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Notice to show cause in the case of Blue Information Technology Ltd

Feb 14, 2005
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Unserved Summons / Notices

General Manager     

Investigation Department-ID6

Tel: 22850451-56 Extn: 404

E-mail: mohanr@sebi.gov.in

IES/IVD6/RM/PA/BITL/       /2005

                                                                                                         February 14, 2005

Ranger Investment & Leasing Ltd.

302 Osiana

Opp. Juhu Post Office

Mumbai – 400054

 

Beta Agro Ltd                                                          

62, Lav Kush Towers,                                             

Drive-in Road,                                                         

Ahmedabad 54                                                       

 

Kingfisher Overseas Pvt. Ltd.

196, Shri Krishna Mandir

Andheri (East)

Mumbai -400059

 

Aadit Medicine Ltd.

310,311 Mahakant Building]

Near V S Hospital,

Ellis Bridge, Ahmedabad – 380006

 

Omega Housing Ltd.

43, Aditya Banglows

Drive in Road

AShmedabad-380054

 

 

Sub:  Notice to show cause under section 11 and 11B of SEBI Act, 1992 in the case of Blue Information Technology Ltd.

 

  1. Securities And Exchange Board of India conducted investigations in the scrip of Blue Information Technology Ltd (BITL) which was incorporated on May 25, 1992 as a Public Limited Company. Mr. Ashok Thussu, Mr. Viren Lall and Mr. Radhey Mohan Sharma were the promoters of the company. In August, 1996 Blue Information Technology Limited (BITL) came out with a public issue of 30, 00,000 equity shares at par. The total post issue the total equity of the company was 5350000 equity shares. The shares of the company got listed on the ASE and DSE, with ASE being the regional stock exchange.

 

  1. On December 23, 1996 BITL had entered into a loan agreement with Ashi Leasing & Finance Ltd (ALFL) name since changed to Sunstar Software Systems Limited. As per the said agreement the ALFL loaned Rs.5.5 crores to BITL at an interest rate of 18% p.a. for a period of nine months. The interest calculated was to be payable at the end of every 3 months from the date of disbursement (i.e. December 31, 1996). The loan agreement further stipulated that in the event of default in payment of interest for any two consecutive quarters, the entire principal amount of the loan along with the arrears of interest shall be converted into equity shares of BITL. Mr. Ashok Thussu, then MD of BITL, signed the said agreement on behalf of BITL and Mr. Dhaval Jhaveri, than Chairman of Ashi Leasing & Finance Ltd, signed the agreement on behalf of ALFL.

 

  1. BITL could not pay interest for the quarters ending 31/03/97 and 30/06/97 due to non-receipt of call money of the public issue and inadequate profit for Accounting Year 1996-97 (as per the company’s letter addressed to ASE). ALFL exercised its option of converting the loan to equity and BITL allotted 55, 00,000 new equity shares on 23/09/97 at par. The interest due was supposedly waived by ALFL on the request of BITL. ALFL, as per the loan agreement instructed BITL to allot the said shares to its nominees. Post conversion of loan into equity the total share capital of BITL rose to 10850000 equity shares.

 

  1. Following is the summary of the result declared by the company for the year 1996-97 & 1997-98:

 

(Rs. In Crores)

 

March 31, 1997

March 31, 1998

Net Sale/Income from operations

0.278

52.307

Total Expenditure

0.202

25.903

Net Profit

0.013

25.705

Equity

5.35

10.85*

Dividend

Nil

250%**

  

*  - In the year 1997-98’ apparently a loan of Rs. 5.5 crores from Sunstar Software Systems Ltd (formerly Ashi Leasing & Finance Ltd) was converted into equity thereby causing an increase in the equity capital of the company.

**  - 100% interim dividend on equity capital of Rs.5.35 Crore for the first quarter ending June 30, 1997, a further 100% interim dividend for the second quarter ending September 1997 and a final dividend of 50% for the financial year ended March 31, 1998.

