WTM/TCN/ 63 /IVD1/09 /07
THE SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: Dr. T.C.NAIR, WHOLE TIME MEMBER
IN THE MATTER OF ACQUISITION OF SHARES OF M/s YASHODHAM COMMERCIAL ENTERPRISES LTD BY SHRI PRAKASH GAGGAR AND SHRI SURESH GAGGAR.
Date of hearing : May 21, 2007
Appearances
For Noticees : Shri Prakash Gaggar
Shri Suresh Gaggar
For SEBI : Shri P.K. Nagpal, Executive Director
Shri Anshuman Das, Manager
Ms. Kshama Chavan, Legal Officer
ORDER
UNDER SECTION 11B OF THE SEBI ACT, 1992
1. M/s. Yashodham Commercial Enterprises Limited (hereinafter referred to as “the company”) is a public limited company. The company came out with a rights issue of 9,90,000 equity shares of Rs.10/- each at a premium of Rs.5/- in the ratio 4:1. The issue opened on January 25, 1996 and closed on February 24, 1996. The issued capital of the company after the rights issue was Rs. 123.75 lakh.
2. It was observed that there was a sudden increase in the trading and price of the scrip of the company from September 11, 1995 on the Bombay Stock Exchange Ltd. (hereinafter referred to as “BSE”). BSE conducted investigation and submitted its investigation report dated November 24, 1998 with its finding to SEBI. BSE report indicated price manipulation by the insiders of the company prior to the proposed rights issue of the company in January 1996. From the investigation report of BSE, it was observed that the list of transferees of shares showed that 64,100 shares were transferred to the Gaggar family during the period October 1, 1994, to December 30, 1995.
3. On receipt of BSE report and in view of the sudden increase in trade and prices of the scrip, Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) also initiated its own investigation into the affairs of and dealings into the shares of the company.
4. On investigation, based on the BSE report, it was observed that Shri Prakash Gaggar, Shri Suresh Gaggar and Ms. Sangeeta Gaggar (hereinafter referred to as “Gaggar family”) acquired 64,100 shares which was 25.8% (approx.) of the total issued share capital of the company during the period October 1, 1994 to December 30, 1995. It was also noted that during the said period, trading in the shares of the company was suspended by BSE between February 21, 1994 and September 10, 1995 for the failure of the company to publish unaudited financial results. The suspension was revoked with effect from September 11, 1995.
5. Further, it was observed that the Gaggar family acquired control over the company around July/ August 1995, i.e. around the time of filing of the rights issue document. It appears that BSE discovered this acquisition when the company approached BSE for revocation of suspension on trading in their scrip in September 1995.
6. During SEBI investigation, Shri Prakash Gaggar and Shri Suresh Gaggar were given many opportunities to explain as to how and when they had acquired controlling stake in the company from other promoters. However, despite many assurances to furnish the information and required details/documents, they failed to respond and explain the same. Therefore, in order to verify the actual date of acquisition of shares of the company by the noticees herein, SEBI investigation team visited the registered office of the company. During the said visit also, the noticees and company representatives/officials did not co-operate and also did not produce the relevant records on one pretext or the other. When questioned as to why such records were not being maintained at the registered office of the company and whether the company had proper method for maintenance of share transfer records, the company representative stated that the transfer records and details of transfer committee meetings were not available at that point of time. On enquiry regarding the Company Secretary to handle such work, the SEBI investigation team was informed by Shri Suresh Gaggar that the last Company Secretary had left the company in 1994 and no one had been appointed to the post since then.
7. As complete information was not forthcoming either from the noticees or from the company and there was no cooperation from either of them, Investigation report was submitted on the basis of the available information interalia indicating that the noticees violated the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 (hereinafter referred to as “SAST Regulations, 1994 ”).
8. Accordingly, a show cause notice dated June 28, 2002 alleging interalia the violation of Regulation 9 and 10 of SAST Regulations and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as “PFUTP Regulations”) was issued to Shri Prakash Gaggar and Shri Suresh Gaggar asking them to show cause as to why appropriate directions should not be issued against them.
9. Shri Suresh Gaggar replied to the said show cause notice vide letter dated August 16, 2002. An opportunity of personal hearing was given on October 26, 2002 before the then Competent Authority to Shri Suresh Gaggar and Shri Prakash Gaggar. In the course of hearing, the main argument inter alia on behalf of the noticees was that both the SAST Regulations, 1994 and PFUTP Regulations 1995 were not in force when the alleged transactions took place. It was also submitted that all relevant documents and material on off-market transactions undertaken by them would be submitted by them. Written submissions were also submitted vide letter dated November 11, 2002, and vide letter dated November 20, 2002; the noticees submitted self attested copies of documents enclosed with their written submissions.
10. Having considered the facts of the matter, material and evidence available on record and the submissions of the noticees, the then competent authority was not satisfied with their submissions. In the facts and circumstances of the case, the then competent authority observed that some of the documents submitted by the noticees were materially altered and doctored to mislead SEBI regarding their actual date of acquisition. Accordingly, vide order dated April 2, 2003, SEBI directed Shri Suresh Gaggar and Prakash Gaggar to dissociate themselves from the capital market for a period of 3 years. They were also prohibited from dealing in securities for the same period for having violated Regulation 9 and 10 of the Takeover Regulations, 1994 and Clause 40 A & B of the Listing Agreement.
