WTM/RKA/ISD/ 117 /2016
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
UNDER SECTIONS 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 - IN THE MATTER OF RADFORD GLOBAL LTD.
In respect of:
Sr. Entities PAN No. Company 1. Radford Global Ltd. AABCM5771E Directors of Radford Global Ltd. 2. Mr. Prakash Bhawarlal Biyani AJNPB0702E 3. Mr. Manish Nareshchandra Shah AELPS8560A 4. Mr. Rajesh Kumar Maheshwari ACJPM4653L 5. Mr. Nitin Shivratan Murarka AMBPM9321M Promoters of Radford Global Ltd. 6. Radford Investment Services Pvt. Ltd. AACCG9982A Directors of Radford Investment Services Pvt. Ltd. (Radford Investment) 7. Mr. Roshan Dwarkani ATXPD7040B 8. Mr. Suresh Kumar Saini BCXPS0818J Preferential Allottees 9. Mr. Aachalchand Balar ABAPB8617M 10. Mr. Piyush Kumar Balar* AEMPB6394Q 11. Mr. Abhishek Kumar Balar* AATPB8811B 12. Mr. Afsar Zaidi AADPZ8571G 13. Ms. Kamal Punwani AFFPP5207G 14. Mr. Dalsukh Ujamshi Trevadia ACDPT3428N 15. Ms. Jyoti Anil Trevadia ABWPT8000C 16. Ms. Tanvi Bhavik Trevadia AFAPT5888A 17. Mr. Bimal J. Desai AAKPD3160A 18. Ms. Jyotsna Jitendra Desai AHPPD4223L 19. Mr. Yogesh Popatlal Thakkar AAPPT1825P 20. Ms. Babita Mittal AAIPG4573G 21. Mr. Mukesh Mittal AJGPM2125D 22. Ms. Renu Aggarwal AAEPA1694C 23. Mr. Tarun Aggarwal AOQPA9034E
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24. Ms. Renu Mittal AGMPM1488Q 25. Mr. Santosh Aggarwal ABAPA4548E 26. Mr. Mohan Mittal APFPM0496Q 27. Nishit Agarwal Ben Trust AABTN3350K 28. Ms. Pinky Agarwal ACGPA7438L 29. Pratik Agarwal Ben Trust AABTP7516K 30. Mr. Hitesh Mangilal Jain AABPJ2835R 31. Mr. Rajendra Mangilal Jain ACPPJ9853R 32. Mr. Shailesh Mangilal Jain AAAPJ6765F 33. Ms. Kalpita Luniya AAAPL9611J 34. Mr. Hukamsingh B. Rajpurohit AABPR9949J 35. Mr. Dilip Chotalal Morzaria AADPM9919M 36. Mr. Hari Kishan Suderlal Vermani AAJPV4754H 37. Ms. Mayuri Darshan Bhanushali AKJPB8572F 38 Sushant Investments/Mr. Sunil Tukaram Bhardkar ACAFS8650G 39. Ms. Shilpa Aggarwal AEXPA1230M 40 Ms. Ritu Singal ABHPS3711M 41. Mr. Brij Bhushan Singal AEFPS6298M 42. Mr. Neeraj Singal ANRPS7986B 43 Ms. Uma Singal ANRPS7987A 44. Mr. Ashok B. Jiwrajka AACPJ3610K 45. Mr. Dilip B. Jiwrajka AAGPJ8756J 46. Mr. Surendra B. Jiwrajka AACPJ4316L 47. Mr. G. M. Prasanna Kumar AHEPG0025A 48. Mr. G. S. Anith Kumar ADPPK9874N 49. Mr. Lingaraju G. M. AEYPM5850Q 50. Mr. Praveen Kumar Agarwal ACSPA4725A 51. Praveen Kumar Agarwal HUF AAIHP6229C 52. Mr. Naresh Nemchand Shah ACRPS0182J 53. Ms. Ujwala Namdev Mane AAEPM5924H Exit Providers, i.e., Radford Group and Suspected Entities 54. Devatma Distributors Pvt. Ltd. AADCD7140G 55. Anjali Suppliers Pvt. Ltd. AAJCA1784D 56. Rangan Vincom Pvt. Ltd. AAGCR1715E 57. Katyani Commodities Pvt. Ltd. AAECK6244R 58. Ladios Trading Pvt. Ltd. AACCL3868N 59. Avlokan Dealcom Pvt. Ltd. AALCA1583G 60. Devakantha Trading Pvt. Ltd. AADCD7044B 61. Shelter Sales Agency Pvt. Ltd AASCS1797F 62. Udbal Mercantile Pvt. Ltd. AABCU2648C 63. Amrusha Mercantile Pvt. Ltd. AALCA0340D 64. Runicha Merchants Pvt. Ltd. AAECR0580M 65. Signet Vinimay Pvt. Ltd. AAMCS1712Q
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66. Winall Vinimay Pvt. Ltd. AAACW8004B 67. Sanklap Vincom Pvt. Ltd AAMCS1711P 68. SKM Travels Pvt. Ltd. AAICS0688K 69. Scope Vyapar Pvt. Ltd. AAICS6023N 70. Spice Merchants Pvt. Ltd. AAPCS7492G 71. Apex Commotrade Pvt. Ltd. AAJCA4459K 72. Kingfisher Properties Pvt. Ltd. AAECK3394G 73. Topwell Properties Pvt. Ltd. AADCT8403C 74. Esquire Enclave Pvt. Ltd. AACCE7065J 75. Radison Properties Pvt. Ltd. AAFCR2818B 76. Shivkhori Construction Pvt. Ltd. AAPCS7850L 77. Limestone Properties Pvt. Ltd. AACCL0133G 78. Natural Housing Pvt. Ltd. AADCN6251G 79. Divyadrishti Merchants Pvt. Ltd. AABCD8147K 80. Divya Drishti Traders Pvt. Ltd. AABCD8146J 81. Dhanraksha Vincom Pvt. Ltd. AADCD6028P 82. Ridhi Vincom Pvt. Ltd. AAECR9858C 83. Dhanleela Investments & Trading Company Ltd. AAACR1770P 84. Blue Circle Services Ltd. AAACB2131L 85. Pine Animation Ltd. AAECM0267A Mishka Finance and Trading Ltd. (Formerly known as: 86. AAACP2548R Pyramid Trading And Finance Ltd.) 87. Amrit Sales Promotion Pvt. Ltd. AACCA3220D 88. Burlington Finance Ltd. AABCB2575P 89. Symphony Merchant Pvt. Ltd. AADCS5411K 90. Bazigar Trading Pvt. Ltd. AABCB3052B 91. Manimudra Vincom Pvt. Ltd. AADCM4316K 92. Vibgyor Financial Service Pvt. Ltd. AAACV8378B 93. Jayant Security & Finance Ltd. AAACJ4848G 94. Trimurthi Finvest Ltd. AAACT6383N 95. Purvi Finvest Ltd. AABCP6564C East West Finvest Ltd./ 96. AAACE6834D Sharad Dharak 97. East West Finvest Ltd. AADCE1236G 98. Ms. Prem Lata Nahar AFAPN8764M 99. Mr. Taran Kumar Rungta ASVPR5947G 100. Rajat Share Broking Pvt. Ltd. AAACR2695B 101. Ms. Manjulaben Sukhdev Pandya ALVPP7764J 102. Mr. Bharat Bagri Bagri AADHB8488A 103. Mr. Rajesh Pravinkumar Jasani ACWPJ4705B Radford Sellers 104. Ms. Manisha Jayesh Shah AOBPS1451C 105. Ms. Artiben Kansara ATWPK6701D 106. Mr. Sunil Mohanlal Kansara ANFPK3652G 107. Mr. Rajeev Garg ACJPG8162C
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108. Mr. Anup Manilal Shah (Huf) AAKHA8826N 109. Mr. Bharat Kumar Jayantilal Shah AGSPS5666E 110. Ms. Dina Satishkumar Mehta AAYPM2723J 111. Mr. Harimohan Khandelwal ACLPK9984A 112. Ms. Hasumati G. Mandlia ANIPM9254B 113. Mr. Kanaiyalal Manilal Gandhi ABGPG6544G 114. Ms. Ramila Gandhi AELPG9023L 115. Mr. Mansukhbhai Jagabhai Tanti AALPT9962B 116. Ms. Pragna Patel AGWPP5778Q 117 Ms. Rekhaben Lakhaben Sagparia AFXPS1751C 118. Ms. Veena Mohandas Valbhani AHGPV3775J The aforesaid entities are hereinafter referred to by their respective names or by their respective category as described in the interim order dated December 19, 2014 or collectively as ‘the noticees’. * Mr. Piyush Kumar Balar and Mr. Abhishek Kumar Balar are joint holders of demat account alongwith Mr. Aachalchand Balar.
1. Securities and Exchange Board of India ("SEBI"), vide an ad interim ex-parte order dated December 19, 2014 (hereinafter referred to as “interim order”), restrained 108 entities, including Radford Global Ltd. (formerly known as “PS Global Ltd.” and prior to that as “Rosette Resorts Ltd.”) and its promoters and directors from accessing the securities market and further prohibited them from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions. Further, vide another ad interim ex-parte order dated November 09, 2015 (hereinafter referred to as “interim order dated November 09, 2015”), SEBI restrained 15 entities from accessing the securities market and further prohibited them from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions. The persons/entities against whom the interim order was passed were advised to file their objections, if any, within twenty one days from the date of the interim orders and, if they so desire, to avail themselves of an opportunity of personal hearing before SEBI.
2. The aforesaid interim orders were passed taking into account facts and circumstances more particularly described therein and summarised inter alia as under:-
(a) The said directions issued in the interim order were on the basis of prima facie findings that Radford and persons in charge of its affairs had allotted its 91,00,000 equity shares of `10 each at a premium of `5 on preferential basis to 48 entities aggregating to `13.65 crore in order to provide fictitious Long Term Capital Gains ("LTCG") to the preferential allottees so as to convert their unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt. It was observed that consequent to preferential allotment of equity shares on February 16, 2012 in Radford, price of the scrip was increased substantially to the extent of 7,442% (74 times) with a very small chunk of
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volume/purchases (i.e., 98 shares per day) by certain entities and after the expiry of the compulsory lock-in period, the average volume increased astronomically to the extent of 5,05,066% (5,050 times) and the preferential allottees were provided exit at a high price by the Exit Providers who are referred to in the interim order as Radford Group & Suspected Entities. It was, thus, prima facie observed that Radford and the preferential allottees acting in concert with the Exit Providers misused the stock exchange mechanism to generate fictitious LTCG. (b) During Pre-Patch I (i.e., February 27, 2012 to January 28, 2013), the scrip opened at `3.20 (pre-stock split price) on February 27, 2012 and rose to a high of `241.35 and closed at `241.35 on January 28, 2013. It was noted that during this period an artificial demand for the shares of Radford was created by Radford and LTP Contributors as Radford did not have the fundamentals to command such a high demand nor were there any external factors such as corporate announcements which could have led to such demand. When compared with the high demand, there was hardly any supply of shares of Radford during Pre-Patch I. It was noted that during Pre-Patch I, the scrip traded with an average volume of 98 shares per day and total volume of 11,950 shares in 121 trading days with an average of 1 to 2 trades per day. (c) Radford Sellers appeared to have played a crucial role in pushing the price of the scrip of Radford to such high levels especially by controlling the supply of shares. Their suspicious acts of selling shares in miniscule quantities despite there being a huge demand, contributing to 100% trading volume on most of the days, placing trades in a manner so as to maintain the daily average volume and not letting the liquidity dry out by sequentially selling shares clearly show that their selling pattern was not normal and was prima facie directed towards pushing up the price of the scrip of Radford. The same was further corroborated by the fact that the share certificates held by the Radford Sellers were prima facie not genuine. The involvement of Radford in issuance of non-genuine certificates to these Radford Sellers signifies that the Radford Sellers carried out the aforesaid acts in collusion with Radford, its promoters and directors. Therefore prima facie find that the Radford Sellers were also a part of the scheme, plan, device and artifice employed in relation to the scrip of Radford and described in the interim order (d) On January 28, 2013, pursuant to a stock split, the face value of each share of `10/- was reduced to `2/- per share. The shares allotted on preferential basis to aforesaid allottees were locked-in for a period of 1 year from date of preferential allotment in terms of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Thus, these shares held by the said 48 allottees pursuant to preferential allotment and share split were not tradable during this lock in period. (e) Post stock-split on January 28, 2013, the share price of Radford opened at `49.20/-, rose to a high of `86/- and closed at `74.95/- during the period January 29, 2013 to July 23, 2013 ("Patch I"). During Patch I, the average volume increased by 5,05,066% (i.e., 5050
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times), from 98 shares per day to 4,95,063 shares per day and the price increased by 74.8% during the same period, i.e., from `49.20/- to `86/-. During the period July 24, 2013 to March 24, 2014 ("Patch II"), the price of the scrip continuously fell from `74.10/- to `4.89/- i.e., a fall of approximately 93.4%. Also, the volumes have again decreased by 67% of the volume of Patch I. (f) Thus, the price in the scrip had increased prior to the expiry of the lock-in period on the shares held by the preferential allottees. After the expiry of the lock-in period, the price and volume in the scrip increased substantially. Such sharp rise in price and volume of the scrip was not supported by any acceptable market factor such as fundamentals, trading history, corporate announcements , etc. as discussed in the interim order but was on account of non-genuine and manipulative trading in the scrip by certain entities. (g) The Exit Providers as aforementioned were acting as buyers in Patch I in order to provide exit to preferential allottees and in the process creating artificial volume. Most of the trades were taking place between the preferential allottees and the Exit Providers as described in the interim order. During this period, the preferential allottees were selling and, in the process, making huge profits. (h) It was inter alia noted that :- (i) The fund brought in by way of preferential allotment was utilised for purposes other than those disclosed; (ii) Even when substantial number of shares, i.e., 91 lakh shares (455 lakh shares after split) were locked-in and non-transferable/tradable, price of the scrip increased substantially to the extent of 7,442% with a very small chunk of volume/purchases by certain entities; (iii) After the expiry of the lock-in period (i.e., in Patch I), the average volume increased astronomically to the extent of 5,05,066% (5,050 times). Such increase in volume was mainly on account of matched trading amongst Exit Providers and preferential allottees. (iv) 46 out of the 48 preferential allottees sold 91.43% shares allotted to them by Radford at the price increased on account of the aforesaid manipulative trading in Pre-Patch I. (i) Following modus operandi was observed in the matter: (i) Firstly, shares were allotted on preferential basis in Pre-Patch I to entities connected/related directly or indirectly to Radford. (ii) Then, just prior to the expiry of lock-in of shares issued on preferential basis, Radford made a stock-split to facilitate preferential allottees to exit, on expiry of the lock-in, since the stock split would reduce the per share price and increase liquidity. (iii) At the same time, it was also observed that price of the scrip was influenced by Radford Sellers while trading in the scrip of Radford by selling either miniscule number of shares per day with very less quantity vis-à-vis their shareholding or by
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controlling the trade volume of the scrip. (iv) It is prima facie inferred that the share certificates held by the Radford Sellers were not genuine. (v) After the expiry of lock-in, the preferential allottees sold the shares to Exit Providers, thereby raking in huge profits. (j) It was, thus, prima facie observed that the Radford and preferential allottees acting in concert with Exit Providers misused the stock exchange system to generate fictitious long term capital gains (LTCG). In the process, Exit Providers and preferential allottees artificially increased the volume and price of the scrip and misused securities market system for making illegal gains and to convert ill-gotten gains into genuine ones. Further, the Radford Sellers played a crucial role in increasing the price of the scrip. Therefore, prima facie, I find that the Radford Sellers were also a part of the scheme, plan, device and artifice employed in relation to the scrip of Radford and described in the abovementioned interim orders.
3. The allegation against the noticees as mentioned in the interim orders is that, acts and omissions of the noticees are ‘fraudulent’ as defined under regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’) and are in contravention of the provisions of regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (e) and (g) thereof and section 12A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992. This allegation in the interim orders against the noticees is made inter alia on the basis of the following:
(a) The noticees forming part of the Exit Providers acted as buyers to the preferential allottees thereby creating artificial demand for the supply of shares from preferential allottees. (b) The noticees forming part of Exit Providers are connected among themselves and provided huge profitable exit to the preferential allottees in such scrip that has hardly any credential in the market. (c) In the process, the Exit Providers acting in concert with the preferential allottees misused the stock exchange system to provide fictitious long term capital gain (LTCG) benefit to the preferential allottees so as to convert unaccounted income into accounted one with no payment of taxes as LTCG is tax exempt. (d) As a result, average trading volume in the scrip of Radford increased astronomically to the extent of 5,05,066% (5,050 times). Such increase in volume was mainly on account of matched trading amongst the Exit Providers and preferential allottees. (e) Securities market system was used to artificially increase volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine one. (f) Thus, the preferential allotment was used as a tool for implementation of the dubious plan, device and artifice. 4. The aforesaid interim orders provided the restrained entities opportunity to file their
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objections, if any, within twenty one days from the date of the order and, if they so desire, to avail opportunity of personal hearing before SEBI. Several entities filed their replies in the matter and availed opportunity/ies of personal hearings on several dates and filed additional written submissions after personal hearings. Some of the entities who had filed their written reply, waived the opportunity of personal hearing. Some of these entities had also sought inspection/ information/documents relied upon for passing the interim order and the same were provided to them. One entity, Mr. Mohit Aggarwal, neither filed written reply nor did it avail opportunities of personal hearing.
5. It is pertinent to mention that SEBI has passed several interim orders in similar cases against several entities based upon prima facie findings and pending investigations in those matters. In response to such interim orders several entities filed their replies praying for revocation of order and for certain common interim reliefs pending passing of confirmatory orders. Considering the large number of entities covered in such orders (more than 1,200), entities common across different orders, complexities involved in the issues such as inter linkages of different tranches of alleged schemes, connection/relation amongst transacting parties in different tranche of scheme, etc., the conclusion of the proceedings to pass confirmatory orders in each case had to take time after completing the procedure in compliance of principles of natural justice with regard to each of the entities involved. After considering the facts and circumstances brought out by these entities who had responded to interim orders; in order to avoid erosion of value of securities due to volatility, maintain some investment avenues in the capital market such as mutual fund and to address the need of funds for meeting the business/any other exigencies, they were granted certain common interim reliefs, including the following:-
(a). to sell the securities lying in their demat accounts as on the date of the respective interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange and keep the sale proceeds in an escrow account; (b). to utilize such sale proceeds for the purpose of investment in mutual fund units and fixed deposits; (c). to utilize 25% of their portfolio value for their business purposes and/or for meeting other exigencies subject to the condition that the balance portfolio value does not go below the profit/loss made by them;
6. In the above background, the aforesaid 118 noticees who had responded to the interim order were granted the common interim reliefs as aforesaid and the decision in the regard was caused to be communicated to them vide separate letters dated January 15, 2016, January 21, 2016, January 29, 2016 and July 29, 2016 permitting it:-
(i) to subscribe to units of the mutual funds including through SIP and redeem the units of the mutual funds
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so subscribed; (ii) to avail the benefits of corporate actions like rights issue, bonus issue, stock split, dividend, etc. (iii) to sell the securities lying in their demat accounts as on the date of the interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange, in orderly manner under the supervision of the stock exchanges so as not to disturb the market equilibrium and deposit the sale proceeds in an interest bearing escrow account with a nationalised bank. (iv) to utilise and deal with the sale proceeds, lying in the aforesaid escrow account under the supervision of the concerned stock exchange, as provided hereunder:- (a) the sale proceeds may be kept in a fixed deposit with a nationalised bank or may be utilised for subscription to units of the mutual funds which shall always be held in the demat form and if such units are redeemed the proceeds thereof shall be credited to the aforesaid escrow account or may be utilised for subscription to the units of mutual funds; (v) The aforementioned window for sale of shares lying in respective portfolio shall be withdrawn if the noticees execute any trade beyond those mentioned in clause (iii) above. The aforesaid reliefs shall be subject to the supervision of the stock exchanges and depositories.
7. In addition to above relief, the entities mentioned at Sr. No. 1 to 8 and from Sr. no. 41 to 118 were also permitted the following, subject to the condition that the residual value of the portfolio (i.e., remaining 75%) is higher/equal to the profit made as indicated in the interim order:
“to utilise upto 25% of the value of their portfolio as on the date of the interim order for their business purposes and/or for meeting other exigencies.
Explanation: For the purposes of determining the portfolio value of the entities, the value of portfolio of securities lying in the demat account/s (individual and joint both) on the date of the interim order after excluding the value of shares that have been suspended from trading as on the date of the communication shall be considered. For NBFCs and stock brokers the value of portfolio shall exclude the value of clients' securities lying in their demat accounts.”
8. Further, specific representation of some of the noticees was being separately decided on case to case basis and communicated to them separately during pendency of the proceedings for passing of confirmatory orders. It was also taken into account that such interim reliefs were reasonable and that the same may be granted expeditiously pending passing of the confirmatory order in respective cases which had to take time considering factors mentioned in above paras. Therefore, the decision to grant such interim reliefs was caused to be communicated by separate letters/orders to respective entities and was to be subsumed in the confirmatory orders. The details of such interim reliefs provided are as follows:
(a) As regards the requests of the Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr.
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Surendra B. Jiwrajka for permitting the substitution of SBI as the pledgee in place and instead of the lenders of the Alok Industries Ltd. and renewal/extension of the pledge of 22,30,950 shares of the Jiwrajka Group with IDBI, the entities were advised to bring to the attention of bankers about the interim order. Subsequent to the communication from these noticees and their bankers, vide letter dated November 06, 2015, the pledge requests were acceded to by SEBI.
(b) Further, I have also received a letter dated August 03, 2016 from Ms. Anju Maheshwari, wife of Mr. Rajesh Kumar Maheshwari (one of the directors of Radford) whereby she has represented that the demat account number “1201370000012218” wherein she was a first holder with her husband Mr. Rajesh Kumar Maheshwari who is a second holder has been frozen pursuant to the interim order. In this regard, she was advised to furnish documentary evidences in support of her claims and to show that the securities lying in the respective joint demat account were purchased out of her own resources and not from the resources of Mr. Rajesh Kumar Maheshwari. The reply is still awaited and hence, this request will be dealt with separately on receipt of required documents by SEBI from the entity.
9. While the proceedings pursuant to the interim order were going on, two separate appeals were filed before the Hon'ble Securities Appellate Tribunal ("the Hon'ble SAT"), one by Mr. Amresh A. Mody and Ms. Hasumati Mody and another by Mr. Anil Rajat Agarwal & Sons (HUF) challenging the interim order. The Hon'ble SAT, vide its order dated July 02, 2015, disposed of the said appeals with the direction to SEBI to pass an appropriate order in accordance with law. Vide the said order, the Hon’ble SAT also permitted these entities to sell any of the shares, other than the shares of Radford, lying in their demat accounts and deposit the sale proceeds in an interest bearing escrow account with the concerned stock exchange. In terms of the order of the Hon'ble SAT, a confirmatory order was passed against these entities on October 12, 2015.
10. Vide order dated November 10, 2015, the directions issued qua Mr. Jayesh Kesharia vide interim order were revoked for the reasons mentioned in that order. Mr. Mohit Agarwal, a preferential allottee, neither filed any reply to the interim order nor availed any opportunity of personal hearing. An ex-parte order dated March 18, 2016 was passed against Mr. Mohit Agarwal confirming the directions issued qua him vide the interim order.
11. In view of the above, out of total 123 entities restrained by the aforesaid interim orders separate orders have been passed confirming/revoking directions in the interim order qua 5 such entities The proceedings against remaining 118 entities restrained by the aforesaid interim orders are being dealt with in this order.
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12. I note that the interim order highlighted the profit/gain earned by the allotees. The details of the profit/gain earned by the preferential allotees covered in this order and against whom confirmatory directions have already been passed are tabulated below at Table 1:
Table 1
Sr. Profit Client Name No. Earned
1 Mr. Abhishek Achalchand Balar 13,648,846 2 Mr. Achal Chand Balar 14,625,025 3 Mr. AfsarZaidi 38,522,857 4 Mr. Amresh Anantrai Mody 3,842,500 5 Anil Rajat Agarwal & Sons (Huf) 19,831,634 6 Mr. Ashok Jiwrajka 95,222,911 7 Ms. Babita Mittal 57,254,422 8 Mr. Bimal Desai 80,945,955 9 Mr. Brij Bhushan Singal 229,451,547 10 Mr. Dalsukh Ujamshi Trevadia 39,148,937 11 Mr. Dilip Chotalal Morzaria 52,788,678 12 Mr. Dilip Jiwrajka 95,246,104 13 Mr. G M Lingaraju 68,913,912 14 Mr. G M Prasanna Kumar 73,720,095 15 Mr. G S Anith Kumar 74,800,649 16 Mr. Harikishan S Virmani 39,994,975 17 Ms. Hasumati Anantrai Mody 36,381,293 18 Mr. Hitesh Jain 39,819,782 19 Mr. Hukamsingh Bhawarsinghji Rajpurohit 39,080,553 20 Ms. Jyoti Anil Trevadia 39,195,998 21 Ms. Jyotsna Jitendra Desai 67,041,532 22 Ms. Kalpita Suresh Luniya 27,916,282 23 Mr. Kamal Indur Punwani 38,156,783 24 Ms. Mayuri Darshan Bhanushali 34,669,719 25 Mr. Mohan Mittal 57,648,729 26 Mr. Mohit Aggarwal* 54,964,383 27 Mr. Mukesh Mittal 57,826,737 28 Mr. Naresh Nemchand Shah 151,568,641 29 Mr. Neeraj Singal 222,156,517 30 Nishit Agarwal Beneficiary Trust 75,549,009 31 Ms. Pinky Agarwal 79,471,984 32 Mr. Piyush Kumar Balar 11,254,028 33 Pratik Agarwal Beneficiary Trust 76,033,233 34 Mr. Praveen Kumar Agarwal 37,735,000 35 Praveen Kumar Agarwal Huf 79,600,930 36 Mr. Rajendra Mangilal Jain 39,805,258 37 Ms. Renu Aggarwal 57,719,483 38 Ms. Renu Mittal 58,703,898 39 Ms. Ritu Singal 205,404,071
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40 Mr. Santosh Aggarwal 57,833,910 41 Mr. Shailesh Mangilal Jain 39,700,600 42 Ms. Shilpa Aggarwal 54,238,750 43 Mr. Surendra Jiwrajka 95,249,154 44 Sushant Investments 18,149,101 45 Ms. Tanvi Bhavik Trevadia 38,535,769 46 Mr. Tarun Aggarwal 57,001,649 47 Ms. Ujwala Namdev Mane 21,577,500 48 Ms. Uma Songal 85,053,164 49 Mr. Yogesh Popatlal Thakkar 77,154,414 Total 3,130,156,898 * Note:- Ex Parte confirmatory order qua Mr. Mohit Aggarwal has been passed on .March 18, 2016.
13. I note that the interim order highlighted the fact that the Exit Providers, who are mentioned as “Radford Group & Suspected Entities” in the interim order, bought most of the shares sold by the preferential allottees. The details of the value of the exit provided by Exit Providers to preferential allottees covered in this order and against whom confirmatory directions have already been passed are tabulated below at Table 2.
Table 2
Total No. Value of the of shares exit S. purchased Name provided to No. from preferential preferential allotees allotees 1 Spice Merchants Private Limited 24,12,945 19,80,67,894 2 Amrusha Mercantile Private Ltd. 21,40,444 17,22,45,726 3 Shelter Sales Agency Pvt. Ltd. 20,57,824 16,64,54,800 4 Winall Vinimay Private Limited 15,82,465 13,00,66,629 5 Udbal Mercantile Private Limited 15,33,719 12,05,02,188 6 Devakantha Trading Private Limited 15,22,393 11,98,61,586 7 Jayant Security & Finance Ltd. 15,35,303 11,75,21,108 8 Limestone Properties Private Limited 13,35,615 10,61,08,787 9 Runicha Merchants Private Limited 12,84,055 10,38,29,678 10 Pine Animation Limited 10,58,869 8,41,32,719 11 Apex Commotrade Private Limited 9,15,830 7,48,76,947 12 Shivkhori Construction Private Limited 8,71,440 6,91,48,141 13 Signet Vinimay Private Limited 8,13,195 6,43,87,914 14 Anjali Suppliers Private Limited 7,47,275 6,10,05,867 15 Dhanleela Investments & Trading Company Ltd. 6,73,166 5,25,17,926 16 Rangan Vincom Private Limited 6,45,065 5,23,43,926 17 Sanklap Vincom Pvt. Ltd. 5,97,148 4,85,46,915 18 Mishka Finance and Trading Ltd. (Formerly 5,18,992 4,17,71,165
Order in the matter of Radford Global Ltd. Page 12 of 130
known as: Pyramid Trading And Finance Ltd) 19 Divyadrishti Merchants Pvt. Ltd 4,99,448 3,91,33,712 20 Divya Drishti Traders Pvt. Ltd 4,50,691 3,52,36,563 21 Ladios Trading Private Limited 4,33,093 3,48,26,982 22 SKM Travels Private Limited 4,43,724 3,43,85,821 23 Avlokan Dealcom Private Limited 3,68,706 2,96,27,332 24 Trimurthi Finvest Ltd 3,29,978 2,45,50,981 25 East West Finvest Limited/ Sharad Dharak 2,24,803 1,49,19,306 26 Natural Housing Private Limited 1,83,926 1,44,38,191 27 Topwell Properties Private Limited 1,58,475 1,25,05,373 28 Radison Properties Private Limited 1,14,517 91,01,989 29 Ridhi Vincom Pvt. Ltd. 1,15,000 86,19,250 30 Purvi Finvest Limited 1,29,253 85,62,629 31 Dhanraksha Vincom Pvt. Ltd. 1,12,390 84,23,631 32 Kingfisher Properties Private Limited 84,375 67,41,563 33 Esquire Enclave Private Limited 82,593 65,42,873 34 East West Finvest Limited 72,200 51,86,230 35 Blue Circle Services Limited 60,323 50,19,665 36 Amrit Sales Promotion Pvt. Limited 47,000 38,45,575 37 Vibgyor Financial Service Pvt. Ltd. 37,840 31,95,588 38 Bazigar Trading Private Limited 32,347 26,27,415 39 Burlington Finance Limited 30,000 24,99,075 40 Manimudra Vincom Private Limited 23,200 19,02,120 41 Katyani Commodities Private Limited 25,000 18,73,750 42 Devatma Distributors Private Limited 11,950 9,40,465 43 Symphony Merchant Pvt. Ltd. 5,000 4,00,000 44 Scope Vyapar Private Limited* 11,000 5,80,800 Total 2,63,21,575 209,84,95,993 * Note: The entity Scope Vyapar Private Limited has provided exit in Patch II of 11000 shares.
14. It is noted that proceedings for passing of confirmatory order pending investigation in the matter are now complete and the confirmatory order in the matter qua the noticees herein needs to be passed considering their replies/submissions and relevant material available on record. The replies/submissions of the noticees inter alia are as under:
I. Radford, its directors and promoters and directors of Radford Investment Services Pvt. Ltd.
(1) Radford, its directors and promoters and directors of Radford Investment (Represented by MLS Vani & Associates, Advocates & Solicitors):
(a). The interim order deserved to be quashed and set aside on several counts which were independent and without prejudice to one another.
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(i) The interim order was based on conjectures and surmise. (ii) The interim order was taken out after a gross delay. (iii) There was no evidence to substantiate that either Radford or its directors were responsible for the market movements in Radford’s scrip. Neither the promoters nor directors have dealt with or traded with their shares in the market at any material time. (iv) Radford did not fall in any of the parameters sought to be relied upon by SEBI which called for measures against Radford or its directors.
(b). Radford was a dormant, defunct company trading in its shares and was suspended at the material time. The current promoters had a business plan and needed a platform which was listed on the stock exchange. For such purpose, only defunct, small cap companies were looked at and it was generally not possible to buy out larger, more heavily traded companies. Since, the shares of Radford were not traded and/ or were suspended due to various reasons, the share value was naturally at the very bottom. The following events occurred which at that time naturally invoked investor interest. (i) Radford was taken over by new promoters in accordance with SEBI guidelines (ii) Radford’s business was revived; (iii) There was as issue of preferential allotment at a premium after all compliances; (iv) It resulted in infusion of large amounts of fresh funds; (v) The above mentioned facts were sufficient to evoke investor interest and affect share prices. The preferential allotments were issued at a premium thereby automatically affecting share value. The issue was after all compliances. Further, since the share prices were very low, the effect of it would be much larger in percentage terms. The purpose was to strengthen the working capital of Radford and the monies raised were used for that purpose.
(c). Radford revived operation form the end of 2012 and that it started its business in earnest. Radford was in the business of supplying skilled manpower to companies and supplies only MBAs and engineers to established, well-known companies for projects but did not wish to employ the persons indefinitely. Radford employs those persons on their payroll and sends them to the clients.
(d). Those persons were employees of Radford and were sent to clients offices. As on June 30, 2015, Radford has 131 employees on their payroll including high end, qualified engineers and management personnel, out of which 76 were working at Radford’s office at Mumbai, Pune and the remaining 55 employees were working in Radford’s office are covered under the PF Scheme and Radford was making payment of the PF contribution of their share.
Order in the matter of Radford Global Ltd. Page 14 of 130
(e). Radford had made a lot of progress since 2012-13 which could be ascertained from the fact that it had only one office in Mumbai in the year 2012 and now it has five offices - three in Mumbai, one in Pune and one in Bangalore and has 131 employees on it payroll. Radford was opening an office in Ahmedabad in month of July, 2015. Radford was in advanced stage of talks with a US based company and has several meetings with US company to open its office in USA shortly through a joint venture where they will have majority shareholding.
(f). They have denied that the said price movement was not backed by fundamentals of Radford and its financials. Radford had shown strong potential. It was a matter of common knowledge that the price movements in the market were not always backed by fundamentals and financials but market news or buzz and business and contracts which Radford was likely to enter into or might procure and like risks to which Radford or its directors had no control. Investor interest was mostly subjective. Since, Radford had increased the business, the allegation against it appeared baseless and unfounded.
(g). During the period, Radford had consistently made profits. These profits were over and above the investment and outlay required to be made, i.e., after setting up three new offices, investing in man power, paying for the new business outlay. The scrip rise as per SEBI’s own study coincided with the operations as is evident from the interim order passed by SEBI under section 11B.
(h). An investor’s mind who purchases or sells shares was subjective and could not be perceived or judged by third parties. There were several companies who were known to be loss making companies and whose share prices were far higher that one would expect prudently. Hence, it was false to suggest that the price movement of a share would always had to be on the basis of the existing fundamental or financial conditions of Radford but was also a subjective evaluation of future potential and faith of the investors.
(i). As regards the impugned transaction/events, it appeared that SEBI had some information regarding persons making long term capital gains. There was nothing wrong in making long term capital gains. Even if some party or parties did, Radford and its promoters/directors had no interest therein and no benefit was even alleged. There was nothing wrong, if investors who have specifically financed the company by subscribing to a preferential issue exit of the lock in period. That was specifically permitted by SEBI and Radford had no powers over it.