 

 

  1. The loan agreement between BITL and ALFL was signed on December 23, 1996 and the loan amount was supposedly disbursed on or before December 31, 1996.   The loan agreement stipulated that in the event of default in payment of interest for any two consecutive quarters, the entire principle amount of the loan along with the arrears of interest shall be converted into equity shares of BITL. On the basis of this the first and second quarter for interest payments are quarters ending 31/03/97 and 30/06/97. BITL allegedly could not pay interest for the quarters ending 31/03/97 and 30/06/97 due to alleged non-receipt of call money of the public issue and inadequate profit for Accounting Year 1996-97 (as per the company’s letter addressed to ASE). But the company declared a 100% interim dividend for the quarter ended 30/06/97 on an equity capital of Rs. 5.35 crores. It is pertinent to note that the company didn’t have liquidity to pay interest instalments of Rs. 24.75 lacs on quarters ending 31/03/97 and 30/06/97 but at the same time declared a dividend of Rs. 5.35 crores for quarter ending 30/06/97. 

 

  1. The statement of Mr. Ashok Thussu, the MD of the BITL at the time when the loan agreement was executed, was recorded and a copy of the said agreement was shown to him. In his sworn statement Mr. Thussu has denied entering into any such agreement with ALFL. Mr. Thussu has stated

“This agreement was never entered in by me & the signatures purportedly shown as mine were never entered by me. This agreement is forged."

 

A visual comparison of Mr. Thussu's signature on the said loan agreement and his statement clearly indicates that the Mr. Thussu's signature on the said loan agreement is forged.

 

 

  1. Also, during the course of investigations Mr. Ashok Thussu, Mr. Vinay Jain & Mr. Rajan Dhawan who were directors of BITL since the public issue and held shares in the company since the public issue in 1996 have stated in their sworn statement that they have not received any dividend for the year 1997-98. BITL was asked to provide a list of shareholders and details of the bank account and bank statement through which the dividends for the year 1997-98 were paid. Company informed that the dividends were distributed through Account No.3237 of Sarvoday Co-op Bank Ltd, Manekchok, Ahmedabad. Summons was issued to the said bank and the same were returned undelivered stating wrong address. The company was therefore asked to provide details of bank statement and narration of all entries, which has not been provided till date inspite of repeated summons/reminders from SEBI to that effect. 

 

  1. From the prospectus filed for the public issue of BITL in 1996, it was found out that Mr. Dhaval Jhaveri was on the board of Directors of BITL at the time of its inception but later on resigned because of personal reasons. He was also one of the major shareholders of BITL at the time of its public issue in 1996.

 

  1. In his sworn statement to SEBI Mr. Ashok Thussu has stated that Mr. Dhaval Jhaveri funded his (Mr. Thussu’s) equity participation in BITL. Later on when Mr. Thussu could not repay the loan he transferred his shares to Mr. Dhaval Jhaveri. Mr. Thussu also stated that Mr. Dhaval Jhaveri was the real promoter of BITL and took over the management of the company after the resignation of Mr. Thussu in September 1997. It should be noted that Mr. Dhaval Jhaveri was the chairman of Ashi Leasing and Finance Ltd. at the time of loan agreement with BITL. This shows that Mr. Jhaveri was controlling both BITL and ALFL.  

 

  1. In September 1997, BITL applied to ASE for further listing of 55, 00,000 equity shares, which had been kept pending for want of further information, the said shares have not been listed on ASE till date. However, the entire equity amounting to Rs.10.85 crores was listed on the BSE on January 2, 1998. One of the criteria followed by BSE that makes the scrip eligible for listing is that the company should first get any additional equity listed on the regional stock exchange, which in the instant case happened to be ASE. As a proof of listing of additional shares on ASE the company submitted a letter to BSE that was certified by Mr. K.C Gupta, Director BITL. The said letter is on an ASE letterhead and is addressed to the Company Secretary, BITL informing about the listing of additional equity of 55, 00,000 equity shares issued on conversion of loan. Another letter on the letterhead of ASE addressed to Director, BITL confirms that the company’s equity shares to the total of 1,08,50,000 (including additional equity) are tradable in lots of 100 only. Mr. K.C Gupta, Director BITL once again authenticated this letter by certifying the letter as true copy.

 

  1.   BSE proceeded to grant permission to list the additional equity of the company based on the letters filed by BITL. However, as per ASE the said letters are fake/forged and were not issued by any officer of ASE. ASE in January 1999 requested BSE to send them the original copy of the fake/forged letter so that they could file a FIR with the Police Authorities in the matter. BSE on its part has also filed a FIR in this matter with the Senior Inspector of Police, MRA Marg Police Station against the Directors of BITL. In the said FIR it is stated that on March 23, 1999 in the course of a meeting with the BSE officials, Mr. Dhaval Jhaveri orally confirmed that the letters were genuine and were issued by the ASE. It is further stated that Mr. Jhaveri produced true copy of the letters certified by himself and Mr. Dilip Kumar Puri. In the FIR it is stated that subsequently BSE requested ASE to verify the authenticity of the letter and asked the company once again for explanation, which was never given inspite of several written and oral reminders. BSE also stated in FIR that apparently Mr. Dhaval Jhaveri and other directors of the company in collusion have hatched a criminal conspiracy with unknown persons.

