SECURITIES AND EXCHANGE BOARD OF INDIA

DIRECTION UNDER SECTION 11B OF SEBI ACT, 1992 READ WITH REGULATION 12 OF SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 1995 AGAINST SHRI KISAN PARWAD AND M/S K P INVESTMENTS.

CO/ 451/IES/01/2003

1.1 Investigations were conducted in the scrip of M/s Morepen Hotels Ltd. (hereinafter referred to as MHL) by SEBI following a major spurt in the total volume and price of the scrip. From 29,400 shares during January 2000 including nil volume for the entire month of July 2000, it shot up to 11,34,200 shares during the period August to November. Further, the percentage of net quantity delivered to gross quantity traded during the period September 11 to November 17,2000 was less than 1% of the total traded volume on the Exchange. Although the brokers of BSE and NSE generated volumes in lakhs, their net delivery obligations in the scrip was however in the range of 100 to 200 shares. The price of the scrip also had gone up to a 52 week high at Rs.285/- on September 11, 2000 which was followed by a fall in price of 52 week low at Rs.154.65 on November 15, 2000. 1.2 Investigations revealed that Shri Kisan Parwad/ M/S K P Investments had transacted in the scrip of MHL with an intention of artificially raising the price of the scrip and also for building artificial volumes in collusion with certain entities connected with it. It was also revealed during the investigation that Shri Kisan Parwad/ M/S K P Investments had acted in concert through a selected cartel of brokers of BSE and NSE and were involved in circular trading in the scrip which had pushed up the volumes to artificial levels at both NSE and BSE during the period from June 2000 to December 2000.

1.3 Investigations disclosed that Shri Kisan Parwad/ M/S K P Investments had been responsible in artificially raising price of the scrip of MHL, having entered into purchase and sale of securities without intending to transfer the beneficial ownership and also for the purpose of creating a false / artificial market for the scrip.

1.4 Shri Kisan Parwad/ M/S K P Investments have been found to be acting in concert with other clients for a common purpose and objective for manipulation of scrip of MHL. Investigations revealed that Shri Kisan Parwad/ M/S K P Investments had violated the provisions of Regulation 4(b) and 4(d) of SEBI (FUTP) Regulations, 1995. It was also found that Shri Kisan Parwad/ M/S K P Investments had traded heavily in another scrip, Eonour Software Ltd. which was also investigated by SEBI for price manipulation and it was revealed that Shri Kisan Parwad/ M/S K P Investments along with other clients was responsible for the price manipulation of Eonour Software Ltd. also.

2.1 A show cause notice dated 14.06.2002 was issued to Shri Kisan Parwad/ M/S K P Investments asking him to show cause as to why suitable directions including such directions debarring / prohibiting Shri Kisan Parwad/ M/S K P Investments from dealings in securities market for a suitable period should not be issued under Section 11B of the SEBI Act, read with Regulations 11 and 12 of SEBI (FUTP) Regulations, 1995. He was also asked to submit his reply supported by necessary records / evidences which he like to adduce in his support within 21 days from the date of receipt of the notice failing which it was indicated that SEBI shall presume that he had no explanation to offer and that it would be constrained to pass appropriate orders. However, no reply has been received from M/s K P Investments till date.

3.1 Subsequently, an opportunity of hearing was granted on 28.10.2002 which was communicated to M/s K P Investment vide letter dated 01.10.2002. Shri Kisan Parwad Proprietor M/s K P Investment had appeared and reiterated his reply made during investigation.