(j). All actions by Radford with regard to preferential allotment and also splitting of shares were done after taking due and prior permission of the concerned authorities. SEBI cannot assume mala fide on that count in as much as such permission would not have
Order in the matter of Radford Global Ltd. Page 15 of 130
been given to Radford and that the SEBI/BSE had ample powers to refuse permissions to it.
(k). Radford and its directors did not have direct access to volume data or interim order placement data or any alleged methodology that may have been used. Radford and its directors/ promoters monitors share price but were not required to and do not monitor any other data. Even if Radford and its directors had any knowledge of any alleged wrongdoings, they had no power to do anything.
(l). On the order hand, BSE had on its own reviewed the performance of Radford, the share data including volumes, price trading patterns and specifically placed Radford’s shares in ‘B’ group from ‘T’ group from March 01, 2013 to April 02, 2013, from June 14, 2013 to February 25, 2014 and from June 30, 2014 to December 19, 2014. If experts found everything in order, Radford could be blamed and further, it is entitled to rely on BSE’s evaluation since they had all the necessary data.
(m). In most cases, after expiry of lock-in periods, investors would like to exit and hence the present case was not an exception to the norm. They have denied that a stock split was announced prior to the expiry of the lock-in with any motive or intent by Radford or its promoters as an analogy was drawn in the circumstances.
(n). Radford or its directors were not aware that the preferential allottees sold the shares to entities connected/related, directly or indirectly, to Radford Group &Suspected Entities as alleged or at all. They were neither aware nor had any medium of getting information about the sellers and the purchasers of Radford’s shares as sought to be alleged. They have denied that the purchasers were related in any manner whatsoever to the directors or promoters of Radford.
(o). The four entities, viz. Mr. Brij Bhushan Singal, Mr. Neeraj Singal, Ms. Ritu Singal and Ms. Uma Singal as mentioned in interim order were in no way connected to Radford as alleged. No one connected with the company had bought the shares of Radford and no one connected with Radford has pushed up any share prices. The promoters of Radford have not sold a single share since the takeover.
(p). Upon receiving and considering the applications made to it, Radford used its discretion to allot the shares to the applicant investors. There was no express prohibition on percentage of preferential allotment to an investor. Preferential issues will always be by private contract/discussions.
(q). Radford was not required to make an announcement for every agreement executed by it. However, it was not unknown that the news of such agreements would be in the public
Order in the matter of Radford Global Ltd. Page 16 of 130
domain which in turn may lead to price movement.
(r). The connotation “Radford Group” was a fiction of imagination of SEBI. Similar to Radford, two entities, viz. “Dhanleela Investments and Trading Company Limited” (mentioned at Sr. No. 1 of Annexure B to the interim order hereinafter referred to as “Dhanleela”) and “Pyramid Trading and Finance Company Limited” (mentioned at Sr. No. 2 of Annexure B to the interim order and herein after referred to as “Pyramid”) were also trading in textiles. The money transfer refereed in the said paragraph between Radford and Dhanleela and also between Radford and Pyramid were in respect of textile trades. There were no direct transactions between Radford and the other named entities mentioned in Annexure B. Radford could not be stated to be connected with the entities without establishing that Radford or its directors had any connection with the said entities. Radford cannot by any stretch of imagination be called upon to explain transactions inter se between the entities merely because those entities bought shares from the preferential allottees.
(s). The market might have reacted which resulted in the rise in prices. Radford had no control in the purchase or sale of its shares. Neither Radford nor its directors bought or sold their shares since inception. The shares of Radford were mainly in demat form and Radford had no means of knowing who was buying or selling the shares. Radford had no control over the shareholders for their actions of buying and selling shares. This information was available to exchanges and if there were any irregularity, it was incumbent on the exchange to intimate to Radford without which it could never know what was happening on the stock exchanges. In any event, Radford had no power to do anything.
(t). Radford or its directors were not involved in any money laundering.
(u). Neither Radford’s address nor its directors were common in the present case. The conclusion based on this basis was unsubstantiated.
(v). SEBI had not given particulars of investors who had lost money, nor of any investor complaint or grievance since 2012 till date which is bought to the knowledge of Radford. No investor of Radford had made complaint and the company had no occasion to look into the matter.
(w). SEBI appeared to have decided upon three criteria for selection but had not disclosed the purpose of the selection or the alleged wrongdoing.. The three criteria are, non- existent on the address or no operations (neither of these criteria applied to Radford), preferential allotment, rise on price and subsequent increase in volumes due to exit of preferential allottees (preferential allottees were investors and there was no wrong in their taking
Order in the matter of Radford Global Ltd. Page 17 of 130
commercial decisions. It could not reflect on Radford, its promoters or directors) and companies having weak financials and price rise not supported by financials (Radford had infused funds and revived its operations since 2012-13 and hence this criteria too was not applicable).
(x). They have submitted that grave harm and irreparable harm loss and prejudice will be caused to Radford if the interim order was not set aside. The balance of convenience was entirely in favour of Radford. The interim order to be set aside.
II. Preferential Allottees:
(2) Mr. Aachalchand Balar, Mr. Piyush Kumar Balar and Mr. Abhishek Kumar Balar (Represented by Mr. Sanjay Kothari and Ms. Sutapa Saha, Advocates):
(a). The interim order is totally speculative and arbitrary. It is based on conjectures and surmises and is capricious and opposed to the principles of natural justice and bad in law and is liable to be set aside.
(b). They could not sell any of the shares of Radford or other securities which they had purchased for investment purposes much before the purchase of preferential allotment in Radford with the result that when money was required to meet their need, they could not liquidate that investment. Thus, the interim order has affected their livelihood. Further, that was not the first instance of them investing in preferential allotment of shares. In the past also they had invested in preference shares of different companies and had earned profits after selling those shares.
(c). The interim order defines Pre-Patch I as the period from February 27, 2012 to January 28, 2013 and the preferential allotment was done on February 16, 2012, i.e., before the Pre- Patch I period. However, paragraph 3(i) of the interim order erroneously mentioned that shares were allotted on preferential basis in Pre-Patch I period (i.e., February 27, 2012 to January 28, 2013). Similarly, error is to be seen in paragraph 4 of the interim order where it has been mentioned that “During the beginning of Pre-Patch I, on February 16, 2012…”
(d). The fact that they were not so related was evidenced from paragraph 4 of the interim order. As per the interim order only 4 of the 48 preferential allottees were connected and/or related to Radford and they were not named as one of those 4.
(e). They were approached by stock brokers/intermediaries who introduced them to Radford.
(f). They said that when the shares were sold online through the stock exchange, the seller did not know who the buyer was going to be. Even during the period when shares were
Order in the matter of Radford Global Ltd. Page 18 of 130
sold in physical form, it was not possible for the seller to know who the buyer was going to be.
(g). The interim order stated that the price movement was not backed by fundamentals of Radford and its financials. What were supposed to be those fundamentals or external factors were not stated in the interim order and kept vague. But, such statements were in contradiction with the data furnished in paragraph 6 of the interim order which indicated that Radford earned 7.5 times more profit in the Financial Year 2012-13 compared to Financial Year 2011-12. The preferential allotment was done on February 16, 2012, i.e., during Financial Year 2011-12 and when the profits increased 7.5 times in the next year, the share prices were bound to increase. No other fundamentals or external factors were needed to support the price rise.
(h). The interim order proceeds on an erroneous hypothesis that, because there were no material corporate announcements made by Radford, the rise in its share price could not be supported. They stated that, price of the shares in market do not solely depend upon the corporate announcements. The investors get information about the performance of the company through various sources and based on such information, they decide to invest or disinvest in that company.
(i). The interim order contained one more erroneous hypothesis that the price rise in the shares of Radford was not proportionate to the movement in Sensex during the corresponding period. There were number of instances where the price of shares of a company has moved contrary to or in opposite direction than that of the Sensex.
(j). The seller and the buyer were not known to each other and in case transaction goes through, it could hardly be termed as matched trading. There were no specific instances of matched trading given in the interim order.
(k). In paragraph 27 of the interim order, it was stated that, “the manipulation in the traded volume and price of the scrip by a group of connected entities has the potential to induce gullible and genuine investors to trade in the scrip and harm them”. They have submitted that, there was not a single complaint on record from any of the so called gullible or genuine investors. On the other hand, there were admitted trades of parties who were not involved in that issue but no one has made any complaint. The interim order was passed after the preferential allotment were sold off and there was no question of inducing any investors to trade in the scrip or to harm them.
(l). They have stated that Bombay Stock Exchange Ltd. (herein after referred to as “BSE”) placed Radford’s shares in B group from T group after examining all data which they obviously possess including the data relied hereon. That confirmed their faith in the scrip
Order in the matter of Radford Global Ltd. Page 19 of 130
and induced the market to respond accordingly.
(m). They have stated that there was no violation of any law in the present case and the findings are mere speculation, conjecture and surmises and are hypothetical and levy of penalty on that finding is unsustainable in law. In this regard, they have relied on the judgment of the Hon’ble Supreme Court in the matter of An Advocate v. Bar Council of India, 1989 Supp(2) SCC 25 wherein it was held as under: “...... As a logical corollary it follows that the Disciplinary Committee empowered to conduct the enquiry and to inflict the punishment on behalf of the body, in forming an opinion must be guided by the doctrine of benefit of doubt and is under an obligation to record a finding of guilt only upon being satisfied beyond reasonable doubt. It would be impermissible to reach a conclusion on the basis of preponderance of evidence or on the basis of surmise, conjecture or suspicion. It will also be essential to consider the dimension regarding mens rea.”
(3) Mr. Afsar Zaidi and Mr. Kamal Punwani (Represented by Mr. Vinay Chauhan and Mr. K. C. Jacob, Advocates):
(a) The interim order was vitiated by gross violation of principles of natural justice, as no opportunity was provided to them to explain their version and the circumstances as stated in the said interim order did not justify dispensation of pre-decisional hearing.
(b) An ex-parte ad interim order was justified if the circumstances justify the same. In the instant case, there was no such emergent situation or circumstance warranting such an ex-parte ad interim order.
(c) The directions under section 11 and 11B were issued for safeguarding the markets and were not for penalizing the persons and denying their legal rights on the basis of assumptions and presumptions. The directions issued against them, at that juncture was neither preventive/ remedial nor curative but penal.
(d) They were informed that certain sophisticated investors (belonging to big business groups) were also investing in Radford by way of preferential allotment and there was possibility of potential takeovers/turnaround of the company. Based on such information, inter alia, they had decided to seek subscription of shares by way of preferential allotment.
(e) They had invested in the shares of Radford inter alia based on the proposal that was made to them along with advice received.
(f) They could not sell because of lock in of shares, therefore after the expiry of period of lock in, they had sold the shares as the price prevailing in the market was decent and was
Order in the matter of Radford Global Ltd. Page 20 of 130
fetching them good return on their investment. Further, at that point of time, they were also in need of funds for their own use.
(g) They were not aware of the profit made by other preferential allottees. Merely because they have made a profit by selling the shares, which SEBI finds to on higher side, the sale by them could not be questioned on the ground that fundamentals of the company do not justify the price etc. Admittedly, the price of the scrip was consistently rising even before their lock-in period got over.
(h) They have denied that they have misused the stock exchange system to generate fictitious long term capital gains so as to convert unaccounted income into accounted one with no payment of taxes as alleged.
(i) They have denied that there was no change in the beneficial ownership of the shares as alleged. All their sales were delivery based, therefore the issue of no change in beneficial ownership cannot and did not arise.
(j) They have not contravened any of the provisions of regulations 3(a),(b),(c) and (d) and 4(2)(a),(b),(e) and (g) thereof and section 12A(a),(b) and (c) of the SEBI Act.
(k) There was nothing in the public domain about anything amiss in the scrip of Radford. Further, neither stock exchange nor SEBI had raised any grievance in public domain about the price rise or volume rise in the scrip. At no point of time, either the stock exchange or SEBI had raised any alarm bells as to price movement in the scrip not being in consonance with its financials or fundamentals, despite the price of the scrip rising sharply as alleged.
(l) When they had sold the shares through their respective brokers they were not aware of counter party purchaser and the same was not possible to be known in the screen based mechanism of the stock exchanges. Further, they were not aware that the trades were happening with Radford Group entities as alleged.
(m) Except as a shareholder, they do not have link/connection/nexus with Radford, its promoters/directors, other preferential allottees as set out in the interim order (except Mr. Kamal Punwani and Mr. Afsar Zaidi with whom they were having a professional relationship), persons/entities who had traded in the scrip during the examination period and persons/entities referred to in the interim order.
(n) They were not aware that the price of the scrip had increased on account of manipulative trading in Patch I as alleged.
(o) No details of the alleged ill-gotten gains have been spelled out in the interim order.
Order in the matter of Radford Global Ltd. Page 21 of 130
(p) They had no fund transactions either with the other preferential allottees, or the alleged Radford Group & Suspected Entities.
(q) Over the years they had built a very strong business reputation. The loss of reputation as a result of the said interim order would severely impediment their business in future.
(4) Mr. Dalsukh Ujamshi Trevadia, Ms. Jyoti Anil Trevadia, Ms. Tanvi Bhavik Trevadia (Represented by Mr. Rajesh Khandelwal and Ms. Isha Warhade, Advocates) and Ms. Ujwala Namdev Mane (Represented by Ms. Poonam Gadkari, Advocate, Juris Matrix, Advocates & Solicitors):
(a). Even though they had placed orders during the said period however, they were only partially executed as there were no buyers on the other side. Therefore, they kept placing orders over a period of four months till the time their entire shareholding which was acquired by virtue of alleged preferential allotment got sold.
(b). Merely because they were allotted shares on preferential basis in Pre-Patch I and after expiry of lock in period the shares were sold yielding profits, they could not be assumed to be a party to alleged fraud and acting in concert with Radford Group & Suspected Entities.
(c). That their names were not among the entities whose names have come up as being related to Radford Group as is also evident from the said Annexure B to the interim order. Also, they have denied having any relationship, direct/ indirect with those entities.
(d). They have traded in shares of Radford on the floor of the stock exchange in a blind and transparent trading mechanism. It was not possible for them to know the counter party buyers. They were neither aware nor have the means to verify the counter party to their trades.
(e). They have denied the observation with regard to modus operandi in the interim order as against us. Further, they were not aware of the alleged modus operandi employed by the other persons referred to in the said interim order.
(f). They have stated that there was no warning signal from the Stock Exchange on the fundamentals and financials of Radford. Similarly, SEBI was a silent spectator to the entire alleged fraudulent practice.
(g). Their only involvement was that they were allotted preference shares which were sold after lock in period of one year and consequently they earned huge profits.
(h). They have denied the allegation against them that they were aware or have participated in
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any mechanism which was presumably used to deceive the authorities by laundering black money and raking in tax-free profits.
(i). They have denied the allegation against them that while acting in concert with Radford Group & Suspected Entities they have misused the stock exchange system to generate fictitious LTCG.
(j). They have sold the shares in normal course of trading business and were not at all concerned with the trading of Radford Group & Suspected Entities and the LTP and their matching of trades, creation of artificial volumes and manipulation of price during the examination period. All the transactions entered into by them were bona fide and under the honest belief that the alleged dealings in the shares were also bona fide.
(k). As mentioned in the interim order, the said price movement was not backed by fundamentals of Radford and its financials, was vague. The interim order itself reflects that Radford had made profits for the last three financial years.
(l). Ms. Ujwala Namdev Mane applied for allotment in the preferential offer of Radford from her own funds. She had received the letter from Radford for the issue of shares on preferential basis. When she received the letter of offer from the Radford, she sought opinion from her financial advisers. She also studied graph of the movement in scrip and then invested in the shares of Radford.
(m). Mr. Dalsukh Trevadia had withdrawn his contribution as capital from Ocean International a partnership firm and invested in the preferential offer of Radford. Similarly, Ms. Tanvi Trevadia had borrowed funds from Mr. Suresh Trevadia, her uncle and invested in the preferential offer of Radford. Ms. Jyoti Trevadia applied for allotment in the preferential offer of Radford from her own funds. Radford informed the shareholders that the company is desirous of making preferential allotment of shares as per terms of the notice.
(n). Mr. Jashwantrai Mehta, an investment consultant (often gives advice to Trevadia family for investments in share market), had informed/contacted them about good investment opportunity in preferential allotments of some two-three companies including Radford. Upon his advice for the good future prospects and business plan of Radford among other companies, they made investments in Radford as an investor only.
(o). They were neither aware of, nor connected with, nor involved in, nor participated in, nor had the means to know the entities of the purported Radford Group & Suspected Entities or their alleged dealings.
Order in the matter of Radford Global Ltd. Page 23 of 130
(p). Radford has earned profits during the pre-investigation, investigation and post investigation period. The interim order had not defined or explained the meaning ''backed by fundamentals of the company and its financials".
(q). They have denied that the allegation against them that they were aware or have participated in the modus operandi of allotting shares on preferential basis at a premium, pumping the share price artificially and then dumping the price so that the same cycle could be repeated, which demonstrates the mala fide of the Radford Group & Suspected Entities as alleged.
(r). The interim order was grossly silent, besides making a bald statement as to why the price rise of 7442% was not justified and was aberrant.
(s). They have relied upon the order of the Hon’ble SAT in 52 Weeks Entertainment Ltd. vs. Bombay Stock Exchange Ltd. & Anr. in Appeal No. 23 of 2015 dated March 13, 2015 whereby the order suspending the trading in the securities of 52 Weeks Entertainment Ltd. was quashed and set aside in the interest of bona fide investors on a condition that the only the promoters shall not buy, sell or deal in the securities of the Appellant company. It was held that if persons, not connected to promoters have traded in manipulative manner which can be recognized, should be appropriately dealt with as per law. However any regulatory actions of the regulatory authority without prima facie evidence of any manipulation shall not affect other bona fide investors who are deprived of trading, even if they have not acted for manipulation of the scrip.
(t). The ratio of judgment passed by the Hon'ble SAT has, in many cases such as Classic Credit Ltd. vs. SEBI (SAT Appeal no. 68/2003, Order dated December 8, 2006), Classic Credit Ltd. vs. SEBI (SAT Appeal no. 76/2003, Order dated January 9, 2007) and Veronica Financial Services Ltd. vs. SEBI (SAT Order dated August 24, 2012), wherein it was held that connection/relations can be established on the basis of factors including the common addresses, common directors/ shareholders, etc. does not apply against them as no connection has been established against them in the Interim order. The ratio in the said judgments needs to be referred to in the true and correct perspective in as much that what was intended was “.....that connection/relations can be established on the basis of factors..." should not be stretched to a level so as to imply that the presence of certain criteria is sufficient to equate a link. There has to be something more than that to establish connections relation. The interim order has failed to bring any such connection/ relation. Mere reliance on the outcome of a particular case without objectively applying fact of their case is miscarriage of justice.
(5) Ms. Jyotsna J. Desai, Mr. Bimal J. Desai (Son of Jyotsana Desai) (Represented by Mr. Pankaj P Pandit and Mr. Khamir Arun Kamdar, Advocates) and Mr. Yogesh P.
Order in the matter of Radford Global Ltd. Page 24 of 130
Thakkar (Represented by self, Mr. Jatin Thakkar and S. H. Bhadega & Associates):
(a). They were genuine investors and they invested in shares and securities of many companies. Investing in Radford was a normal commercial transaction for them like investment in any other company.
(b). They have also disclosed the said purchase of share to the income tax department vide their Balance Sheet as on March 31, 2012.
(c). They had purchased the said shares from their own capital and have not borrowed from any one.
(d). None of the entities to whom preferential allotment was made by Radford have any connection with them and they did not have any nexus with the company in any manner whatsoever and hence they could not be said to have had any influence on the decisions taken for raising funds through preferential allotment.
(e). The inclusion of their name in the interim order had deprived them of much needed liquidity and transferability of their shares. Their survival and livelihood would be affected due to illiquidity situation by the interim order.
(f). The interim order passed is ex-parte, i.e., without according opportunity to them to present their case, which was against the principles of natural justice and was inconstant with the relevant provision of SEBI Act, 1992.
(6) Ms. Babita Mittal, Mr. Mukesh Mittal, (Represented by Mr. Madhu Mohan, Partner, AMRG & Associates) Ms. Renu Aggarwal, Mr. Tarun Aggarwal (Represented by Mr. Arun Jain, Chartered Accountant, Arun Naresh & Co.) Ms. Renu Mittal, Mr. Santosh Aggarwal (Represented by Mr. Jai Kishan Lakhwani, Advocate and Mr. Mukesh Agarwal, Chartered Accountant)and Mr. Mohan Mittal (Represented by Mr. Jai Kishan Lakhwani, Advocate):
(a). As per the interim order, enquiry was conducted by SEBI pursuant to preliminary examination conducted by BSE in the dealing of shares of Radford. The enquiry in respect of their transactions in the shares of Radford was concluded by the Surveillance & Supervision Department of BSE and upon satisfaction of the genuineness of the transaction, BSE continued to allow the trading in the said scrip at its exchange.
(b). SEBI should pass ex-parte ad-interim order under sections 11 and 11B of the SEBI Act, 1992 only in situations which warrant an urgent intervention of the regulator which would prevent a possible manipulation or damage to the securities market. In this case, there was no urgency as the alleged transaction in question was complete. SEBI has not
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demonstrated/justified the urgent situation requiring the regulator to pass as ex-parte ad- interim order under sections 11, 11B of the SEBI Act for an alleged transaction which had already taken place and had been concluded in all respects by the stock exchange.
(c). As stated in the interim order, only 4 of the preferential allottees were found to be connected to Radford. However, they were not one of those 4 entities.
(d). Their entire sales order could not be executed on few occasions and part of the sales order remained unexecuted, because of lack of buyer at their offer price. Further, the shares were not immediately purchased by the buyers on placement of sale order by them. Rather, there was considerable amount of time gap in placement of sales order and purchase of shares by the buyer. Therefore, sales order placed by them at the online trading platform of BSE, was open to the other investors for purchase of those shares. Also, they have not indulged in matched trading, as shares sold by them remained unsold on some occasions.
(e). They had sold the shares in the open market, through online trading system without having any knowledge of actual buyer of the shares.
(f). In absence of any cogent material, no such presumption could be drawn that entire purchase and sale transactions was device for the purpose of money laundering by them and to convert black money into tax free LTCG.
(g). As mentioned in the interim order, both total revenue and profit after tax of Radford had increased by more than 700% in the financial year 2012-13 as compared to financial year 2011-12. Therefore, as stated in the interim order, that increase in price is not backed by financial fundamentals of Radford is not correct.
(h). They were a regular investor in the stock market and all of their investments and income is duly assessed to Tax.
(i). In the absence of cogent material no such presumption can be drawn that entire purchase and sale transactions for the purpose of money laundering by them and to convert black money into tax free LTCG. In support of the same, they have relied on various judgements courts, including in the matter of Deputy Commissioner of Income-tax, Circle -11 (2) vs Bhoruka Engineering Inds. Ltd. High Court of Karnataka (supra), wherein the following has been held: “Where arrangement of assessee to avoid payment of tax did not contravene any statutory provision and was achieved within four corners of law, it cannot be found fault with Tax planning may be legitimate provided it is within the framework of law. 'Colourable devices cannot be a part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid payment of tax by resorting to
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dubious methods'. It is an obligation of every citizen to pay the taxes without resorting to subterfuges. Therefore, though all tax planning is illegal /illegitimate/impermissible, the revenue cannot tax a subject without a statue to support and in the course it is also acknowledged that every taxpayer is entitled to arrange his affairs so that his taxes shall be as low as possible and that he is not bound to choose that pattern which will replenish the treasury. A citizen may legitimately claim the advantage of any express terms or of any omissions that he can find in his favour in taxing statutes. His legal right so to dispose of his capital and income as to attract upon himself the least amount of tax is fully recognized The legal right of taxpayer to decrease the amount of what otherwise would be his taxes, or altogether to avoid them by means which the law permits, cannot be doubted.”
(j). Except Ms. Babita Mittal and Mr. Mukesh Mittal, all have stated that preferential allotment of equity shares cannot be said merely the action of the directors/promoters of Radford but a collective decision of the company, i.e., its members/shareholders. The resolution was passed in the normal course of Radford and the decision taken was in the wider interest of Radford. Hence, no question of connivance/alleged involvement in fraudulent scheme arises in this situation. Had the allotment was not in the interest of the shareholders, they would have rejected the preferential allotment. Court, statutory body or any other person cannot interfere in the functioning of the company unless it is established that the decisions taken by the company are ultra vires to the Act or the articles of association of the company. This view has been upheld by the Hon'ble Madras High Court in the case of Maxwell Dyes and Chemicals Private Limited v. Kothari Industrial Corporation Ltd. [(1996) 85 CompCas 111 Mad]
(k). The Hon’ble SAT has time and again held that SEBI has the power to issue ex-parte ad- interim order under section 11, 11B but it shall do so only in case where there is a grave and serious/extreme urgency. In this regard, the noticees have relied on the order of the Hon’ble SAT in various matters including in the matter of Zenith Infotech Ltd. v. SEBI, Appeal No. 59 of 2013, decided on July 23, 2013.
(7) Mr. Praveen Kumar Agarwal, Praveen Kumar Agarwal HUF, Nishit Agarwal Ben Trust, Ms. Pinky Agarwal and Pratik Agarwal Ben Trust (Represented by Mr. Vinay Chauhan, Advocate and Mr. K. C. Jacob, Advocate):
(a). Except as a shareholder, they do not have link/connection/nexus with Radford, its promoters/directors, other preferential allottees, except with each other, who were their relatives and group entities, persons/entities who had traded in the scrip during the examination period, persons/entities referred to in the interim order.
(b). With regards to the price movement in the scrip, at no point of time either the stock exchange or SEBI had raised any alarm bells as to price movement in the scrip or that the same was not in consonance with its financials or fundamentals. For the price rise in
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the scrip consequent to trading by others, with whom they are not connected or related, no adverse interferences could be drawn against them.
(c). It was not shown in the interim order as to what loss would be caused to the securities market if they were allowed to continue trading in the market or how the interest of the investors would be affected if they were not debarred with immediate effect.
(d). They have submitted that 1,39,15,339 shares of Radford [i.e., 4,15,99,539 shares less 2,76,84,200 shares] was bought by the alleged Radford Group & Suspected Entities from entities other than the preferential allottees. The same proves the fallacy of the argument put forth in the interim order that the preferential allottee has sold shares to the alleged Radford Group & Suspected Entities by design or under a preplanned “modus operandi”. Had the allegation been true, there was no rational for the alleged “Radford Group & Suspected Entities” to acquire 1,39,15,339 shares of Radford from entities other than the preferential allottee.
(e). The profit earned by them were in the ordinary course and not with any fraudulent intent or ulterior motive. Profit and losses are part of trades in capital markets. A gain for one ought to be loss someone and vice versa. Merely leveling allegation based on profit earned was erroneous.
(f). They have transparently subscribed to the shares of Radford by making payment through their own funds and got shares by way of preferential allotment.
(g). No details of the alleged ill-gotten gains have been spelled out in the interim order.
(h). They had built a very strong reputation. The passing of ad interim ex-parte order, which is in the nature of capital punishment, will enormously affect their business interest and deprivation of their right to carry on legitimate business and investment activities.
(i). The powers available under section 11B of the SEBI Act were not available to SEBI in the instant case for the reason that a direction there under can be issued only "after making or causing to be made an enquiry". There is nothing on record to show that the said requirement had been followed in their case.
(j). Investigation and enquiry were two separate legal proceedings under the SEBI Act, 1992. The enquiry regulations were applicable only for SEBI registered intermediaries and since they were not an intermediaries in the securities market, the said regulations were not applicable to them.
(k). The interim order was vitiated by gross violation of principles of natural justice, in as much as no opportunity was ever provided to them to explain their version and circumstances
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as stated in the interim order do not justify dispensation of pre-decision hearing of the notice.
(l). There was no such emergency situation warranting such an ex-parte order. By stating that, the interim order was passed "in order to protect the interest of the investors and integrity of the securities market", is not adequate. The interim order should demonstrate that the situation was emergent warranting an ad interim order.
(m). They were investors in securities market since 2006 and they are investing for gains. They make investments in the identified scripts and restrict their investments to a selected few stocks. Preferential allotments were one such mode of acquisition of bulk shares without disturbing the market equilibrium of their identified scripts.
(n). Most of their investments were held onto for Long Term and they have been investing in the securities market even when Long Term Capital Gains were not exempt u/s 10(38) of the Income Tax Act, 1961. They trade in the market in the ordinary course and not with any fraudulent intent or design.
(o). Praveen Kumar Aggarwal has stated that he was still holding onto 5,00,000 shares of Radford, out of the total 10,00,000 shares acquired by him. He further stated that had the allegation leveled in the interim order been true, they would have made a complete exit and would not had continued to hold onto their investments till date.
(p). Radford had proposed to be a one stop financial solutions for all kind of services especially in both Funds based and Non Fund based qualitative services related to Real Estate Industry and recruitment agency. Both these sectors looked promising to them. Both these sectors were the direct beneficiary of economic revival. Radford was a profit making company and with infusion of funds was expected to grow faster. The price of `15/- at which the preferential issue was offered, was in their opinion justified by the fundamental of Radford and its business plans and projected earnings. When the price of the scrip overran its fundamental, they had sold the shares.
(q). They sold their shares in the anonymous screen based order matching system of the exchange, wherein they do not get to choose the counterparty to their trades. They further, submitted that, at no point of time they were privy to the counterparty to their trades.
(r). They were not related/connected either directly or indirectly to the alleged Radford Group & Suspected Entities.
(s). They have sold shares in small quantities spread over several days and had not dumped
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the same as stated in the interim order. The very facts demonstrate that their objective was to sell the shares in the market at best possible price, without disturbing the market equilibrium. Their trades were independent, genuine and in the ordinary course.
(t). No one should be deprived of livelihood by restraining them from doing legitimate investment activities only on the basis of charges mentioned in the interim order alone.
(u). Mr. Praveen Kumar Agarwal and Ms. Pinky Agarwal stated that the preferential allotment made by company was not questioned either by the stock exchange or SEBI, while granting approval for the same. Therefore, now after permitting Company to make preferential allotment, granting listing and trading permission for the shares issued in preferential allotment, the issuance of the same could not be questioned.
(v). Mr. Praveen Kumar Agarwal and Ms. Pinky Agarwal have stated that the shares of Radford allotted by way of preferential allotment, were sold in the ordinary course. Since the price of the scrip quoting in the market was decent and fetching good return on investment, they had decided to sell the shares.
(w). Except Pratik Agarwal Ben Trust, all have stated that the interim order was described as an "ad interim ex-parte order", which is ex-parte as no chance of representation was given to them. An ad interim ex-parte order is justified if the circumstances so warrant. In the instant case, there was no such emergency situation warranting such an ex-parte order. Simply stating that the interim order has been passed "in order to protect the interest of the investors and integrity of the securities market" is not adequate, that the interim order should demonstrate that the situation was emergent warranting an ad interim order.
(x). The Hon'ble Supreme Court's diction that "A public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of the authority committed to do it. It must act in good faith and it must act reasonably", seems to have not been accepted by SEBI in the present case.
(y). In the judgment delivered by the Hon'ble SAT on the issue of common address employed for linking in the matter of Alaknanda Capital Services Pvt. Ltd. V SEBI, Appeal No. 114 of 2012, (order dated: August 27, 2013) wherein it held:
"In this connection, they also stated that sharing common address or one of the Appellants being the promoter of the other group at some point in time are not in themselves sufficient to bring home the residual charge against the Appellants. There has to be sufficient evidence on record to clearly prove connivance on the part of the Appellants with a counter party to prove the charge in question against the Appellants. In the absence of any such evidence and unambiguous findings by the learned WTM to this effect, we have no option but to quash the interim order in question."
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(8) Mr. Hitesh Mangilal Jain, Mr. Rajendra Mangilal Jain and Mr. Shailesh Mangilal Jain (Represented by Mr. Rohan Rajadhyaksha, Advocate, Ms. Manik Joshi, Advocate and Ms. Gayatri Pinkya, Advocate):
(a). The directions passed against them were not warranted and urgent. In the instant case, nothing was brought on record to justify the directions, inflicting irreparable damage on them.
(b). The exercise of such an arbitrary power is unwarranted or unjustified in the facts and circumstances of the instant case. Not even a prima facie case was made out to warrant the issuance of such an ad-interim ex-parte order of such serious consequence against them. The imminent urgency was also not explained to support the interim order.
(c). Radford approached them in the year 2011 and after reviewing its company profile and its proposed business plans, they were convinced that, any investment in Radford shall be profitable, as Radford had an array of businesses, which included the business of property, recruitment agency/staffing, trading in textile industry and also investment in shares and securities. The variety in the business of Radford attracted them and helped them strengthen their decision to invest in it.
(d). They became aware of the fact that certain eminent/distinguished people were also subscribing to the preferential allotment of Radford. Accordingly, they postulated that investment in Radford might be a profitable decision as other well-known people, who are very selective about their investments were also investing in Radford and therefore they, in good faith, decided to subscribe to the preferential allotment of Radford.
(e). They had invested in Radford out of their own capital. While investing in Radford, they reviewed the annual reports of the Radford and based on the annual reports for the Financial Year 2009-10 and Financial Year 2010-11 and upon comparison thereof, it was public knowledge that the turnover of Radford increased from Nil to `2.28 Cr. which was 228% increase over the previous year, and the profit before tax increased from `20,000 to `1.11 lakh which was 556% increase over the previous year.
(f). They did not trade on a daily basis. They were neither an active trader nor a short term trader in the market. The trading pattern followed by them were long term in nature and if they get a chance, once in a quarter, they invests their capital in the securities market, if the company’s profile or its business plan looked lucrative.
(g). Further, if they see any positive scope in the proposed business plans of the company, they generally hold such securities for a period of at least 12 months and then considering the investment sentiments and other allied activities in the economy, they sell
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the same and exit from such company(s).
(h). Another reason which encouraged them to exit from Radford was the election exhilaration. The Sensex, during the period between January 2012 (16154) to June 2013 (20150) rose by around 25%. The stock market started to rise considering the election euphoria and in terms of the principles of contrarian investment strategy.
(i). They sold their shares on the anonymous trading platform of BSE wherein the identity of the counter party was not disclosed and therefore the question of any entity giving them a “profitable exit” did not arise. The resultant net buyers, whomsoever they were, including Radford Group, were not known to them.
(j). They do not have any connections/ nexus with Radford and its promoters/directors and buyers.
(k). The shares allotted by Radford to them on February 16, 2012 were subject to a lock-in in accordance with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (the ICDR Regulations) until February 16, 2013. However, even after the lock-in period expired on February 16, 2013, they did not offload the shares of Radford held by them until April 2013. In fact, the shares of Radford were offloaded by in a responsible manner during the period from April 1, 2013 to June 6, 2013 at the prevailing market prices. Thus, the profits earned by them from the sale of shares of Radford were genuine and legitimately earned by them.
(l). That SEBI did not have jurisdiction in relation to allegations of money-laundering and it was denied that they had indulged in any money laundering activities.
(m). They were facing grave hardships, as the adverse findings in the SCN has affected not only their reputation as individuals in society but had also restrained them from accessing the securities market.