 

 

 

  1. The CMD of the company Mr. Dhaval Jhaveri was summoned to appear in person before the investigation authority on various occasions. In response the Company Secretary, BITL informed that as per the directives in the bail order from the Metropolitan Magistrate of Additional City Session Court, Ahmedabad, Mr. Dhaval Jhaveri was permitted to travel outside the limits of the State of Gujrat, only with the special permission of the court. It was further stated that an application for special permission had been made to the court to appear before the investigation authority. The company did not provide any proof of the said order of the Additional City Session Court, Ahmedabad and application made to the said court. Further, The Company did not provide any information on the outcome of the application made before the court. At the same time, the other directors of the company (whose names appear on the annual Report for the year 1997-98) were also summoned to appear in person along with the aforementioned details. The directors have also not complied with the summons and no information or details were provided.

 

  1.  Further a SEBI official also visited the registered office of the company at 333, Sarvodaya Commercial Centre, Salapose Road, NEAR G.P.O., Ahmedabad-380001. The Registered office, it appears, was just a room with an area of 6 X 4 feet and there were no records of the company as are required under Section 209 & 209A of the Companies Act, 1956.

 

  1. Due to non-compliance of summons by the company SEBI communicated its findings and apprehensions as regard the company to the Department of Companies Affairs (DCA) vide letter No. LKS/197/99 dated December 3, 1999 and requested them to consider examining / investigating both Blue Information Technology Ltd and Ashi Leasing & Finance Ltd. DCA informed SEBI that they are undertaking inspection of the company. It was also informed that BITL has not declared any dividend during the year 1997-98 and 1998-99 and therefore the question of payment or non-payment of dividend does not arise.

 

  1. Registrar Of Companies (RoC), Gujrat, informed SEBI that BITL has not filed its balance sheet for the years 1996-97, 1997-98 and 1998-99 with RoC, Gujrat. It is further informed that as per the half-yearly un-audited results for the financial year 1999-2000, as published in the newspapers, the company has claimed to have earned extraordinary profits from the software business. It is stated that in their opinion the company could not have earned such profits on the basis of records available with RoC, Gujrat. It is also informed that RoC, Gujrat, is taking action against the company for violation of the provisions of the Companies Act.

 

  1. On May 6, 2003 a letter was received from Office of superintendent of Police, Anti­-Economic Cell, C.I.D. Crime, Gandhinagar asking whether SEBI has taken any action against BITL in interest of Investors. Further, On December 18, 2001 a letter was received from the office of Income- tax officer, Ahmedabad asking for the complete information of the company and the status of the investigations being conducted by SEBI, as Rs. 3.26 crore interest is outstanding against BITL.

 

  1. On June 20, 2000 SEBI in its action in respect of companies not complying with the listing agreement and not physically traceable at the registered office address mentioned in the offer document, issued 11B orders prohibiting Mr. Dhaval A. Jhaveri from entering into the capital market for a period of 5 years in the case of Ashi Industries Limited. Later on Blue Information Technology Ltd. informed the BSE that Mr. Dhaval A. Jhaveri has resigned as Director of the company w.e.f. 23.06.2000.

 

  1. An analysis of trading data of brokers and clients of the top trading brokers in the scrip on BSE indicates no concentrated buying in the scrip. Further, a diverse range of clients has picked up delivery. It therefore appears that there was no concerted effort by any person or cartel of persons to rig the price of the scrip. The price of the scrip moved up mainly due to the apparently false results published in the newspapers and the bogus dividend payout announced by the company. The price rise was also fueled due to fact that such announcement were made at a times when there was a general euphoria in the stock markets as regard software companies.   

 

  1. In light of the above, an analysis of top selling brokers was conducted to check who had sold the shares of BITL. Following is the list of top selling brokers and their top clients:

Broker/Member

 Sub-broker

Clients

Harvestdeal Securities Ltd.

