R Mohan, General M anager
Investigation Department
Tel: 22850451-56 Extn: 404
E-mail: mohanr@)sebi.cov.in
IES/IVD6/RM/SS/RSL/ 41973/2005
June 6, 2005
Shri Kunaram Chaudhry
Director, Ransi Software India Ltd Bhagwati Niwas
Bhulabhai Chaur Rasta
Geeta Mandir- Road
Ahmedabad
Sub: Notice to show cause under regulation 11(B) of SEBI Act in the case of Ransi Software India Ltd
Securities and Exchange Board of India conducted investigations in the case of Ransi Software India Ltd based on the corporate announcement by the company and then announcement was not followed by the company. An advertisement had also appeared in the newspapers stating manifold increase in revenue and profit of the company and getting new project
The Company. Ransi Software India Ltd (RSIL), was incorporated on March 28th, 1994 as a private limited company as Ransi Roadways Ltd. The name of the Company was changed to Ransi Cargo India Ltd; vide fresh certification of incorporation dated August 23, 1995. The company was engaged in the business of transportations. The company again changed its name to Ransi Software India Ltd and reportedly diversified its activities in Software Development from the transport business w.e.f. March 20, 1999. The Registered office of the company is situated at Basement Uma Appt., Maharastra Lodge, Dandiya Bazar, Baroda. The shares of the company are listed on the Bombay Stock Exchange (BSE) and Ahmedabad Stock Exchanges (Regional stock exchange). The company has changed its registration from
regional Stock Exchange, Ahemdabad to Vadodara on December 07, 2001 on change of registered office to Basement Uma Apartment, Maharastra Lodge, Dandiya Bazar, Vadodara 390001.
The Company has acquired 100% equity of the companies M/s Madho Agro farm Pvt. Ltd. and M/s P.c. Patel Green Wood Pvt. Ltd. by issuing 5,00,00,000 shares at par worth Rs.50 crores. The shares were issued based on a valuation which was certified by auditor D V Dave and Co. (M. No.34224) However, during investigation. BSE got the valuation done by another auditor, Ingit Modi Associates (M. No. 42822), who valued the two companies at Rs. 5 crores only, indicating gross over valuation by Ransi Software, apparently for the purpose of issuing preferential shares. The aforesaid allotment of preferential shares to the shareholder/promoter of the merged company docs not seem to be genuine. Hence the company has violated 'Disclosure and Investor Protection Guidelines' issued under Section 11 of SEBI Act, 1992 for allotting preferential shares.
The company vide its letter dated March 14, 2002 has informed the exchange that the meeting of Board of Directors is scheduled to be held on March 26, 2002 to consider a proposal to issue bonus shares and to consider negotiations for acquiring a US based software firm, which was later rescheduled to April 5, 2002. The company has not followed up these corporate announcements. Further According to SEBI guidelines a listed company proposing to issue bonus share has to follow SEBI guidelines which states that 'bonus shares can be issued only out of free reserves (i.e. reserves not set apart for any specific purpose) built out of the genuine profits or share premium collected in cash only'. However investigations revealed that the company did not have genuine profit (The profit stated for the financial year 2000-01 is only Rs.1.92 lakh) and reserves and surplus (for the year 2000-01 reported as nil) for the proposed Bonus issue as well as the proposed dividend of 10% on an expanded capital after the issuance of preferential allotment totaling to Rs.6.02 crores. Hence the company has not followed 'Disclosure and Investor Protection Guidelines' issued under Section 11 of SEBI Act, 1992 for the Bonus Issue.
On 28/1/2002 and 13/2/2002, it was reported that the Ransi Software India Ltd. has bagged an export order of RS.19.65cr from Canada-based V Karya and Company. M A Shah, director of the company, said the company is on the verge of bagging another export order of Rs.6.28Cr. from a US-based company. It has also initiated negotiations with a company in Singapore for a software development contract worth Rs.12.21 cr. The company has not provided any reply on the matter and seems that this information was given to create interest in the scrip. By publishing advertisement to disseminate false information and allotment of preferential shares to the shareholders/promoters of the two other companies which does not seem to be genuine promoter of the company had acted in a fraudulent manner and thereby violated Regulation 3, 5( 1) & 6(a) of SEBI (FUTP) Regulation 1995. It is also noted that these directors/promoters of the company have not given reply to queries raised by the SEBI.