(n). The assumption under the interim order stating that the entire alleged modus operandi of allotting preference shares at a premium, announcing stock split and then bringing in connected entities to provide exit was a scheme devised to rake in ill-gotten gains, is strongly opposed, as the exit from Radford by them, were in no manner related to any alleged scheming devised to rake in alleged ill-gotten gains and was a part of the noticees usual trading pattern.
(o). They were law abiding citizens of India and regularly file their income tax returns and conducts their business and investments in a transparent manner in accordance with the provisions of the various laws prevailing in India.
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(p). The interim order was vitiated by gross violation of principles of natural justice, equity and fair play in as much as no opportunity was ever provided to them to explain their side of the facts and circumstances, as the facts stated in the interim order do not justify the dispensation of a pre-decision hearing of them.
(q). They had built a very strong reputation. An interim order of this nature, which is based merely on surmises and conjectures, would adversely affect them and besmirch their impeccable reputation, and would also result in irreparable damage to them and to their standing in the society circles.
(r). They may be allowed to redeem/liquidate their other investments in shares and mutual funds, etc.
(s). They have stated that SCN fails to place on record any material. SEBI has not placed any material on record to show any culpable conduct on the part f the notices even by discharge of the standard of a preponderance of probabilities. In fact, the SCN incorrectly proceeds only on the basis of mere surmises and conjectures in making allegations against the notices. It is settled law that the nature and gravity of an issue necessarily determines the manner of attaining reasonable satisfaction of the truth of the issue. Therefore, in relation to issues as serious as the issues in the instant case, the standard of proof would necessarily have to be higher than the ordinary test of ‘preponderance of probability’ in civil proceedings. In any event, it is submitted that the SCN has not placed any material on record to prove the allegations made against the Apellant even by discharge of the standard of a preponderance of probabilities.
(9) Ms. Kalpita Luniya and Mr. Hukamsingh B. Rajpurohit (Represented by Mr. Anant Upadhay, Advocate):
(a). Ms. Kalpita Luniya invested in the preferential allotment based on her husband's advice and started to sell her shares in tranches. Mr. Hukumsingh Rajpurohit got to know through his son, Mr. Mahendra Rajpurohit about the preferential issue by Radford.
(b). They have been filling their income tax returns on regular basis and also paying their taxes as per law and till date no objection has been raised by Income Tax Department. Hence, all their income had been accounted for and they have not concealed any source of income from Income Tax Department.
(c). The interim order had affected their reputation both in social circles and business circles.
(d). SEBI has passed the ad interim ex parte order without seeking any explanation from them.
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(e). They were not part of any scheme to make ill-gotten gains since they had sold the shares on the electronic, transparent and anonymous trading platform provided by stock exchange wherein the counter party was not known and therefore was not provided any exit by Radford.
(f). They have never used the securities market system to artificially increase volume and price of the scrip for making illegal gains.
(g). They were not connected to any of the preferential allottees, Radford and Radford Group & Suspected Entities and the same was not proved by SEBI by giving documentary evidence.
(h). They denied that they have misused the stock exchange system to generate fictitious LTCG.
(10) Mr. Dilip Chotalal Morzaria (Represented by Mr. Prakash Shah, Advocate):
(a). The interim order was issued without any prior letter/communication/notice or any correspondence seeking his explanation or clarification on the subject matter.
(b). It was settled law that if in breach of principles of natural justice and granting an opportunity of hearing were ignored and an interim order was passed to the pre-justice of any person, the interim order was nullified for want of natural justice.
(c). There had been no grievance by any investor, stock broker, stock exchange or any other agency concerned in the matter.
(d). As mentioned in the interim order, Glory Investment Services Pvt. Ltd. and Ramchandra Satre were preferential allottees. However, they were not debarred. He sought clarification from SEBI, in what manner their application/allotment process was different from his and rationale applied by SEBI in selecting/not selecting preferential allottees in issuing prohibition directions against him.
(e). He had subscribed to the preferential allotment by Radford as suggested by his financial advisor and it was very much within his own ‘risk and reward’ parameters.
(f). There was no nexus in any manner whatever with Radford or any persons/entity named in the interim order. Otherwise, he would have purchased much higher number of shares to earn much higher profits.
(g). He had paid for the shares allotted to him under the preferential allotment from his bank account and has deposited the sale proceeds in his bank account. The same was properly accounted and fully disclosed to the authorities including Income Tax and Service Tax
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Departments, hence, question of any money laundering did not arise. There was also no question of avoidance of Income Tax, as long term profit on securities are exempted from tax as per the Income Tax rules.
(h). He had no idea who had purchased his shares as all the transactions were executed through the normal screen based trading system of stock exchange.
(i). He has no financial dealings, like giving loan, taking loan or any other dealing with any of the persons or entities mentioned in the interim order. Except for making an application in the preferential allotment, he has no financial dealing with Radford Group.
(j). He has no connection of whatever nature with the buyer of his shares of Radford. He did not know who bought his shares. Identification of buyers and sellers in capital market was not possible.
(k). All his transactions in Radford shares were delivery based and has met with all obligations on the market. There was no allegation of establishing new high price or that any trades had any impact on the last traded price of Radford shares. Thus, allegation of any price manipulation was not applicable.
(11) Mr. H. S. Virmani and Mr. Naresh Nemchand Shah (Represented by Mr. Suriyanarayan S. Iyer, Advocate):
(a). Since he had dealt in the shares of Radford through BOLT and normal banking channels, section 12 A of the SEBI Act and regulations 3 and 4 of the PFUTP Regulations, 2003 in the interim order was not applicable to him.
(b). Radford Group & Suspected Entities and allottees used the securities market system to artificially increase volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine one.
(c). They denied that they never indulged in any act or omission in the whole scheme as alleged/in the interim order. Further, they denied that they indulged in any act/omission inimical to the interests of participants in the securities market.
(d). The adverse finding termed as prima facie finding in the interim order was based on conjectures, surmises, predetermined and unsustainable on facts and law. He has denied each and every allegation, adverse findings etc. made against him in the ex-parte ad-interim order.
(e). The connection/ relation between him and Radford Group & Suspected Entities were false, vague, lacking in material facts and particulars, prejudged, and therefore illegal. They
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denied allegation against them as persons belonging to the group of preferential allottees.
(f). As a preferential allottee, he has not acted in concert with Radford Group & Suspected Entities and misused the stock exchange system to generate fictitious LTCG.
(g). They denied that they have indulged in any fraudulent act/omission of SEBI (PFUTP) Regulations, 2003 and SEBI Act, 1992.
(12) Ms. Mayuri Darshan Bhanushali (Represented by Mr. P. K. Ramesh, Advocate):
(a). She was not active in the stock market and that she did not hold any portfolio of shares as of date. She neither remained a frequent trader nor made any contribution to the volumes generated in the scrip of Radford.
(b). While analyzing long term investment avenues, she came across an offer of private placement of equity shares on a preferential basis by Radford, based on presentations made/discussions held jointly with Radford’s representatives and their known advocate friend Mr. V.V. Mishra.
(c). She did a general analysis of Radford’s performance and future outlook, particularly the prospects of the real estate development business the company was engaged in and steady rise in the performance of the company.
(d). The whole process/exercise of selling shares of Radford by her in the market was delivery based. Till date, she had not entered in any off market transaction with respect to the shares of Radford.
(e). SEBI’s action has proved detrimental to her personal image in the industry. Prior to passing of the interim order by SEBI, there was no investigation carried out or details sought from her, which is in total denial of justice.
(f). She was not given any opportunity to make her statement and no clarification was sought from her prior to issue of such interim order.
(g). She was not aware of any entities who have appeared as counterparties to her trades. In the anonymous order matching system deployed by the stock exchanges, the counter party details are confidential and the matching takes place in an electronic manner based on time/price priority.
(h). She had no information /instruction/arrangement for placing of her orders on any particular date/ time / though a particular broker etc. to suggest matching of orders.
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(i). All her sale transactions were subjected to STT.
(j). She was not in any way related to the Radford Group and it was not furnished to her clearly on what basis SEBI had based its observations on for drawing any inference that she was a preferential allottee and was directly or indirectly connected to the Radford Group.
(k). The said sale trades were not intended for deriving any LTCG benefits or towards making illegal gains and to convert ill-gotten gains into genuine one, as alleged in the interim order.
(13) Sushant Investments/Mr. Sunil Tukaram Bhardkar (Represented by Mr. Manoj Sethia, Partner, Monika Jain & Co.):
(a). He had formed his partnership firm Sushant Investments with his wife Ms. Tanuja Sunil Bharadkar on December 15, 2011 for the purpose of trading and investments in shares and for broking business.
(b). In December 2011, he received invitation along with financials and corporate presentation by courier from Radford to invest in the proposed issue of shares on preferential basis (private placement). He had discussed the investment feasibility on the basis of records available (through BSE website, company website, annual reports etc.) with his financial consultant and other close friend. Accordingly, they had decided to invest in Radford.
(c). They bought the shares of Radford as a prudent investor and had started selling small quantity in tranches when market price of the same was more than the cost price and wait for more price hike.
(d). He sold only 19.17% of total holding. He is still holding 10,10,396 shares of Radford out of his original holding of 12,50,000 shares.
(e). The interim order was passed without seeking any explanation from him which was in violation of natural justice, equity and fair play. The said interim order has tarnished his reputation, caused an irreparable loss to his business/career.
(f). It was first necessary to prove the nexus/connection/relationship and then give a finding that his investments were falling foul of any law for that reason. The interim order drew a deduction that there was a nexus/connection/relationship because the investments were made by him. He was not hand in gloves with person/entity mentioned in the interim order.
(g). He sold shares on the anonymous trading platform of the stock exchanges wherein the identity of the counter party was not disclosed.
(h). He submitted that he had not indulged in any manipulative activities directly or indirectly
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and has not violated the provisions of law as alleged.
(i). He had sold the shares of Radford on recognised stock exchange and the profits that were earned were not fictitious. He did not misuse the stock exchange system to generate fictitious profit.
(j). He did not use the securities market system to artificially increase volume and price of the scrip for making illegal gains to and to convert ill-gotten gains into genuine one.
(k). There was no surveillance alerts either from the stock brokers or from the stock exchanges regarding the ‘price fluctuation’ in the scrip of Radford at the relevant time. Had there been any such advisory received from any of the market systems, he would not have sold the shares at the relevant time.
(14) Ms. Shilpa Aggarwal:
Ms. Shilpa Agarwal vide letter dated July 07, 2015 is inter alia stated that the interim order was causing serious prejudice and hardship in her day to day operations.
(15) Ms. Ritu Singal, Mr. Brij Bhushan Singal, Mr. Neeraj Singal and Ms. Uma Singal (hereinafter referred as “the Singal Group”):
(a). The said interim order was vitiated by gross violation of principles of natural justice, in as much as no opportunity was provided to them to explain their version and the circumstances as stated in the said Interim order do not justify dispensation of pre- decisional hearing.
(b). The power to issue directions under section 11 and section 11B of SEBI Act has to be exercised judiciously and it is all the more necessary in a case having adverse civil consequences as well as reputational adversity. Further, it was well settled that a discretionary power was not to be invoked arbitrarily devoid of justification, as has been done in the matter under reference.
(c). The said ex parte order was described as an "ex parte ad interim order". An ex parte ad interim order is justified if the circumstances justify the same. In the instant case, there was no such emergent situation or circumstance warranting such an ex parte ad interim order.
(d). The directions under section 11 and 11B are issued for safeguarding the markets and are not for penalizing the persons and denying their legal rights, on the basis of assumptions and presumptions. The direction issued against them, at this juncture is neither preventive / remedial not curative, but out and out penal.
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(e). They pointed out that, they as a family constituting of Singal Group were regularly making investments in the share market and their collective share portfolio as of March 31, 2012 including preferential issue of Radford, stood at around `758 crore. The amount of investment made by them as a family in the preferential issue of Radford was exceedingly insignificant vis a vis their total portfolio.
(f). Sometime around 2011, based on the information and feedback received from various professionals, friends and other persons in the industry who were actively involved and were having adequate knowledge of the securities market, they invested in the preferential issue of Radford.
(g). Radford was a listed company on BSE and that it was seeking investors for its growth plans, who would be willing to subscribe to the shares of Radford by way of preferential allotment and that issuance of shares would be made in consonance with applicable SEBI Regulations and Listing Agreement provisions and only after seeking approval of shareholders and stock exchanges, there was possibility of potential takeover/turnaround of the Company. Based on, inter alia, the aforesaid, they, decided to seek subscription of shares by way of preferential allotment and made an application seeking allotment of shares. They had paid consideration amount of towards subscription of shares of Radford. The said amount was paid out of their own funds. Complete audit trail of funds is there with them.
(h). At the relevant time, the shares were allotted by Radford after completing the process in consonance with applicable provisions of SEBI regulations and Listing Agreement and the process followed by Radford did not suffer from any infirmity. Significantly, the factum of allotment of shares was also disclosed by Radford to the stock exchanges and this information was in public domain. Significantly, at the relevant time, neither SEBI nor the stock exchange had raised any objection with regard to preferential allotment made by Radford. In fact, stock exchange had given the requisite listing and trading permission to the shares allotted by Radford by way of preferential allotment. Admittedly, the shares allotted by Radford were listed and traded on the stock exchange.
(i). After expiry of the lock in period, i.e., February 16, 2013 there were no fetters on selling the shares allotted by Radford. The price of the scrip had already witnessed decent movement. The price of the scrip had increased from `3.20/- (as on February 27, 2012) to `78.05/- (as on April 15, 2013). Given the price rise in the scrip, they decided to sell the shares of Radford held in their name.
(j). The pay-out amounts received from their broker towards sale of shares of Radford, from time to time, were utilized by them for their own business and financial purpose and were not transferred, whether directly or indirectly to any of the entities as stated in the Interim
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order (including the alleged Radford Group & Suspected Entities and other entities who had traded in the scrip of Radford during the Examination Period).
(k). Significantly, at the relevant time when they had placed the order for sale of shares of Radford in the ordinary course, there was nothing in the public domain about anything amiss in the scrip of Radford. Further, neither stock exchange not SEBI had raised any grievance in public domain about the alleged price rise or volume rise in the scrip. Admittedly, at no point of time either the stock exchange or SEBI had raised any alarm bells as to price movement in the scrip not being in consonance with its financials or fundamentals, despite the price of the scrip rising sharply as alleged.
(l). They do not have link/connection/nexus with Radford, its promoters/directors, save and except as a shareholder, by virtue of preferential allotment, other preferential allottees as set out in the Interim order (save and except their family members), Persons/entities who had traded in the scrip during the examination period, persons/entities referred to in the Interim order,.
(m). The sales were carried out by the Broker on the screen based mechanism of the Stock exchanges wherein it was not possible to know the counter party buyer or the counter party broker. At the relevant time, they were not aware of other persons/entities (including the preferential allottees or the alleged Radford Group & Suspected Entities) who were trading in the scrip and the same was of no concern to them. Further, they were not aware that the trades carried out by their Broker in their account were happening with Radford and Suspected Entities as alleged. Further, they were not aware about the mode and manner of trading of the alleged Radford Group & Suspected Entities and the other preferential allottees. Based on their trading no adverse inferences can be drawn against them.
(n). Merely because of sale of shares in the ordinary course, profit was earned, everything was being viewed suspiciously without any tangible basis and purely on surmises and conjectures. It was vehemently denied that they had been provided hugely profitable exit as alleged.
(o). They had transparently subscribed to the shares of Radford by making payment through their own funds and got shares by way of preferential allotment, which had the blessings of the shareholders of Radford and the stock exchange. Further, the details of shares allotted to them were fully disclosed to stock exchanges and the information was in public domain. They had not traded in the shares during the lock in period and had observed the lock in requirement religiously. Post expiry of lock in period, broker had, based on their instruction to sell the entire shareholding, sold the shares in their account transparently. If the law provides the facility of Long Term Capital Gain, if the shares are sold after a period of more than one year, then how can they be faulted if they have sold the shares
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post expiry of one year. It is incomprehensible as to how the gains made by them by selling the shares on the floor of the exchange, be branded as fictitious gains.
(p). It was denied that they had used the preferential allotment as a tool for implementation of the dubious plan, device and artifice as alleged. Further, they were not part of any purported "dubious plan, device and artifice". Therefore, based on seeking preferential allotment, no adverse inference be drawn against them. Further, the purported reasoning offered for making preferential allotment etc. instead of secondary market buying, is self- serving and does not advance the case against them.
(q). They have stated that merely because their broker had sold the shares in their account during Patch I, when the alleged Radford Group & Suspected Entities were also trading, no adverse inferences could be drawn. The sales in their account were independent and had nothing to do with the trading done by the Radford Group & Suspected Entities.
(r). No details of the alleged “laundering black money” and “raking in tax-free profits” were spelled out. Further, what is the alleged “tax-free profits” that they had made, was also not been spelled out.
(s). They had built a very strong business reputation. The loss of reputation as a result of the said Interim order would severely impediment their business in future which was enormously detrimental to them which had throttled their business and crippled their operations.
(t). It was denied that they have used the securities market system to artificially increase volume and price of the scrip for making illegal gains to and to convert ill-gotten gains into genuine one as alleged. No details of the alleged "ill-gotten gains" which have been converted into "genuine gains" had been spelled out. Further, what is the alleged “ïll gotten gain” that they have made, was not spelled out.
(u). Except Ms. Uma Singal others have stated that in so far as transfer of monies to them by Dhanleela is concerned they had applied certain number of shares of Dhanleela and were allotted certain shares. Dhanleela refunded some money to them. The said transaction has no nexus with investment made by them in the scrip of Radford, save and except the relationship of a shareholders and Radford. They have no relationship with Dhanleela and therefore they cannot alleged to be connected to part of Radford Group through Dhanleela.
(16) Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka, Mr. Surendra B. Jiwrajka (hereinafter referred as “the Jiwrajka Group”) (Represented by Mr. Ravi Kadam, Sr. Advocate, Gagrats, Advocates & Solicitors and Mr. K. H. Gopal, Director, Alok Industries):
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(a). They are promoters of Alok Industries Ltd. (“Alok”) and are holding 10,57,11,815 shares representing 7.68% shareholding. Prior to the interim order, between 2008 and 2014, they had pledged a part of their shareholding in Alok to banks/financial institutions, namely, IDBI Bank, State Bank of India (SBI), SICOM, STCI, Sunidhi Capital, ECL Finance Ltd. and Edelweiss Finance and Investment for the purposes of availing term loans.
(b). Alok was in the process of obtaining export order of up to $1.633 billion from overseas customer based on an equivalent export performance bank guarantee from SBI. The said export performance bank guarantee was sanctioned by SBI vide letter dated September 29, 2014. The proceeds were to be utilized to replace high cost INR debt and for working capital purposes.
(c). However, the said sanction letter mentioned conditions that 25% of promoters shares to be pledged by March 31, 2015 and 51% of the promoters shares to be pledged to the consortium by March 31, 2016.
(d). Further, the sanction/disbursal under the said sanction letter was inter alia subject to “Pledge of all unencumbered shares of the promoters to be obtained and to be ramped up to atleast 25% by 31.3.2015” and that the bank had absolute right to cancel the limits in case of non- compliance of terms and conditions of sanction.
(e). Alok was also availing similar export performance bank guarantee from IDBI Bank pursuant to sanction letter dated December 10, 2014, for which Alok was required to create exclusive charge on the pledge of 24,51,300 shares of which 22,30,950 shares were already pledged to IDBI.
(f). The promoters had to first get the shares released from various lenders and then re- pledge to SBI, which was not currently possible, as through the said interim order they were restrained in doing so.
(g). The name of Alok was not in the aforesaid interim order so there is no restriction on Alok.
(h). Therefore, no prejudice will be caused if SEBI permits substitution of pledgees for the said shares to SBI and extend the pledge of 22,30,950 shares already pledged with IDBI.
(i). SEBI is requested to pass appropriated directions permitting: - the substitution of SBI as the pledgee in place and instead of the lenders of Alok, in respect of shares pledged to them. - renewal/extension of the pledge of 22,30,950 shares of the applicants with IDBI in pursuance of the sanction letters of IDBI dated 10, 2014.
(17) Mr. G. M. Prasanna Kumar, Mr. G. S. Anith Kumar, Mr. N. Lingaraju G. M.
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(Represented by Mr. Prakash Shah and Ms. Binal Shah Advocates):
(a). These noticees belonged to the joint family settled at Bheemasamudra, Karnataka. They are promoters of GM Group of companies and also engaged in various business activities like manufacture of sugar, electricity and fruit beverages, trading of Areca nut and other agriculture products, real estate, managing educational institutions and agriculture.
(b). They are promoters and directors of M/s G. M. sugar and Energy (P) Ltd., Bangalore engaged in manufacture of Sugar and electricity. Every year, they used to raise loan from banks pledging the Sugar Stock for payment to farmers for supply of Sugar Cane. Now, banks have been refusing to sanction loan to their company, as their names have been included in the banned entities in the interim order. Further, they submitted that it was seriously affecting payments to farmers by their company, payment of salaries to employees and also affecting the day-to-day activities of their companies.
(c). Great harm and damage was done to them since the interim order had impacted their business and allied activities.
(d). Besides business, they were involved in social and philanthropic activities and all their life they have worked tirelessly in uplifting the poor and needy of society.
(e). The interim order which was issued ex parte without any prior communication, notice, letter or any correspondence seeking their explanation or clarification on the subject matter was in gross violation of the basic principles of ‘audi alteram partem’.
(f). The power to issue directions under sections 11, 11 (4) and 11B of the SEBI Act, 1992 is a drastic power having serious civil consequences and ramifications on the repute and livelihood of those against whom it was directed. In large number of cases, the Hon’ble SAT had observed that such a discretionary power was not available for routine application and it should be used only in exceptional and extraordinary measure. However, no such need, necessity or rationalization has been delineated in present interim order for use of such severe and drastic measure against them.
(g). They were advised by one Mr. Purushothama G, who was an astute professional and a financial consultant and handling investment portfolios, that the investment in Radford would fetch them good returns since the company was engaged in real estate and construction business.
(h). As a business philosophy, they invest in a company based on its future prospects and growth potential and not the present ‘financials’ of the company. The decision of
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investment in Radford at the relevant time was based on the perusal and consideration of future prospects of the company as presented to them by Mr. Purusothama G.
(i). They dealt in stock market only through SEBI registered and reputed intermediaries. They submitted that their sale transaction in Radford was at the then prevailing market price; thus they failed to understand as to how their transactions were termed to be ‘fraudulent’ in nature.
(j). They had no idea who purchased their shares in Radford since all the transactions were executed through the normal screen based trading system of the stock exchange. They also understand that matching in stock market is extremely advanced computer software driven algorithm process and buy/sell orders in scrip was done by on-line trading module.
(k). It is an undisputed fact that in case of screen based trading the automated system itself matches orders on a price-time priority basis and hence was not possible for anybody to have access over the identity of counter party dealing in any transaction. Since, the counter party identity was not displayed, one can never have any choice with whom it wants to deal or not to deal.
(l). They had sold the shares of Radford over a period of around 6 months, i.e., from February 2013 to July 2013. Thus, their trading was diminutive and that too spread over a period of 6 months so as to have any impact on the price of the scrip.
(m). At the time when the said scrip was traded on market, no alert was generated by any regulatory authority including SEBI and BSE. It is only in hindsight that SEBI had established on ‘prima facie’ findings that some entities may have been involved in alleged manipulation in the scrip of Radford. In view of this, the volume and price of Radford was not affected due to their dealings in the said scrip and therefore the allegation of any price manipulation in Radford was not applicable in their case.
(n). They submitted that they were not part of any wrong doing and had no idea of any ‘modus operandi’ by any group/entity as alleged. They further stated that their investment in Radford was in regular and ordinary course of their business activity.
(o). They stated that they regularly monitored their investments and it was a well-accepted belief that in order to make money in the market; one should buy at low and sell at high. When value of their investment in Radford appeared to be at peak, they realized that it was appropriate time to sell and reinvest funds in other more profitable option. Thus they acted as any other prudent businessman and sold the said shares on the floor of the market.
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(p). They submitted that all their sale transactions in the shares of Radford were delivery based and they had met with all their obligations towards the market.
(q). They have no financial dealings or nexus with the alleged Radford Group or promoters, directors and key management persons of Radford. They were shareholders and pure investors in Radford and they have no connection with respect to any other activity of Radford.
(r). As a consequence of the interim order, their demat account has been frozen. SEBI has acted beyond its scope and purview and power assigned to it and transgressed the power delegated to it by the Parliament of India.
(s). They do not have any relationship with any entity mentioned in SEBI’s interim order neither do they have any common ‘Know Your Client ("KYC") details, bank statements, off-market transactions’ with the entities mentioned in the interim order.
(t). SEBI is requested to withdraw the interim order as markets are aggressively volatile and if they put losses because of ban on trading in shares, they would claim damages. They shall also be compelled to take appropriate proceedings against SEBI as may be advised in law.
(u). While making investments they had followed and complied with all the procedure and requirements as statutorily required.
(v). In any investment one can either make profit or loss. They submitted that at the relevant time they had no idea of any profit or loss in the said investment. They invested in Radford taking into account the ‘risk and reward’ parameters as done by any other prudent businessman.
(w). At the relevant time, they genuinely had no idea of any alleged ‘manipulative modus operandi’ by any entity in Radford, as alleged or otherwise and in this regard they stated that they were not a part of any game plan, ‘fraudulent scheme’, ‘devise’ or ‘artifice’ as alleged or otherwise. In fact, it was only from the present interim order, they came to know about the alleged wrongdoing, if any, by some of the entities named therein.
(x). They denied the alleged violation of the provisions of Section 12 A (a),(b) and (c) of SEBI Act, 1992 and Regulation 3 (a),(b),(c),(d) along with Regulations 4(1), 4 (2) (a),(b),(e)and (g) of the PFUTP Regulations.
(y). They have objected to SEBI’s aforesaid interim order which has been issued ex parte without any prior communication, notice, letter or any correspondence seeking their
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explanation or clarification on the subject matter. Thus, the interim order is in gross violation of the basic principles of ‘audi alteram partem’.
(z). Strict proof required for a serious charge of ‘fraud’. It is wholly untenable for any authority to arrive at a finding of fraud merely on the basis that shares of Radford were acquired in the preferential allotment and sold on floor of stock exchange. This is particularly so since there was no alarm or cautionary notice issued by SEBI or BSE w.r.t. trading in scrip of Radford at any point of time.
(aa). The interim order without specific and firm findings against noticee is in utter disregard of law. The Hon’ble SAT in Bhoruka Financial Services Limited vs. SEBI (Appeal No. 18 of 2006), the relevant portion of which is reproduced as under:
“We do not think that this was the proper stage for the Board to record such findings. It was also unwise on its part. Since the matter is pending investigation, it is possible that on its conclusion the Board may have sufficient material with it on the basis of which whatever has now been said in the interim order could be sustained. It is equally possible that the material which the Board may collect may not be enough to substantiate those allegations. When both the possibilities are there it was not proper for the Board to record findings at this preliminary stage. It obviously amounts to pre-judging the issues and may lead to the charge of bias.”
III. Exit Providers i.e. ‘Radford Group & Suspected Entities’:
(18) Devatma Distributors Pvt. Ltd. and Anjali Suppliers Pvt. Ltd.:
They denied all the allegations made in the interim order. They have not violated the provisions of SEBI Act / Rules / Regulations as alleged in the interim order.
(19) Rangan Vincom Pvt. Ltd., Katyani Commodities Pvt. Ltd., Ladios Trading Pvt. Ltd. and Avlokan Dealcom Pvt. Ltd.:
They sought the documents/material relied upon by SEBI for alleging the charges against them in the interim order. The documents relied upon by SEBI for alleging the charges against them were provided to them. However, they have not responded till date.
(20) Devakantha Trading Pvt. Ltd., Shelter Sales Agency Pvt. Ltd., Udbal Mercantile Pvt. Ltd. and Amrusha Mercantile Pvt. Ltd:
(a). They purchased shares from open market/equity market/BSE platform.
(b). They were not at all connected directly or indirectly with Radford.
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(c). Amrusha Mercantile Pvt. Ltd. stated that it did not have any business or professional relationship with it, directly or indirectly.
(21) Runicha Merchants Pvt. Ltd., Signet VinimayPvt. Ltd., WinallVinimayPvt. Ltd., SanklapVincomPvt. Ltd., SKM Travels Pvt. Ltd., Scope VyaparPvt.Ltd., Spice Merchants Pvt. Ltd. and Apex CommotradePvt. Ltd.:
(a). They denied all the allegations made in the interim order. They did not violate the provisions of the SEBI Act and PFUTP Regulations as alleged in the interim order.
(b). The interim order was passed against the principle of natural justice and had brought huge loss to their business.
(c). They were neither directly nor indirectly related to Radford or any of its promoters or directors. Neither they were in a position nor have acted in concert with Radford and its promoters or directors to misuse the stock exchange System.
(d). They acquired the shares of Radford only as an investor and the said investment was made by them out of their own savings and resources. They regularly invest in shares and securities. Those investments were made with the sole objective of earning dividend and profits.
(e). They had no knowledge regarding control over price and volume of shares of Radford or its promoters or directors or any other person or group of persons in any manner whatsoever.
(f). The transaction in the scrip of Radford was as per the rules and regulations of the stock exchange, as applicable.
(g). They have done trading in Radford in normal course of trading.
(h). They were not in any way involved in price manipulation of Radford.
(i). They did not know who were the seller brokers nor their clients who have sold the shares.
(j). They did not receive any funds from the promoters/directors of Radford.
(22) Kingfisher Properties Pvt. Ltd., Topwell Properties Pvt. Ltd., Esquire Enclave Pvt. Ltd., Radison Properties Pvt. Ltd., Shivkhori Construction Pvt. Ltd., Limestone Properties Pvt. Ltd. and Natural Housing Pvt. Ltd.:
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(a). The interim order was passed without granting them an opportunity of hearing and the same was therefore in gross violation of principles of natural justice.
(b). Consequent to the directions issued vide the interim order, their business had come to a complete standstill and they continue to suffer both financially and reputationally.
(c). They were engaged in the activity of making investments & trading in the capital markets. Their investments were made after considering several factors viz., the sector in which the company operates, the profile of the products, their market share, credit rating of the company, the financial of the company, future growth plans-expansion and diversifications, order books position, profile of the management, corporate governance standard, profile of the major shareholders, market capitalization of the company, liquidity in the script, etc.
(d). They were trading in the securities market, in the ordinary course, based on their commercial wisdom and analysis. They have traded in several scripts in the ordinary course. They traded in Radford out of their own funds and out of their own will and were not influenced by others.
(e). They were not connected/ related to Radford, its promoter or its director, any of the preferential allottees and the alleged "Radford Group & Suspected Entities", neither any connection/ relation of them with those entities were established in interim order. It was not spelt out as to how they sharing a common address with themselves were related to the alleged “Radford”, its promoters, management or Directors, the preferential allottees, the other entities of the alleged “Radford Group & Suspected Entities”.
(f). All their trades were at prevailing market price, in small lots and were in the ordinary course. They did not execute any off market trades in Radford.
(g). They denied that they were aware of any pattern in which the shares of Radford were traded or any modus operandi adopted by any traders in the script.
(h). They never defaulted in meeting their payment or delivery obligations to their brokers.
(i). The entities in Annexure – B to the interim order were stated to be related by virtue of common address; e-mail id, KYC details, bank statements, information on Ministry of Corporate Affairs (hereinafter referred as “MCA”) website, etc. Such parameters for establishing any relation/ connection between entities for drawing adverse inference against these entities were flawed and was bound to lead to erroneous results.
(j). The Ex parte order was passed based on mere suspicion, assumption & hersay and not a single evidence was brought on records to substantiate the allegation made. All through
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the interim order uses of the words & phrases viz. “This could be only possible…..”, "it can safely be assumed…..”, “the mechanism is being presumably used….”, "it can reasonably be inferred…." etc lead one to believe that the interim order was passed on mere assumption, presumption & heresy.
(k). They had noted from BSE website that the trades during Patch I aggregate to 6,03,97,726 shares. It was alleged in the interim order that 4,15,99,539 shares were sold by the preferential allottees. Thus, 1,87,98,187 shares were sold by entities not belonging to the alleged Radford Group & Suspected Entities. It was alleged that the alleged Radford Group & Suspected Entities have bought 4,08,51,126 shares during the Patch I out of which allegedly 2,76,84,200 shares matched with the Preferential allottees. No details of such matching has been provided anywhere in the interim order. Thus, out of 6,03,97,726 shares traded in the BSE, the alleged Radford Group & Suspected Entities allegedly traded in 4,08,51,126 shares. The remaining 1,95,46,600 were bought by entities not belonging to the alleged Radford Group. It was also alleged that out of 4,15,99,539 shares sold by the preferential allottees, allegedly 2,76,84,200 shares were bought by the alleged Radford Group & Suspected Entities. Thus, 1,39,15,339 shares sold by the preferential allottees were bought by entities not forming part of the alleged Radford Group & Suspected Entities. The observation in para 15 that “most of the trades were taking place between the preferential allottees and the entities of Radford Group & Suspected Entities” did not hold good. Thus, out of a total of 6,03,97,726 shares traded on BSE in Patch I, total impugned shares against which allegation has been leveled in the interim order was 2,76,84,2000 shares. The balance 3,27,13,526 shares i.e., 54.16% of shares traded on BSE during the period are therefore untainted and genuine. In a market where majority of the shares were genuine, can allegation of manipulation and providing exit to the preferential allottees hold good. They were unable to work out the figure of 70.01% mentioned in Table III to the interim order, nor was the same clarified in Table IV to the interim order. It was wrong to allege that their buy trades as mentioned in the interim order comprising lesser % of the market volume during the period could be manipulative.
(l). Nothing was spelt out in the interim order as to the rational of the alleged Radford Group & Suspected Entities in providing exit to the preferential allottees.
(m). A majority of the trades in the market were by entities not impugned in the interim order demonstrate that the alleged manipulation presumed by SEBI is based on wrong presumption and flawed rational.
(n). A majority of their trades had matched with entities other than the preferential allottees. Further, in the anonymous order matching system of the exchange, it was almost difficult to identify the counterparties to their trades. All their trades were executed in the opaque
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screen, wherein they did not get to choose the counterparties to their trades. Their trades that matched with the preferential allottees had matched in the ordinary course and not by design. Adverse inference was drawn against them, by clubbing trades of different entities and drawing adverse inference based on the same.
(o). They have not done any fraudulent trading as alleged. Further, they denied that they had not violated provisions of regulations 2(1) (c) of the PFUTP Regulations, as alleged or that their trading were in violation of regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (e) and (g) thereof. It is further denied that they had contravened provision of section 12A(a), (b) and (c) of SEBI Act, 1992.
(p). Directions passed against them were stemming from incomplete appreciation of factual position and restraint directions against them were totally unjustified, unwarranted and untenable and enormously detrimental to their rights and interests. Further, directions had not only caused enormous reputational adversity to them but the same had not also unfairly deprived them from carrying on their legitimate business. Complete embargo on their trading, if the facts and circumstances of the case was uncalled for and would result in their financial death.
(q). Shareholders of these companies were different from shareholder of other companies and they maintain an arm’s length with each of these companies in the group in respect of their share trading and investment activities and the flow of funds from/ to these companies were in the ordinary course.
