Pvt. Ltd and M/s Samson Marketing Pvt Ltd., is that the shares which were under lock in were not carrying the inscription ‘non-transferable’. In the enquiry against the Registrar and share transfer agent, the Enquiry Officer found from computer data sheet presented before him by the Registrar and share transfer agent that the list of initial and post issue shares of the promoters were having the tag of ‘lock-in’, wherever required. Further, Ankit had submitted a certificate from Chartered Accountant to CSE indicating the distinctive numbers of shares which were under lock-in.
13. In view of the above and in the absence of copies of the certificates of shares under lock-in, which are alleged to have been delivered in the market, without the “non-transferable” tag, the allegations can not sustain. Mere mention of distinctive number of shares, allegedly delivered in the market during their lock-in period, is not sufficient to establish the charges, especially when the noticees are disputing the allegation, claiming that the alleged shares were lying with them all through the lock-in period and seeking copies of the impugned share certificates to prove their point.
14. In the light of the above, I find that there is no adequate material on record before me to prove that any of the recipients of the show cause notice was responsible for circulation of the shares under lock-in. I am, therefore, inclined to grant a benefit of doubt to these entities.
ORDER
15. Accordingly, in exercise of the powers conferred upon me in terms of section 19 of Securities and Exchange Board of India Act, 1992, I hereby dispose off the show cause notice issued to M/s. Ankit Prachi Trading & Investment Ltd., its directors, Shri Jaiedeo Dokania, Shri Ajay Kumar Dokania, Shri Pradeep Poddar, M/s Samson Vincom P. Ltd. and M/s. Samson Marketing Pvt. Ltd. I also hereby make it clear that this order does not come in the way of initiating action, if any, in accordance with law, based on fresh material.
16. This order shall come into force with immediate effect.
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G A K BATRA
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Date: 7 September. 2004
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WHOLE TIME MEMBER |
| Place:MUMBAI |
SECURITIES AND EXCHANGE BOARD OF INDIA |