      

1.         Kingfisher Overseas Ltd.

2.      Mr. R.K. Banthia

M/s Shrikant Mantri

 

      

1.      Ranger Investment and Leasing Ltd.

2.      Mr. R.K. Banthia

3.      First Custodian Ltd.

4.      Manish Chokhani

5.      Vyapar Account

N.C. Jain

 

   

1.       M/s. D.K Consultancy Services

 

 

  1. M/s. Harvestdeal Securities Ltd, Broker, BSE had sold a net of 2,59,900 shares of Blue Information Technology on behalf of their clients Kingfisher Overseas Ltd. and Mr. R.K. Banthia. Incidentally, Harvestdeal Securities Ltd, prior to conversion to a corporate, was a proprietary card of Mr. R.K. Banthia. Mr. Banthia is also a Director in Harvestdeal Securities Ltd.

 

  1. M/s Shrikant Mantri, broker, BSE had delivered 4,89,500 shares of BITL in the market on behalf of Ranger Investment and Leasing Ltd., Mr. R.K. Banthia, First Custodian Fund Ltd (Broker NSE), Mrs. Manisha Chokhani and Shrikant Mantri. 

 

  1. Mr. Rajendra Banthia, who is a Director on Harvestdeal Securities Ltd. and First Custodian Fund Ltd., sold approx. 2, 85,000 shares of BITL in the market. Mr. Banthia vide letter dated June 8, 1999 had stated that he had received 3,00,000 equity shares of BITL on 26/12/97 from his client M/s Omega Housing Ltd. Omega Housing Ltd as an adjustment against the debit balance in the account of his client. As per the details submitted by M/s. R.K. Banthia his client, Omega Housing Ltd., had incurred trading losses to the extent of Rs. 33,55,100/- as on 18/12/97. Since the client was unable to pay the said amount they handed over 3, 00,000 shares of BITL to M/s. Rajendra Banthia. From the Client Registration form of Omega Housing Ltd submitted by Mr. Banthia it was found that Omega Housing Ltd has a bank a/c no. CC-0275/96 with Navrangpura, Drive-in-Road, Ahmedabad Branch of Ahmedabad mercantile co-operative Bank. In response to SEBI’s enquiry Ahmedabad Mercantile Co-operative Bank replied that they don’t have bank a/c mentioned above.

 

 

  1. Kingfisher Overseas Pvt. Ltd. and Ranger Investment & Leasing Ltd. are concerns of Mr. Brij Khanna and clients of Harvestdeal Securities and Shrikant G. Mantri respectively. Kingfisher Overseas Pvt. Ltd and Ranger Investment & Leasing Ltd have sold 75,800 & 29,300 shares of BITL through Harvestdeal Securities and Shrikant G. Mantri respectively.                  Kingfisher Overseas Pvt. Ltd., started dealing at Harvestdeal Securities Ltd in April 1998 in January 1999, Kingfisher Overseas sold approx. 75,000 shares of BITL. Summons was issued to Kingfisher Overseas Pvt. Ltd to provide information regarding their procurement of BITL shares. Kingfisher Overseas Pvt. Ltd. has not yet replied to the summons issued under Section 11(3) of SEBI Act, 1992. From the Client Registration form of Kingfisher Overseas Pvt. Ltd submitted by Harvestdeal Securities Ltd it was found that Kingfisher Overseas Pvt. Ltd has a bank a/c with Kalbadevi Road, Mumbai branch of Allahbad Bank. In response to SEBI’s enquiry Allahbad Bank replied that kingfisher Overseas Pvt. Ltd had a current a/c with them but it has been closed on 11/04/96. It should be noticed here that Client Registration form of Kingfisher Overseas Pvt. Ltd with Harvestdeal Securities Ltd is dated 13/04/98.

 

  1. Likewise, Ranger Investment had been a client of M/s. Shrikant Mantri since April 1998. In the period December 1998 to January 1999 they had sold 29,300 shares of BITL and by February 1999, Ranger Investment has an outstanding debit balance of Rs.97,96,980/- with M/s. Shrikant Mantri. Summons was issued to Ranger Investment & Leasing Ltd. to provide information regarding their acquisition of BITL shares. Ranger Investment & Leasing Ltd. has not yet replied to the summons issued under Section 11(3) of SEBI Act, 1992. From the Client Registration form of Ranger Investment & Leasing Ltd submitted by M/s. Shrikant Mantri it was found that Ranger Investment & Leasing Ltd has a bank a/c with Kalbadevi Road, Mumbai branch of Allahbad Bank. In response to SEBI’s enquiry Allahbad Bank replied that Ranger Investment & Leasing Ltd had a current a/c with them but it has been closed on 24/04/96. It should be noticed here that Ranger Investment became the client of M/s. Shrikant Mantri in the year 1998.