(r). The directors of these entities were Mr. Chiranjit Mahanta and Mr. Debi Prasad Pal and not Mr. Vishal Sharma & Mr. Chiranjit Mahanta, as stated in the interim order. Mr. Vishal Sharma ceased to be Director of their company since 31/05/2013. The movement of funds to / from various entities stated above having common directors with them, were in the ordinary course of their business and not with any sinster or manipulative objectives.
(s). They have stated that present e-mail id of Kingfisher Properties Pvt. Ltd., Topwell Properties Pvt. Ltd., Esquire Enclave Pvt. Ltd., Radison Properties Pvt. Ltd., Shivkhori Construction Pvt. Ltd., Limestone Properties Pvt. Ltd. and Natural Housing Pvt. Ltd. are [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], respectively and not [email protected]. The email id [email protected] belongs to a professional who looked after their ROC compliances.
(t). Except Kingfisher Properties Pvt. Ltd., other entities have in this group stated that their directors were on Board of several other companies. They informed that the stakeholders of all the companies were different and their directors endeavor to maximize their
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shareholder value in the long run. Thus, the ownership of all the companies wherein their Directors are director were different. Further, they stated that in respect of observation on movements of funds to/from other entities they were not aware of any transaction/ relation/dealing such entities have with others and they were not concerned for the same.
(u). Kingfisher Properties Pvt. Ltd. and Topwell Properties Pvt. Ltd. stated that the movement of funds to M/s. Signet Vinimay Pvt. Ltd. was in the ordinary course, devoid of any manipulative intent. Further, such movement of funds were not related to their trading in Radford.
(v). Kingfisher Properties Pvt. Ltd. denied that they had any transaction with Fairlink Housing Pvt. Ltd. during the financial year 2013-14 or subsequently or that they were a group company of Fairlink Housing Pvt. Ltd., Divya Drishti Merchants Pvt. Ltd. and Divya Drishti Traders Pvt. Ltd. They had not traded in the shares of Radford through Korp Securities Ltd., nor were they aware of their dealing with their clients or other entities and they were not concerned for the same. In respect of receipt of funds by an entity from ‘Venkatesh Sales Pvt. Ltd.’ it was not clear as to who has received the funds. They denied receiving any funds from ‘Venkatesh Sales Pvt. Ltd.’ They were not related/connected to ‘Venkatesh Sales Pvt. Ltd.’, ‘Dhruv Narayan Jha’ or ‘Blue Circle Services Ltd.’ and they were not concerned for any relationship between these entities.
(w). Kingfisher Properties Pvt. Ltd., Topwell Properties Pvt. Ltd., Esquire Enclave Pvt. Ltd., Shivkhori Construction Pvt. Ltd. and Limestone Properties Pvt. Ltd. stated that they were alleged to be part of the “Radford Group” based solely on the premises that they traded in the scrip in Patch I and that some of their trades matched with the preferential allottees. Even details of trades that matched with the preferential allottees have not been provided in the interim order. Levelling of allegation based on such narrow premises and debarring them from securities market based on such connection is wrong and flawed.
(x). In this connection, the judgement delivered by the Hon’ble SAT on the issue of common address employed for linking in the matter of H.B. Stockholding Ltd. Vs SEBI, Appeal No. 114 of 2012, Date of decision: 27.08.2013, wherein in para 17, it has been held that :
“In this connection, we may also pertinently not that the mere factum of one or two Appellants sharing common address or one of the Appellants being the promoter of the other group at some point in time are not in themselves sufficient to bring home the residual charge against the Appellants. There has to be sufficient evidence on record to clearly prove connivance on the part of the Appellants with a counter party to prove the charge in question against the Appellants. In the absence of any such evidence and unambiguous findings by the learned WTM to this effect, we have no option but to quash the interim order in question.”
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(y). All their trades were executed in the opaque screen, wherein they do not get to choose the counterparties to their trade. Their trades that matched with the preferential allottees have matched in the ordinary course and not by design. Adverse inference has been drawn against us, by clubbing trades of different entities and drawing adverse inference based on the same. Further it is almost impossible to know the identity of the parties in a screen- based transaction. The position has been accepted and affirmed by SEBI before the Joint Parliamentary Committee (JPC) on Stock Market Scam and matters relating thereto, 2001, which tabled its Report in the Parliament in December, 2002.
(z). Thus, the case laws relied upon in the interim order are not relevant to the fact of their cases and any inference of connection based on them would let to erroneous results.
(23) Divya Drishti Merchants Pvt. Ltd. and Divya Drishti Traders Pvt. Ltd. (Represented by Mr. Vinay Chauhan, Advocate and Mr. K. C. Jacob, Advocate):
(a). Divya Drishti Merchants Pvt. Ltd. and Divya Drishti Traders Pvt. Ltd. submitted the same submission in line with the submission made by Kingfisher Properties Pvt. Ltd., Topwell Properties Pvt. Ltd., Esquire Enclave Pvt. Ltd., Radison Properties Pvt. Ltd., Shivkhori Construction Pvt. Ltd., Limestone Properties Pvt. Ltd. and Natural Housing Pvt. Ltd. as given above.
(b). They have stated that nothing was spelt out in the interim order, as to how the entities, Divya Drishti Merchants Pvt. Ltd., Divya Drishti Traders Pvt. Ltd., Dhanraksha Vincom Pvt. Ltd. and Ridhi Vincom Pvt. Ltd. were related to Radford, its promoters, its directors, its top management, any of the preferential allottees or the entities of the alleged Radford Group & Suspected Entities. They were not related to any of the entities listed in the interim order for the purpose of their share trading and investment activities and they trade independent of others, out of their own will and out of their own funds.
(c). It appeared that their trades in Patch II were not considered in the interim order and allegation was levelled against them solely based on their trades in Patch I. It appeared that hand-picked data was used to make allegation against them.
(d). They were alleged to be part of the “Radford Group” based on the premises that they had traded in the scrip in Patch I and that some their trades matched with the preferential allottees. Levelling of allegation based on such narrow premises and debarring them from securities market based on such connection was wrong.
(24) Dhanraksha VincomPvt. Ltd. and Ridhi Vincom Pvt. Ltd. (Represented by Mr. Vinay Chauhan, Advocate and Mr. K. C. Jacob, Advocate):
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(a). They were included as part of the Radford Group based merely on whims, suspicion and apprehension and without any material on records. All the allegations against them were leveled based merely on surmises, conjuncture and suspicion. Absolutely nothing was brought on record to substantiate as to how they form part of Radford Group.
(b). They submitted that they were in no way connected/related/associated with any of the entities forming part of the alleged Radford Group, or Radford, its directors, its promoters, directors of the promoter company, the preferential allottees, the Radford Group (except these entities), the Suspected Entities and others.
(c). They are a corporate, engaged in the business of investments and trading. They were regularly investing in the capital market and they trade for gains. Their investment decisions were taken by their Board of Directors. They were always adhering to all rules and regulation for the purpose of their investment activities and they were never faulted for their trading.
(d). They traded in various scripts and their trades were not restricted to the impugned scripts alone.
(e). They traded in the scrip of Radford in the ordinary course, devoid of any ulterior motive.
(f). Table III to the interim order states that 4, 15, 99,539 shares were sold by the preferential allottees out of which only their trades on two days of merely shares of purchase in the scrip have been considered to bring them within the alleged mischief of the purported scheme was nothing but pure guess work done to include them by whatsoever permutation and combination. Their other trading in the scrip was not considered in the interim order. This clearly shows that selective data were handpicked, without taking into consideration the totality of the trades executed by them, so as to include them, by whatever possible permutation and combination, in the purported scheme of events. This handpicked selective data was being used against them to establish that they provided exit route to the preferential allottees.
(g). They strongly denied the charge that they were any way, either directly or indirectly, acting as buyers to provide exit route to the preferential allottees.
(h). In view of the upward movement in the share price of Radford at that relevant time, their management took a view to invest in the shares of Radford to make profit from such trading. The management bought shares on 2 days at an average price of around `75 per shares. It was contemplated that the amount invested would give decent returns
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in future, considering the upward price movement.
(i). Soon after their acquisition, the price of the scrip started to fall. That decision of the management would be considered a commercially unwise decision as the price of the scrip started falling soon thereafter.
(j). With a view to reduce its average cost of acquisition they made further purchases of shares of Radford at an average price of `6.50 per share. This resulted in acquisition price of `20 per share. The management was hopeful of recovering its cost and making a profit after such acquisition. They continue to hold onto its acquisition till date. This reflects the fair intent.
(k). This is purely a case where a normal business decision had gone wrong and they had no idea of the alleged price manipulation or other scheme of things discussed in the interim order. Their trades were an act of genuine investment activity carried on in accordance with their normal business activity.
(l). At the time of execution of the trades they were not aware of any counter party to their trades. Moreover, in the screen based anonymous order matching system of the exchange there were no mechanism to identify the counterparty to one's trade. They traded in the opaque screen. Further it is almost impossible to know the identity of the parties in a screen-based transaction. They bought shares during the investigation period in the anonymous order matching system of exchange.
(m). That the shares bought by them were still lying in their demat account and the ownership rests with them. Thus, the allegations made, that there was no change in the beneficial ownership did not hold ground against them. They are still holding their acquisitions made in the script
(n). Some other alleged parties in interim order, share common address with them, can by no stretch of imagination and guesswork form a basis of inclusion of their name in the list of Suspected Entities.
(o). Dhanraksha Vincom Pvt. Ltd. stated that their address was changed from 163B, M. G. Road, Kolkata 700 007 to 14/1 Hazra Road, 14 Floor, Flat No IA, Kolkata 700026 with effect from June 10, 2014 therefore they did not share common address with other entities.
(p). They stated that the expression “Radford Group & Suspected Entities" was developed on premise of assumption and surmises that the net buyers in the scrip provided exit route to the preferential allottees and thus created artificial demand for the supply of shares from preferential allottees.
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(q). They strongly objected to the arbitrary methodology employed which was devoid of any scientific finding based on some material having evidentiary value, but which otherwise was based on pure guesswork and assumptions, in arriving at the list of parties which were allegedly treated as “Radford Group & Suspected Entities".
(r). Para 14 and Table III to the interim order had alleged “Radford Group & Suspected Entities” were buyers to the extent of 70.01% of the shares of the preferential allottees. It is submitted that, their buy trades as mentioned in Table IV to the interim order, which were independent of others, was included in the “Shares purchased from preferential allottees" columns without any basis. Further, they failed to compute the figure of 70.01% mentioned in last column, as to how the same was worked out. The data provided is a matter of record, not in public domain, and they did not offer any comment on the same.
(s). Only part of their trades were considered for leveling allegation against them. Their trades were wrongly clubbed with several others, so as draw adverse inference against them.
(t). They were a separate and distinct company having their shareholders interest as their prime objective. Their shareholding and management were distinct from other impugned entities connected to the “Radford Group".
(u). The interim order has not stated clearly as to how in the absence of the interim order; the integrity of the securities market or interests of the investors would have been adversely affected. In the instant case, nothing has been brought on record to justify the directions inflicting irreparable damage on them.
(v). They strongly denied the allegation that their act was “fraudulent" as defined under regulation 2(1)(c) of the SEBI(Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market Regulations, 2003 (PFTUP Regulations') and were in contravention of the provisions of regulation 3(a), (b), (c) and (d) and 4(1), (2)(a), (b),(e) and (g) thereof and Section 12A(a), (b) and (c) of the SEBI Act, 1992 since the same was based on suspicion, conjectures and surmises
(w). They were exercised in terms of Section 19 read with Section 11(1), (4) and section 11B of the SEBI Act, 1992, restraining them from accessing the / securities market and buying selling or dealing in securities, either directly or indirectly, in any manner, before completion of inquiry was uncalled for and arbitrary.
(x). Powers available under section 11B of the SEBI Act are not available in the instant case for the reason that a direction there-under can be issued only "after making or causing to be made an enquiry". There is nothing on record to show that the said requirement was followed in their case. On the contrary, the interim order stated that it was the outcome of an “interim investigation" stated to have been carried out by SEBI. It may be noted that “investigation" and “enquiry" are two separate legal proceedings under the SEBI Act and not one and the same, as could be seen from the SEBI Act itself. In this context, it may
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be noted that “investigation" has been detailed in section 11C of the SEBI Act. Though SEBI Act does not detail “enquiry", relevant regulations have detailed the same. SEBI has notified Securities & Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations 2002 (Enquiry Regulations), providing details of enquiry procedures for the purpose of conducting “enquiry". The term “enquiry" has been defined therein. However, the enquiry regulations are applicable only for SEBI registered intermediaries. Since they were not an intermediary in the securities market the said regulations were not applicable to them.
(y). In this context, it is submitted that their action was in total disregard to the mandatory provision in section 11(4) that “the Board shall either before or after passing such orders, give opportunity of hearing to such intermediaries or persons concerned".
(z). Post decisional hearing provided under section 11(4) is an exception and that pre- decisional hearing is the general rule. The decision to dispense with the pre decisional hearing and an empty offer of post decisional hearing is against the well settled law as laid down by the Hon’ble Supreme Court.
(aa). The interim order is vitiated by gross violation of principles of natural justice, inasmuch as no opportunity was ever provided to them to explain their version and circumstances as stated in the interim order did not justify dispensation of pre-decision hearing of the noticee.
(bb). They submitted that an ex-parte ad-interim order was passed, in an extreme emergent situation to protect further loss to the market. In the instant case, however no such emergency has been shown in the interim order. It is submitted that it has not been shown in the interim order as to what loss would be caused to the securities market if they were allowed to continue trading in the market or how interest of the investor would be affected if they were not debarred with immediate effect. Simply stating that the interim order is issued as an emergent measure is not adequate, that the interim order should demonstrate that the situation was emergent warranting an ad interim order.
(cc). They have built a very strong reputation. The interim order of this nature, which is based merely on surmises and conjectures, would adversely affect them and would besmirch their impeccable reputation, and would also result in irreparable damage to them, and to their standing in the financial markets.
(dd). Dhanraksha Vincom Pvt. Ltd. has stated that they bought 5,83,390 shares in the ‘examination period’ and their trades of only 1,13,390 shares on two days were considered. Further Ridhi Vincom Pvt. Ltd. had bought 5,38,751 shares in the examination period and their trades of only 1,15,000 shares on two days were considered. That clearly showed the “choose and pick method” adopted, which was completely unacceptable.
(ee). Dhanraksha Vincom Pvt. Ltd. had stated that in Patch II, they have not sold any shares.
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On the contrary they had bought 4,70,000 shares to average down their cost of investments. Further, Ridhi Vincom Pvt. Ltd. had stated in Patch II, they have not sold any shares. On the contrary they had bought 4,23,751 shares to average down their cost of investments. No allegations were levelled against them based on their acquisition of shares in Patch II, which proved beyond doubt the genuineness of their trades as an innocent investor.
(ff). Divya Drishti Merchants Pvt. Ltd., Divya Drishti Traders Pvt. Ltd., Dhanraksha Vincom Pvt. Ltd. and Ridhi Vincom Pvt. Ltd. have submitted that, they were alleged to be part of the “Radford Group" based solely on the premises that they have traded in the scrip in Patch I and that some of their trades matched with the preferential allottee. Leveling of allegation based on such narrow premises and debarring us from securities market based on such connection is wrong and flawed.
(gg). The Hon'ble SAT while considering the factual matrix of the case has relied on the constitution, shareholding pattern, their directors who also had common address in coming to the conclusion they had acted in concert.
(hh). In their case, only common address shared with some other alleged buyers have been used to establish link with the alleged Radford Group and there in no connection of the commonalty of constitution, shareholding and directors. Thus, this case is clearly distinguishable on facts.
(ii). They strongly denied all the allegations made in Para 27 of the Order. They denied that they have violated regulation 2(1) (c) of the PFTUP Regulations and have contravened the provisions of regulation 3(a), (b), (c) and (d) and 4(1), (2)(a), (b),(e) and (g) thereof and section 12A(a), (b) and (c) of the SEBI Act, 1992.
(jj). They were in no way connected to the "Radford Group". None of their directors have any connection, whatsoever, either with the alleged group or its alleged Suspected Entities. Nothing to that effect has been brought in the interim order.
(kk). They are a separate and distinct company having their shareholders interest as their prime objective. Their shareholding and management are distinct from other impugned entities connected to the “Radford Group".
(ll). Some other Suspected Entities have been listed in the interim order. That they shared a common address with these Suspected Entities at some point of time, and hence they are a part of the Radford Group is pure guess work and suspicion an imagination stretched too far without any tangible material on record to substantiate their connection.
(25) Blue Circle Services Ltd. (hereinafter referred as “Blue Circle”), Pine Animation Ltd. (hereinafter referred as “Pine”) and Dhanleela Investments & Trading Company Ltd. (hereinafter referred as “Dhanleela”) (Represented by Mr. Nikunj Kanodia, Chartered Accountant):
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(a). The interim order was passed for the transactions made during the examination period which already occurred and hence there was no such emergent situation to restrain these companies for dealing from the securities market as a whole rather than dealing in Radford in isolation.
(b). Restraining these companies from accessing the securities market without giving an opportunity of being heard was against the principal of natural justice.
(c). They had purchased the shares of Radford purely as its investment strategy and with the sole object of earning good returns. There was no mala fide intention behind buying the shares of Radford. Analyzing the past tack records of Radford, its growth and future returns, they considered the equity shares of Radford as a good investment opportunity that can earn good returns to them and can create wealth.
(d). They had purchased units of equity shares of Radford through their registered brokers facilitated the transactions of the scrips listed at BSE at various dates and various prices as per the availability of funds with them.
(e). All the purchases were made through online terminal and during the market hours complying with all the relevant rules, regulations and guidelines made by SEBI in this regard. Further, all the necessary payments including cess, transaction tax, etc. were duly paid with respect to the transactions made in this regard. It was not possible for the buyer or the seller to know about the counter party which was an assumption.
(f). They had not violated or misused any system to make personal gains or to provide gains to others. Merely on the grounds of buying shares of Radford did not create basis or grounds for alleging that they had violated any provisions of the Securities Regulation Act, rules or procedures.
(g). They had no role to play in the market manipulation as alleged in the said interim order.
(h). Blue Circle and Pine had acquired the shares of Radford only as an investor. Those investments were made with the sole objective of earning dividend and profits.
(i). Blue Circle and Pine had no knowledge regarding control over price and volume of shares of Radford by the said company or its promoters or directors or for that matter other person or group of persons in any manner whatsoever.
(j). Blue Circle and Pine were neither directly not indirectly related to Radford on any of its promoters or directors. They were neither in a position nor had acted in concert with Radford and its promoters or directors to misuse the stock exchange system.
(k). During the Financial Year 2012-12 and the Financial Year 2013-14, Blue Circle had purchased 64,073 units of equity shares of Radford and not sold any unit of equity shares of Radford. All these shares were still lying in the DP account.
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(l). Blue Circle had only single transaction with Pine wherein it had received `150 Lacs from Pine. This receipt was towards the sale of 15,000 units of equity shares of JMD Sounds Ltd. from Pine at a rate of `1,000/- per equity share. No other transaction had been made between both the entities except as those mentioned herein. Such transaction was merely a business transaction and a nexus would not be established between them in any manner whatsoever through this transaction. Blue Circle having transacted with Pine could not have control over the business operation of it and thus cannot be deemed to have been a related entity or belonging to a same group. Thus, establishing such a relationship between Blue Circle, Pine and Radford based on the above single transaction is purely hypothetical and based on assumptions which does not stand valid.
(m). Blue Circle had never transferred any funds to Amrit Sales Promotion Pvt. Ltd. There had been no transaction between them at any time. Thus, Blue Circle was no way connected to Amrit Sales Promotion Pvt. Ltd. in any manner whatsoever.
(n). It has been alleged that Blue Circle was related to Devatma Distributors Pvt. Ltd., Venkatesh Sales Pvt. Ltd. and Anjali Suppliers Pvt. Ltd. vide common email id, viz. [email protected].
(o). Blue Circle stated that Mr. Dhruvonarayan Jha was the director of Blue Circle for the period July 01, 2006 to October 28, 2011. Mr. Dhruvonarayan Jha was looking after the ROC compliances of Blue Circle during the tenure of his appointment. Subsequent to his resignation, he was assigned with the responsibility of looking after the ROC and Secretarial Compliances of the company under professional arrangement between Blue Circle and him. Hence, the fact that the other entities, i.e., Devatma Distributors Pvt. Limited, Venkatesh Sales Pvt. Ltd. and Anjali Suppliers Pvt. Ltd. having the common email id as that of Blue Circle is not the matter of concern of Blue Circle as Blue Circle has no connection or relation with them. Blue Circle was connected to Mr. Dhrvonarayan Jha only under a professional arrangement to look after the ROC and Secretarial Compliances of the company.
(p). Thus, drawing inference that Blue Circle was related to Devatma Distributors Pvt. Ltd., Venkatesh Sales Pvt. Ltd. and Anjali Suppliers Pvt. Ltd. through common email id viz., [email protected] stands invalid.
(q). Blue Circle had dues to be repaid to its creditors and lenders for an amount of `1798.82lacs which they were unable to repay to its investors due to the fact that they were unable to liquidate shares and create liquidity to repay its debts. This had caused a heavy impact on Blue Circle to carry on its regular business activities and hence, the business of them is endangered.
(r). During the Financial Year 2012-12 and the Financial Year 2013-14, Pine had purchased 20,16,490 units of equity shares of Radford and sold 471,490 units of equity shares of Radford. The balance 19,45,000 units of equity shares were still lying in the DP account.
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In the whole transaction, Pine had suffered a loss of `118.29 lac and has not made profit in any trade.
(s). Pine never had any transaction with Radford and alleged "Radford Group". Merely on the grounds that Pine had transactions with Pyramid and Blue Circle, who in turn is alleged to be an entity in the "Radford Group" is completely unjustified and unwarranted.
(t). They have stated that Pine had advanced some amount of money to Pyramid which it had received from them in return. Pyramid had never transferred its own funds to Pine. Had Pyramid transferred any amount to Pine, it would have been returned to Pine and no balance or outstanding would have remained in the books of the either parties.
(u). Dhanleela had purchased 12,50,578 units of equity shares of Radford and sold 4,41,249 units of equity shares of Radford. The balance 8,09,329 units of equity shares were still lying in the DP account. In the whole transaction, Dhanleela had suffered a loss of `118.29 lac and has not made profit in any trade.
(v). Dhanleela is connected to Radford only in terms of its business transactions. Dhanleela had sold fabrics to Radford during the Financial Year 2012-13, 2013-14, 2014-15 and had received payments from Radford towards the sale of such shirts and fabrics.
(w). Merely on the grounds of business transactions, Dhanleela would not be considered as a related entity to Radford. Further, it was alleged that, funds were transferred from Dhanleela to 'Neeraj Singal', 'Brij Bhushan Singal' and 'Ritu Singal'. In this regard, there was no transfer of fund from Dhanleela to these entities.
(x). Dhanleela and Blue Circle stated that it was the right of them to continue its regular course of business activities till any final decision is declared. Since they operates primarily as an Investment Company, as evident from its Memorandum of Association, they should be allowed to transact in the securities market and be allowed to take necessary steps to prevent its investments from making further losses and also liquidate funds in order to carry on its business activities. Due to this ad-interim order, they have not been able to conduct its regular business operations smoothly and was unable to achieve good profits as compared to the previous year. References may be drawn to the case of DLF ltd. Vs. SEBI (Misc. Application No. 157 and 158 of 2014, SAT order dated November 05, 2014) where they have been contended that an order cannot prohibit a company to carry on its business Hence, they be allowed to carry on its regular business activities in the Stock Market.
(26) Mishka Finance and Trading Ltd. (hereinafter referred as “Mishka”) (Represented by Mr. Sunip Sen, Advocate, Mr. Kamal Khata, Advocate and Mr. Akshay Vani, Advocate):
(a). Mishka trades in textiles since last 4 years. Mishka had bought goods from Radford and had made payment for the same. The transactions with Radford were relating to textile
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trade, were supported by invoices and duly accounted for.
(b). Table IV in paragraph 15 to the interim order was based on merely conjectures and surmises and accordingly deserved to be set aside. Mishka had bought shares from the market through its stockbroker CD Equisearch Pvt. Ltd. from 8 April, 2013 until 22 May, 2013 and sold the shares in first week of August, 2013.
(c). Mishka was an investor in the stocks and securities in the year 2012 and 2013. The effect of the interim order was that the Mishka could not buy or sell shares or securities. Thus, the interim order directly affected the smooth and healthy functioning of Mishka.
(d). The interim order was totally speculative, arbitrary and belated. It was based on conjectures and surmises and was capricious, vexatious and opposed to the principles of natural justice. Consequently, it was bad in law and deserved to be set aside. In paragraph 18 of the interim order, the authority records the basis as "it can be safely assumed". Then in paragraph 20, it records the basis as "it can be comfortably stated". Then in paragraph 24, it records the basis as "it can be reasonably inferred". All these aforesaid assumptions, statements and inferences are totally insufficient to pass a quasi-penal order like the interim order and demonstrate on the face of it that the interim order is purely speculative and arbitrary.
(e). It was a settled principle of law that for levying penalty, there had to be actual violation of law/provision and a mere possibility of committing a breach was not sufficient to levy penalty. There was no violation of any law in the present case and as stated above, the findings were a mere speculation, conjecture, surmise and were hypothetical. A levy of penalty on such purported finding is unsustainable in law.
(f). The penalty imposed on the Mishka is extreme and deprives it of smooth and healthy conduct of its business and consequently its sustenance in the market. The very fact that the interim order was only an interim order pending further inquiry and investigation, it was absolutely unfair and illegal to totally restrain Mishka to access the security market. Mishka cannot be barred from practicing its trade on mere suspicion when admittedly further investigation is required and pending.
(g). The authority passing the interim order had misconstrued the scope and ambit of the legal provisions relied upon in paragraph 27 of the interim order. There was no violation of any of those provisions by the Mishka.
(h). Mishka stated that, it was a settled principle of law that for levying penalty, there has to be actual violation of law / provision and a mere possibility of committing a breach is not sufficient to levy penalty. There is no violation of any law in the present case and as stated above, the findings are a mere speculation, conjecture, surmise and are hypothetical. A levy of penalty on such purported finding is unsustainable in law.
(27) Amrit Sales Promotion Pvt. Ltd., Burlington Finance Ltd., Symphony Merchant
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Pvt. Ltd. and Bazigar Trading Pvt.Ltd. (Represented by Mr. Vinay Chauhan, Advocate and Mr. K. C. Jacob, Advocate):
(a). They denied that they had violated any of the provisions of Regulations 3 or 4 of the PFUTP Regulations or provisions of SEBI Act as alleged. They submitted that they had not indulged in any fraudulent and unfair trade practices relating to the securities so as to warrant any kind of punitive directions.
(b). The interim order was vitiated by gross violation of principles of natural justice, in as much as no opportunity was provided to them to explain their version and the circumstances as stated in the interim order did not justify dispensation of pre-decisional hearing.
(c). The power to issue directions under section 11 and section 11B of the SEBI Act had to be exercised judiciously and it was all the more necessary in a case having adverse civil consequences as well as reputational adversity. Further, it was well settled that, a discretionary power was not to be invoked arbitrarily devoid of justification, as was done in the matter under reference.
(d). The directions under section 11 and 11B were issued for safeguarding the markets and were not for penalizing the persons and denying their legal rights, on the basis of assumptions and resumptions. The direction issued against them, at this juncture is neither preventive or remedial not curative, penal.
(e). The directions passed against them were not warranted and urgent. Nothing was brought on record to justify the directions inflicting irreparable damage upon them. Exercise of such an arbitrary power was unwarranted and unjustified. Not even a prima facie case was made out to warrant the issuance of such an ad interim ex parte order.
(f). They did not have any link/connection/nexus with Radford or its promoter/directors etc. or the alleged preferential allottees. Further, they did not have any financial transactions with them.
(g). They were an investment and financial company primarily engaged in the trading of securities in secondary and primary market. They were registered with Reserve Bank of India as a Non-Banking Financial Company (NBFC). They had been carrying on the business of trading in the securities market with fairness and in accordance with the provision of law.
(h). They had in the ordinary course of business, based on their commercial wisdom, traded in the scrip of Radford.
(i). They are not holding any shares of Radford. They had done trading in various other scrips also. While trading in the scrip of Radford they were trading independently without acting in concert with anybody.
(j). Amrit Sales Promotion Pvt. Ltd. had stated that the observation that Radford could not
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have commanded the price in Patch I was totally misplaced. In Pre-Patch I, the price of the scrip was increasing and had increased considerably which perhaps prompted many entities, including them to enter the fray. Further, what price a particular scrip would command is a very subjective issue and is contingent upon forces of demand and supply. When the price of the scrip was increasing, nobody raised the issue that the scrip could not command the price as was being erroneously done.
(k). They had traded on the screen based mechanism of the stock exchange wherein it was not possible to know the counterparty broker or counterparty client. Furthermore, when they had placed the order for purchase/sale of shares with their broker, they were not aware of the person/entities who were trading in the shares of Radford or were purchasing/selling the shares of Radford. None of the counterparties to their trades were related to them in any manner. Further, nothing had been brought in interim order to connect them to the counterparties to their trades.
(l). No borrowings were made and utilised from the entities belonging to Radford or from their promoter or from preferential allottees of Radford and from any of the other entities mentioned in the said interim order. Further, post the sale of shares, the pay outs received were deployed by them for their own business and the same were not transferred to any other business or entity/entities including the entities belonging to Radford and to their promotes/directors or to the preferential allottees.
(m). They had not provided any exit (or hugely profitable exit) to preferential allottees as alleged. Nothing has been brought on record to connect them to preferential allottees in any manner. In the absence of any link/connection, issue of providing any exit cannot and does not arise. Merely because, they had bought the shares in the ordinary course, when the preferential allottees were allegedly selling the shares, it could not be alleged that, they have provided exit to them.
(n). They denied that they had deceived the authorities by laundering black money and raking in tax-free profits as alleged. For the alleged acts of others, no adverse inferences could be drawn against them. Admittedly, they had not generated any tax-free profits. On the contrary they had suffered losses.
(o). The interim order had adverse impact not only on their reputation and recognition, but it unfairly deprives them from carrying on their business.
(p). No material/evidence was brought on record to connect them with other entities and to demonstrate even remotely as to how they were acting in concert with others. Based on mere surmises and conjectures, it was inferred that they were acting in concert with others. For instance it has not been spelled out as to out of 48 preferential allottees who all they were acting in concert, how they were acting in concert, how it was of concern to them that the so called unidentified preferential allottees should generate fictitious LTCG and how they benefitted by the same. The allegations were as vague as they could be and were totally untenable and unsustainable. Just because they traded in the scrip in the ordinary
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course they have been roped in and an attempt has been made in the order to bend over backwards in order to somehow connect them with other and to issue punitive directions, completely ignoring and overlooking the correct factual position on record.
(q). Prior to commencement of their trading in Radford, Radford price was in upward mode and had increased from `3.20/- to `241.35/-. The time at which they entered into the market to buy this stock, the charts were showing bullish signals based upon technical data (which includes price rise along with traded volumes). The pricing and daily volume of Radford was good enough to suggest that further rise was around the corner. Radford was considered among others as one of the technically sound on the charts. Further, at the relevant time, market was also abuzz with rumours of a potential takeover by a big corporate house by a high profile group which already had investments in Radford. Their decision to buy shares of Radford was primarily and majorly influenced by the past price movement of Radford, the rumours floating in the market about potential takeover by corporate house and also the technical analysis of Radford which was also suggesting similar signals.
(r). With regard to transfer of `11,700/- to Amrit Sales Promotion Pvt. Ltd.’s bank account by Blue Circle on November 02, 2012, they submitted that, the said payment was the dividend received from Blue Circle. Save and except of this, they have not received any funds from Blue Circle or given any funds to Blue Circle.
(s). Amrit Sales Promotion Pvt. Ltd.’s transactions were independent and simply based on common e-mail id and phone number with Bazigar Trading Pvt. Ltd., no adverse inference could be drawn. The email id of Mr. Arun Pareek [[email protected]] was mentioned, as they used to get the share trading accounting done through him.
(t). With respect to funds transaction between Symphony Merchants Pvt. Ltd. /Burlington Finance Ltd. and Amrit Sales Promotion Pvt. Ltd. and was concerned, they have stated that the same was a normal business transactions. Since all these companies are NBFC having activity of money lending and share trading activities. In the regular course business they had taken interest bearing loans on various dated from Symphony Merchants Pvt. Ltd. /Burlington Finance Ltd. Loans taken from these companies was never utilized for purchasing shares of Radford at any point of time.
(u). With respect to funds transaction, Burlington Finance Ltd. had never taken any loan from Symphony Merchants Pvt. Ltd. They had given interest bearing loan to Symphony Merchants Pvt. Ltd. as a normal business transaction and earned interest.
(v). Bazigar Trading Pvt. Ltd. stated that they had shifted their registered office from Kolkata to their present rented office at Mumbai with effect from March 24, 2009. With respect to common email id i.e., [email protected], no interferences could be drawn on this basis. There was no common phone number with Amrit Sales Promotion Pvt. Ltd. Therefore no interferences could be drawn on such basis.
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(28) Manimudra Vincom Pvt. Ltd. (Represented by Mr. Vinay Chauhan, Advocate and Mr. K. C. Jacob, Advocate):
(a). They were an ordinary trader in stock market. Their company is registered as an NBFC with the Reserve Bank of India. Their main activities were dealing in shares and securities and money lending. They keep on investing/selling in stock market according to their own prudent judgment, technical advice, fundamentals, market scenario and overall Indian & World economy.
(b). During the period in question, i.e., January 29, 2013 to March 31, 2014, they had purchased more than 37 different scrip’s making a total of 3566126 shares & sold 28 scrip’s making a total of 4514367 shares. The list of shares had a combination of large- cap/mid-cap & others. Out of the above total no. of shares, the shares of ‘Radford’ constituted only 23500 shares which was very negligible.
(c). They had made payment of all their purchases from the sources of fund generated from their own business & commercial activities. The sale proceeds were utilized for re- investing in other scripts and for regular business activities.
(d). The shares were transferred in their own demat account and delivered from their own demat account.
(e). They had taken on hire one office space at 16, Netaji Subhas Road, 4th Floor, Kolkata- 700001. They never shared their space with any other person. As regards common address of their company and Bazigar Trading Pvt. Ltd., they noted that the registered office address of Bazigar Trading Pvt. Ltd. is at Mumbai (Maharashtra) as per MCA site.
(f). They stated that no interferences should be drawn on the basis of common e-mail id.
(g). One of their directors Mr. Panna Lal Maloo became director of Symphony Merchants Pvt. Ltd. on March 04, 2014 which was much after the transaction of Radford was completed. But at the relevant time Mr. Panna Lal Maloo was a director of Amrit Sales Promotions Pvt. Ltd. However, all the entities have acted independently.
(h). No Funds were borrowed for purchasing the shares of Radford either from any entities of Radford Global group or from the directors, promoters or from its preferential allottees or from any other alleged entities mentioned in the interim order.