11. Aggrieved by the said order, Shri Suresh Gaggar and Shri Prakash Gaggar filed appeals (Nos. 62 and 63 of 2003) before the Hon’ble SAT which vide order dated July 4, 2003, while refusing to grant stay, admitted the appeals. When the appeals came up for final hearing before the Hon’ble Tribunal on April 13, 2006, the Hon’ble Tribunal observed that the period of debarment was already over and therefore without going into the merits of the case, dismissed the appeals as infructous.
12. The aforesaid order of the Hon’ble SAT was challenged by the appellants before the Hon’ble Supreme Court. The Hon’ble Supreme Court vide order dated November 06, 2006, remanded the matter back to SAT and directed to hear the matter on merits.
13. Accordingly, the Hon’ble SAT heard the matter on merits on April 30, 2007. After hearing both the parties, the Hon’ble SAT while remanding the matter back to SEBI for re-examination on facts, set aside the impugned order. The Hon’ble SAT also directed the noticees to appear before SEBI on May 21, 2007 for further proceedings with a liberty to produce further records / documents in support of their plea. SEBI was directed to pass a fresh order after examining all the documents which may be submitted by the noticees latest by September 30, 2007.
14. Pursuant to the said directions of the Hon’ble SAT, an opportunity of personal hearing was granted to Shri Prakash Gaggar and Shri Suresh Gaggar before me on May 21, 2007. During the hearing they were asked to furnish the details of payment made towards the transfer of shares of the company. Vide letter dated June 1, 2007 Shri Prakash Gaggar and Shri Suresh Gaggar submitted confirmation letters from the sellers viz., Prestige Stocks and Bonds Limited, B P Kedia, HUF and Dinesh P Kedia, HUF with the details of distinctive numbers and quantity of shares confirming that they had received the consideration amount on or before March 31, 1994.
15. From the documents submitted, it was observed that they had not provided the details of payments received towards the consideration of sale of shares as asked to them specifically at the time of hearing before me. Accordingly, vide letter dated September 10, 2007, Shri Prakash Gaggar and Shri Suresh Gaggar were once again reminded to submit the details of the payment on or before September 17, 2007. While replying to the above letter, Shri Prakash Gaggar and Shri Suresh Gaggar vide their letter dated September 14, 2007 inter alia submitted all the details of the acquisition of 64,100 shares claiming that all these shares in question had been acquired by them during the period February 6, 1994 to April 14, 1994.
16. I have carefully considered the facts of the matter, material and evidence on record, replies and submissions including the written submissions. The issue for consideration is as to what was the date of acquisition of the shares of the company by Shri Prakash Gaggar and Shri Suresh Gaggar.
17. From the perusal of the documents, I observe the noticees have claimed to have acquired 64100 shares from various persons namely, the Kedias, Prestige Stocks & Bonds, Umesh Timberwalal, Bina Sundershan Timberwala, and Jeevrajdhar during the period February 6, 1994 till April 14, 1994.
18. It appears that the then competent authority after examining the documents filed by the noticees had doubts about the authenticity of the signatures of one of the directors of the company namely Kailash Bajaj. He had observed that the signatures of Shri Bajaj on the current account opening form of Indian Bank October 28, 1982 and on share transfer certificate which was enclosed with written submissions filed by the noticees, were not tallying. On the basis of the said findings, the then competent authority appeared to have concluded that the documents submitted by the noticees herein were materially altered and doctored documents.
19. I note that Hon’ble SAT in its order dated April 30, 2007 has observed that the Board had not gone into the details of the documents produced by the notices in support of the claim that shares were acquired by them before October 24, 1994.
20. I note that difference in signatures and non cooperative attitude of the noticees during the investigation process including during the visit of SEBI investigating team to the office of the company on July 27, 1999 wherein no documents were made available to the investigation team created enough doubt in the minds of the then competent authority to draw adverse inference against the notices and concluding that the acquisition had taken place after the notification of Regulation in 1994. In the facts of this case, I believe that non cooperation during the process of investigation, difference of signatures and overall conduct of parties led the competent authority to believe that the notices were trying to conceal the material information thereby misguiding SEBI about the actual date of acquisition.
21. From the careful examination of the different documents submitted by the noticees to SEBI in support of their claim that they had acquired all the shares prior to the notification of SAST Regulations 1994, there is a visible difference in signatures of Shri Kailash Bajaj. This led to the suspicion in the mind of the then competent authority that the documents being submitted might had been doctored by the noticees. I however, in view of the observations of the Hon’ble SAT that the fact of difference in signatures by itself may not be sufficient to come to a finding either way, hold that no conclusive finding can be given in this regard.
22. In such a case, in the absence of any other material on record suggesting that the shares were acquired after the notification of SAST Regulations 1994, and also in view of the fact that the noticees have already undergone debarment for a period of 3 years for the said alleged violations, I am inclined to give benefit of doubt to the noticees herein regarding their date of acquisition.
23. Order
In view of the above, I, hereby direct, in exercise of the powers conferred upon me in terms of section 19 read with section 11 and 11B of the SEBI Act, 1992 , that the present proceedings against Shri Prakash Gaggar having PAN No. ACMPG8826C and Shri Suresh Gaggar having PAN No. ABLPG3809K would finally stand disposed of without any further directions.
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PLACE: MUMBAI
DATE: 27.09.2007
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T .C. NAIR
WHOLE-TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
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