 

  1. First Custodian Fund Ltd. broker, NSE, and client of M/s Shrikant G. Mantri, had delivered approx. 2, 00,000 shares of BITL.  When asked as to how they acquired the shares of BITL, First Custodian has submitted that their client Beta Agro Industries Ltd kept the shares with them as security deposit on 23/03/98. They have further submitted that the client had a debit balance of Rs. 95,53,002 and could not make payment of their dues. They therefore requested First Custodian to adjust their dues against the shares of BITL. As per details submitted by First Custodian, it appears once again that the debit balance in Beta Agro's account was due to speculative transactions squared up in the same settlement. The address of the client Beta Agro provided by First Custodian is 62, Lav Kush Towers, Drive-in Road, Ahmedabad- 54.  This is incidentally the registered address of Ashi Leasing and Finance Ltd., a company under the same management as BITL.

 

 

  1. The trading pattern of Beta Agro Ltd with First Custodian Fund Ltd, broker NSE was examined and all the bills and relevant contract notes were called for. From the same it was noted that all the transactions of Beta Agro Ltd were speculative in nature i.e. squared up within the same settlement. There was no delivery taken or given by the said client. No payment was made or received from the said client.  Beta Agro Ltd was summoned to appear in person before the investigating authority, they have failed to do so. Again Summons was served to Beta Agro Ltd through First Custodian to provide details and appear in person. This time Summons was delivered and acknowledgement was received.  Beta Agro Ltd has however not complied with SEBI summons issued under Section 11(3) of SEBI Act, 1992. From the Client Registration form of Beta Agro Ltd. submitted by First Custodian it was found out that Beta Agro Ltd. had an a/c no. C-3161 with M.G. Road, Ahmedabad Branch of Ahmedabad District Co-operative Bank. In reply to SEBI’s summons the Ahmedabad District Co-operative Bank stated that no such branch of Ahmedabad District Co-operative Bank exists and they don’t have an a/c of Beta agro Ltd. in any of their branches.

 

  1. Mr. Shrikant G. Mantri in his vyapar account had sold approx. 1,67,000 shares of BITL. As per the submission of the broker Mr. Mantri acquired 4,50,000 shares of BITL from a client, namely, Aadit Medicine Ltd. As per the broker the said client had a debit balance in his account in FY 1997-98 and since the client could not make the payment he requested the broker to adjust the same from the security deposit. The trading pattern of Aadit Medicine with M/s. Shrikant Mantri was examined and all the bills and relevant contract notes were called for. From the same it was noted that all the transactions of Aadit Medicine Ltd were speculative in nature i.e. squared up within the same settlement. There was no delivery taken or given by the said client. 

 

  1.   It was found out that the Mumbai address of Aadit Medicine at Kalbadevi Chambers, Dadiseth Agyari Lane, is also the address of Mr. Dhaval Jhaveri. Mr. Mantri has stated that he does not know Mr. Dhaval Jhaveri personally and had no idea that he had an office at Kalbadevi. But from the bank a/c statement of Mr. Shrikant G. Mantri it was found out that Mr. Mantri has issued two cheques, cheque no. 54676 dated 21/11/98 and cheque no. 54677 dated 24/11/98, of amount Rs. 750000 each from his bank no. CA 0154-0-000-000042 with Nedungadi Bank, in favour of Mrs. Seema D. Jhaveri, Director BITL and wife of Mr. Dhaval A. Jhaveri, CMD BITL. This proves that Mr. Shrikant Mantri is connected with the Management of BITL. Aadit Medicine Ltd was summoned to appear in person before the investigating authority, they have failed to do so. Aadit Medicine was also served summons to provide details and appear in person, through M/s. Shrikant Mantri. They have however not complied SEBI summons issued under Section 11(3) of SEBI Act, 1992. From the Client Registration form of Aadit Medicine Ltd. submitted by M/s. Shrikant Mantri it was found out that Aadit Medicine Ltd had an a/c with Ashram Road, Ahmedabad Branch of Canara Bank. Summons dated 10/08/2000 were issued to Ashram Road, Ahmedabad Branch of Canara Bank to provide details of the a/c of Aadit Medicine Ltd. Till date no reply has been received from Canara bank. Incidentally, Mr. M. R. Rajesh, Officer, SEBI, visited Ahmedabad in June 22, 1999 to check the antecedents of Beta Agro and Aadit Medicines. Both the companies were not available at their respective address.