3.2 I have carefully considered the findings of the investigations and the submissions made by Shri. Kisan Parwad. I find that M/s. K. P Investment is a proprietary concern of Shri Kisan Parwad residing at Shiv Krupa Chawl, Comm. Ganesh Nagar, Pump House, Jijamata Marg, Andheri (East), Mumbai 400 093. Shri Kisan Parwad is an employee of M/s Jem Fiscal Ltd. which is located at 28, Great Western Building, 1^st Floor, S. B. Road, Fort, Mumbai 23. Though he was found to have a proprietary concern whose main activity was to invest in securities market and do jobbing, he was seen to have been mainly dependent upon the salary income, which was Rs. 50,000/- to Rs. 60,000/- p.a. (employer being M/s Jem Fiscal Ltd). The dealings of M/s. K. P. Investment in the scrip of Morepen Hotels Ltd. with different brokers are given as under:

3.3 Shri Kisan Parwad is seen to have stated that, during the period of investigations he had traded in the scrips of Eonour Software Ltd., M/s. Veronica Laboratories Ltd. and M/s. Colig Labs apart from Morepen Hotels Ltd. He had also stated that he was introduced to Manoj J. Doshi and M. J. Doshi, by one Shri Rakesh Shah. Shri Sudhakar, who was a friend of his was said to have introduced his firm to Shivam Investment. He also stated that he had not paid margins to any of the above mentioned brokers/sub-brokers and had settled their bills at the end of the settlement. The reasons for having traded in the scrip with many brokers was stated to be that when he had started trading with Shivam Investment , it had received the letter from the exchange regarding their dealings in Eonour Software Ltd. After having received the letter from the Exchange, they had stopped trading with him and hence he was forced to trade through other brokers.

3.4 Again, the reasons for his trading in an illiquid scrip like Morepen Hotels, according to Shri Kisan Parwad was that, his employer M/s. Jem Fiscal Ltd. was investing in the scrip and was actively trading. While asked for reasons for his squaring off the positions almost on the same day in most of the cases, he had stated that he had employed such practice in order to avoid margin payments to the brokers. The explanation given by Shri Kisan Parwad for his frequent cash deposit in the bank account was that his father was in the business of trading in Alphonso Mangoes and since he needed money to pay his brokers, he borrowed money from his father who is based at Ratnagiri.

3.5 Shri Kisan Parwad / M/s K P Investments, instead of investing in the scrip by taking delivery, was merely creating artificial volumes in the scrip at the behest of his employer, M/s Jem Fiscal Ltd. It is also pertinent to note here that all the other scrips in which the client was trading were illiquid scrips. It appears that he had deposited huge cash in his bank account in order to pay up the brokers. Shri Kisan Parwad of M/s K P Investments is found to have earned a profit of approx. Rs. 20,000 to – Rs 30,000 for his dealings spread across 15-20 settlements with different brokers/sub-brokers. Since these transactions were cash deposits made in the accounts, it can be construed that in all probability the money had come in from M/s. Jem Fiscal Ltd., which was his employer. The transactions between Jem Fiscal and Shri Kisan Parwad could have been adjusted outside the scope of books.

3.6 From the trading details above, it is evident that the client has transacted in the scrip without giving and taking any delivery. Therefore, the purpose of his dealing is not for effecting transfer of beneficial ownership but for creating a false and misleading appearance of trading on the securities market.

4.1 The relationship / link of the clients with each other is explained in the table below:

¨ FT Traders ( Shri Fakruddin Moiyandi) had dealt through three members of BSE simultaneously viz. Bhupendra Bheda, Dinesh J Shah and Anantrai A Parekh

¨ Jem Fiscal Ltd dealt through two members of BSE simultaneously namely, Suresh Rathi Securities and GSB Capital Markets

¨ Prasanth Investments ( Prasanth Shah) and KP Investments (Kisan Parwad) have dealt in the scrip of MHL simultaneously through two BSE members viz. Joginder Capital and MJ Doshi.

¨ Both FT Traders and KN Traders have accounts with United Bank of India and their account nos were close to each other i.e 4664 and 4667.

¨ The fax no. 2818179 given by Prasanth investments ( Prasanth Shah) is the same as that of Hakeem Auto and KN Traders.