(i). They did not hold even a single share in Radford. Hence, they could not have made any dubious plan to manipulate the stock exchange mechanism.
(j). They did not have any connection with the directors/promoters or to the preferential allottees of Radford Global Group in any manner whatsoever.
(k). The said interim order was vitiated by gross violation of principles of natural justice, in as much as no opportunity was provided to them to explain their version and the
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circumstances as stated in the interim order did not justify dispensation of pre-decisional hearing.
(l). They had inter alia stated that no adverse inferences based on specific allegation of acting in concert with Radford entities to provide exit to preferential allottees could be drawn against them in the absence of any material particulars.
(m). All the trades executed by them were as per market rate, as per market mechanism, within limits of high and low as decided by stock exchanges. They were not aware of the counterparties to their trades. None of the counterparties to their trades were related to them in any manner. Further, nothing has been brought in interim order to connect them to the counterparties to their trades. They were trading independently without acting in concert with anybody. Furthermore, when they had placed the order for purchase/sale of shares with their broker, they were not aware of the person/entities who were trading in the shares of Radford or were purchasing/selling the shares of Radford.
(n). Neither they were a beneficiary of “Long Term Capital Gain/Loss” nor they had supported/helped or become instrumental for any other entity to get benefit of LTCG.
(29) Vibgyor Financial Services Pvt. Ltd. (Represented by Ms. Preeti Bharadwaj, Advocate and Ms. Minakshi Lata, Chartered Accountant ):
(a). They were into the business of NBFC since the year 2001. They were engaged in the business of offering loans and advances and also purchase and sale of securities and commodities from a long time. Their investments in shares spread over different terms.
(b). The decision to invest in the shares of Radford was based on the information gathered from the common market circle price movement analysis and that such an investment would yield good gain, in long term, short term and medium term, on the upward movement of the price of the scrip.
(c). Trades were placed through recognized stock exchange which had anonymous order matching mechanism and there was no possibility of knowing the counter party. The parties did not get to know the counter parties and order matching was not possible under such a robust mechanism.
(d). Their trades comprised of a negligible 0.14% of the total traded volume of which only an even smaller % of trades had matched with the alleged preferential allottees. This quantity of shares matched with alleged preferential allottees or promoter related entities were a negligibly miniscule 0.06% of the volume in Patch I. With such negligible volume, one cannot be expected to carry out activities of manipulative nature as alleged.
(e). While they had dealt with the shares of Radford during June 2013 to Dec 2013 the transactions establishing relationship with them were pretty old and had no connection
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with the transactions of Radford. They also clarified that they were not a broker. No further information was provided by SEBI as to how by having purchased shares from them, long time ago made them a “Radford Group Entity”.
(f). They were never involved in the alleged market manipulation. They were genuine investors, hence they have requested SEBI to take remedial actions to collect the funds from the market manipulators and refund the same to them for the losses incurred to an extent of `64,11,345.79/-, due to investment done in Radford.
(g). They were not exit providers but innocent investors who have been victimized due to the so called fraud detected by SEBI and were wrong categorized as a “Radford Group Entity”. In fact they were shocked and surprise to know about the alleged fraud detected by SEBI in the scrip they invested with bona fide intention to earn profits.
(h). They requested to detach the demat account on immediate basis, since they were genuine investors and the said interim order was causing them huge financial and reputation loss.
(i). They stated that a public authority like SEBI passed such a drastic interim order without bringing the allegations against them to their knowledge and without giving them an opportunity to be heard. The said interim order was passed in blatant breach of the well- established principles of natural justice and is therefore, bad in law. They had purchased the shares of Radford on June 3, 2013 and sold the same on December 12, 2013, while SEBI issued the interim order on December 19, 2014. Assuming, but not accepting that the allegations cast upon them were true and then too there was no reason of passing such a restrain interim order without offering them an opportunity to appear before SEBI and explain their contention or file a reply.
(j). There was no ground to pass an interim ex parte order against them. No urgency was shown by SEBI for the restraint, since the transactions took place almost a year ago. Thus, the restraint imposed by SEBI on them appeared to be a penalty for dealing in the shares of Radford, rather than preventive in nature. Such action in an ex-parte manner was not permitted under the SEBI Act, 1992 or any of the regulations framed there under, except in case where such actions will prevent a fall of heaven, which was not the current case of SEBI as well.
(k). They were one of the genuine investors who bought the shares of Radford. No connection or relation is shown between Radford and them or between them and the directors of Radford or between them and the promoters of Radford or between any of the entities which traded in Radford and them or between any of the preferential allottees and them or between the entities alleged to be belonging to the purported ‘Radford Group’ and them.
(l). They denied that they were connected or were hand in glove with any of the entities of Radford Group or Radford and its promoter/director.
(m). They have denied that they had converted unaccounted income into accounted one with
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no payment of taxes or that they had misused the stock exchange system as falsely alleged or otherwise. Trading in Radford had resulted in substantial losses because of the fraud played upon them. Neither the Income Tax Department nor any other revenue departments have ever alleged that they have avoided tax by generating LTCG as alleged upon other parties in the interim order.
(n). They denied the allegation that they along with entities of Radford Group used securities market system to artificially increase volume and price of the scrip for making illegal gains to and to convert ill-gotten gains into genuine one. In fact they had purchased the shares at almost the highest level when the price had already been manipulated. Further they only placed sell orders when the price had already reached below `7 and all orders were placed with the sole intention of salvaging whatever they could. It is worthwhile to note that they could only exit from their investment in the said company on 4th attempt, after having failed to exit in the initial 3 attempts. Further their volume of 82000 shares against the market volume of 84.600699 is a meagre, negligible, miniscule and extremely unnoticeable 0.1%.
(o). Table IV to the interim order also quotes that only 37,840 of the 82,000 shares have matched with the preferential allottees, which substantiates beyond doubt that they did not have any relationship with the Radford Group or any other entity with regards to their dealing in the shares of the said Company. Had they been related or connected, all their trades would have matched with the preferential allottees, which was not the case. The same table substantiates that 54% of their trade were executed with the orders of persons other than preferential allottees. This in itself was adequate to substantiate that they were not connected or related to any other person for the transactions of Radford as alleged.
(p). They were categorized as a part of ‘Radford Group” because of their off market transactions with Scope Vyapar Pvt. Ltd. Their transactions with them were commercial transactions of shares purchased and had nothing to do with purchase or sales of Radford. Further, the reason for showing them as an entity of Radford Group was not specifically explained by SEBI except that in Annexure B to interim order, where were categorized as Radford Group entity on the basis of their dealing with Scope Vyapar Pvt. Ltd. They submitted that these transactions had nothing to do with their dealing in Radford. Details of transactions were given hereunder: (i) On November 18, 2009, they purchased 67,000 equity shares of Rich Universe Network Ltd. @ `172.45/- per share for `1, 15,54,150/-. The payment was made through bank account. (ii) On February 15, 2012, they purchased 30,000 equity shares of Rander Corporation Ltd. @ `153/– per share for `45,90,000/-. The payment was made through bank account. (iii) It is evident that 1st transaction was carried out more than 4 years before the transactions in Pine and the 2nd transaction was carried out more than 2 years before the transactions in Pine and can no way form a basis of categorizing us as a “Pine Group” entity.
(q). They invested in shares of Radford using the genuine money and it has been accounted
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for in their financial statements. Except for the purchase of shares in Radford, they never had any financial transaction with Radford.
(r). They denied that they had violated the provisions of the PFUTP Regulations, 2003 or the provisions of section 12A (a) to (c) of the SEBI Act, 1992 as falsely alleged or otherwise.
(s). They have stated that many times orders have caused huge financial losses to the affected parties and SEBI reverse the interim order after some time saying that there was no fault. Though there are many such cases, one such case pertains to the matter of Littlestar Vanijya Pvt. Ltd. where their demat account is blocked through a similar ex parte as interim order on August 3, 2012 and reverse it on November 9, 2012. During this period the holding of the affected company faced severe devaluation.
(30) Jayant Security & Finance Ltd. (Represented by Mr. Rajendra G. Kookada & Associates and Mr. Harish Pandya, Advocate):
(a). They were a public Ltd. company registered under companies act, 1956 and its main object is investing &trading in the capital & secondary market. They were well-known NBFC operating in the business of investment & finance for more than a decade.
(b). They deal in the equity shares of various companies. They do trades on the basis of their regular research on historical, technical charts or intraday analysis of various scripts. In the same way, they did trading, in the scrip of Radford.
(c). Their investment process was totally initiated by buying or selling through registered stock broker on nationwide trading terminal of BSE in normal segment at the prevailing market price and none of the transactions were off-market or through any negotiated deal/block deal.
(d). They bought shares of Radford in the month of February 2013 on the basis of past performance of the scrip in pre-patch I and technical analysis which suggested them great opportunity of bullish market.
(e). They were not connected with Radford as per section 2(h) SEBI (Prohibition of Insider Trading) Regulations, 1992.
(f). They had no common addresses, KYC details, email ids, bank statements, off market transaction in relation with Radford Group, preferential allottees except the common email id sharing with one suspected entity. It happened due to various MCA forms having being filed by common professional and the mentioned email id did not belong to them. Therefore, it was not sufficient ground to make them connected with Radford Group or preferential allottees.
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(g). They were not connected/related with the directors, promoters, preferential allottees, trading member mentioned in Table II to the interim order for any of the associates who was involved for pushing of share price Radford or contributing in LTP as mentioned in the interim order. Neither financial nor legal transactions were done with Radford Group and preferential allottees.
(h). Radford Group & Suspected Entities contributed 70.01% of net buy trade in this contribution, their contribution was only 5.88% which was very less and could not be considered to be called them as Suspected Entities.
(i). They did not come under definition of fraudulent in connection with Radford Group and preferential allottees to give misinformation that affects the market price of shares resulting misled to investor as per regulations 2(1)(c) of the PFUTP Regulations, 2003. They did not contravention of regulation 3(a), (b), (c), (d) and 4(1), 4(2) (a), (b) & (g) of PFUTP Regulation.
(j). They did not come under the definition of person acting in concert in connection with Radford Group and preferential allottees for generating fictitious LTCG as per the SEBI (SAST) Regulations, 1997.
(k). SEBI Act, 1992 has not defined “related/connected or suspected entity” and whatever was written in the interim order was everything based on assumption.
(l). They were unable to sustain in their course of business and losing opportunities in the current market which is at its peak and expected to outperform in the coming months. They humbly requested to permit them to continue their normal course of business.
(31) Trimurthi Finvest Ltd., Purvi Finvest Ltd., East West Finvest Ltd./ Sharad Dharak and East West Finvest Ltd. (Represented by Mr. Rajendra G. Kookada & Associates and Mr. Harish Pandya, Advocate):
(a). Their directors namely, Mr. Sharath Kumar Darak and Mr. Dawrka Das Darak were jointly managing many ventures and was finding it difficult to conclude that just because their above mentioned directors were jointly holding positions in the three entities namely, Trimurthi Finvest Ltd., Purvi Finvest Ltd. and East West Finvest Ltd. and being referred as Suspected Entities in the case of third party namely, Radford.
(b). They, their promoters and directors have neither in the past nor in the present had any connections with the directors, promoters and preferential allottees of Radford and therefore classifying them as a part of “Radford Global & Suspected Entities” was totally mistaken and erroneous.
(c). They were a well-known Non-banking Financial Company Operating in the business of investment & finance for more than a decade.
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(d). In the case of Radford, they took the call after tracking the prices of Radford for a period, the charts indicated a heavy buy-in and their directors saw an opportunity to earn some profit. As their object clause direct them in investing and trading in the equity market, they brought the shares of Radford in the normal course of business through registered stock broker on nationwide trading terminal of BSE in normal segment at the prevailing market price. None of the transactions were off – market or through any negotiated deal / block deal.
(e). They made the purchases of shares from February, 2013 and paused buying shares of Radford on May, 2013 as the prices of Radford, kept on increasing day by day. They kept buying at every level of technical chart. They were overjoyed to be part of the price rally. But their joy was short lived as the prices started falling sharply.
(f). The price of share marked a high of `85 per share in the month of May, 2103, which created eagerness to make some profit, as they brought shares of Radford at an average price of around `61.89 per share. After the month of May 2013 the price of shares started declining, they anticipated that the price would recover in their favor, but soon after the situation took a U-turn and price of shares started declining sharply even though much more less than their average buying price. They were in an inconclusive decision whether to hold the stock or book loss and move out. They anticipated the prices to recover at least to their weighted average price and provide them an opportunity to exit. But the prices continued to crumble to lower levels and they were forced to sell of those shares after making a huge loss in the scrip, before the whole quantum of investment got evaporated. That was the only transaction their company did in the shares of Radford and burnt their hands.
(g). The price of shares of Radford had touched high of `241.35 from `3.20 per share in the referred period which was a magical difference from any investors point of view. If they were connected with Radford then they would have sold the shares long back and made huge profit and made the difference.
(h). As per the online trading platform mechanism, the platform was designed in such a way that neither the buyer nor seller could identify the counterparty before any transaction takes place. Moreover, how much profit/loss going to be booked by seller & buyer was totally dependent on the decision maker of entity to take call for buy or sell at any point of time.
(i). They had no idea about the mala fide intension of Radford Group and preferential allottees who used the stock exchange system for taking benefit of long term capital gain (LTCG), and subsequently thus became victim in the whole process by virtue of huge loss and proving themselves as non-related entities of Radford Group and preferential allottees.
(j). Barring and restraining them from accessing the securities market was totally mistaken and erroneous, as they were unable to carry on its business and losing opportunities in
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the current market which is at its peak and expected to outperform in the coming months.
IV. LTP Contributors:
(32) Ms. Prem Lata Nahar (Represented by Mr. Prakash Shah):
(a). She is a 65 years old senior citizen residing in the small town of Chhotisadri belonging to Pratapgarh district of Rajasthan. She is a house-wife belonging to a conservative and traditional Marwari business family. In 2008, she decided to mobilize her shares in ancestral property and savings from money received by her over the years in stock markets. Having a very less or almost no educational background she did not possess the requisite skills to understand the nitty gritty of complex capital markets and thus her investments were managed by her husband Mr. Naxtramal Nahar also a 68 year old senior citizen and a seasoned businessman.
(b). During the period from April 01, 2009 to December 31, 2014, she traded in around 176 stocks and was holding more than 50 stocks as on December 31, 2014. These stocks included stocks from various sectors and sizes ranging from blue chip large caps, mid caps and a small proportion of penny stocks or small caps.
(c). Unlike informed Institutional and HNI category investors, retail investors like her have limited skill and experience of fundamental and technical research before making an investment decision. Thus the investment decisions were mostly made on the basis of news and rumors in print media, electronic media, grapevines, investment decision of other investors, intuition and psychology of the investors.
(d). She stated that the revenue for Radford increased astronomically in June 2012 quarter by 515% (Quarter on Quarter). Further, there was a consistent in subsequent quarters of the year by 65% and 11 %. The increase in cumulative revenue was consistently by 92.50%, 69.73% and 41.90% in September 2012, December 2012 and March 2013 respectively. The year on year increase in Revenue and Profit for F.Y 2011–2012 and 2012-2013 has been 3,670.67% and 967.44% respectively. Thus, that performance backed her decision to add more of the aforesaid scrip to her portfolio. Further, she understood from the information available in the public domain that none of the authorities had ever questioned the astronomical increase in revenue and profit indicating that the same was normal. In absolute terms the EPS of Radford increased from `0.01 in financial year 2011-2012 to `0.07 in financial year 2012-2013. However, this accounts to 600% increase in percentage terms which is really astonishing. Despite of lower EPS, there were many other companies which were trading at fairly high PE multiple despite of very low or negative EPS.
(e). Radford was able to raise funds aggregating to `13.65 crores at a premium of `5/- by way of preferential allotment to 48 investors. The confidence shown by HNI and the preferential allottees in the stock was clearly an indication for the retail investor like her that
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the efforts of the management in reconstruction of Radford were in right direction and investment in the company was worthy;
(f). Radford was categorized by BSE under Group “B” category indicating that the shares were better than penny stocks. Usually under B group, midcap companies were categorized and such midcap companies were considered as “Potential Money Baggers;
(g). Information like Directors Reports, Balance Sheet, Company Website, the details of property showing ongoing projects at prime locations like NCR Region (Delhi/Noida/ Gurgaon), Nasik etc. available in various sources had backed her claim.
(h). Every time BSE sought explanation or documents, the same was readily provided by her. No further grievance or adverse findings were observed by the exchange. Since, no further information was received either directly or in public domain, she was always under the impression that there was nothing wrong in the dealing and the enquiry was of a routine nature.
(i). She started buying the shares of Radford only from April, 2012 which was 1 month before preferential allotment and 12 months before Patch I.
(j). She stated that sudden spurt in volumes/price and constant sessions of upper circuits, made the stock looked more attractive and profitable and hence she decided to buy and hold the shares of Radford. However, the stock used to hit the upper circuit limit immediately as soon as the market would open. She gave standing instruction to the dealer to place order at the time of commencement of market at the applicable upper circuit rate of the day.
(k). Further, there was a substantial time gap between the stock price hitting the upper circuit and execution of order. This time gap indicates that the buy and sell trades were done by unrelated parties and were not a part of negotiated deals placed by related parties at both the ends.
(l). Orders were necessarily required to be placed for small quantities. The volume for which orders were placed was nearly the number of shares which were usually traded on any trading day. Thus, the argument that the orders were placed purposely in small quantities with a view to manipulate price did not hold good. From past trend one knows that he/she would not be able to get maximum 10-25 shares of any stock then why would he/ she place orders for 100 shares.
(m). The interim order had considered her responsible for price rise in 25 out of 121 occasions for establishing new high price. These were only for the day when trades were successfully executed in the market. The fact that on many occasions trades were placed, but were not executed has not been considered. Buying the stock was clearly coincidental and totally unconnected to any kind of alleged malpractice.
(n). They did not know who were the seller brokers nor their clients who have sold the shares.
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(o). They did not receive any funds from the promoters/directors of Radford.
(p). She stated that allegations of her involvement in contribution to price rise of other stocks were still unproven. Similar allegations were made against her in another ex-parte ad-interim order of the even date (i.e., December 19, 2014) in the scrip of First Financial Services Limited. Except for these two existing ad interim ex-parte order her conduct in the stock market were never questioned. She had always been a law abiding citizen and there were no civil or criminal charges including penalties or of whatsoever nature against her. Even her trading and investment activities were not questioned for the first time either by SEBI or by the Exchanges.
(q). The fact of relationship was not denied by her anywhere during the course of investigation. She stated that, any parent would first prefer to do business through their son/daughter instead of any outsiders. This was truer in case of financial markets dealing where investors always fear misappropriation of funds and securities. There is nothing in law that prohibits dealing of any family member of the management of the stock broking entity through the stock broking concern.
(r). From review of interim order it was observed that no nexus or trail of prior arrangement was established with Radford Group, Suspected Entities, preferential allottees, its Directors/Promoters during the course of investigation.
(s). Her name and/ or the name of Shilpa Stock Broker Pvt. Ltd. (SSBL) appeared in entities named in Table-IV (Para 15) to the interim order i.e., details of counterparties for sale transactions, details of trades carried out by allottees and profit calculation in Table-V (Para 16) and in Annexure-B to the interim order. Radford Group & Suspected Entities and the basis of connection/ relationship amongst them. Further, she or SSBL were also not found to be directly or indirectly related to either the preferential allottees or Radford or related group.
(t). The investment in the stock of Radford was merely incidental and had no connection with or was not a part of any organized LTCG cartel as alleged in the interim order.
(u). Further, for the purpose of Income Tax for Assessment Year 2013-2014 (Financial Year 2012-2013) in the year in which the said shares were sold, she had offered the aforesaid profit for the period to be taxed under the head Short Term Capital Gain and had paid tax at highest marginal rate. If at all she would have been involved in the syndication for managing LTCG then ultimately she would not have ended up in paying tax and would have planned the same in such a manner that she would have enjoyed the benefit of tax free income like others did.
(v). She completely denied involvement in any kind of securities market fraud, manipulative transactions, unfair trade practices as alleged in the interim order.
(w). She stated that, in drawing conclusions, certain important facts, explanations including the
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enquiry conducted by the Exchange during the aforesaid period were not considered. That included the fact that during the course of preliminary investigation conducted by BSE (Para 1 of the interim order), no information or communication was provided by the exchange which indicated any suspicion of such activity either in any private communication or information in public domain. She stated that she would have immediately stopped dealing in such share she had received with any such adverse information.
(x). With regard to her dealing in Radford, she further stated that, as on date she did not hold even a single share. Further, she also undertook and stated that she would not deal any more in the Radford scrip until completion of investigation by SEBI.
(y). Besides aforesaid, she humbly submitted that, since capital market is subject to volatility and any event happening even internationally distort the market equilibrium. Hence she is afraid that she might lose an opportunity to sell her holding in shares and securities including investment in mutual funds during such unforeseen circumstances. Hence, as an interim relief, she humbly requested that she might be permitted to sell the shares and securities held buyer.
(33) Mr. Taran Kumar Rungta (Represented by Mr. Vinay Chauhan, Advocate and Mr. K. C. Jacob, Advocate) & Rajat Share Broking Pvt. Ltd:
(a). They denied that they had violated any of the provisions of SEBI Act as alleged. They submitted that, they had not indulged in any fraudulent and unfair trade practices relating to the securities so as to warrant any kind of punitive directions.
(b). The said interim order was vitiated by gross violation of principles of natural justice, in as much as no opportunity was provided to them to explain their version and the circumstances as stated in the interim order did not justify dispensation of pre-decisional hearing.
(c). The power to issue directions under section 11 and section 11(B) of SEBI Act had to be exercised judiciously and it was all the more necessary in a case having adverse civil consequences as well as reputational adversity. Further, it was well settled that, a discretionary power was not to be invoked arbitrarily devoid of justification, as was done in the matter under reference.
(d). The directions under section 11 and 11B were issued for safeguarding the markets and were not for penalizing the persons and denying their legal rights, on the basis of assumptions and resumptions. The direction issued against them, at this juncture is neither preventive or remedial not curative, penal.
(e). The directions passed against them were not warranted and urgent. Nothing was brought on record to justify the directions inflicting irreparable damage upon them. Exercise of such an arbitrary power was unwarranted and unjustified. Not even a prima facie case was
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made out to warrant the issuance of such an ad interim ex parte order.
(f). They were investors in the stock markets and also engage in short term trading and investment in stocks. Till date, there was no any action against them. All the trading done by them in the scrip was bona fide dehors sinister manipulative fraudulent intent or design. Further, all the trading was delivery based and they had used their own funds for the purpose of trading.
(g). Tarun Kumar Rungta and Rajat Share Broking Pvt. Ltd. had begun purchasing the scrip in April 2012 and early January 2013 respectively. But due to poor volumes in the scrip they got small quantity of shares. Due to lower volumes, at times they had to place the order at a higher price than the prevalent price. Therefore, merely because they had placed the order at higher than LTP on few occasions, cannot be alleged to have increased the price of the scrip. Price rise as a result of genuine buying cannot be alleged to be violative of any provisions of law.
(h). While trading they were really not concerned with the fundamentals etc. of the company. While trading in the scrip they were trading independently without acting in concert with anybody. Further, they were not aware of other persons/entities who were trading in the scrip and they had no role to play in trading by other person/entities.
(i). Prior to passing of the interim order no explanation was sought from them by BSE or SEBI which has resulted in erroneous inferences being drawn against them.
(j). At no point of time either the stock exchange or SEBI had raised any alarm bells as to the price movement in the scrip not being in consonance with its financials or fundamentals, despite the price of the scrip rising sharply as alleged.
(k). The price of the scrip had increased even during the period when they had not traded at all. The purchases made by them were in very small quantity and the orders were placed at prices higher than the last traded price as no sellers were available at lower price. They vehemently denied that, they had traded with a view to push the price up as alleged. They had placed the orders with a bona fide view to purchase the shares and in the absence of availability of sellers at a lower price, had to place the orders above the last traded price for the transaction to take place.
(l). They denied that they had put buy order for negligible /very less quantity as alleged. They submitted that they had put buy orders for large number of shares, but since the sellers were not there, only small quantum were actually fructifying into trades.
(m). They had put first trades, in the ordinary course. By putting first trades, their idea was not to raise the price as alleged but to buy the shares.
(n). They stated that during the period when they had bought the scrip of Radford, they had also traded in various other scrips. All their purchases and sales were delivery based.
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(o). They denied that they were instrumental in contributing to the price rise of other stocks as alleged. No particulars of the alleged other scrips were provided.
(p). They had not indulged in any fraud or manipulation. They had not made any gains or derived unfair advantage as a result of falsely alleged violations. There was nothing to indicate in the interim order that they had made any gains.
(q). There was nothing on record to show that sell orders were pending in the system at rates lower than the rates at which they had purchased the shares. Further, the interim order stated that there was insignificant liquidity in the scrip.
(r). They vehemently denied that they were either instrumental or had contributed to price rise of some unnamed other stocks.
(s). They admitted that they are related to Shilpa Stock Broker Ltd. but only as a stock broker and client. Save and except the aforesaid they had no relationship with the broker SSBL.
(t). With respect to para 12 of the interim order, they stated that it was not spelled out which were the scrips, who were the entities, who were the stock brokers based on which the conduct was being doubted. Further, admittedly no directions was passed qua their broker SSBL, therefore their alleged connectivity with the broker was also neither here nor there. In any event, they reiterated that they had traded bona fide without acting in concert with anybody including the stock broker.
(u). They reiterated that they were not connected to other entities as stated in the interim order and categorized - Company, Directors of Radford Global Ltd, Promoters of Radford Global Ltd, Directors of Radford Investment Services Pvt. Ltd, preferential allottees, Radford Group, Suspected Entities and Others.
(v). They had an impeccable track record. Except the matter under reference, no adverse direction was ever passed against them by any regulatory authority including SEBI. The impugned proceedings have caused considerable mental agony/pain and also considerably eroded their reputation.
(w). They have prayed that they be allowed to sell shares of various other companies / Mutual fund units lying locked in their demat account and to utilise the sale proceeds, since the investigation is qua the impugned scrip only.
(x). Tarun Kumar Rungta stated that he had purchased only 610 shares in Radford, which was insignificant to have any impact on price or volume. He had first purchased 100 shares in early April 2012 at a price of `3.37 and his second purchase was of 251 shares at `45.64 in October 2012. Even though he had not purchased any share during this seven month period, the price had already gone up from `3.37 to `45.64. Further, when he commenced buying the shares two months later in December 2012, the share price of the scrip had already increased above `100. Thus, even during the period, when he had not traded in the scrip, the price of the scrip had gone up consistently. He had purchased
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small quantity of shares on 12 occasions in the month of December 2012 and January 2013 and bought only 259 shares with the last purchase of 20 shares at `187. The stock price however, had continued to increase subsequent to his trades also and went up to touch `241 on January 28, 2013. Admittedly, his trades constituted only 11.57% of the total instances and hence could not be considered to be significant in any manner. In fact, he had sold 3,050 shares on April 8, 2013, which shows that he had no intention to increase the price. The entire allegation against him is contrary to the facts. Further, despite his sales, the price of the scrip had gone upto `86 in Patch I. Therefore, his trades cannot be held responsible for any increase in the price.
(y). The entire basis of calculation of the contribution of their trades to the price increase is highly unscientific and erroneous since there were significant time gaps between their purchases, their various trades at different point of time, in different market conditions, cannot be taken together to arrive at preconceived conclusions.
(z). Rajat Share Broking Pvt. Ltd. stated that quantity of shares purchased by them was very small and such an insignificant quantity would not have impacted price or volume. Even during the period, when they had not traded in the scrip, the price of the scrip had gone up consistently. They had purchased a small quantity of shares in the month January 2013 and sold the same in March 2013. Admittedly, their trades constitute only 4.96% of the total alleged instances and hence cannot be considered to be significant in any manner.
(aa). They have stated that, the scrip was listed on stock exchange and was available for trading. There was nothing adverse about the scrip in the public domain and there were no cautionary announcements made by BSE in this regard. Therefore, there was nothing to excise their suspicion that there was something amiss in the scrip, as now alleged. They stated that they had bona fide bought 610 shares of Radford involving an amount of `50,219/-. And taken delivery of the same. Further, in the ordinary course they had sold the same on 8.4.13 and made a profit of `173,258/-. They reiterated that their trading in the scrip was not actuated by any sinister motive or design and they alleged price rise consequent to their bona fide trading was incidental and not by design.
(34) Ms. Manjulaben Sukhdev Pandya (Represented by Mrs. Rinku S. Valanju, Advocate, Mr. Pratham Masurekar and Mr. Sanjay S. Pandya (son of Ms. Manjulaben Pandya)):
(a). She was a small investor of 66 years of age, widow and homemaker. She executed trades in stock market through her son. During the investigation period of Radford, she traded in other scrips also and met with all her settlement obligations qua the broker from her own funds.
(b). The power to issue directions under section 11(4) and 11B is a drastic power having serious civil consequences and ramifications on the repute and livelihood of those against whom it is directed. Said power is not available for routine and retrospective application and cannot be used for penal action. It is exceptional, extraordinary and discretionary
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power and SEBI has to justify the need for invocation of the said power after about 9 months of the alleged cause of action.
(c). She inherited certain shares from her deceased husband in and around September 2005. She then opened a demat account and trading account for the first time.
(d). She had authorized her son, Mr. Sanjay Pandya to carry out trading activity in her account.
(e). Her son is active trader / arbitrager / jobber in the stock market for more than 20 years. Her son based on his independent research, study and close watch on the market developments, invested in various scrips and carried out buy / sale transactions for small profits.
(f). She either used to invest either in fundamentally very strong company shares or companies where investment was minimal, some announcement fund raising etc. was there and based on that, movement in the price of the scrip was expected.
(g). She used to invest in small quantity of shares of various companies based on research and invest a sum of about `50,000 in a particular company's shares and take minimal risk. Her son used to identify different small company for investment based on following criteria: a) Scrip’s touching 52 weeks high/low prices. b) Companies where fund raising activities are carried out (e.g. preferential allotment, right issue, convertible warrants etc.) c) Scrip’s where takeover offers given. d) Shares of companies where reduction in capital is proposed. e) Company where amalgamation is proposed.
These companies were perceived to be good scrips for investments.
(h). She had not done any transaction for availing long term gain tax benefits. She had paid taxes on her short term gain made by her. Her transactions were within a period of one year.
(i). Since the scrip was continuously hitting upper circuit, her orders were not getting fully executed and were getting partially executed for insignificant or miniscule quantity of shares. She purchased 865 Radford shares in the range of `33 to `91 for a total of `42,349.09 and sold them for `2,90,345.25 and made profit of about `2,47,996.16
(j). She had traded in various such scrips during the period from September 17, 2012 to March 24, 2014 wherein some preferential allotment, scheme of amalgamation, open offer, capital etc. were announced. She had traded in about 50 scrips during the relevant period. She had no transactions in Patch II.
(k). She was not connected directly or indirectly to any of the Radford Group entities and nor is
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it shown. Also Annexure B of the interim order: Radford Group & Suspected Entities and the basis of connection /relationship amongst them to the captioned interim order do not set out any connection between her and the alleged Radford. She did not share any common address and email id with any of the alleged suspected/connected entities.
(l). All her transactions in Radford shares were delivery based and she made some profit, as on today her holding in Radford scrip is NIL also she had not carried out any off-market transactions in the Radford.
(m). As per Table II at page 4 to the interim order, she had been shown to have traded on 15 instances above the LTP. She stated that the scrip was hitting upper circuit on a continuous basis and since as per her strategy she wanted to purchase / acquire shares. She was also placing the Orders at upper circuit price.
(n). She stated that she had not indulged in any price manipulation activity by way of trading at LTP variation. She clarified that her orders were keyed-in within permissible price limits and impact to the price rise of Radford, if any, was normal and not manipulative as alleged or otherwise. Her trades have not caused any material or significant impact on price of the Radford scrip.
(o). She was not aware about the counter parties to her trades during her trading. The trading in the account was on the online trading system based on order time priority basis.
(p). She attempted purchase orders for about 50 days for about 1000 shares on each day (as she wanted to acquire about 1000 shares) out of which her trades were executed only on 15 days for about total of 865 shares. She stated that on 37 days, her orders did not get executed and got converted into trade whereas there were other investors / purchasers, whose orders got executed. Her order input time and order execution time had a vast difference.
(q). It was a seller driven trades and she had no role to play in the price determination as alleged. There were only buyers and no seller in the scrip. She had no control in determining price and quantity of the trade.
(r). She had not Violated 3(a), (b, (c) and (d) and 4(1), 4(2)(a), (b), (e) and (g) thereof and section 12A(a), (b) and (c) of the SEBI Act, 1992 as alleged or otherwise.
(35) Mr. Bharat Bagri (Represented by Mr. Uttam Bagri (son of Mr. Bharat Bagri) and self):
(a). They submitted that they were not connected/or related to the promoters/directors/ key management of Radford, the allottees to whom the shares have been allotted, any other entity against whom interim order was passed, any other entity who have purchased and sold the securities of said company.
(b). During the period from April 2012 to December 2012, they had purchased a total of 579
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shares over 16 days of Radford. Against the purchase, 201 shares were received short from the market where to delivery but only close out credit was received as per the BSE procedures, thus dealing to a net acquisition of 378 shares for a consideration of approximately `6,000/- which was not significant. These shares were subsequently sold off in January 2013, yielding a profit of around `66,000/- and unlikely to have any significant impact on the price movement.
(c). They understood that the spirit of the interim order was to act against the practice of persons claiming incorrect Long Term Capital Gains. They submitted that they had not claimed any Short Term/ Long Term Capital Gains. Their profit was a small amount of `66,000/- which is trading profit, not Capital gains.
(d). All trades were done in the market, with no off market trades. They had traded in hundreds of securities during the said time period. The said trades were a part of their trading strategy with no malafide intentions.
(e). Being market participants, they followed different trading strategies with the sole intention of making trading profits. One of the strategies deployed is to look for securities locked at upper circuits where the number of outstanding buyers at the end of the day is significantly higher than the volumes traded on that day. Such cases were that of unsatisfied demand, i.e., large numbers of buyers were desirous of purchasing the securities and therefore the chances of prices hitting higher circuits in the forthcoming days were bright.
(f). The list of such securities was compiled by them from the analysis of the BSE touchline data at the end of the day. Based on this data, they attempted to identify such securities and place order the next day to purchase the security at the upper circuit for that day. Usually, there was a single order put at the beginning of the day. No other order was placed. The said order was not modified or updated during the course of the day. The exposure under this trading style was usually capped at `1 lakh, and this cap was relaxed on the higher side only in exceptionally buoyant markets.
(g). The decision was purely a technical decision based on a demand and supply in the momentum style of trading and there was no study of the fundamentals of the company in the same.
(h). They also informed that they were large numbers of other buyers on the screen to purchase the securities which enticed them to put their purchase order.
(i). From April 2012 to March 2014, they had traded under this strategy in the name and style of Bharat Bagri HUF, and since April 2014 in the name and style of Uttam Bagri HUF. They explained trading strategy to BSE Surveillance Department in March 2007. During years 2007-2009, they sent daily proactive declarations to the BSE Surveillance Department and in March 2014, they declared trading strategies proactively to SEBI too. The fact that they chose to a proactive disclosures makes their intentions absolutely clear
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and devoid of any mala fide.