 

 

  1. The shares given as deposit by Beta Agro Ltd, Aadit Medicine Ltd, Omega Housing Ltd, Kingfisher Overseas Ltd. and Ranger Investment and Leasing Ltd were not in their name. These shares could not have been purchased from the market as in the period prior to April 1998 the shares of BITL were hardly ever traded. Therefore, it can be reasonably concluded that the shares came from the management of the company. Further Beta Agro Ltd, Aadit Medicine Ltd, Omega Housing Ltd, Kingfisher Overseas Ltd. and Ranger Investment and Leasing Ltd were summoned to appear in person and/or provide information as regard their acquisition of the shares of BITL but summons returned undelivered. The summonses were also served on them through the brokers but they were not complied.

 

  1. The brokers M/s. Shrikant Mantri, Broker, BSE, First Custodian Fund Ltd, Broker, NSE and M/s. R.K.  Banthia (now Harvestdeal Securities Ltd),  broker, BSE have all given similar versions on how they acquired the shares of BITL. They all had clients who had an outstanding debit balances with them. The said clients did only square up of transactions with the broker with no delivery ever being received or given. All the clients of these brokers deposited approx. 9,50,000 shares of BITL with the broker as security which were not in the name of the clients. The three brokers got 9,50,000 shares of BITL transferred to their name without any problems at all, when SEBI has received numerous complaints from investors as regard non-transfer of shares by BITL. All the three brokers have stated that they went by the results of the company and thought that the shares of BITL were sufficient deposit to permit their clients to trade. Mr. Mantri has stated that he even visited the office of the company at Delhi. All the three brokers have sold the shares acquired in the market. The fact the brokers have accepted 9,50,000 blank share certificates of BITL goes against all conventional market practice. A prudent broker would only accept such shares if there was an assurance from his clients or the management of BITL that the shares were not bad delivery and would be transferred to his name. Therefore, their contention that they are not aware of any connection of their said clients with the management of BITL or Mr. Dhaval Jhaveri is doubted.

 

  1. Also in his sworn statement to SEBI Mr. Shrikant G. Mantri lied before the investigating authority that he does not know Mr. Dhaval Jhaveri or anyone from the management of BITL. But the bank a/c statement of Mr. Shrikant Mantri shows that he has issued two cheques in favour Mrs. Seema D. Jhaveri, Director BITL and wife of Mr. Dhaval A. Jhaveri, CMD BITL. 

 

 

  1. Incidentally Harvestdeal Securities Ltd., First Custodian Fund Ltd & M/s. Shrikant Mantri operate from the same registered office at 3, Surya Mahal, Nagindas Master Road, Fort, Mumbai 400 001. Also, the clients of these brokers namely, Aadit Medicine Ltd, Beta Agro Ltd, Omega Housing Ltd, Kingfisher Overseas Pvt. Ltd. and Ranger Investment & Leasing Ltd. have deliberately and intentionally not complied with SEBI summons and have provided wrong information in their client registration forms. When a SEBI officer visited Ahmedabad to check the antecedents of some of these entities, Aadit Medicine Ltd, Beta Agro Ltd, Omega Housing Ltd were not found at their respective address. This puts a question mark on the genuineness of these entities and trades done by them. The three brokers, namely, M/s. R.K.  Banthia (now Harvestdeal Securities Ltd), M/s. Shrikant Mantri and First Custodian Fund Ltd, therefore, appear to have assisted the management of the BITL and entities connected to BITL in perpetrating a fraud on the investors.