¨ The telephone nos. provided by FT Traders in the client registration form to BSE member M/s DJ Shah were in the name of Smt. Hakeem Zohra who is one of the directors of Jem Fiscal Ltd

¨ The telephone numbers provided by KP investments and Prasanth Investments in their client forms were matching with the telephone nos of Hakeem Zohra who is a director of Jem Fiscals Ltd

¨ Both Narendra Navale of NN Investments and Kisan Parwad of KN Traders shared the same address viz. Ganesh Nagar, Pump House, Andheri East.

4.3Therefore, it is observed that all the above mentioned clients are connected to each other. When questioned about the fact that Jem Fiscal Ltd., Prashant Investment, F. T. Traders, Hakeem Auto etc. were having the same correspondence address as that of his, Shri Kisan Parwad of M/s K P Investments had not given a satisfactory reply. He had said that these clients had also traded in the scrip of MHL during the period under investigations and that his transactions were mainly for earning profits. He had also said that he had nothing to do with the trading of other entities operating from the same address. Also, it was stated that the Manager of Jem Fiscal Ltd. had recommended the scrip in its web site and therefore he had decided to trade in the shares of the company.

4.4 It is also clear from the trading pattern that these clients were involved in Circular Trading in the scrip and these clients had entered into buy and sell transactions with each other, squaring up positions and reversing trades either on the same day or during the same settlements making the net receivable/deliverable positions as either nil or shares of negligible quantities i.e., about 100 to 200 shares. It is also noteworthy that the same set of clients had acted in concert with each other and had been involved in the price manipulation of another scrip viz. Eonour Software Ltd. Thus, all the aforesaid clients had done transactions of fictitious nature through different members of NSE and BSE and had created artificial volumes in the scrip thereby affecting the market equilibrium in the scrip.

4.5 In light of the above, I find that Shri Kisan Parwad and M/s K P Investments, are guilty of violating the provisions of Regulations 4(b) and (d) of SEBI (FUTP) Regulations, 1995.

4.6 Therefore, in exercise of the powers conferred upon me under Section 4(3) of SEBI Act, 1992 read with Section 11B and Regulation 11 and12 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, I hereby prohibit Shri Kisan Parwad and M/s K P Investments from dealing in securities for a period of two years. This order shall come into force with immediate effect.

Name of the Broker	Settl No.	Purchases	Sales	Gross	Net
M J Doshi	25	14,200	14,200	28,400	0
Member BSE	26	17,300	17,300	34,600	0
	27	18,800	18,800	37,600	0
	29	17,300	17,300	34,600	0
	30	20,000	20,500	40,500	-500
	31	11,300	11,000	22,300	300
	32	8,100	8,000	16,100	100
	33	20,900	20,600	41,500	300
	34	21,400	21,700	43,100	-300
	35	21,100	20,800	41,900	300
	36	21,000	21,000	42,000	0
	37	20,300	20,300	40,600	0
	38	18,800	18,800	37,600	0
	39	22,400	22,400	44,800	0
	40	20,100	20,400	40,500	-300
	41	13,700	13,700	27,400	0
Total		2,86,700	286,800	5,73,500	-100
Manoj J Doshi	38	14,700	14,700	29,400	0
Member NSE	39	16,900	16,900	33,800	0
	40	14,800	14,800	29,600	0
	41	15,400	15,400	30,800	0
	42	21,600	21,800	43,400	-200
	43	17,400	17,000	34,400	400
	44	7,000	7,000	14,000	0
	45	7,100	7,100	14,200	0
	46	18,100	18,600	36,700	-500
	47	18,800	18,800	37600	0
	48	19,800	19,800	39600	0
	49	23,700	23,700	47400	0
	50	18,700	18,700	37400	0
	51	11,300	11,300	22600	0
	52	15,600	15,600	31200	0
	53	17,200	17,200	34400	0
	1	3,900	3,900	7800	0
Total		2,62,000	2,62,300	524300	-300
Shivam Investment	25	14,800	14,800	29600	0
SubBrok to Joindre	26	14,600	14,600	29200	0
	27	16,800	16,800	33600	0
Total		46,200	46,200	92400	0
Grand Total		5,94,900	5,95,300	11,90,200	-400

