DIVISION CHIEF
INVESTIGATIONS DEPARTMENT
IVD/SD/BM/ /2004
December 02, 2004
Shri Rajnikant Shah,
43/45, Raja Bahadur Mansion,
Tamarind lane, Fort,
Mumbai - 400001
Dear Sir,
Sub: Show cause notice for issuing directions under Section 11(4) read with Section 11 B of the Securities and Exchange Board of India Act, 1992 in the matter of dealing in the shares of M/s. Cyberspace Ltd.
1. SEBI noticed that there was an unusual movement in the shares of M/s. Cyberspace Ltd. There were media reports indicating some problem in relation to the scrip as also in the settlement relating to trades in the scrip. Subsequently, The Stock Exchange, Mumbai and National Stock Exchange withheld the payouts in the scrip for the settlement No. 242-246 and W 47-W50 respectively.
2. During the course of investigations it was observed that the scrip was trading at around Rs. 1200/- prior to split in September 2000 and the price was adjusted proportionally to Rs. 168/- 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., Member of BSE and NSE defaulted and the price of the scrip started crashing by 16% on daily basis. Upon being satisfied, on the basis of prima-facie evidences, Chairman SEBI vide order dated April 24, 2001 ordered an investigation into the matter. Prior notice under the relevant Regulations was dispensed with in the interest of investors. The said investigation was conducted for the time period from October 1999 to March 2001 and report was submitted to the Board. It was noticed in the investigation that the scrip of M/s. Cyberspace Ltd. had gone up substantially in the period from October 1999 to March 2000 and thereafter started attracting large volumes from September 2000/October 2000 till March 2001.
3. From the investigation report submitted to the Board, it is observed that you have purchased 2,44,565 shares and sold 72,500 shares on BSE during the period under consideration, with a view to create artificial volumes in collusion with M/s. Cyberspace Ltd./M/s. Century Consultants Ltd./its promoters and other related/linked entities.
4. The investigating team observed that on several occasions the shares purchased by you on The Stock Exchange, Mumbai were transferred to Shri Pratik Shah, who admitted under oath that all the transactions executed in his name were actually executed by Shri Arvind Johari, promoter & Director of M/s. Cyberspace Ltd. He also admitted that he was not aware of any of the transactions in the scrip of M/s. Cyberspace. He stated that he was taking computer training at Andheri Office of Cyberspace Ltd. and was asked Sri Arvind Johari to do some trading in the stock market for learning purpose. Shri Johari, later on, started trading in Cyberspace Ltd. with his own finance and direct instructions on his behalf by using Pratik Shah’s name. Some of the instances of share transfer from your Demat account to that of Shri Pratik Shah are given hereinunder:
|
Date
|
Particulars
|
Quantity
|
Date
|
Particular
|
Quantity
|
|
27.02.01
|
Pur. in Sett. 226 – BSE
|
5,000
|
27.02.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
28.02.01
|
Pur. in Sett. 228 – BSE
|
4,875
|
28.02.01
|
Trf. to Pratik Shah–ID 10000218
|
3,732
|
|
28.02.01
|
Pur. in Sett. 227 – BSE
|
3,732
|
28.02.01
|
Trf. to Pratik Shah–ID 10000218
|
4,875
|
|
1.03.01
|
Pur. in Sett. 230 – BSE
|
5,000
|
2.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
2.03.01
|
Pur. in Sett. 231 – BSE
|
5,000
|
02.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
5.03.01
|
Auction Sett. 227-BSE
|
1,268
|
05.03.01
|
Trf. to Pratik Shah–ID 10000218
|
1,268
|
|
5.03.01
|
Pur. in Sett. 232 – BSE
|
5,000
|
05.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
7.03.01
|
Pur. in Sett. 233 – BSE
|
5,000
|
|
|
|
|
7.03.01
|
Pur. in Sett. 234 – BSE
|
5,000
|
08.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
9.03.01
|
Pur. in Sett. 234 – BSE
|
5,000
|
09.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
12.03.01
|
Pur. in Sett. 236 – BSE
|
5,000
|
12.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
|
|
|
12.03.01
|
Trf. to Pratik Shah–ID 10000218
|
5,000
|
|
14.03.01
|
Pur. in Sett. 237 – BSE
|
4,000
|
|
|
|
|
|
Auction Sett. 228 – BSE
|
25
|
19.03.01
|
Sold in Sett. 1054 – NSE
|
4025
|
The instances of purchasing the shares in the market and transferring the same to Shri Pratik Shah almost immediately upon receipt clearly indicate that you were acting in concert with Shri Arvind Johari in creating artificial volumes in the scrip.
5. Central Bureau of Investigations (CBI) has also observed that you and certain related entities are related with Century Consultants/Cyberspace and also appear to have received funds for trading in M/s. Cyberspace shares. Accordingly, CBI has frozen your/related entities pay-outs on the respective exchanges.
6. The above establishes that you along with related/linked/associated entities have transacted in the scrip of M/s. Cyberspace with a view to creating artificial volumes and manipulating the price in collusion with M/s. Cyberspace/Century and its promoters. It is observed from the records that you were rotating the shares in the market to create artificial volumes. You are responsible for creating false or misleading appearance of trading in the market and also entering into trades that are not genuine trade transactions. You therefore, have violated provisions of Regulation 4 (a), 4 (b), 4 (c) and 4 (d) of SEBI (Prohibition of Fraudulent & Unfair Trade Practices relating to Securities Market) Regulations, 1995.
7. In view of the above, without prejudice to any action that may be initiated against you under the relevant provisions of the SEBI Act, 1992, you are hereby called upon to show cause as to why in the interest of the investors and orderly development of Securities market, appropriate direction(s) as provided under Section 11(4) read with Section 11 B of the SEBI Act, 1992 including restraining you from accessing the securities market and prohibiting you to buy, sell or deal in securities should not be passed against you for the violations specified above.
8. You are advised to submit the reply within 15 days of receipt of this notice. If you fail to furnish reply, it would be presumed that there is no explanation to offer and SEBI would be free to take action as deemed fit under the provisions of the SEBI Act, 1992.
Yours faithfully,
SANJIV DUTT