CHIEF GENERAL MANAGER
INVESTIGATIONS DEPARTMENT
IVD/ID7/SD/ /2004
July 8, 2004
M/s. Kamrao Plastique P. Ltd.,
1083/9,
Indranagar,
Lucknow – 226 016
Dear Sirs,
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. 186/- 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 M/s. Kamrao Plastique P. Ltd. (hereinafter referred to as ‘you’) have purchased 42,600 shares and sold 37,000 shares on BSE during the period under consideration, with a view to creating artificial volumes in collusion with M/s. Cyberspace Ltd./M/s. Century Consultants Ltd./its promoters and other related/linked entities.
4. You were issued identity card by National Securities Clearing Corporation Ltd. (NSCCL) for the purpose of entering the clearing house as the representatives of Century Consultants Ltd to make pay-in etc. and you have been found to be director of Kamarao Plastique Ltd.
From the analysis of details obtained by SEBI it was observed that you made payment of Rs. 38,20,000/- and Rs. 7,75,000/-to Sipra Education Career Foundation Pvt. Ltd. on March 05, 2001. You have also made payment of Rs. 46,00,000/- to Century Consultants on March 13, 2001. You appear to have sold shares through Mangla Capital. The shares were transferred from the entities like Shivam Multi Services Ltd., Pradeepak Finance & Management Consultants Pvt. Ltd., Sipra Education Career Foundation Pvt. Ltd. etc.
5. Your relationship/linkage with M/s. Cyberspace/M/s. Century Consultant Ltd., its promoters and other entities as per your own admission is given hereinunder:
- The trades done in the account of Kamrao Plastique Ltd. were not known to you. Shri Arvind Johari, Director of Century Consultants Ltd. and Cyberspace Infosys Ltd. used to trade for this firm.
- You also stated that whenever required, you were told to sign on the papers and blank cheques. Shri Johari never allowed you to read the papers also. You were also not in possession of any papers related to Kamarao Plastique and Shri Johari used to keep everything in the office of Century Consultants Ltd.
- It was stated by you that Shri Johari used to trade on behalf of almost all the employees who were made directors of different companies.
- Upon being asked, you stated that in the month of September / October 2000, Shri Johari asked you to sign some papers/agreement papers to float the company. Shri Johari held a meeting of employees in October 2000 and told them that he intended to increase the volume of transactions in Cyberspace Ltd. and you were asked to be directors of different companies.
- You stated that to save your job, you did not have any option but to obey his instructions. You were also not aware of anything about financing or trading which were taking place in Kamrao Plastique Ltd.
6. Central Bureau of Investigations (CBI) has also observed that you and certain other 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 respective exchanges.
7. 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. It is alleged that you 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.
8. 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.
9. You are advised to submit the reply along with documentary evidence, if any, within 15 days of receipt of this notice. If you fail to furnish reply, it would be presumed that you have no explanation to offer and SEBI would be free to take action as deemed fit in the matter.
Yours faithfully,
SANJIV DUTT
Encl: Copy of statement