Name of the client	Relationship/Link with other clients
Jem Fiscal Ltd.	a) They are/were employer of Ketan Shah (K. N. traders), Prashant Shah (Prashant Investment), Kisan Parwad (K. P. Investment), Shamshad Sheikh (S. M. Investment), Narendra Navale (N. N. Investment).
	b) The Director of the firm, Shri Nazir Hakeem is also a Director with Hakeem Auto Ltd.
	c) Shri Nazir Hakeem introduced the bank a/c of F. T. Traders ( Prop. Fakruddin Moyiandi) with United Bank of India, Fort Branch.
	d) Shri Prashant Shah ( Prashant Investments)placed orders on behalf of Jem Fiscal with Toss Financial Services, member NSE and Varun Stock Brokers, (Sub-broker to Suresh Rathi Securities)
Hakeem Auto Ltd.	a) The Director, Shri Nazir Hakeem is also a director of Jem Fiscal Ltd.
	b) Introduced the bank account of F. T. Traders with United Bank of India.
N. N. Investment	a) The proprietor of the firm, Shri Narendra Navale, is an employee of Jem Fiscal Ltd.
	b) He stated that he has traded on the recommendation of his employer’s website.
	c) Shri Prashant Shah (Prop: Prashant Investment), who also in employment with Jem Fiscal Ltd. placed the orders on behalf of N. N. Investment with Toss Financial, member NSE.
S. M. Investment	a) The proprietor, Shri Shamshad Sheikh, is an employee of Jem Fiscal Ltd.
	b) The account of the firm with United Bank of India was introduced by Shri Fakruddin Moiyaddi of F. T. Traders.
	c) He had traded in the scrip because his employer, M/s. Jem Fiscal Ltd. was also trading in the scrip.
K. N. Traders	a) The proprietor, Shri Ketan Shah was employed with Jem Fiscal Ltd. as Manager (Reseach).
	b) As per information provided by Shilpa Stock Brokers, he was trading on the terminal provided to Hakeem Auto Ltd.
	c) He had given recommendation on the web site of Jem Fiscal Ltd.
	d) He had also recommended the scrip for trading to Prashant Shah (Prashant Investment)
Prashant Investment	a) The proprietor, Shri Prashant Shah, is an employee of Jem Fiscal Ltd.
	b) He had traded in the scrip based on the recommendation on the website of his employer.
	c) Had discussed the matter with Ketan Shah (K. N. Traders) before he started trading in the scrip
	d) He had placed orders for Jem Fiscal Ltd. with Varun Stock Brokers (Suresh Rathi Securities Pvt. Ltd.)
	e) He had also placed orders for Jem Fiscal Ltd. with Toss Financial, Member NSE.
	f) He had placed orders for N. N. Investment with Toss Financial, member NSE.
K. P. Investment	a) He is employed with Jem Fiscal Ltd.
	b) Has traded mainly because his employer, Jem Fiscal Ltd. was also trading/investing in the scrip.
F. T. Traders	a) Shri Fakruddin Moiyadi, Prop. F. T. Traders, had given the office address of Jem Fiscal Ltd. as his correspondence address.
	b) The BOLT terminal provided by Bhupendra M. Bheda to F. T. Traders was installed at the office address of Jem Fiscal Ltd.
	c) The account of F. T. Traders with United Bank of India, Fort Branch was introduced by Shri Nazir Hakeem, who is a Director of Jem Fiscal Ltd. and Hakeem Auto Ltd.
	d) Shri Fakruddin Moiyadi had introduced the account of S. M. Investment (Proprietor: Shri Shamshad Sheikh, an employee of Jem Fiscal Ltd.) with United Bank of India.