(j). His decision to place purchase orders in the said security was based on the touchline data of the previous date. There was a huge demand on the previous day with very low volumes, and the buy quantity far exceeded the volume traded by a factor of more than 100 times and the demand satisfaction percentage therefore was less than 1% is at the instances. That was the single and the only rationale of their orders and consequent trades.
(k). They had never contributed to any increase in price of any scrip as they entered in to trades of buy side only of those securities, which had already hit upper circuits in previous trading day. In all the instances, there were many other buyers at the upper circuit rates. Clearly, even the absence of their order in the system would have led to the same price discovery. Further, there was an average gap of more than a week between two trades. Thus, the presence or absence of their order had no implication on the price movement of the security which continued to hit upper circuits continually.
(l). The entire order book of the exchange of that time was not available to them currently. Their order size as a percentage of the order book size of the day or of the period, would be negligible.
(m). The total trading turnover of Bharat Bagri HUF on BSE from April 2012 to March 2014 was 10,08,00,91,465. These trades of `1, 000 crores were divided over 1125 different securities. The trade in the said-securities forms less than 0.001% of the total turnover of Bharat Bagri HUF at BSE.
(n). The BCB group was the financial services group of Bagri family headed by Shri Bharat Bagri. The Bagri family was in the Capital Markets since 1958, when the membership of BSE was taken in the name of CRD Bagri and Sons. Thereafter in 1982, the membership became the individual proprietary concern of M/S Bharat C Bagri and in 2001 was corporatized in BCB Brokerage Private Limited.
(o). The BCB group companies are RBI registered Non-Banking Finance Company, members of four major stock exchanges, Depository Participant with Central Depository Services (India) Limited and SEBI Registered Merchant Bankers. Their thousands of clients have an impeccable track record.
(p). Since 1958, they had an untainted and untarnished reputation. The order had put them into much embarrassment and their image has taken a severe beating. Their name has cropped up in media and concerns have been expressed by their clients, stakeholders and well-wishers. However, they understood that in the fight between the suspected manipulators and the regulator, innocents may sometimes unintentionally get trapped in the crossfire. However, it would only be in the fitness of things that immediate remedial steps be taken for the redressal of the grievance of such affected parties like them who were not involved in any of the manipulation.
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(q). They submitted that in the exchange matching system, participants place orders. Trade was a function of the counterparty order fate and size. However, the season for the low trade size was that the counterparty seller(s) seemed to have sold extremely low quantities every day. Since they got such few shares, the same led them to repeat the orders continuously to get the desired stock. It was the behavior of the sellers who were selling such small quantity of shares would therefore be suspects which required further investigation.
(r). They had no reason / indication from any authority not to deal in the scrip.
(s). There was absolutely no finding of any wrongdoing by them in the interim order.
(36) Mr. Rajesh Pravinkumar Jasani (Represented by Ms. Rishika Harish, Advocate, Mr. Amit Dey, Advocate and self):
(a). His primary business activity includes buying and selling of securities and the instant Ex- parte ad-interim order’s, operation was causing serious prejudice and hardship to him in his day to day operations.
(b). The aforesaid allegations and contraventions have been impliedly attributed to him, without any evidence, basis, finding or even an explicit mention of the same against him in the Ad Interim Ex-Parte Order.
(c). The Ad-Interim Ex-Parte Order did not provide an iota of evidences/material on the basis of which any relationship or connection could be established between him and alleged preferential allottees or with the Radford Group & Suspected Entities, even on the basis the principle of preponderance of probability. SEBI post preliminary investigation had failed, to bring out to what role he had played in the alleged scheme, on prima facie basis and therefore in absence any prima facie finding, the Ad-interim Ex Parte Order cannot survive qua him and had to be set aside.
(d). The Ad-interim Ex-parte Order categorize entities, viz. (a) entities related to Radford, (b) Preferential Allottees, (c) Radford Group of Entities, (d) Suspected Entities, (which had allegedly participated in the scheme of artifice vide which ill-gotten gains were converted into LTGC by way of manipulating the market) and (d) Others (his name featured in this category). He submitted that the Ad-interim Ex-parte Order discusses the role played by the entities mentioned in point (a) to (c) above and how there was an alleged prior understanding or meeting of minds between the said entities, so that in the alleged manipulative scheme can be executed, in the scrip of Radford. However in the whole order there was not even a whisper made on the role played either by the entities categorized under "Other" category or by him in the alleged manipulative scheme.
(e). Therefore, making him the part of the alleged scheme, plan, device or artifice vide which, certain entities had allegedly used securities market mechanism for making illegal gains
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and to convert ill-gotten gains into genuine ones was completely wrong and illegal on the part of SEBI and on the same the Ad-Interim Ex Parte Order/directions passed against him had to be revoked.
(f). The circumstances under which pre decisional hearing might be dispensed with were wherein the mischief attempted to be cured represents a grave and imminent danger to the securities market and a personal hearing would preclude the grave and imminent danger from being averted; or in a clear case of public injury flowing from least delay; or supervening public interest; or interest of justice would be better served by denying the opportunity of hearing; or danger to be averted or prevented is imminent. It was reiterated that in the present case under reference, no such circumstances existed.
(g). He submitted that, for an ex-parte ad-interim direction, SEBI should have satisfied themselves that SEBI was able to establish its case at least in following three parameters: a) Existence of a prime facie case against him; b) The balance of convenience lied in SEBI's favor; c) Non-restraint would cause an irreparable loss or grave injury to public/investor at large; He further submitted that in the facts and circumstances of the instant case, none of the aforesaid conditions were satisfied, by SEBI.
(h). A prima facie case, implies, the probability of the party on whose instance a court or a quasi-judicial authority grants a relief after weighing the materials placed before the court/quasi-judicial authority. Neither did the Ad-interim Ex-parte Order accompany any evidence/documents/ materials, nor did it record any details of the evidence/ documents/ materials, which were collected by SEBI before passing the ad interim directions (ex-parte) against him.
(i). An authority (both judicial/ quasi-judicial), while granting any relief of ad interim nature must apply their mind to the evidence brought before it and satisfy itself that the plaintiff/petitioner (in present case SEBI) had established its case beyond preponderance of probability against the opposite party (in the instant case, him) in a given matter and an authority (either judicial/quasi-judicial), in no circumstance should grant such ex-parte ad interim directions merely on the basis of its pleading. A mere pleading did not make a strong prime facie case. The case must be established by sufficient material on record. In the present case, there was no evidence supplied or stated in the Ad-interim Ex-parte Order which specifically proved or prime facie showed that he was guilty of any collusion as alleged.
(j). Due to the operation of the said Interim order, he was being made to undergo serious hardship, both in financial and operational terms and the harm and injury which caused to him was far greater and substantial than which was allegedly made out in the said interim order. Thus the balance of convenience lied in his favour and not in the favor of SEBI and therefore the ex-parte ad-interim directions passed against him should not be allowed to persist/ remain operative in the present scenario.
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(k). The exercise of such an arbitrary power was unwarranted and unjustified in the facts and circumstances of the instant case. No prima facie case has been made out to warrant the issuance of such an ex parte ad interim order/directions of such serious consequences against him. The alleged imminent urgency has not been explained to support the said Interim order.
(l). His trades in the scrip of Radford did not fall within the examination period (which was between January 28, 2013 to March 24, 2014) as same were much before the start of the examination period. The same, clearly showed that an attempt was made to link his trading with the alleged manipulative activities carried out in the scrip of Radford, although there existed no nexus/connection with the entities mentioned in the Ad-interim Ex-Parte Order and with him.
(m). SEBI appeared to have conducted a partial/selective analysis of the Pre-Patch I period and had held lone entities, including him, to be instrumental in contributing to price rise during the Pre-Patch I period. He submitted that the Ad-interim Ex-Parte Order refers to 121 instances in all, out of which SEBI had analyzed only 91 instances, i.e., SEBI appears to have excluded some 30 odd instances, and entities which were responsible for creation of these new high prices in 30 odd instances without assigning any reason whatsoever. It was submitted that the Ad-interim Ex Parte Order did not provide any rationale or criteria, as to why it has decided to proceed against some entities i.e., those responsible for 91 instances and not against the remaining entities who were responsible for remaining 30 odd instances, even though all 121 instances had allegedly contravened the same provision of law or indulged into same contraventions (i.e., trading above LTP and creating new high price in the scrip of Radford during Pre-Patch I)
(n). Out of total 121 instances when there was new high "price was created, his trades were responsible creating new high price in the scrip only in 7 instances which were about 5.79% of the total instances. Price scrip of Radford started increasing from February 2012 and the same continued to rise until the completion of Pre-Patch I (i.e., up till January 2013). In this context, he was trying to buy Radford from September 29, 2012, i.e., he was putting buy orders in the scrip, but none on the orders could convert into trades. However, it was only on November 21, 2012 when his first order got executed in the scrip of Radford. Before he started trading (i.e., from February 27, 2012 to September 28, 2012) in the scrip the prices in the scrip had already gone up from `3.20/- to `42.2/-, i.e., an increase of around `39/- which was around 1218% spurt in the price. Further, when his first order got executed (i.e., on November 21, 2012) the scrip had already gone up from `3.20/- to `75.4/- i.e., around `72.2 i.e., around 2256% spurt in price (i.e., from February 27, 2012 to November 21, 2012). Therefore, the price in the scrip of the Radford had moved substantially upward, before he started trading in the scrip. In fact the upward movement of the share price from February 2012 onwards, was inter alia one of the reason that, in the first place, he became interested in the scrip, as he felt investment in this scrip would give him an opportunity to make some profit.
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(o). He was a small investor-cum-trader, and whenever, he sees an opportunity to invest in the stock market, he invested from his own money.
(p). The price in the scrip of Radford was moving circuit to circuit on most of the days, and any investor/trader wished to buy the scrip, had to place his orders at the higher circuit price or closest to higher circuit, so that his trade could be executed. This phenomenon occurred since there were no sellers in the scrip and when a seller came, he would want to sell at higher price.
(q). Therefore, he submitted that, if his orders were to be executed, they had to be either on the circuit price. For example, on November 21, 2012, the circuit limit was of 5% and the tentative limit was `75.44/-. Thus his broker punched a price which was closest to the tentative circuit price and which was `75.40/- at which price the trade was executed.
(r). It could be easily concluded that, none of his orders in reality resulted into creation of high price in the scrip, as he was just trying to place order at higher circuit price as he wanted to buy the shares of Radford, because there was substantial amount of upward movement in the scrip and there was a possibility that the price of the scrip would go further upward in the near future. Since, there were a lot of buyers and almost nil seller there was queue among the buyers to buy the shares. Owing to the queue if one had to buy the shares he needed to be at top of the queue and order to be at the top of the queue the buyer had to place order as quickly as possible, on opening of the market and also at the price higher than the other buyer in the scrip. Therefore, since he had to buy shares, he had to instruct his broker to quickly place order for buying at the earliest possible moment upon opening, of the market. Further, the best way to get at the top of queue was to place order at highest possible price, wherein, no-one could surpass him and get ahead of him, which was either the circuit price or the price tick just before the circuit price. Therefore, he placed order at such price to be at the top of the queue and ensure that he got the shares. Hence, no negative inference should be drawn on him on the basis of aforesaid seven trades which allegedly resulted into creation of new high price in the scrip. All the trading in the scrip was done from his own fund.
(s). The Ad-interim Ex parte Order alleged him of rigging price of the scrip by placing buy orders higher than the last traded price in the scrip. Such a charge could be established if the material available on the record could show that sell orders were pending in the system at rates lower than the rates at which he had placed orders or there was pending buy order at the rate lower than his orders. If that were so, one could infer that he was trying to set a higher benchmark because every trade establishes the price. In the present case there is data to show that there were pending sell orders or sell order at the lower rate at the time when the buy orders were placed by him. In the absence of such a data, the charge as laid in Ad-interim order cannot be said to have been either established or sustained against him.
(t). From data provided by SEBI, it could be noticed that on the alleged seven days when his trades created new high price in the scrip, there were pending buy orders (on most of the
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days) which were also at the same price at which, his orders were placed, however his orders got executed.
(u). All the orders placed by him were need based order, which were best under the circumstances to get shares of Radford, therefore no, negative interference against him could be drawn on the basis of the order put in by him and the resultant seven trades. He submitted that securities market was a seller driven market and the price of the scrip was determined by the seller, in the instant case had there been sellers at lower price there was no need for him to place orders at higher price, in fact the question that arose as to why the sellers who wanted to sell shares were following a particular pattern.
(v). He did not have any role/connection in the impugned transactions which are allegedly led to the artificial increase in the price and volume of the scrip of Radford. He was a bona fide investor and he engaged only in bona fide trading practices with the intention of earning a profit on his investment. The practice undertaken by him is similar to that of any other rational investor. It was the objective of every shareholder to transact in the securities market in a way that shall enable him to maximize his profits and gain the most out of his/her investment in scrip.
(w). On April 22, 2013, he had received a letter from BSE Ltd. vide which BSE Ltd. had sought certain details from his broker, regarding his trading in the scrip of Radford. Subsequently, required details were submitted to BSE Ltd. by his broker and till date, neither BSE Ltd. has not come out to any adverse finding, in relation to his trading in the scrip nor has it sought any further information from him in relation his trading in the scrip of Radford. However, as a measure of abundant caution, he had stopped trading the scrip of Radford and did not even trade in the scrip of Radford,
(x). He stated that his acts, omission in the scrip of Radford neither tantamount to fraudulent activity as defined 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 nor the Ad-Interim Ex-Parte Order charges him with the violations of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, in such a scenario there was no rational for passing the ex-parte direction against him. Further the Ad-interim Ex- Parte Order neither specifies the role played by him in the alleged scheme/artifice, nor does it level any specific violation against him, in pursuance to which the present ex parte ad interim directions were passed against him.
(y). He stated that Ad-interim Ex-Parte Order does not specify any specific violation against him. His acts and omissions in the present matter does not tantamount to any fraudulent activity as defined under Regulations 2(1)(c) of PFUTP Regulation. Thus, there is no contravention to regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b) (e) and (g) thereof and section 12A(a), (b) and (c) of the SEBI Act, 1992.
(z). In order to establish charges of fraudulent trading or violation of PFUTP Regulations, it is set principle of law that the parties to these trades should have colluded amongst
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themselves.
(aa). None of his orders in reality resulted into creation of high price in the scrip, he was just trying to place order at higher circuit price as he wanted to buy the shares of Radford, because there was substantial amount of upward movement in the scrip and there was a possibility that the price of the scrip would go further upward in the near future. It may be noted that since there were a lot of buyers and almost nil seller there was queue among the buyers to buy the shares. Owing to the queue if one had to buy the shares he needed to be at top of the queue and order to be at the top of the queue the buyer had to place order as quickly as possible, on opening of the market and also at the price higher than the other buyer in the scrip. Therefore, since he had to buy shares, he had to instruct his broker to quick and place order for buying at the earliest possible moment upon opening of the market. Further, the best way to get at the top of queue was to place order at highest possible price, wherein, no-one could surpass him and get ahead of him, which was either the circuit price or the price tick just before the circuit price. Therefore, he placed order at such price to be at the top of the queue and ensure that I get the shares. Hence, no negative inference should be drawn on him on the basis of aforesaid seven trades which allegedly resulted into creation of new high price in the scrip.
V. Radford Sellers:
(37) Ms. Manisha Jayesh Shah, Ms. Artiben Kansara and Mr. Sunil Mohanlal Kansara (Represented by Mr. Mayur Shah, Advocate):
(a). Ms. Manisha Shah had purchased 1000 shares of Radford at `5/- dated December 23, 2011 from Atherton Glass Works Limited and paid a sum of `5000 vide cheque No.407841. She had sold 966 shares by off market to one Mr. Sunil Kansara on August 30, 2012 @ `30 of Radford, as prevailing market rate of Radford on the day was `24.20/- as she was getting high valuation in off market transactions. So, she preferred to sell the scrip in off market transaction. She had sold 34 shares in various trading session from May 24, 2012 to August 08, 2012 on BSE platform.
(b). As regard to KYC of Mrs. Manisha Jayesh Shah, she submitted that she was residing at Bhuj, Gujarat and used address and phone number of her relative (i.e., Mr. Manish Nareshchandra Shah) whose address is at Andheri. She further submitted that it was a pure coincidence that her relative was appointed as a director of Radford. Further, she had purchased the share on December 23, 2011; whereas Mr. Manish Nareshchandra Shah was appointed as director on January 23, 2012. Hence there was no question of any internal information.
(c). Mrs. Manisha Shah had purchased share at `5/- of paid up value of `10/- and also sold at various price in a range of `8/- to `30/-between May 24, 2012 and August 31, 2012 having paid up value of `10/-. The paid up value of Radford was split from `10/ to `2/- on January 29, 2013 and achieved a high of `85/ having paid up value of `2/-, whereas she sold at only `8/- to `30/- having paid up value of `10. If she had any knowledge or
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information of price rise then she could have definitely sold the shares at `425/- having paid up value of `10/-.
(d). Mrs. Artiben Kansara purchased 1,500 shares of Radford at `5/- from Atherton Glass Works Limited Dated December 23, 2011 and paid a sum of `7,500 vide cheque No.413461. She sold 10 shares of Radford from August 16, 2012 to September 06, 2012 in 10 trades.
(e). Mr. Sunil Kansara purchased 966 shares of Radford at `30/- dated August 31, 2012 from Mrs. Manisha Shah and paid a sum of `28,980. He sold 517 shares of Radford from December 31, 2012 to January 10, 2013 in 10 trades.
(f). All of them preferred to sell small quantities because they observed that they were getting high price every day.
(38) Mr. Rajeev Garg (Represented by self):
(a). He stated that he was a small retail investor. In the year 1995, he had applied 600 shares in public issue of Rosette Resorts Ld. (Currently, Radford) and got the allotment of 600 shares from Radford and the allotment amount of `3,000 was paid by him on June 30, 1995. He has original allotment acknowledgement with him which he has submitted. Since, 1995, he has been a shareholder of Radford and later in year 2012 when demat process was going on in Radford’s share, at that time, he had also dematted the shares.
(b). As on price of shares went on increasing, he had started selling his shares. On September 2012, he sold 100 shares each at the rate of `6,000/- and on November 2012, he sold 100 shares each at the rate of `8,000/-. In the same manner, he had sold 600 shares at the rate of `78,000/-and he gained profit of `72,000/- (78,000-6,000) after 17 years.
(c). He was not involved in any illegal buying or selling of shares. He did not have or had any dealings with Radford and other entities. Being a small retail investor, he was subjected to restrictions, without any reason. Due to this, he was facing hardships in personal and restriction was imposed on his legal dealings.
(d). He had applied IPO of S. H. Kelkar & Co. Ltd. on October 30, 2015 wherein he got the allotments but since his demat account was frozen, the said shares were not credited to the account. So, he requested to unfreeze the demat account so that said shares could be allotted.
(e). He was a small investor and his livelihood depended upon photocopying, computer designing and ticket booking. Through his saving, he used to invest in share market (in public issue) since 1992.
(f). Even today he has around 30-40 company shares with him in a physical form, whereas he had applied and got the shares at different time through public issue.
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(g). He stated that he had purchased 90% shares in IPO only through his demat account. Further, he informed that there was no crime to purchase shares from allotment.
(h). At present, he is holding shares of `1.5 lakhs in value in physical form and also was converted shares from physical form to demat form.
(i). He stated that SEBI was investor friendly since he had received an amount of `500 into his S.B A/c from SEBI Protector fund. Similarly, he requested to find all the companies in which he had lost of `1.5 lakhs in a physical form or to compensate him from Investor Protector Fund.
(j). He stated that he did investments through his savings. His child who was going to give 10th class exam and he needed money for further studies of his child. Since, his trading and demat account was frozen, he was unable to sell his shares. Hence, he requested to unfreeze his demat account.
(k). He stated that debarring him was a violation of legal rights of his personal life and property.
(39) Anup Manilal Shah (HUF) (Represented by Mr. Anup Manilal Shah):
(a). He denied all allegations made against him under the interim order dated November 09, 2015 and stated that the allegations were baseless and that the interim order dated November 09, 2015has been issued without complete investigation of the matter.
(b). He has not been involved in either punching a buy quote or sell quote except for one single day when he got the right price to sell shares and actually sold 2800 shares. Exactly as mentioned in the interim order dated November 09, 2015, he held on to these shares till such time as there used to be large buyers and not done any trade that would either help the price movement. On the particular day (i.e., January 10, 2013), he sold 2800 shares as the circuit limit got opened and hence he decided to book his gains.
(c). He stated that the trading volumes on January 10, 2013 were higher than average (in fact the highest) and therefore he sold a lot of 2,800 shares, which was in complete contradiction to the observation in Para 2 and Para 11 of the interim order dated November 09, 2015 that miniscule number of shares were sold per day by him to control trade volume.
(d). He stated that Anup Manilal Shah (HUF) the entity purview was engaged in the business of buying physical shares from open market for a discount to the market price, getting the shares duly transferred, dematerializing the same and selling them when there was an opportunity to make reasonable gains. These purchases were for listed as well as suspended or unlisted shares. Generally sellers would want to get rid of all their physical shares held over years and also would want to sell odd lots of stocks at discounted rates. So, he has purchased a whole lot of junk shares as well.
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(e). He stated that during the course of this business he bought the shares of Rosette Resorts ltd., (Currently, Radford) from various holders. After an initial start-up period he was unsure and hence treated these as investments, he was treating all purchases and sales as business and has not been claiming any LTCG benefit as well, barring on the initial period purchases that had been accounted as investments.
(f). He purchased and sold in various scrips during period under review. This should clearly establish that they were genuine equity trader/ investor and did the trades as per the opportunity and in their routine course of business of buying and selling of shares.
(g). As stated in Para 5 of the interim order dated November 09, 2015, he stated that no buy order was placed on January 10, 2013 when he sold 2800 shares. He further stated that none of the allegations made in Para 6 of the interim order dated November 09, 2015 apply to him as is evident from the details provided in the interim order dated November 09, 2015, and hence there was no pre-determined or non-genuine manner of sale of shares by him to manipulate the scrip of Radford.
(h). He further stated that he was not connected to any entities involved in any type of malpractices in rigging the prices of any stock/securities, and he was not privy to any statements given by Registrar and Share Transfer Agent (hereinafter referred to as “RTA”) in respect of transfer of shares to him. He had no reason to believe that the share certificates held by him was not genuine and the same were dematerialized by the depository without any objections.
(i). He further stated that he has not been presented an opportunity to be heard in accordance with principles of natural justice. He once again reiterated that he was genuine sellers of the said scripts and pray for immediate reversal of the restraining interim order placed upon him. He did not have any link, contact or association with any of the stated entities.
(40) Mr. Bharat Kumar Jayantilal Shah (Represented by self):
(a). He applied shares in IPO of Rosseto Resorts Ltd. (Currently, Radford) in May 1995 and 500 shares were allotted to him in this IPO. Folio No. was 12521. Certificate No. was 42333 TO 42337 (Five Certificates).
(b). Further, he dematerialised these shares on September 11, 2012 through his broker/Inventure Growth and Securities Ltd. Demat No. was 1201120100034789.
(c). He was a Long Term Share Investor and had investment in long Term Shares securities. He further stated that he sold his old investment shares after Demat.
(d). SEBI has restricted him to buy or sell the securities. In this regards, he inquired what to do with his physical shares. He stated that when SEBI will release him to do transaction till then Radford would change its name, address and scrip code and being a small
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investor, they would not able to find them.
(e). Vide letter dated January 15, 2016, he was given a permission to sell only 25% of shares. It is a punishment for a small investor like him. They would not able to bare the fees of again opening a new demat account and new bank account.
(f). He stated that if he sells shares worth `1 lakh, whether is it justified to enable him to use `25,000 out of the sale proceeds and to keep details of the same.
(g). SEBI’s motto is to protect investors and to provide justice. So he expected that he would get justice at the earliest.
(41) Mr. Dina Satishkumar Mehta:
(a). She was a small investor and she was not having big portfolio of shares. She was not allotted shares on the preferential basis. On the contrary, she had acquired the shares from Rajendra. P. Patel. When shares were transferred on her name, she had sent them on April 17, 2012 for dematerialization. They got dematerialized on April 26, 2012 and she had sold them in the market on 11-05-12.
(b). She did not have any relation with any of the promoters, directors or mediators of Radford.
(c). She did not have any unaccounted income. She had been filing her income tax returns regularly without fail. She has not made profit in long term capital gains by Radford’s transaction. She has not taken any tax exemption by long term capital gain by Radford’s transaction.
(d). She was a genuine investor. She was not engaged in any of the activities such as artificial demand or supply of the shares trading.
(e). She had only 100 shares of the Radford and had sold them in a single stroke on May 11, 2012. She had sold her shares for `4.47 per share. She had sold her shares at 9:43:59am, much earlier on that day. As she had only 100 shares of Radford, she had sold all her holding of the Radford, making no point of having trade of other shares of Radford.
(f). She did not know any of the person listed in Annexure- A to the interim order dated November 09, 2015. Neither of them was her relative nor linked with her by any means. She has sold her shares in a legal way and not acting under a pre-determined plan to fix or manipulate the price of the script.
(g). She had sent her shares for transfer on her name on January 24, 2012 to P.S Global Limited (Currently, Radford) at Baroda. She had received the above shares after transfer on her name on April 16, 2012 from registration transfer agent Mondkar Computers Pvt. Ltd. with forwarding letter dated March 31, 2012, then she had sent them for dematerialization on April 17, 2012 which was done on April 26, 2012. Later, she had
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sold the shares on May 11, 2012 in the market.
(h). She might provide with any of the clarification or evidence if needed in the future.
(i). She was not engaged in artificially increasing the price of scrip for providing long term capital gain to the preferential allottees and did not play any crucial role in increasing the price of the script. She was not a part of the scheme, plan, device or artifice employed in relation of the script. She was not involved in such fraudulent, unfair or manipulative transactions.
(j). She requested not to restrict her from accessing the securities market and buying, selling or dealing in securities either directly or indirectly in any manner and permit her to have trading with the stock exchanges and the depositories.
(k). She has objection for this interim order dated November 09, 2015 because shares were transferred on her name after January 24, 2012 and she had sold them on May 11, 2012 after dematerialization, so there is no question of long term capital gain in her case. Also there is no long term capital gain in her statement of income.
(42) Mr. Harimohan Khandelwal:
(a). He stated that he had been a shareholder since IPO of Radford and was allotted 1000 shares
(b). He had dematted the shares when trading in Radford started.
(c). He had sold the shares in five different dates on July 12, 2012, September 07, 2012, September 13, 2012 till September 21, 2012 which was clear from his Demat account.
(d). After selling of all the shares, he had no connection with Radford or its director.
(e). No interim order dated November 09, 2015 can be imposed on him
(f). He informed that he was unable to come down to Mumbai for hearing as he was staying far so difficult to be present. So, whatever response he has given may be recorded and requested him to pass an interim order dated November 09, 2015 for releasing him.
(g). The interim order dated November 09, 2015 is passed against him was wrong and against law.
(43) Mr. Hasumati G. Mandlia:
(a). She was a very small investor. She is a house wife aged around 61 years. She is having some health problem. Her husband Mr. Ghanshyam M. Mandlia aged 64 years is also Senior Citizen (retired) and his health was also not good.
(b). She requested to give her a chance of hearing at Ahmedabad Gujarat Office to hear her.
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(c). She purchased 200 shares of Rossette Resort Ltd. in physical form around year 2003-04. Formally, this was old name of company. Then company changed the same as P. S. Global Ltd. and then again it was changed as Radford Global Ltd.
(d). Share price of Radford was stable up to July 2012. Suddenly one day, she found / read the rate of P. S. Global Co. was around `12/-.
(e). The said 200 shares were sent by her for demat on July 27, 2012. The same shares were converted in demat mode on September 27, 2012. These 200 shares were sold by her on October 10, 2012 on BSE @ rate `43.00.
(f). She requested to unfreeze her demat account.
(44) Mr. Kanaiyalal Manilal Gandhi and Ms. Ramila Gandhi (Represented by Mr. Anshul Shah, Advocate):
(a). They denied all allegations and his involvement of any kind in any irregularities observed in the functioning and management of Radford or illegalities committed by it or its Registrar and Transfer Agent (RTA).
(b). Mr. Kanaiyalal Manilal Gandhi was a 76 year old senior citizen, having multiple health problems including heart ailment, living with her wife, aged 70 years in a small 2BHK flat.
(c). They have no other source of income except returns from their investment, a majority of which was in securities. They live a very simple life.
(d). They buy or sell shares to maximize the return on their investment. However, ex-parte ad interim order dated November 09, 2015 imposing restrictions on them from dealing with the securities in any manner had put them in the worst ever situation as it may lead to starvation or non-affordability of continuous ongoing medical expenses.
(e). Responding to the public issue of Rosette Resorts Ltd., they had applied for 500 shares each for both of `10/- each. They paid the initial subscription of `2,500/- for 500 shares of the face value of `10/- each. After allotment of 500 shares, they paid the balance amount of `2500/- vide a cheque no. 392743 dt. June 26, 1995 drawn on Bank of Baroda, University Campus branch, Vadodara.
(f). They were issued a share certificates. Since there was no trading in the Radford’s shares for long during the period from January 2003 to December 2011, they kept the shares in physical form only.
(g). Being a resident of Vadodara and staying near the area of operation of Radford, they came to know that the management of Radford has changed and Radford was entering into real estate business, which was booming across India in 2012. They decided to get
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rid of their dead investment and got their shares of Radford dematerialized by surrendering the physical certificate to their DP, the Stock Holding Corporation. Their share certificates were sent to the RTA of Radford for Demat by their DP.
(h). After due scrutiny, the RTA dematerialized their shares of Radford, which were being traded in the name of Radford.
(i). Any negligence, omission or lapses on the part of the RTA or Radford while dematerializing their shares could not be termed as their involvement in illegal activities.
(j). The shares of Radford were duly credited to their Demat account. Since the shares were being traded much lower than the issuing price, they preferred not to deal with the shares of Radford.
(k). In August 2012, the price of the shares crossed `20/-. Though the said price was quite low for an investment of `10/- made before 17 years, they decided to recover their loss in the scrip in a phased manner and started to sell 100 shares (1 market lot) from August 28, 2012 totalling to sell off of 800 shares.
(l). Thus the total net earnings on the investment of `10,000/- made before 17 years was approx. `20,552/-, less than even the savings bank interest!
(m). With respect to the discrepancies noticed in examination of their physical share certificates as mentioned in Annexure B to the interim order dated November 09, 2015, they submitted that they preferred not to sell all shares in a single trade despite there being heavy demand from buyers.
(n). They purchased shares through public issue and the share certificate was issued to them by Radford. They had no occasion or reason to verify the genuineness of their share certificate. The shares were not being traded for a very long period. When they noticed some movement in the share price, they decided to get them dematerialized so as to be able to get rid of an otherwise dead investment. They sent their original share certificate for dematerialization to RTA through their DP. RTA/Company after due verification and being completely satisfied with the genuineness of their share certificates, credited their Demat account with 1000 shares. Thus they were assured of the existence of Radford and the tradability of its shares, not just of the genuineness of the shares, which they had no reason to doubt.
(o). If their name is not found in the mailing list or MCA list or RTA list as a shareholder, it cannot be assumed that there were involved in price rigging of the shares and in their humble submission no penalty can be imposed upon them for the fault of Radford or RTA. In para 10 of the interim order dated November 09, 2015, it has been rightly observed and held that the stationery of the physical share certificates was controlled by Radford only. Under the circumstances, it is illogical and illegal to cast the responsibility of fictitious share certificate on them.
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(p). So far as the genuineness of the share certificates was concerned, they had no role if a fake and fictitious certificate were issued to them by Radford without their knowledge, which was later on dematerialized also, and for selling the shares, they acted like all other investors with ordinary prudence.
(q). He further stated that their livelihood solely depended upon the returns from their investment which was largely in securities only. If there had been the slightest involvement of their in price rigging of the shares as alleged, they also could have sold their shares @ `241.35 per share against their selling of shares within the price band of `20.92 to `48.25.
(45) Mr. Mansukhbhai Jagabhai Tanti:
(a). He was a small investor in share market and he was never involved in any miniscule or mechanism to generate fictitious LTCG in share market and also not involved in Radford Group Suspected Entities who misused the stock exchange mechanism to generate fictitious LTCG.
(b). He had purchased 100 shares of Radford from the market in 1996 and not purchased directly from Mr. Purshotam Senjalia and he was not aware about whether he had sold the said certificate from abeyance list of RTA and MCA. In 1996 delivery of said share certificate received to him through stock market, thereafter he sent same share certificate to Radford for transfer it in his name, and Radford has transferred the said certificate in his name after observing all necessary verification.
(c). Further, he stated that, in 2012, he had dematerialized same share certificate in his demat account while request form, thereafter again share certificate had gone to Radford through his DP ID for request to convert his said share in demat form. At the time again Radford Global Limited had re-verified the genuineness of the certificate and converted his only 100 share in demat form on October 08, 2012 and after that on October 17, 2012 he had sold said 100 share in market.
(d). He further requested that from 1996 to 2012 and till today he had purchased and sell only 100 share of Radford not more than that, he was innocent and not involved in this matter.
(e). His wife, Ms. Majulaben Mansukhbhai Jagabhai Tanti stated that her husband had come under depression due to worries imposed by SEBI. Due to wrong interim order dated November 09, 2015, her husband could not sell another scripts which was lying in his accounts & as market is volatile, he come in trouble day by day due to unnecessary harassments. If he did not sell other scripts lying in his demat account and any loss incurred to him will be liable to SEBI.
(f). His wife challenged to release her husband’s demat accounts otherwise any loss of life or money that was come in their family will be fully responsible to SEBI, as her husband is
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totally innocent.
(g). He stated that he was innocent & unnecessarily his 2 demat accounts were ceased. It was harming on his other investment, as he had other scripts & he required to sell out.
(h). He would be in big loss in coming days if SEBI did not release his demat account, so, he requested to release his dermat accounts.
(46) Ms. Pragna Patel (Represented by Mr. Rajesh C. Patel):
(a). She stated that she was a retail investor. She had applied for 500 shares of `10/- each for cash at par in public issue of equity shares of ‘Rossette Resorts Ltd’., vide application No. 821713 on April 03, 1995 and have paid `2500/- towards application money.
(b). She was allotted 500 shares of Radford , vide their Allotment Advice No.1003 under folio No.011003, Share certificate No.28346 to 28350, Dist Nos. 4337001 to 4337500. She had paid remaining amount of `2500/- towards allotment money in Bank Of Baroda, Vrundavan Shopping Centre br., Ahmedabad, vide cheque No.947791 dtd June 29, 1995 for `2500/- drawn on State Bank Of India, Pragatinagar, Ahmedabad.
(c). Out of 500 shares, she had sold 200 shares on July 23, 1995 and delivered Share certificate No. 28346 & 28347 towards delivery to the stock Exchange.
(d). After that the price of company’s share was in discount so she had not sold remaining 300 shares. After that the scrip was suspended from BSE for the period from January 14, 2003 to November 19, 2011.