 

  1. M/s. Gaglani Investment, sub-broker of M/s. K.A Gunderia had sold 10,700 shares of the company. Mr. Rakesh Gaglani appeared before the investigation authority and has stated that all these transactions were on behalf of his client Mr. Dilip Kumar Puri. The shares delivered did not belong to Mr. Dilip Kumar Puri but were in the name of S.R Patel (which is the maiden name of the wife of Dhaval Jhaveri), D.N. Shah and S.S.Tibrewala. As per Mr. Gaglani, he was asked by his client to make the cheques for these transactions to S.R Patel and Mr. Dhaval Jhaveri. Investigations by SEBI revealed that Mr. Dhaval Jhaveri and Mrs. Seema Jhaveri are having bank accounts with Jain Shahkari Bank, C.P Tank, Mumbai.When Mr. Gaglani was asked as to why he accepted shares from Mr. Dilip Kumar Puri when they were not in his name and were also not market deliveries, Mr. Gaglani stated that he accepted the same because he got assurance from the Chairman of the company that the shares were genuine and would not be bad delivery. In reply to the question that how he was introduced to Mr. Dilip Kumar Puri. Mr. Gaglani stated that Mr. Bimal Parekh, whom he knows for last few years, had introduced him to Mr. Puri.  Mr. Bimal Parekh in his sworn statement to SEBI said that he had handled some matters pertaining to listing the script of BITL on BSE and during that he came to know Mr. Puri as Mr. Puri used to sit in Mr. Dhaval Jhaveri’s Office at Kalbadevi Chambers, Dadi Sheth Agairy Lane, Kalbadevi. It should be noted here that Mr. Dilip Kumar Puri was a director in both BITL and Sunstar Software Systems. SEBI summon issued to Mr. Puri had returned undelivered stating that he has changed his address.

 

 

  1. The M/s Hemchand Jaynarayan broker had delivered a net of 77,100 shares on behalf of their sub-broker Gautam Fiscal Consultancy. The proprietor of Gautam Fiscal Consultancy, Mr. Jatin D. Shah appeared before the investigating authority on 02/09/99.  Mr. Jatin Shah in his sworn statement submitted that he has sold the shares on behalf of the following clients:
    • Jyotsana J. Jogani and Vipul R. Vora have sold 5,600 shares and have the same address at Sindhu Baug, 'A' Wing, Block No.7, 1st Floor, Tilak Road, Ghatkopar (east)
    • Urvish R. Vora, Kamlesh Thakkar and Parul R. Vora have sold 17, 100 shares and have the same address of Raji Building, Block No.18, Ground Floor, Ghatkopar (East).
    •  Dilip Kumar Puri (HUF) has sold 25,000 shares and has office at 7, Dadiseth Agiyani lane, Kalbadevi Chambers, Kalbadevi, Mumbai and residence at 302, Curzon House, 2nd Henry Road, Colaba. As per records with BSE Mr. Dilip Kumar Puri is the present Director of BITL.
    • Ms. S.R.Patel has sold 24,900 shares and his office is at 7, Dadiseth Agiyani Lane, Kalbadevi Chambers, Kalbadevi, Mumbai,  and residence is at Ashish, 6, Dilkush Society, Navrangpura, Ahmedabad 380 014. Incidentally, S.R Patel is the maiden name of the wife of Mr. Dhaval Jhaveri i.e. Mrs. Seema Jhaveri. She is also a Director on the board of BITL.  

 

Mr. Jatin D. Shah appeared before the investigation authority on behalf of Gautam Fiscal Consultancy and his statement was recorded. In his sworn statement Mr. Jatin D. Shah has stated that one Mr. Ketan Shah who he knows for over 7-8 years introduced him to Mr. Urvish Vora.  Mr. Urvish Vora, further introduced Parul R. Vora, Vipul R. Vora, Jyotsna J. Goyani, Kamlesh K. Thakkar. He has stated that he has never met or dealt directly with any of the aforementioned person other than Urvish R. Vora. Apart from trading in the shares of BITL, Mr. Urvish Vora had also done some trading in other scripts through him.  He has further stated that Mr. Urvish Vora also introduced him to Mr. Dilip Kumar Puri, saying that Mr. Puri belongs to the company BITL. Mr. Jatin D. Shah met Mr. Dilip Kumar Puri about 4 to 5 times regarding collecting shares from his office at Kalbadevi Chambers, Dadi Sheth Agairy Lane, Kalbadevi, and making payments. The said address is also the local address of Mr. Dhaval Jhaveri.

 

 

  1. Independently, SEBI had summoned the account at Jain Sahakari Bank, C.P Tank account No.3029 which is the account of Seema D. Jhaveri. In the account of Seema Jhaveri funds have been received from the following banks and accounts:

- New India Co-op Bank, Ghatkopar (East) from the account of Urvish R. Vora, & Bala R. Vora who are clients of Gautam Fiscal Consultancy.

