CHIEF GENERAL MANAGER
INVESTIGATIONS DEPARTMENT
IVD/ID7/SD/ /2004
July 8, 2004
M/s. Sipra Education Career Foundation Pvt. Ltd.,
B-2043
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. Sipra Education Career Foundation Pvt. Ltd. (hereinafter referred to as ‘you’) have purchased 1,58,000 shares and sold 1,75,804 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. The investigating team observed that you had made payments to A M Johari on March 13, 2001(Rs. 20,00,000), to Century Consultants Ltd. on March 13, 2001 and received of Rs. 38,20,000/- from Kamarao Plastique P Ltd. on March 05, 2001. An analysis of CDSL A/c indicates that shares have been received from Amit Inter-chemicals, Octopus Soft-Tel and Pratik Shah, who have been found to be related to Shri Johari. The majority of the debit entries are for sales made. There are off-market transfers to Prabodh Arth Sanchay and Nucleus Soft-Tel. From NSDL A/c, it is observed that the majority of the credit entries are for purchases made. There are off-market transfers from Kamrao Plastique, Amit Inter-chemicals, Octopus Soft-Tel and Nucleus Soft-Tel. The majority of the debit entries are off-market transfers. Off-market transfers have been made to Delta Investments, the Beneficiary A/c of Century Consultants, Octopus Soft-Tel, Shivam Multi Services, Nucleus Soft-Tel and Vinod Gupta.
Some of the instances of transfer from and to entities controlled by/ connected/related to M/s. Century Consultants Ltd./ M/s. Cyberspace Ltd. and its promoters who have either received shares from you or given shares to you for meeting the delivery obligations are given hereinunder:
|
Settlement No
|
Name of the client
|
Deliverable Position
|
Name of the transferor
|
Qty Transferred
|
|
2001050
|
Sipra Educational Career Foundation Pvt Ltd
|
72500
|
Nucleus Soft Tel P Ltd
|
17960
|
|
|
|
|
|
Mkt Del from Century on BSE
|
54540
|
|
|
2001046
|
Octopus Soft Tel P Ltd
|
55000
|
Mkt Del from Century on NSE
|
34673
|
|
|
|
|
|
Sipra Education Career Foundation
|
20327
|
|
|
2001046
|
Nucleus Soft Tel P ltd
|
50350
|
Mkt DEL BSE- Century
|
4170
|
|
|
|
|
|
Mkt DEL BSE- Others
|
28500
|
|
|
|
|
|
Mkt Del Others-NSE
|
36900
|
|
|
|
|
|
Ramesh Shah
|
35000
|
|
|
|
|
|
Delta Investments
|
8965
|
|
|
|
|
|
Sipra Edu. Career Foundation
|
7000
|
|
|
|
|
|
Shivam
|
98523
|
|
|
|
|
|
Amit
|
23500
|
|
|
|
|
|
Octopus
|
11750
|
|
|
|
|
|
Country
|
5500
|
|
| |
|
|
|
|
|
|
|
|
|
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:
- You have stated that you were working with Century Consultants Ltd. since September 2000 as a trainee for NSE terminal operator for a salary of Rs. 6000/- per month. Some time in the second week of December, you received a call from Shri Amit Singh, Personal Assistant to Shri Arvind Johari, Promoter of Century Consultants Ltd., to reach Fort office and asked to get either a copy of Ration Card or Passport/Driving Licence along with 20 passport sized photographs. You took 20 photographs and a copy of passport to their Fort office. Upon arrival, they made you sign some papers without showing the content of it. On enquiry they told you that nothing will happen as all the other staff members are also signing these papers. Shri Amit Singh further said that it is an order from Sir (Shri Arvind Johari) for all the employees to sign these papers. You were instructed to hand over all the letters which you may receive at your residence to Shri Amit Singh. Shri Gaurav Shah, a senior employee of Century Consultants Ltd., on instructions from Shri Amit Singh took you to Bank of India, Stock Exchange Branch and opened a bank account in the name of Sipra Education Career Foundation Ltd. for which they asked you to sign the papers. They further told you not to disclose that you were made a Director in SECL.
After around 15-20 days Shri Amit Singh called you up at Kandivli office where you were working and said that he is sending me a cheque book and some papers relating to opening of DP account with Global Trust Bank with a peon. You signed all the cheques and papers relating to opening of DP account and sent it back to Shri Amit Singh at Fort office.
One day you received a letter from Global Trust Bank at your residential address which you forwarded to Shri Amit Singh without opening the same because it was addressed to SECL.
After sometime you received a legal notice sometime in first week of April 2001 from Mayur Narendra and Company, Advocates stating that there are dues to the tune of Rs.9,16,120.43 in the account of SECL. At this point of time, you came to know that they had fraudulently made you Director and there were some shady deals with some other brokers.
- You have shown your ignorance about the modus operandi but stated that Sri Arvind Johari himself used to trade on the behalf of SECL from his Fort Office. Sri Johari and his two/three person viz. Sri Ketan Jain, Director, Sri Rakesh Gandhi were the other dealing persons. Sri Amit Singh took blank signed cheques from you and never gave any contract notes etc. Sri Johari and Amit Singh used to tell you not to divulge anything to anyone. They used to take your signature in papers without showing you the contents and all the trades were done by them only.
- You also informed that following employees of Shri Johari were forced to trade in the scrip by using different entities:
· Chetan Patel (Director- Kamarao Plastique),
· Anil Tambe (Accountant and Director – Octopus Softel)
· Rohit Shah (Director – Shreeji Investments, Arihant Investments),
· Amit Singh (PA to Arvind Johari and employee, Director – Nucleus Softel),
· Gaurav Shah (Accountant and Director – Amit Inter-Chemicals)
· Kalnath Jha (employee, Director – Calculuas Softel)
· Mahesh Mistry (employee, Director – Delta Investment)
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 the 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