(e). After that Radford changed its name and issued fresh certificates in lieu of old share certificates, bearing new name of the company under folio no: 11003, Share certificate No.100235. Dist Nos.23401 to 23700 for 300 shares and delivered the same by company’s RTA i.e., Universal Capital Securities Pvt. Ltd. alongwith their letter dtd December 12, 2012.
(f). Thereafter she had lodged the above said share certificate No.100235, comprising 300 shares to her DP i.e., Sharekhan Ltd. for dematerialization of shares and the said 300 shares were credited in her demat a/c on January 10, 2013.
(g). From above said 300 shares , she had sold 60 shares during the month of January 2013. The transactions carried out by her was purely on delivery basis and not for manipulation purpose. She never bought/sold securities for intraday trading/future/option. She bought securities for purely on investment purpose .i.e., delivery basis.
(h). She could be judged by her genuineness from her limited transactions in stock exchange and demat a/c since 20 years. She was not allotted any shares on preferential basis. She is the original allottee of public issue in May-1995.
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(i). She also undertakes that she had no relation/connection with company’s promoters/directors/any entity mentioned in the interim order dated November 09, 2015 and she was not involved in any manipulation/Fraudulent matter of Radford.
(j). So she requested to release the ban on her trading a/c as well as demat a/c at the earliest.
(47) Ms. Rekhaben Lakhaben Sagparia (Represented by Mr. Pravin B. Sojitra):
(a). Three of her family members had applied for the IPO of Radford, when this IPO was in the market in April, 1995. In this IPO, they were allotted some shares.
(b). At the time allotment of these shares, there was no required price for sale of these shares. They had therefore transferred all these shares in the name of Rekhaben Lakhabhahi Sagparia, with an intention to sell the same whenever they get a good price for the same. They had sold 200 shares when the price of the scrip reached at a good movement.
(c). They had not done anything beyond the rules and regulations for the price movement.
(d). She was not connected, directly or indirectly, to any promoter/director/key managerial employee of Radford.
(e). She was not related to Radford nor does she has any business or professional relationship with it, directly or indirectly.
(f). She was not directly or indirectly, connected to any officer or an employee of any Stock Broker.
(g). She was not directly or indirectly, connected to any group of entities connected/related (“Suspected Entities” or Radford Group & Suspected Entities) in this matter and script.
(h). Her KYC details were also not matching with any group of entities connected/related (“Suspected Entities” or Radford Group & Suspected Entities ) in this matter script.
(i). The sources of fund for all her dealings in the securities of Radford Global Ltd. are through her own funds.
(j). She has not been debarred by SEBI vide interim order and suddenly interim order dated November 09, 2015 debarred her from accessing securities market.
(k). Further, the letter dated November 10, 2015 is the only communication received from SEBI debarring her from accessing the securities market without giving opportunity of natural justice or giving opportunity to hear her or giving opportunity to represent and clear her stand in the matter.
(l). She requested to SEBI to allow her to sell of the securities kept in her demat account and put restriction for the trading the scrip of Radford only.
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(48) Ms. Veena Mohandas Valbhani:
(a). She stated that she was a small investor. She is unmarried with age of 51 years. She was shocked after receiving notice to which she is not a accused.
(b). She did not have any relation with any company nor any deal. She herself suffering from her personal disease and she even could not roam without anybody’s help or support even in Baroda.
(c). Many years back public issue of Rossette Resorts Ltd. came. She was allotted 500 shares. Then after 17 years this shares was converted into demat account and got in another company name and then she had sold those shares.
(d). She even did not know that the shares are 98/per day volume. And because of that she was requesting that the blame which is on her is false and fake.
(e). She requested to do the needful and withdraw this notice.
15. I have carefully considered the allegations and the submissions of the noticees herein and have perused the relevant documents and material available on record. I note that the limited issue to be considered, in view of submissions made by the noticees and in the facts and circumstances so far brought on record in the instant case, is as to whether the direction in the interim order qua the notices need to be continued, revoked or modified in any manner. The facts and circumstances as prima facie observed in preliminary inquiry in this case need to be seen holistically taking into account the scheme artifice and device employed by the players.
16. The facts and circumstances of the instant case as brought out in the interim order, prima facie, show the modus operandi employed by Radford, directors, its promoters and directors of Radford Investment, preferential allottees and the Exit Providers, wherein Radford, in nexus with the preferential allottees made façade of preferential allotment. After the expiry of the lock-in period, the Exit Providers provided huge profitable exit opportunity to the preferential allottees by buying the shares of Radford at artificially increased prices. Hence, the preferential allottees with the aid of the Exit Providers misused the stock exchange mechanism to exit at a high price in order to book illegitimate profits with no payment of taxes as LTCG is tax exempt. Further, the interim order discusses the manner by which the preferential allottees sold their shares pursuant to abnormal increase in price in a manipulative way and made huge illegitimate profit in the whole event.
17. Before dealing with replies/submissions of the noticees on merit I deem it necessary to deal with preliminary and common contentions raised by some of the noticees. The first such contention is that the interim order has been passed in complete disregard of the principles of
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natural justice in as much as no opportunity of hearing was provided to the noticees. In this regard, I note that the interim order has been passed on the basis of prima facie findings observed during the preliminary examination/inquiry undertaken by SEBI. The facts and circumstances necessitating issuance of directions by the interim order have been examined and dealt with in the interim order. The interim order has also been issued in the nature of show cause notice affording the noticees a post decisional opportunity of hearing. This position has been upheld in various judgements of the Hon'ble SAT, the Hon'ble High Courts and the Hon'ble Supreme Court. Relevant portions of few such judgments are referred to hereinafter:-
(a) Hon'ble Bombay High Court in Anand Rathi & Others Vs. SEBI (2002 (2) BomCR 403 upheld the procedure of post decisional hearing in such matters and observed as under:
"31. It is thus clearly seen that pre decisional natural justice is not always necessary when ad-interim orders are made pending investigation or enquiry, unless so provided by the statute and rules of natural justice would be satisfied if the affected party is given post decisional hearing. It is not that natural justice is not attracted when the orders of suspension or like orders of interim nature are made. The distinction is that it is not always necessary to grant prior opportunity of hearing when ad-interim orders are made and principles of natural justice will be satisfied if post decisional hearing is given if demanded. 32. Thus, it is a settled position that while ex parte interim orders may always be made without a pre decisional opportunity or without the order itself providing for a post decisional opportunity, the principles of natural justice which are never excluded will be satisfied if a post decisional opportunity is given, if demanded."
(b) Hon'ble High Court of Judicature for Rajasthan at Jaipur in the matter M/s. Avon Realcon Pvt. Ltd. & Ors Vs. Union of India &Ors (D.B. Civil WP No. 5135/2010 Raj HC) has held that:
“…Perusal of the provisions of Sections 11(4) & 11(B) shows that the Board is given powers to take few measures either pending investigation or enquiry or on its completion. The Second Proviso to Section 11, however, makes it clear that either before or after passing of the orders, intermediaries or persons concerned would be given opportunity of hearing. In the light of aforesaid, it cannot be said that there is absolute elimination of the principles of natural justice. Even if, the facts of this case are looked into, after passing the interim order, petitioners were called upon to submit their objections within a period of 21 days. This is to provide opportunity of hearing to the petitioners before final decision is taken. Hence, in this case itself absolute elimination of principles of natural justice does not exist. The fact, however, remains as to whether post-decisional hearing can be a substitute for pre-decisional hearing. It is a settled law that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, the requirement of giving reasonable opportunity exists before an order is made. The case herein is that by statutory provision, principles of natural justice are adhered
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to after orders are passed. This is to achieve the object of SEBI Act. Interim orders are passed by the Court, Tribunal and Quasi Judicial Authority in given facts and circumstances of the case showing urgency or emergent situation. This cannot be said to be elimination of the principles of natural justice or if ex-parte orders are passed, then to say that objections thereupon would amount to post-decisional hearing. Second Proviso to Section 11 of the SEBI Act provides adequate safeguards for adhering to the principles of natural justice, which otherwise is a case herein also…"
18. I, therefore, do not find any violation of principles of natural justice while passing the interim order as has been contended by the noticees. In this case, as discussed hereinabove, the purpose of the interim order is to achieve the objectives of investor protection and safeguarding the market integrity by enforcing the provisions of the SEBI Act. In my view, section 11(1) of the SEBI Act casts the duty on SEBI to protect the interests of the investors, promote development of and regulate the securities market, “by such measures as it thinks fit”. Apart from this plenary power, section 11(2) of the SEBI Act enumerates illustrative list of measures that may be provided for by SEBI in order to achieve its objective. One of the measures enumerated in section 11(2)(e) is "prohibiting fraudulent and unfair trade practices relating to securities markets". The word 'measure' has not been defined or explained under the SEBI Act. It is well settled position that this word has to be understood in the sense in which it is generally understood in the context of the powers conferred upon the concerned authority. From the provisions of section 11, it is clear that the purpose of section 11(2)(e) of the SEBI Act is to prohibit all fraudulent and unfair trade practices relating to the securities market and the Board may take any 'measures' in order to achieve this purpose.
19. The 'measures' and the directions under sections 11 and 11B of the SEBI Act can be taken/issued for prohibiting the fraudulent and unfair trade practices relating to securities market and achieving the objective of investor protection, and promotion of and regulation of the securities market. It is also pertinent to mention that the interim order has been passed in the course of preliminary inquiry and the investigation in the matter is ongoing. Based on the prima facie findings in the matter and in order to protect the interest of investors in the securities market, SEBI had issued directions vide the interim order.
20. In this case, as discussed hereinabove, the purpose of the interim order is to achieve the objectives of investor protection and safeguarding the market integrity by enforcing the provisions of the SEBI Act. I, therefore, do not agree with the contentions of these noticees with regard to the scope of the interim order and the power of SEBI in the matter.
21. Some of the noticees have raised another preliminary contention that no emergency situation existed warranting such an ex parte ad-interim order. I note that the time taken to arrive at such decision/action is dependent on the complexity of the matter, its scale and modus operandi
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involved and other attendant circumstances. The power under section 11 and 11B of the SEBI Act can be invoked at any stage, i.e., either during pendency or on completion of enquiry/inquiry or investigation. The interim order clearly brings out the reasons and circumstances for issuance of ex-parte ad-interim directions. I, therefore, do not find any merit in these common preliminary contention of the noticees.
22. Some of the noticees have contended that they had traded on the anonymous screen based system of the stock exchanges and as such their trades cannot be regarded as having manipulative/fraudulent intent. They have further contended that they have not provided exit to the preferential allottees. In this context, I note that in the screen based trading, the manipulative or fraudulent intent can be inferred from various factors such as conduct of the party, pattern of transactions, etc. In this context, vide its order dated July 14, 2006, in Ketan Parekh vs. SEBI (Appeal no. 2/2004), the Hon’ble SAT has observed that:
"The nature of transactions executed, the frequency with which such transactions are undertaken, the value of the transactions, ...... , the conditions then prevailing in the market are some of the factors which go to show the intention of the parties. This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn."
23. With respect to the common contention raised by some of the noticees as aforesaid, with regard to price rise in the scrip, I note that para 8 to 10 of the interim order clearly demonstrates the manner by which price of the scrip was increased up by few entities from `3.20/- to `241.35/- in 121 instances with nominal trading volume of average 98 shares per day which cannot be treated as normal trading behaviour. It is also noted that when the price of the scrip was moving upward through first trades and it was influenced by few of the LTP Contributors, and these entities were executing 1 to 2 trades per day with miniscule quantity of buy orders contributed significantly to price rise. During the relevant time, I find that out of a total of 121 instances of trades establishing new high price in the scrip, certain entities established new high price on 91 instances (75.21% to total instances) and contribution of these entities in establishing new high price was 82.81% of the total new high prices.
24. The contention of some of the noticees is that after giving permission to make preferential allotment, granting listing and trading permission for the shares issued in preferential allotment, the issuance of the same could not be questioned, has no merit as preferential allotment is like any other corporate action/instrument which is allowed as per the extant regulations for raising funds by corporate bodies for the purpose of business requirements. However, the same becomes questionable/doubtful when it was used as tool for implementation of any dubious plan or mala fide intention as done in the instant case in the manner described in the interim order. I, therefore, find no merit in the submission of Radford
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that nobody raised grievance about preferential allotments made by it during the relevant period and hence reject the same.
25. As regard the common contention of some of the noticees that at no point of time either the stock exchange or SEBI had raised any alarm bells as to price movement in the scrip, I note that it is a common knowledge that movement in the price of a scrip is driven by various factors. Unlike in the present case, the steep price rise with meagre volume followed by sudden increase in volume at high price at the relevant time cannot be assumed as a normal market trend when the buyers and sellers of Patch I are known entities of Radford, i.e., the preferential allottees as sellers and entities of the Exit Providers as buyers. It may be noted that whether there is any concern with respect to trading pattern in scrip is a subject matter of examination/investigation in that scrip and its outcome. Any direction or measure, if warranted, based on the outcome of such examination/investigation, is a post facto action taken to safeguard the interest of investors in securities market and protect the market from further damage, as done in the instant case. Thus, the time taken to arrive at such decision/ action is a subjective matter and depends on the complexity of the matter, its scale and modus operandi involved. I, therefore, do not find any substance in the contention of the noticees.
26. Some of the noticees have claimed that the financial fundamentals of Radford had improved in the Financial Year 2012-13 as compared to the Financial Year 2011-12 considering the increase in the total revenue and the profit after tax of Radford. In this regard, it is observed that the financial statements of Radford for the relevant years as tabulated below give different picture:
Table 3 Particulars 31/03/2012 31/03/2013 31/03/2014 Amount in `Lakhs Net Sales / Income from Operations 292.03 2,134.24 1,103.60 Expenditure (for Operations) 295.20 2,162.12 1,165.20 Loss from Operations (3.18) (27.89) (61.60) Other Income 12.30 94.29 87.70 Profit before Tax 9.13 66.40 26.10 Tax 2.96 20.53 8.10 Profit after Tax 6.17 45.87 18.00 Market Price Per Share(`) 0.64 73.30 4.62 Earnings Per Share (`) 0.01 0.07 0.03 Price to Earnings Ratio (P/E Ratio) 72.90 1,123.55 180.47 Market Capitalization to Sales Ratio 1.54 24.15 2.94 * Annual Report FY 2012-13 and BSE Website
27. From the table above, it is noted that though net profit of Radford for the Financial Year 2012-13 increased to `45.87 Lakhs compared to `6.17 Lakhs in the preceding Financial Year,
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the increase in profit is not a result of the operating performance of Radford. In contrast, Radford had incurred higher operating losses in the Financial Year 2012-13 compared to the Financial Year 2011-12. Thus, the net profits of Radford have increased due to the increase in the other income, comprising of interest income and dividend received, and not due to operating performance of Radford. Further, from the comparison of the key financial ratios like P/E ratio and ratio of market capitalization to sales for the Financial Year 2012-13 to the preceding and the subsequent financial years, it is apparent the increase in price of the shares of Radford is not justified by its financial performance. The data in aforesaid table as derived from the Annual Report of Radford do not substantiate astronomical price rise to the extent of 7442% during Pre-Patch I. I, therefore, do not agree with this contention of the noticees.
28. Having dealt with the preliminary contentions as above, I now proceed to deal with the specific submissions made by the different categories among the noticees.
Radford, its promoters/directors and directors of Radford Investment.
29. As regards the common contention of Radford, it directors and its promoters and directors of Radford Investment that Radford’s business was revived, I note that trading in shares of Radford was suspended on BSE from January 14, 2003 to December 19, 2011 (almost 8 years) since Radford had not paid the requisite listing fees and as such there was absence of any pricing history in the scrip of Radford due to which the minimum issue price could not be arrived at. Also, no supporting material or documents have been submitted by these noticees in support of these contentions. Further, I note that the company has diverted the funds raised through preferential issue for certain other purposes as detailed elsewhere in this order. In view of the above, I do not find any merit in the submission of these noticees.
30. The contention that there is nothing wrong in making long term capital gains and that the Radford and its promoters/directors had no interest therein, is not tenable in the facts of the present case as set out herein and in the interim order in detail. Clearly the market was manipulated for the benefit of the preferential allottees to give them an exit at huge profits, and Radford was involved in the modus operandi, since the first step was the large preferential issue at high value. Preferential issues can only be made by pre–negotiation. I, further note that Radford has failed to provide any material such as any communication between the preferential allottees and Radford, Information Memorandum, etc. in order to substantiate its contention. The sharp price rise in the scrip was not supported by fundamentals of Radford or any other external factor as mentioned in the interim order, in my opinion, would not entail investments from rational investors unless Radford and the preferential allottees are known to each other and there is prior arrangement between them for issue of shares. I, therefore, reject the contentions of Radford in this regard.
31. Another contention of these noticees that all actions by Radford with regard to the
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preferential allotment and also splitting of shares were done after taking due and prior permission of the concerned authorities, the issuance of the same cannot be questioned, has no merit. This is because the preferential allotment, though like any other corporate action, may be in compliance of legal requirements, the same become questionable/doubtful when it is used as tool for implementation of any dubious plan or mala fide design and purpose as done in the instant case in prima facie fraudulent manner as described in the interim order.
32. In my view their contention that the exchange transferred Radford's shares from 'T' group to 'B' group, is totally irrelevant and has no bearing on the said prescribed parameters. Shifting of the scrip to /from ‘B’ group in this case was done in the normal routine course by the stock exchange based on the pre-defined parameters provided by SEBI and as per the system generated data in respect of such parameters.
33. I note that there was no material corporate announcement made by Radford which could support the price rise of 7,442% during Pre-Patch I in this scrip. Also, the movement was extremely aberrant vis-à-vis the movement of the stock market as the SENSEX only moved from 17,645 to 20,103. These noticees have failed to give any plausible explanation to the charge in this regard. They have contended that Radford had no control over the price of its shares and it is decided by market forces. I note that it is a common knowledge that movement in the price of a scrip is driven by various factors. The steep price rise with meagre volume followed by sudden increase in volume at high price cannot be assumed as a normal market trend when the buyers and sellers of Patch I are known entities of Radford, i.e., preferential allottees as seller and the entities of the Exit Providers as buyer.
34. The claim of these noticees that Radford or its directors were unaware that the preferential allottees sold the share to entities connected/related, directly or indirectly, to the Exit Providers as alleged or at all has no merit and is a farce in the backdrop that Radford and the persons in charge of its affairs had used the preferential allotment as a device to achieve the mala fide objectives as alleged in the interim order. This becomes more clear from various factors like in spite of having poor track record and weak fundamentals Radford was able to garner crores of rupees through preferential allotment, immediate transfer of preferential money to various entities on the pretext of loan without utilising for the purpose for which it is raised, abnormal rise in price and volume of Radford scrip during the relevant time, connections found with different entities, manner of trading between preferential allottees as sellers and some of the entities of the Exit Providers as buyers, etc. In fact, the basis of the interim order is about the modus operandi of the schemes, plan, device and artifice employed in the instant case by Radford and its related entities including some of the Exit Providers is to benefit the preferential allottees in a manner that is fraudulent and is contravention of securities market regulations. In view of the same, I find no merit in the submission of these noticees in this regard. These noticees are unable to demonstrate or provide any plausible reasons as to why
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any rational investor would like to invest in such a company that has neither any trading history nor have any financial or business presence/recognition in the market. In my view, the same can only be possible if there is nexus between the allottees and company and its directors/promoters. In view of the same, I do not find any merit in this contention.
35. With regard to the alleged connections among the Exit Providers based on the facts from KYC documents, Bank Statement analysis, off market transfers analysis, MCA details, etc. they have claimed that the money transfer referred to in the Annexure B to the interim order were in respect of textile trades. It is noted that such connection through transfer of funds as discussed in the interim order was to indicate connection of these noticees with the other entity/entities of the Exit Providers. Whether such fund transfer was for textiles or otherwise is immaterial. The fund transfer as demonstrated in the interim order shows connection amongst the respective noticees and they have failed to give any plausible explanation to refute the same.
36. With regard to contention made by these noticees that SEBI had not given particulars of investor complaint or grievance since 2012 till date, I note that there were several complaints against Radford and its RTA which were lodged by investors in SCORES. SCORES complaints can be accessed directly by Radford and its RTA. Even if no complaints/grievances were received then also SEBI on observing any suspicious activities can suo moto carry out examination.
37. With regard to contention that SEBI has decided three criteria for selection of scrip for suspension of trading but had not disclosed the purpose of the selection or the alleged wrongdoing is not relevant for the purpose of the interim order as the suspension of trading is an independent action taken by the stock exchange under its bye-laws, rules, regulations, etc. in this scrip.
38. I find no substance or material in the submissions of these noticees with respect to connection with various entities as mentioned in the order. Radford has neither given any plausible submission nor has brought any material on record to substantiate its reply. Mere denial of the connections or not being aware of the connections is not sufficient enough to be considered and has no bearing on the findings of the interim order. I deny that Radford, directors, its promoters and directors of Radford Investment were not aware that the preferential allottees sold the share to entities connected/related, directly or indirectly, to the Exit Providers as alleged.
39. The facts in the instant case clearly reveal that these noticees had failed in their duty to exercise due care and diligence. Facts of the case indicate that directors of Radford were responsible for bringing the scheme of preferential allotment of equity shares that was used as tool for implementation of the dubious plan, device and artifice of the Exit Providers and
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the preferential allottees. This scheme of preferential allotment has resulted into misuse of stock exchange system by the entities of the Exit Providers, the preferential allottees and others in a manner that are fraudulent in terms of the PFUTP Regulations, 2003 as brought out in the interim order. Further, as specified in the interim order, the purported connections of these directors with the entities of the Exit Providers indicate that they are hand in glove with the entities of the Exit Providers. From this, I note that the whole scheme of operations starting from issue of equity shares on preferential basis to exit of preferential allottees at a very high price could not have been fructified without the involvement and co-operation of the directors of Radford.
Preferential Allottees
40. The preferential allottees have contended that there is nothing in the interim order to allege or demonstrate any wrong-doing on their part. They have further contended that they are not connected/related to Radford, its directors/promoters or with any other entities who are alleged to have indulged in the price manipulation or who have provided exit to the preferential allottees. It is trite to say that the preferential allotment of shares is an issue of shares by an issuer to select person or group of persons on a private placement basis unlike a public issue where funds are raised by inviting subscriptions from public in general. It is also a matter of common knowledge that a preferential allotment is made to the persons/entities on a one-to-one basis who are acquainted/familiar with the company and/or its promoters/directors. A preferential allotment is always for the purposes of meeting fund requirements of the concerned company and involves a covert, manifested and planned actions by the concerned parties, i.e.,- (a) the company to identify select persons/group of persons who are known to it or its promoters/directors for investing in its share capital; (b) select persons/group of persons (preferential allottees) exercise due diligence and then finance the fund requirements of the company and subscribe to its shares issued on preferential basis; (c) the company allots shares to the preferential allottees.
41. It is well accepted position that a preferential allotment signifies that the allottees agree with the issuer on one-to-one basis to finance its fund requirements and is not open to general public as an investment opportunity. Such financing pre-supposes nexus and prior understanding amongst the issuer, its promoters/directors and the allottees. A stranger cannot just make investment in a preferential allotment merely on the basis of an advice without having nexus, directly or indirectly, and prior understanding with the company.
42. In the instant case, some of the preferential allottees have claimed that they were approached by certain individuals with a presentation and were asked to make investment in the preferential
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allotment by Radford. However, the preferential allottees have failed to provide any details (such as address, contact details, etc.) of the individuals who had approached them for subscribing to the preferential allotment by Radford. The preferential allottees have failed to give any plausible explanation as to how Radford could make allotment to them if they were not known to it or its promoters/directors and if they had no nexus/connection with them. They have also failed to explain as to how only they were selected for making individual presentation. I am unable to accept the explanation of the preferential allottees that they invested in the shares of Radford on the advice/tips of some random public sources. I note that the preferential allottees have not been able to furnish any satisfactory documentary evidence to explain how they were approached by Radford for the preferential allotment, or in providing the details of the offer made by Radford to them and other details of communication between them and Radford in that regard. It is important to note that financing of a company by way of preferential allotment, as found in this case, pre-supposes a nexus and prior understanding amongst the issuer, its promoters/directors and the allottees.
43. The above facts and circumstances indicate that Radford and the preferential allottees were acting in concert towards a common objective that has been brought out in the interim order. Considering the background of Radford, the investment made by the preferential allottees cannot be termed as a rational investment behaviour and such investment, as in this case, could be possible only if the preferential allottees had nexus with Radford and its promoter/directors and the issue of such shares was under a prior arrangement between them for an objective other than providing equity capital to the company. This is further substantiated by the fact that funds received as proceeds of preferential allotments were immediately transferred by Radford to various entities on the and were never retained with the company for expansion of its business or for execution of its plans as envisaged in the special resolution in respect of the aforesaid preferential allotments. The trading data also reveals that significant number of shares sold by the preferential allottees was bought by the entities of the Exit Providers. In my view, this cannot be termed as a mere coincidence especially when sellers have nexus with the company and buyers who are either connected amongst themselves or connected to Radford, directly or indirectly, as mentioned in the interim order. As brought out in the interim order, the ultimate beneficiaries of the whole scheme in question are the preferential allottees. It is beyond reason to hold that Radford and other entities mentioned in the interim order, except the preferential allottees, would devise the impugned plan/scheme for the benefit of the entities who are neither party to the plan/scheme nor have any complicity in the plan with others. Since, the preferential allottees are the ultimate beneficiaries; they cannot pretend to be oblivious to the scheme/plan. The facts and circumstances of this case, in my view, strongly indicate that the issue of these shares was under a prior arrangement between them for the ulterior motive or the end objective of the scheme that has been brought out explicitly in the interim order. Also, the contention of
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the preferential allottees that no specific allegation has been levelled against them in the interim order does not hold any merit in light of the fact that the preferential allottees have prima facie been found to be a part of the holistic scheme as discussed hereinabove and in the interim order. In view of the foregoing, I reject the contentions of the preferential allottees in this regard.
44. The preferential allottees have also contended that they had invested in the scrip of Radford from their own funds as genuine investors considering the preferential allotment a good investment opportunity. The infusion of funds by way of preferential allotment that too at a premium in a company like Radford that hardly had any credentials in the market at the time of allotment could only be possible if the preferential allottees had nexus and prior understanding with the Exit Providers with regard to the dubious plan, device and artifice as prima facie found in the interim order.
45. In this case, considering the background of Radford, as brought out above, the investment made by the preferential allottees cannot be termed as rational investment behaviour. It is strange to note that a company which was dormant or suspended for around 8 years with negligible activity was able to make preferential allotment at premium of `5 and garner funds approximately 5 times its share capital just two months after the revocation of suspension by the stock exchange without the prior understanding with the allottees. Further, the funds raised by Radford in the purported preferential allotment were transferred to various other entities shortly after receipt from the preferential allottees and were never retained by Radford for expansion of its business or for execution of its plans as disclosed in the special resolution in respect of the said preferential allotments. These facts and circumstances strongly indicate that the preferential allotment was just a facade and was never done with the real intent of raising capital for Radford.
46. It is intriguing to note that, price of the scrip increased from `3.20/- to `241.35/- in 121 instances with an average trading volume of 98 shares per day during the lock-in period. Thereafter, preferential allottees were able to offload their shares at high price, continuously during Patch I. In any normal market, a sudden supply if not matched by similar demand leads to price fall. In this peculiar case, the preferential allottees were able to offload shares at high price because of the presence of the Exit Providers who in this case came in as counterparties to preferential allottees. In the whole process, artificial demand was created by the entities of the Exit Providers so as to absorb the supply from the preferential allottees. Thus as a result of the trading between preferential allottees and entities of the Exit Providers in Patch I, the average trading volume in the scrip increased astronomically to the extent of 5,05,066% (5,050 times). Such increase in volume was mainly on account of matched trading amongst the Exit Providers and preferential allottees. This artificial volume in the scrip created by the preferential allottees and the Exit Providers had the potential to induce any genuine investor to invest in the scrip without knowing the scheme of operations deployed, as in the instant
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case. Thus, the above facts and circumstances reinforce the finding in the interim order that preferential allottees and the Exit Providers used the securities market system to artificially increase volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine ones.
47. Certain preferential allottees have contended that they were not aware that entities of the Exit Providers had provided profitable exit to them and no adverse inference can be drawn against them based on the same. In my view, the contention has no merit and seems to be after thought in the backdrop that preferential allotment itself was a key to the scheme of operations deployed in the instant case by the Exit Providers that provided exit to the preferential allottees are either related to each other or to the Radford, directors, its promoters and directors of Radford Investment in the manner as mentioned in the interim order. I agree to the submission of these noticees that exchange platform is an anonymous trading platform where counter party is not known but the said theory does not fit in the instant case when it is observed that noticees dealing in the scrip were driven by the common objective of the scheme. The objective of the scheme was aptly brought out in the interim order which says that the scheme of preferential allotment was orchestrated to provide LTCG benefit to the preferential allottees where company acted as a platform for issue of equity shares on preferential basis and the Exit Providers to provide exit to these preferential allottees after lock-in so that the they can claim LTCG and convert their unaccounted income into accounted one. The modus operandi deployed in the instant case is such that the entities involved in the scheme necessarily have to act in concert, under a pre mediated plan to achieve the end objective of the scheme. Admittedly, none of the noticees have denied to have dealt in the scrip during the examination period as mentioned in the interim order and when the acts and deeds of these notices are seen holistically with the facts and circumstances of this case, it shows that they are acting in nexus.
48. With regard to the contention of some of the preferential allottees that in the interim order only the Singal Group are identified as connected persons with Radford, it is noted that such mention is in context of direct connection of these four persons with Radford on the basis of other financing transactions as described in Annexure B of the interim order. Further, such direct connection is stated therein for highlighting the magnitude of shares, i.e., 19,00,000 shares (20.87% of total number of shares allotted) allotted to these four persons in the preferential allotment. The said mentioning at one place in the interim order should not be read in isolation rather the interim order is to be read holistically and in its perspective. The entire facts and circumstances stated and modus operandi described in the interim order and as reiterated hereinabove need to be seen holistically in totality and the same strongly suggests nexus, cooperation and complicity of the preferential allottees in the preferential allotment by Radford for their ultimate benefit rather than for any genuine fund requirement of the company. I, therefore, am not convinced with these contentions.
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49. Mr. Dilip Morzaria has contended that Mr. Ramchandra Satre and Glory Investments Services Pvt. Ltd. were also the preferential allottees but they have not been debarred. In this regard, I note that both these preferential allottees have not sold the shares post lock in period and are still holding the shares. However, Glory Investment Services Pvt. Ltd. is now known as Radford Investment Services Pvt. Ltd., which is the promoter of Radford, and is restrained from accessing the securities market by the interim order.
50. With regard to contention made by Mr. Aachalchand Balar, Mr. Piyush Kumar Balar and Mr. Abhishek Kumar Balar that an error in the interim order was evidenced from paragraph 3(i) wherein it was mentioned that shares were allotted on preferential basis in Pre-Patch I, i.e., from February 27, 2012 to January 28, 2013. In this regard, it may be noted that this was a typo error in the interim order, as the preferential allotment was made on February 16, 2012.
51. Mr. G. M. Prasanna Kumar, Mr. G. S. Anith Kumar and Mr. N. Lingaraju G. M. contended that banks refused to sanction the loan to their company. Sanctioning of loan is the discretion of bankers and SEBI has no role to play in it. Hence, these noticees may deal with the matter independently.
Exit Providers
52. Some of the Radford Group & Suspected Entities have contended that nothing was spelt out in the interim order as to the rational of the alleged Radford Group & Suspected Entities in providing exit to the preferential allottees. In this regard, I note that consequent to preferential allotment of equity shares on February 16, 2012 in Radford, price of the scrip was increased substantially to the extent of 7,442% (74 times) with a very small chunk of volume/purchases (i.e., 98 shares per day) by certain entities and after the expiry of the compulsory lock-in period, the average volume increased astronomically to the extent of 5,05,066% (5,050 times). Thereafter, the preferential allottees were provided exit at a high price by the Exit Providers under the scheme in question as alleged in the interim order. In the interim order these Exit Providers who have been referred to as ‘Radford Group & Suspected Entities’ for the sake of description. The charge on the Exit Providers is based on their trading behaviour in such illiquid scrip and inter-se connections amongst some of them and the connection of certain other Exit Providers with Radford as described in the interim order.
53. Further, some of the Exit Providers, who are top buyers in Patch I of the examination period, apart from being connected amongst themselves in the manner as mentioned in the interim order, provided exit to the preferential allottees in Patch I. Thus, the homogenous trading pattern of such Exit Providers itself corroborates a premeditated and concerted role in the modus operandi/scheme of things as brought out in the interim order.
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54. In the instant case, it is noted that the Exit Providers were buyers for the sale of Radford shares by the preferential allottees after the lock-in period especially in Patch I. These entities had bought shares at high prices and some of them sold it at extremely low prices, thereby incurring huge losses when there was no general downturn in the market. Such trading behaviour belies any economic rationale and indicates existence of certain premeditated arrangement among the Preferential Allottees and the Exit Providers and indicates existence of premeditated arrangement among the preferential allottees and the Exit Providers. Had the Exit Providers not traded/dealt in the scrip of Radford during the relevant time, it would not have been possible for the preferential allottees to offload/sell in large numbers at such high price in such a stock that has hardly any intrinsic value. In my view, such repeated purchases of shares of Radford from the preferential allottees by a coterie of persons that too by incurring repeated losses, cannot be just a coincidence and is possible only if these transactions of the Exit Providers, some of whom are connected amongst themselves or with Radford, are pre- meditated. I, therefore, am not inclined to agree with the contentions of Exit Providers i.e. Radford Group & Suspected Entities in this regard.
55. Some of these noticees have also contended that establishing any relation/connection between entities as mentioned in Annexure B of the interim order for drawing adverse inference against them is flawed and is bound to lead to erroneous results. They have also contended they are not connected to any of the entities mentioned in the interim order. In this regard, I note that the primary reason for clubbing these Exit Providers and referring them to as Radford Group & Suspected Entities is that they have traded during the examination period and have provided exit to the preferential allottees. In the whole process they have not only enabled the preferential allottees to claim for fictitious LTCG and convert their unaccounted income into accounted but also created artificial trading volume in the scrip leading to false liquidity in the scrip as it was not determined by genuine market forces. Their trading pattern and behaviour certainly shows that they were acting in league and concert with beneficiaries of the pre-mediated plan /scheme in question.
56. Some of these noticees have also contended that no material has been brought on record to demonstrate any kind of nexus or prior arrangement between the allottees and Radford, directors, its promoters and directors of Radford Investment. Again some of these noticees have also contended that they have invested in the scrip based on background of Radford, positive news/rumours about the company such as change in management, positive financial results etc., internal research, and price movement in the scrip. In this regard, I note that these noticees were unable to demonstrate or provide plausible reasons as to why any rational investor would like to invest in such a company which was suspended for more than a decade and there was hardly any operation in Radford and have poor business or financial standing in the securities market. Despite such poor background of Radford, the exuberance shown by these noticees for a scrip like of Radford either by way of subscription to
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preferential allotment or by way of purchase from the market cast doubt on the investment/trading strategy of these noticees. In my view this type of investment was possible only when the entities are acting in nexus for a common objective as brought out in the interim order. In view of the same the contention of these noticees has no merit.