-Shri Arihant Co-op Bank, Ghatkopar (East) from the account of Parul R. Vora & Urvish R. Vora.

- Syndicate Bank, Ghatkopar from bank account of Vipul Vora another client of Gautam Fiscal Consultancy.

 

Kapol Co-op Bank, Vile Parle (W) from the bank account of Gautam Fiscal Consultancy.

 

 All the above receipts into the account of Seema Jhaveri coincide with the payment made by Gautam Fiscal Consultancy to its other clients. It is therefore abundantly clear that the money pertaining to the sale of shares by the aforementioned persons has finally gone into the account of Seema Jhaveri, director on BITL and wife of Mr. Dhaval Jhaveri, CMD, BITL.  Mr. Dilip Kumar Puri, Mr.Vipul Vora and Mr. Urvish Vora are therefore in violation of Regulation 3 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995.

 

 

  1. M/s. D.K Consultancy Services, client of Triumph Securities, broker, BSE has sold 24,400 shares. M/s. D.K Consultancy Services has submitted that all shares of BITL that he sold were purchased on a spot basis from the following entities-

 

a)      H.M Trading Co., having address at 135, Sarvodaya Commercial Center, Near GPO, Salapose Road, Ahmedabad, and who has sold 10,000 shares.

b)      Tikoo Sales & Services, having address at 10, Sarvodaya Commercial Center, Nr GPO, Salapose Road, Ahmedabad, and who has sold 7,000 shares of the company.

c)      Sagar Sales Corporation, having address at C-8, Keshav Apartment, Memnagar, Ahmedabad, and who has sold 7,000 shares.

It may be noted that of the aforementioned clients, those mentioned at (a) & (b) are located in the same building as the office of the company. Summonses were sent to these entities that were returned undelivered.

 

 

  1. The facts mentioned above unfold a conspiracy by BITL and its Directors to defraud investors.  The loan agreement between BITL and ALFL signed on 25/12/96 and subsequent conversion of loan to equity on 23/09/97 was mere paper transactions between two connected entities. It was done to increase the share capital of the company to over Rs.10 crores so as to make it eligible for listing on the BSE and at the same time the additional shares were allotted to connected entities. The next step was to show an increase in turnover and profits and announcement of a false dividend with a view to generate interest in the scrip of BITL. In the financial year 1997-98 turnover of the company was shown as Rs. 52.3 Crores compared to last year’s figures of Rs. 27.8 Lacs i.e. an increase of 18715 percent. The profits increased from mere Rs. 1.3 Lacs to Rs. 25.7 Crores, an increase of 197630 percent. From the fact that a few shareholders have not received any dividends for the year 1997-98 it is quite apparent that the said dividend of 250% was a false announcement. This is also reinforced by the fact that the company has not provided any details or bank proofs of the said dividend payout and that the company has not filed any documents with the RoC, Gujrat pertaining to the results of the company since 1996-97. The last step was to offload the increased shares of BITL into the market through entities close to the management namely, Aadit Medicine Ltd, Beta Agro Ltd, Omega Housing Ltd, Kingfisher Overseas Pvt. Ltd., Ranger Investment & Leasing Ltd, Mr. Dilip Kumar Puri, Mr. Urvish Vora and Mr. Vipul Vora. Brokers Harvestdeal Securities, M/s Shrikant Mantri and First Custodian Fund Ltd. helped management of BITL in this act.  It is alleged that . you are,  therefore,    in violation of Regulation 3 and 6 (a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995  (said regulations).

 

  1. In view of the above, all of you are called upon to show cause as to why  suitable directions including direction of  restraining all of your from accessing the securities market and prohibiting from buying, selling or dealing in securities for a specified period should not be passed u/s 11 and 11B of SEBI Act, 1992 read with Regulation 11 and 13 of the SEBI (Prohibition of fraudulent and unfair trade practices relating to securities market) Regulations, 2003.

 

  1. Your reply, if any, should reach us within 21 days of the date of receipt of this notice. While replying you may also indicate whether you desire to be personally heard in this case. In case no reply is received from you, within the above specified period, it shall be presumed that you have no further explanations/submissions to offer in this regard and action may be initiated as per law.

 

 

Yours sincerely

  

R Mohan