In the financial result it is noticed that the company is reporting income for the quarter ending June 30, 2001 is Rs.26.20 lakhs and quarter ending September 30, 2001 is Rs.54.95 lakh but annual income for the company is showing only Rs.54.95 lakh which does not seem genuine. The company filed results for the quarters ended June 2001 and September 2001 showing increase of 100%. The result of the company reported for year ended March 2002 showed a 10 times increase in income from the previous year. There also appears to be discrepancy in the results declared by the company. The rise in the profit of the company within four months (June-September 200 I) increased more than 125%. The annual and quarterly results after September 200 I have not been filed by the company. This leads to suspicion of dressing up the financial statements and giving incorrect information to the public at large.
During the course of investigation Managing Director of the company had been summoned to be present on August 08, 2004 before Investigating Officer by registered post. SEBI had not received any response from the company in this regard. SEBI has not received any reply even after sending a reminder. Summons was sent to the promoter/director of the company at the address which was submitted by the company to the exchange but no reply received from the company or directors/promoters. The summons was also sent to the address of the company given to Stock Exchange, Vadodara. The Summons was undelivered by the Stock Exchange with the comment that the company's office has been closed from 3-4 years. There was no cooperation received from the company on this regard.
'.
It is observed that during the period when the scrip was suspended in the BSE on the basis of
non compliance of the listing requirements, the VSE has given the listing on December 07. 200 I. In the reply of SEBI queries dated August 30, 2004 VSE had replied that the Exchange has given listing to the shares bearing Distinctive Nos 0 1 to 1, 02.00,000. Here in BSE report it was stated that the 500,00,00,000 shares issued by the company on preferential basis to the existing shareholders of M/s Madho Agro Farm Pvt Ltd. and M/s P C Patel Green Wood Pvt Ltd. were listed in the VSE. It was stated as the company has submitted a letter from the VSE in which it was stated that the VSE has given listing for the shares bearing distinctive nos. 10200001 to 60200000 and permission for the trading was granted w.e.f January 08, 2002. Apparently, as per a letter issued by VSE. a copy of which submitted by the company to BSE, these 5 crores shares were listed by VSE and permission for trading was granted from January 08. 2002 and genuineness of this letter is doubted.
The company has submitted different shareholding patterns for the same date with differing figures for promoter's holdings vide their letters of various dates. The discrepancies are given below:
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1,38,92,303
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6,02,00,000
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31.03.2002
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16.05.2002
|
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1,26,78,120
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6,02,00,000
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30.06.2002
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03.08.2002
|
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61,00,000
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1,02,00,000
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31.10.2001
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27.08.2002
|
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61,00,000
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6,02,00,000
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31.12.2001
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27.08.2002
|
.
It may be observed that as from 31 March 2001 till 31 December 2001, the company has shown the same figures i.e. 27.20,340 shares as Promoter's holding under various quarterly reports submitted on the 16th May 2002. However, on 2nd August 2002, under the listing application for the preferential sl1ares Promoter's holding has been shown as 61,00,000 shares for the same period, despite their disclosure that no allotment was made to the promoters under preferential issue. In all these reports on shareholding pattern the promoter's holding only comprises of shares held by three individuals viz. Mahendra A Shah, Kunaram Choudhari and Vargi Srinivas.
SEBI received a complaint letter dated July 17,2002 alleging Mahendra Shah's involvement in manipulation of various scrips including Ransi Software India Ltd. (erstwhile Ransi Cargo Ltd.),
BSE had also reported that several complaint letters were received from investors by the Investors' Services Cell of the Exchange for non receipt of dividend, non receipt of shares duly transferred, non- receipt of credit with DP.
The Modus Operandi of the transferring shares in large quantity by the entities related to the company/preferential allotee and coming up with the attractive corporate activity by the company and later on withdrawal of the same proposal clearly shows that the company and the promoters/director had malfide intention. They disseminated misleading information about proposal of corporate activity and created demand for the scrip of the company and then they sold shares in the market with the help of intermediary entity namely Shri Kishore Thakkar.
You are now required to show cause as to why suitable directions under Sec. 11(4) read with 11 B of SEBI Act, 1992 including directions debarring you from the capital markets/dealing in securities for a suitable period of time may not be issued against you for the above mentioned violations committed by you.
Your reply, if any, should reach us within 15 days of receipt of this notice failing which it will be presumed that you have no explanation to offer in this matter and further necessary action as deemed fit will be initiated against you without any further reference to you. You may specify whether you desire to be heard in the matter.