57. I note that the connections highlighted in the interim order and conclusions drawn based on these connections are pursuant to preliminary examination in the matter and material available in support. Pending investigation in the matter, I note that these prima facie connections of the Exit Providers along with their trading/dealing in the shares of Radford and the circumstantial evidence as mentioned in the interim order lead to the prima facie inference that acts and omissions of them are fraudulent.
58. In such case where the scheme of things or the modus operandi deployed herein is complex and deep-rooted as the entities involved in the said matter are large and spread on to different geographical areas the entire scheme needs to be seen holistically. The modus operandi deployed in such cases is such that it is also difficult to find the fund trail considering the scale of the operation as the funds used for this purpose have been layered through complex structure before reaching the end users. This modus operandi in any case has already been referred to the concerned regulatory agencies/bodies. The connivance or collusion or concerted action of parties involved can be established from a gamut of facts and circumstances such as their trading pattern conduct and behaviour. The interim order has brought out relevant factors for alleging such connection, concert and connivance and these noticees have failed to explain the same. In view of these facts and circumstances, I do not find any cogent reason to deviate from the prima facie findings in the interim order in this regard.
59. Rangan Vincom Pvt. Ltd., Katyani Commodities Pvt. Ltd., Ladios Trading Pvt. Ltd. and Avlokan Dealcom Pvt. Ltd., Devakantha Trading Pvt. Ltd., Shelter Sales Agency Pvt. Ltd. and Udbal Mercantile Pvt. Ltd. had sought copies of the documents/material relied upon by SEBI for alleging the charges against them using the said order. I note that documents which were relied upon by SEBI for passing the interim order have been provided to these noticees. However, these entities have not filed any reply on merit to the allegations qua them in the interim order. Hence, it is inferred that they have no desire to offer any explanation and allegation against them are upheld ex parte.
60. Kingfisher Properties Pvt. Ltd., Topwell Properties Pvt. Ltd., Esquire Enclave Pvt. Ltd., Radison Properties Pvt. Ltd., Shivkhori Construction Pvt. Ltd., Limestone Properties Pvt. Ltd., Natural Housing Pvt. Ltd., Divya Drishti Merchants Pvt. Ltd., Divya Drishti Traders Pvt. Ltd., Dhanraksha Vincom Pvt. Ltd. and Ridhi Vincom Pvt. Ltd. have claimed that details of match trades were not provided anywhere in the interim order and also they were
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unable to work out the figure of 70.01% mentioned in Table III to the interim order, nor was the same clarified in Table IV to the interim order and further they contended that most of the trades were taking place between the preferential allottees and the Exit Providers did not hold good. In this regard, it is noted that trade log with respect to the matching trades were already provided to these noticees who had sought the inspection of documents. It is also noted that in Table IV to the interim order it has been mentioned that the Exit Providers have bought 4,08,51,126 shares during Patch I out of which 2,76,84,200, i.e., 67.77% shares matched with the preferential allottees. Further, the Exit Providers had bought 4,08,51,126 shares during Patch I where they contributed to 70.01% of Net Buy Volume in Patch I. Thus, it is seen that most of the trades had taken place between the preferential allottees and the Exit Providers.
61. Kingfisher Properties Pvt. Ltd. has denied that it had any transaction with Fairlink Housing Pvt. Ltd. as alleged. In this regard, it is noted from the bank statement of Fairlink Housing Pvt. Ltd. that it had received `100 lakhs from Kingfisher Properties Ltd. on December 12, 2011 and immediately transferred the same to Topwell Properties Pvt. Ltd. which is also banned entity vide interim order. This fund transaction, in itself, is an indication that they are known to each other. Kingfisher Properties Pvt. Ltd. has also questioned the prima facie findings about receipt of funds from Venkatesh Sales Pvt. Ltd.. In this regard, it is noted that Fairlink Housing Pvt. Ltd. had received `100 lakhs from Venkatesh Sales Pvt. Ltd. during March 2012. Also, as per the MCA website Venkatesh Sales Pvt. Ltd. has the common address as that of one of its director viz., Dhruv Narayan Jha who is also the director of Blue Circle. In addition to their connection, the trading of these connected entities in the same scrip, i.e., Radford at the same time and in similar pattern as that of the other Exit Providers signifies their role in the scheme in question that led to misuse of securities market system. In view of the same I find no merit in the contention of Kingfisher Properties Pvt. Ltd.
62. With regard to the contention of Kingfisher Properties Pvt. Ltd., Topwell Properties Pvt. Ltd., Esquire Enclave Pvt. Ltd., Radison Properties Pvt. Ltd., Shivkhori Construction Pvt. Ltd., Limestone Properties Pvt. Ltd. and Natural Housing Pvt. Ltd. that the directors of these entities were Mr. Chiranjit Mahanta and Mr. Debi Prasad Pal and not Mr. Vishal Sharma & Mr. Chiranjit Mahanta and that Mr. Vishal Sharma ceased to be the director of their company since May 31, 2013. In this regard, I note that the entities have not denied the fact that Mr. Vishal Sharma was not a director. Only that, he ceased to be the director of their company since May 31, 2013. I also note that he was a director at least before May 31, 2013 i.e., at least for a part of Patch I (January 29, 2013 to July 23, 2013) where the alleged exit was provided to the preferential allottees. Further from the account opening form/ KYC submitted by the trading member Gateway Financial Services Ltd., it was observed that the account opening form/ KYC mentions the name of Mr. Vishal Sharma and also his signature was appended therein. I, therefore, reject this contention.
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63. With regard to the contention of Divya Drishti Merchants Pvt. Ltd., Divya Drishti Traders Pvt. Ltd., Dhanraksha Vincom Pvt. Ltd. and Ridhi Vincom Pvt. Ltd., their trades in Patch II were not considered in the interim order and allegation was levelled against them solely based on their trades in Patch I and that hand-picked data was used to make allegation against them. In this regard, I note that the interim order had clearly enumerated the modus operandi and the period where the Exit Providers had given exit to the preferential allottees i.e., in Patch I. Further, Table IV to the interim order also mentions the details of counterparties for sale transactions in Patch I. Hence, Patch I was taken for analysis and for arriving at a logical conclusion and not hand-picked data, as alleged. I, therefore, reject this contention.
64. Dhanraksha Vincom Pvt. Ltd. has contended that with effect from June 10, 2014, it has shifted from its earlier premises at “163B, M. G. Road, Kolkata - 700 007” to “14/1 Hazra Road, 14 Floor, Flat No IA, Kolkata - 700026” and as such it does not share address with Divya Drishti Merchants Pvt. Ltd., Divya Drishti Traders Pvt. Ltd. and Ridhi Vincom Pvt. Ltd. I note that Dhanraksha Vincom Pvt. Ltd. replied vide letter dated January 08, 2015 to SEBI on its letter head bearing the earlier address i.e., 163B, M. G. Road, Kolkata 700 007. It shows that they are sharing address and also know each other.
65. Blue Circle and Pine have admitted that there were fund transactions between them amounting to `150 lakhs which was towards the sale/purchase of 15,000 units of equity shares of JMD Sounds Ltd. among themselves. Similarly, Dhanleela has also admitted that there was fund transaction between Dhanleela and Radford for selling fabrics to Radford and that it had received payments from Radford.
66. It is an undisputed fact that Blue Circle, Mishka, Pine and Dhanleela traded in the scrip of Radford along with its connected entities during the same time and in same/similar manner as the other Exit Providers. Further, through their trading, these entities and other Exit Providers not only provided exit to the preferential allottees but also contributed to artificial trading volume in the scrip. Thus, all these facts and circumstances indicate that these entities acted in concert while dealing in the scrip of Radford as alleged in the interim order. Their connection or nexus in the scheme of affairs is further corroborated when seen in light of their trading pattern in the scrip of Radford i.e., buying the shares of Radford to provide beneficial exit the preferential allottees.
67. Burlington Finance Limited, Manimudra Vincom Private Limited, Symphony Merchant Private Limited, Amrit Sales Promotion Private Limited and Bazigar Trading Private Limited have disputed the basis of connection between them and have submitted that no adverse inferences can be drawn on the basis of common directorship or common e-mail id as mentioned in the Table III to the the interim order dated December 19, 2014. In this regard, I note that Mr. Rabi Paul is the common director of Amrit Sales Pvt. Limited and Burlington
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Finance Pvt. Limited and Mr. Panna Lal Maloo is the common director of the companies namely, Amrit Sales Pvt. Limited, Manimudra Pvt. Limited and Symphony Pvt. Limited. From the KYC documents it is observed that Mr. Vinay Maloo is the common director in Manimudra Vincom Pvt. Limited and Bazigar Trading Pvt. Limited. Further, as per the shareholding pattern for the quarter ended September 30, 2013, i.e., the period when the scheme in question was in operation, Burlington Finance Limited, Manimudra Vincom Pvt. Limited and Bazigar Trading Pvt. Limited were shareholders of Amrit Sales Promotion Pvt. Limited. It is also observed from the shareholding pattern available with the MCA that Symphony Merchants Pvt. Limited is one of the shareholders of Bazigar Trading Pvt. Limited.
68. Apart from the common directors in these noticees and cross holding of shares amongst them, the bank statements of Amrit Sales Promotion Pvt. Limited clearly indicate fund transfers between Amrit Sales Promotion Pvt. Limited on the one hand and Burlington Finance Limited, Manimudra Vincom Pvt. Limited, Symphony Merchant Pvt. Limited and Bazigar Trading Pvt. Limited on the other on multiple occasions during the period of May 2012 to March 2013.
69. The contention of Bazigar Trading Pvt. Limited that its registered office address is at “131/B, Mittal Court, 13th Floor, 224, Nariman Point, Mumbai- 400 021” and the office space was never shared with any other person/ entities, including Manimudra Vincom Private Limited, as mentioned in the interim order does not deserve any merit as it is evident from the available records that prior to shifting to the said address, Bazigar Trading Pvt. Limited was having common address with Manimudra Vincom Pvt. Limited (i.e., 19, R.N. Mukherjee Road, 2nd Floor, Kolkatta-700001). Further, Amrit Sales Pvt. Limited, Manimudra Pvt. Limited and Symphony Pvt. Limited have common e-mail id which is [email protected].
70. The facts as enumerated above clearly establish that Burlington Finance Limited, Manimudra Vincom Private Limited, Symphony Merchant Private Limited, Amrit Sales Promotion Private Limited and Bazigar Trading Private Limited were connected to each other. In addition to their connection, the trading of these connected entities in the same scrip, i.e., Radford at the same time and in similar pattern as the other Exit Providers signifies their role in the scheme in question that led to the misuse of securities market system. In view of the same, I find no merit in the contentions of Burlington Finance Limited, Manimudra Vincom Pvt. Limited, Symphony Merchant Pvt. Limited, Amrit Sales Promotion Pvt. Limited and Bazigar Trading Private Limited.
71. With regards to the contention made by Vibgyor Financial Services Pvt. Ltd. in respect to their off market transaction with Scope Vyapar Pvt. Ltd., they have submitted that their
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transactions were commercial transaction of shares purchase and had nothing to do with purchase or sales of shares of Radford. I note that the primary reason for issuance of interim directions against it was its role in prima facie fraudulent dealing in the scrip of Radford. The off-market transaction was only a corroboration of connection as alleged in the interim order.
72. Some of the Exit Providers who have been categorised as the Suspected Entitles in the interim order have contended they had no connections with the Radford, director and its promoters and therefore classifying them as a part of “Radford Group & Suspected Entities” was totally mistaken and erroneous. In this regard, I note that such Exit Providers are connected amongst themselves. Further, it is observed from Table III to the interim order dated December 19, 2014 that 33.19% trades were executed between the preferential allottees and these Exit Providers. During this period, these Exit Providers were found to be buyers who gave profitable exit to the preferential allottees. The trading pattern of the Exit Providers categorised as Radford Group in the interim order was also the same i.e., providing exit to the preferential allottees. It was observed that the Exit Providers contributed 70.01% to the net buy trade during Patch I. Further, the basis of connection of the Exit Providers described as Suspected Entities in the interim order is not to be seen selectively and read in isolation but read and understood holistically in its perspective. The entire facts and circumstances stated and modus operandi described in the interim order and as reiterated hereinabove strongly suggest nexus, cooperation and complicity of the preferential allottees in the preferential allotment by Radford for their ultimate benefit rather than for any genuine fund requirement of the company. I, therefore, reject contentions of these Exit Providers in this regard too.
73. The Exit Providers have contended that they had invested in the shares of Radford as a normal investment activity and did not create any artificial volume. Considering that the share price as discussed in the interim order was not supported by fundamentals of Radford or any other external factor, investment by them in the scrip of Radford that has hardly any intrinsic value cannot be termed as rational/normal buying or investment behaviour. The trading pattern of these noticees appears to be providing profitable exit to the preferential allottees acting as buyers who are counterparties to preferential allottees. In the whole process, the Exit Providers have contributed to trading volume in the scrip of Radford as mentioned in the interim order. This significant increase in the volume appears to be unnatural considering the background of Radford and was possible because of the concerted trading between the Exit Providers on one hand as buyers and preferential allottees on the other hand as sellers.
74. It is also pertinent to note that in any normal market, a sudden supply if not matched by similar demand, leads to price fall. In this particular case, the preferential allottees were able to offload shares at high price continuously because of the artificial demand created by the Exit Providers so as to absorb the supply from the preferential allottees. This artificial demand in the scrip created by the Exit Providers had the potential to induce any genuine investor to invest
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in the scrip without knowing the scheme of operations deployed, as in the instant case. Thus, the above facts and circumstances reinforces the finding in the interim order that of the Exit Providers and preferential allottees used the securities market system to artificially increase the volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine one. Thus, in my view, the Exit Providers are grossly involved in the modus operandi or scheme in question.
75. It is worthwhile to note that there was hardly any trading history in the scrip of Radford nor does Radford had any business or financial standing in the securities market till December 2011 as the scrips of Radford were suspended on Bombay Stock Exchange (“BSE”), the only stock exchange where Radford is listed, from January 14, 2003 to December 19, 2011 for non-compliance of the equity listing agreement. Thus, considering these poor credentials of Radford, in my opinion, no prudent investor would like to invest in such company unless there was a pre-mediated plan. This is further corroborated by the fact that a set of entities who acted as the Exit Providers and categorised as Radford Group & Suspected Entities in the interim order continuously acted as buyers while the other set of entities named as preferential allottees acted as seller. This trading pattern or behaviour in itself suggests that entities are acting in concert for a common objective that is to provide profitable exit to the preferential allottees as a part of the scheme or device as brought out in the interim order. In view of these facts and circumstances of this case and pending investigation in the matter, I do not find merit in the contentions of the Exit Providers.
76. The Exit Providers have submitted that their trades that matched with the preferential allottees had matched in the ordinary course. The trading data reveals that most of the shares bought by the Exit Providers were sold by the preferential allottees who were either connected amongst themselves or connected to Radford directly or indirectly as mentioned in the interim order as discussed elsewhere in this order. During this period, the preferential allottees were selling and in the process making significant profit. The fact that the scrip in question was suspended till December 19, 2011 and the trading volume and price of the scrip gradually increased in Pre- Patch I and unassumingly increased in Patch I on account of manipulative trading. In view of these facts and circumstances, matching of transactions of the Exit Providers with those of the preferential allottees cannot be just a coincidence of anonymous screen based trading as sought to be contended by these noticees. The above facts and circumstances of the case reinforce the prima facie finding that these noticees was used as a tool for implementation of the dubious plan, device and artifice of the Exit Providers and preferential allottees.
77. In the instant case, the interim order has reasonably highlighted the modus operandi wherein Radford, directors, its promoters and directors of Radford Investment in nexus with the preferential allottees made a facade of preferential allotment ostensibly to raise money and thereafter the preferential allottees with the aid of the entities of the Exit Providers misused the
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stock exchange mechanism to exit at a high price in order to generate fictitious LTCG. Subsequently, pursuant to passing of interim order, it is also gathered that this type of modus operandi or scheme of operations are devised not only help the concerned entities to claim LTCG and convert their unaccounted money into accounted one but also to accommodate other entities who wants to book short term loss in their books of accounts in order to pay less tax. This aspect of booking of short term loss to reduce tax liability can be well envisaged from the trading pattern of the Exit Providers whereby they purchased shares at high price and sold these shares at very low price using the stock exchange mechanism thereby booking short term loss. While the tax related issues and routing of funds will be looked after by the other law enforcement agencies, SEBI would look into the probable violation or misuse of securities market system.
78. Thus, in the present case, the Exit Providers, while acting under dubious plan, device and artifice, have traded in the shares of Radford that, prima facie, led to the creation of artificial volume in the scrip by misuse of securities market system. Therefore, the acts and deeds are fraudulent and are in contravention of the provisions of the Securities Laws so far as it relates to the misuse of securities market system. I, therefore, do not find any reason to revoke or modify the directions of the ad interim ex parte order dated December 19, 2014 in the matter of Radford.
LTP Contributors
79. The LTP Contributors have generally contended that they did not claim any exemption under short or long term capital gains, rather they have shown the profit as trading profit and paid tax accordingly. Further, they claimed to have traded negligible quantity of shares and made meagre profit and thus, question of making LTCG doesn’t arise in their case. In this regard, it may be noted that, it has not been alleged in the interim order that the LTP Contributors have claimed LTCG benefit. The allegation against them is that they were part of alleged scheme and they indulged in fraudulent transactions for artificially raising the share price of Radford in order to provide fictitious LTCG to the preferential allottees. Thus, such contentions are unfounded.
80. Some of the LTP Contributors have also contended that they made miniscule investments in the scrip of Radford and subsequently sold off the shares yielding minimal profits. I am of the view that individual transactions when seen in isolation may look miniscule, however, when considered holistically in a perspective they may have their own contribution in the entire scheme as alleged in this case. I also note that the individual contribution of some of the LTP Contributors is significant to the tune of more than 15% or more of the total LTP contribution during Pre-Patch I.
81. Certain LTP Contributors have claimed that there was large number of other buyers to
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purchase the securities which enticed them to place their purchase order. They have also submitted that they started buying after observing the price and volume movement in the scrip and that the investment was a technical decision based on demand and supply in the momentum style of trading and not on fundamentals of Radford. Few LTP Contributors stated that orders were placed at or near the upper circuit during Pre-Patch I period with average order quantity per order ranged from 1 to 25,000 and buyers placing orders ahead of the sellers in most of the cases. In this regard, as described in the interim order, during Pre- Patch I, the scrip opened at `3.20 (pre-split price) on February 27, 2012 and had risen to a high of `241.35 and closed at `241.35 on January 28, 2013. During this period, the scrip was traded with an average volume of 98 shares per day and total volume of 11,950 shares in 121 trading days with an average of 1-2 trades per day.
82. It was also observed that price of the scrip was influenced by certain entities primarily through first trades during this period. From LTP analysis, it was observed that price of the scrip increased from `3.20 to `241.35 mainly through first trades in 121 instances. It was observed that in Pre-Patch I, out of a total of 121 instances of trades establishing a new high in the price of the scrip, LTP Contributors tabulated below established new high price on 83 instances (68.6% to total instances). The contribution of LTP Contributors in establishing new high price was `188.72/- out of total price rise of `246.7/-, which constitutes 76.50% of the total new high prices. The details of contribution to price rise by these entities during Pre- Patch I are as following:
Table 4 Pos LTP No. % to Contri Tot Positive of Sr. Trading Member Total bution Positive Contribu Clnt Name Inst No. Name Insta of the Contributi tion (in ance nces Client on In Sec %) s as a buyer
1 Taran Kumar Rungta Shilpa Stock Broker 14 11.57 45.21 246.7 18.33 2 Prem Lata Nahar Pvt. Ltd. 25 20.66 43.3 246.7 17.55 Sanghavi Brothers 3 Manjulaben Sukhdev Pandya 15 12.4 32 246.7 12.97 Brokerage Ltd. Shilpa Stock Broker 4 Rajat Share Broking Pvt. Ltd 6 4.96 25.5 246.7 10.34 Pvt. Ltd. Monarch Research & 5 Rajesh Pravinkumar Jasani 7 5.79 24.85 246.7 10.07 Brokerage Pvt.Ltd. BCB Brokerage Pvt. 6 Bharat Bagri Bagri 16 13.22 17.86 246.7 7.24 Ltd. Total 83 68.6 188.72 246.7 76.50
83. Upon further analysis of trading data pertaining to the price rise period (i.e., Pre-Patch I), buy orders were placed in the trading system at upper circuit or near upper circuit, most of them being at the beginning of the trading session. The details of order log of the aforesaid
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LTP Contributors (in above table) is given below:
Table 5 Sum of % of Sr. Count of Shares Avg qty Trade/Order LTP Name Order Buy qty No orders placed in per order ratio (%) in % book all orders Mr. Taran Kumar 1 18.33 Rungta 254 11,02,300 12.44 4340 610 0.06 2 Ms. Prem Lata Nahar 460 15,16,500 17.12 3297 2209 0.15 17.55 Ms. Manjulaben 3 12.97 Sukhdev Pandya 49 37,070 0.42 757 866 2.34 Rajat Share Broking 4 10.34 Pvt. Ltd 23 71,409 0.81 3105 70 0.10 Mr. Rajesh 5 10.07 Pravinkumar Jasani 77 23,600 0.27 306 164 0.69 6 Mr. Bharat Bagri Bagri 29 46,200 0.52 1593 579 1.25 7.24 TOTAL 892 27,97,079 31.58 4,498 76.50
84. As noted in the interim order, during the examination period an artificial demand for the shares of Radford was created though it did not have the fundamentals to command such a high demand nor were there any external factors such as corporate announcements which could have led to such demand. From the trading behavior shown in this case it is noted that despite there being a huge demand for the shares of Radford, the sellers sold shares in miniscule quantities on various occasions and thereby controlled the supply of shares. Such selling behavior also exhibits suspicious trading in spite of a huge demand for the shares. Although the role of buyers in creating such demand cannot be outrightly ignored, the facts and circumstances of each case need to be holistically examined. LTP Contributors i.e., Ms. Manjulaben Sukhdev Pandya, Rajat Share Broking Pvt. Ltd., Mr. Rajesh Pravinkumar Jasani and Mr. Bharat Bagri have demonstrated that they had placed the buy orders seeing huge demands on previous trading day as against thin volume traded and purchase quantity was always far less than the order volume. Further, they had placed impugned orders in the scrip without foreseeing any manipulation or being a party to the scheme described in the interim order. They have also demonstrated that they had purchased only 1,679 shares out of their own funds through 44 trades in Pre-Patch I without being party to the scheme in question. In view of the above, I do not find sufficient material, at this stage, to attribute the role of these noticees in the dubious plan, scheme or devices and to continue the directions issued in the interim order against them as they have not materially contributed to LTP on individual basis and they are, prima facie, not found to be connected to other noticees. Therefore, the directions issued against Ms. Manjulaben Sukhdev Pandya, Rajat Share Broking Pvt. Ltd., Mr. Rajesh Pravinkumar Jasani, and Mr. Bharat Bagri issued in order of Radford dated December 19, 2014 stand revoked and appropriate proceedings, if any, may be initiated against them on conclusion of investigation.
85. An analysis of the order book reveals that during the price increase period i.e. Pre-Patch I, there were 229 sell orders for 17,100 shares as against total of 4,499 buy orders for 88,58,158
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shares. From the order book, it appears that a facade of huge demand at upper circuit was created without which a scrip like Radford with hardly any credentials regarding its trading history, fundamentals, business or financial standing, etc., could not have witnessed a sustained increase in the price (i.e. 5,05,066% or 5,050 times) for a continuous period of about 12 months of Pre-Patch I. As mentioned above, there were 312 buyers during this period who had placed buy order for 88,58,158 shares through 4,499 orders. These orders were placed at or around the upper circuit with average quantity per order ranged between 306 shares and 4,340 shares and buyers were predominantly placing orders ahead of the sellers. Thus the involvement of entities/ persons in placing large quantity of orders knowing that the scrip is very thinly traded creates doubt on the intent and trading pattern of these entities/ persons. Considering the modus operandi deployed in the instant case, the exuberance shown by the buyers such as Mr. Taran Kumar Rungta and Ms. Prem Lata Nahar (who contributed more than 15% to the order book) in placing orders for the purchase of the scrip needs further investigation. It is very unusual in the market that in a situation when miniscule quantity is being offered by the sellers in a thinly traded scrip the buyers as discussed hereinabove contribute more than 15% of the order book at the upper circuit price. Such behaviour appears to be self-detrimental as seeing so much interest on the buyer side, no seller will offer shares. In a real market situation the buyer and sellers move step by step gauging the interest on the opposite side. Nobody displays such a huge interest which is in complete disconnect with the interest on the other side. Therefore, the order book appears to be spoofed up by the buyers who may be doing the same with an understanding with the sellers. The same needs a detailed investigation to find out such link.
86. Based on the facts mentioned in Table 4, I find that top two LTP Contributors namely, Mr. Taran Kumar Rungta and Ms. Prem Lata Nahar, contributed to the price rise of Radford through first trades tabulated in Table 4. The positive LTP contribution by Mr. Taran Kumar Rungta and Ms. Prem Lata Nahar is 18.33% and 17.55% respectively, which shows that their trading behaviour is suspicious. Trading in this manner wherein LTP contribution by these two entities individually is quite high, contributes to the price substantially and above 15% during Pre-Patch I.
87. Based on order to trade ratio of all these LTP Contributors, it is seen that they have very low Trade to Order Ratio. It is worthwhile to note that Ms. Prem Lata Nahar appears at top most position in buy side order book and represents 17.12 % of buy side order book (above 15%) as brought out in Table 5. She bought 2,209 shares which is only 0.15% of 15,16,500 shares placed as buy orders by her in 460 orders as tabulated in Table 5. Hence, such flooding of buy side order book by her appears to be suspicious in nature and may need further investigation on account of her irrational exuberance in placing such huge number of orders despite miniscule Trade to Order ratio.
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88. In view of the above, considering the fundamentals of Radford and the long history of no trading at the exchange, such unfounded interest shown by the top two LTP Contributors namely, Mr. Taran Kumar Rungta and Ms. Prem Lata Nahar in placing such large number of orders for purchase of this scrip is not explained at this stage and is suspicious. The role played by LTP Contributors in the Pre-Patch I to artificially increase the price during the lock- in period in order to give significant profitable exit to preferential allottees as brought out in the interim order needs to be seen holistically in the backdrop of scale and size of operations undertaken by facilitating the beneficiaries (preferential allottees) to generate fictitious long term capital gains by showing that the source of their income was trading at the stock exchange. I also find that restrictions have been imposed on Ms. Prem Lata Nahar in several other interim orders issued by SEBI on the same modus operandi. Consequently, I reject the submissions of the top two LTP Contributors namely, Mr. Taran Kumar Rungta and Ms. Prem Lata Nahar, that their trading did not have an impact on the price rise of the scrip of Radford.
Radford Sellers 89. As regards the twelve Radford Sellers, namely, Anup Manilal Shah (HUF), Ms. Dina Satishkumar Mehta, Mr. Mansukhbhai Jagabhai Tanti, Ms. Rekhaben Lakhaben Sagparia, Ms. Hasumati Ghanshyam Mandlia, Mr. Hari Mohan Khandelwal, Mr. Rajeev Garg, Mr. Kanaiyalal Manilal Gandhi, Ms. Veena Mohandas Valbhani, Mr. Bharatkumar Jayantilal Shah, Ms. Ramila Gandhi and Ms. Pragna Patel, based on their submissions, prima facie, all of these twelve Radford Sellers do not appear to be connected to the other noticees and many of them have been holding shares in physical form since longer time i.e. since 1995. Further, they had sold the shares in the normal course of trading seeing the buy orders available in the market. I am of the view that they have shown prima facie case and balance of convenience is in their favour at this stage. Accordingly, I do not deem it appropriate to continue the interim directors as issued against these twelve Radford Sellers vide interim order dated November 09, 2015 and the same stand revoked. However, the role played by them in the modus operandi elaborated in interim order needs further investigation.
90. However, from the trade book examination, the trading of remaining Radford Sellers namely, Ms. Manisha Jayesh Shah, Ms. Artiben Kansara and Mr. Sunil Mohanlal Kansara appears to be suspicious and they sold 34 shares in 30 trade instances, 10 shares in 10 trade instances and 517 shares in 10 trade instances respectively.
91. None of these Radford Sellers have been able to satisfactorily show as to how they got the shares in question. It is undisputed fact that Ms. Manisha Jayesh Shah and Ms. Artiben Kansara chose to sell miniscule number of shares vis-à-vis their shareholding specifically when there was huge buy order pending in the order book during Pre-Patch I as elaborated in the interim order dated November 09, 2015, thereby controlling the supply of shares and
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creating artificial scarcity of shares. I also find that Ms. Manisha Jayesh Shah, Ms. Artiben Kansara and Mr. Sunil Mohanlal Kansara (another connected Radford Seller) have traded shares in 50 out of total 111 trade instances (i.e., 45.05%) of trades done by Radford Sellers during Pre-Patch I are contributed by these three Radford Sellers.
92. Ms. Manisha Jayesh Shah and Ms. Artiben Kansara have submitted that they bought Radford shares from Atherton Glass Works Ltd. in December, 2011. However, the name of Atherton Glass Works Ltd. is not found in the shareholder list submitted by Radford either to RTA or to MCA, which is a public record as per the Companies Act. Even if this claim is accepted it appears the said shares were bought just one month before Mr. Manish Nareshchandra Shah became a director of Radford. Further, Ms. Manisha Jayesh Shah, who was holding 1,000 shares transferred 966 shares to Mr. Sunil Mohanlal Kansara on August 31, 2012 through off market transaction and sold remaining 34 shares on market as mentioned hereinabove. Mr. Sunil Mohanlal Kansara also sold, on the exchange as mentioned hereinabove, the shares acquired by him through off-market transaction from Ms. Manisha Jayesh Shah.
93. Ms. Manisha Jayesh Shah is connected with director of Radford, Mr. Manish Nareshchandra Shah on the basis of common phone number and address. She has claimed that she used address of her relative Mr. Manish Nareshchandra Shah staying at Andheri and that her relative being the director of Radford is only a matter of coincidence. Thus, it is admitted position that she is related/connected with said Mr. Manish Nareshchandra Shah, who has been, prima facie, found to be part of the scheme in question. Further, these three Radford Sellers viz; Ms. Manisha Jayesh Shah, Ms. Artiben Kansara and Mr. Sunil Mohanlal Kansara are connected amongst themselves on account off-market transfer of shares between Ms. Manisha Jayesh Shah and Mr. Sunil Mohanlal Kansara, common phone number and address of Mr. Sunil Mohanlal Kansara and Ms. Artiben Kansara, and relationship between Mr. Sunil Mohanlal Kansara and Ms. Artiben Kansara.
94. It has been noted that these Radford Sellers being connected with the director of Radford and amongst themselves were in control of 2500 tradable shares. The trading pattern in an illiquid scrip like Radford, prima facie, indicates that these Radford Sellers being in control of the tradable shares of this scrip and the persons responsible for the flooding the order book inspite of the fact that only a miniscule is being traded, have played a major role in manipulating the price of the scrip. From the order book it appears that a facade of huge demand at upper circuit was created without which a scrip like Radford with hardly any credential regarding its trading history, fundamentals, business or financial standing etc., could not have witnessed a sustained increase in the price (5,05,066% or 5,050 times) for a continuous period of about 12 months of Pre-Patch I. The only way the price of such scrip could have increased is by deploying manipulative trading pattern. I, therefore, reject the contentions of Ms. Manisha Jayesh Shah, Ms. Artiben Kansara and Mr. Sunil Mohanlal
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Kansara.
95. I note that the connections highlighted in the interim order, interim order dated November 09, 2015 and the conclusions drawn based on these connections are pursuant to the preliminary examination in the matter and material available in support. Pending investigation in the matter, I note that these, prima facie, connections established in the aforesaid interim orders and the circumstantial evidence as mentioned in the interim order lead to the inference that acts and omissions of them are fraudulent.
96. In view of the reasons discussed above, the facts and circumstances of the case do not justify the continuation of the directions passed against following LTP Contributors vide the interim order dated December 19, 2014 and following Radford Sellers vide interim order dated November 09, 2015. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19, read with sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 hereby revoke the directions contained in the aforesaid ad interim ex-parte orders qua the following noticees:-
Sr. Entities PAN No. LTP Contributors 1. Rajat Share Broking Pvt. Ltd. AAACR2695B 2. Ms. Manjulaben Sukhdev Pandya ALVPP7764J 3. Mr. Bharat Bagri Bagri AADHB8488A 4. Mr. Rajesh Pravinkumar Jasani ACWPJ4705B Radford Sellers 5. Mr. Rajeev Garg ACJPG8162C 6. Mr. Anup Manilal Shah (Huf) AAKHA8826N 7. Mr. Bharat Kumar Jayantilal Shah AGSPS5666E 8. Ms. Dina Satishkumar Mehta AAYPM2723J 9. Mr. Harimohan Khandelwal ACLPK9984A 10. Ms. Hasumati G. Mandlia ANIPM9254B 11. Mr. Kanaiyalal Manilal Gandhi ABGPG6544G 12. Ms. Ramila Gandhi AELPG9023L 13. Mr. Mansukhbhai Jagabhai Tanti AALPT9962B 14. Ms. Pragna Patel AGWPP5778Q 15. Ms. Rekhaben Lakhaben Sagparia AFXPS1751C 16. Ms. Veena Mohandas Valbhani AHGPV3775J
97. I, however, find that, at this stage, the other 102 noticees have failed to give any plausible reasoning/explanation for their acts and omissions as described in the interim order dated December 19, 2014 and interim order dated November 09, 2015 and have not been able to make out a prima facie case for revocation of the interim orders. I, therefore, in this case, reject the prayers of such noticees for complete removal of restraint imposed by the interim orders. I,
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therefore, do not have any reasons to change or revoke the ad interim findings as against them. The list of these noticees is as under:-
Sr. No. Entities PAN Company 1. Radford Global Ltd. AABCM5771E Directors of Radford Global Ltd. 2. Mr. Prakash Bhawarlal Biyani AJNPB0702E 3. Mr. Manish Nareshchandra Shah AELPS8560A 4. Mr. Rajesh Kumar Maheshwari ACJPM4653L 5. Mr. Nitin Shivratan Murarka AMBPM9321M Promoters of Radford Global Ltd. 6. Radford Investment Services Pvt. Ltd. AACCG9982A Directors of Radford Investment Services Pvt. Ltd. 7. Mr. Roshan Dwarkani ATXPD7040B 8. Mr. Suresh Kumar Saini BCXPS0818J Preferential Allottees 10. Mr. Aachalchand Balar ABAPB8617M 10. Mr. Piyush Kumar Balar AEMPB6394Q 11. Mr. Abhishek Kumar Balar AATPB8811B 12. Mr. Afsar Zaidi AADPZ8571G 13. Ms. Kamal Punwani AFFPP5207G 14. Mr. Dalsukh Ujamshi Trevadia ACDPT3428N 15. Ms. Jyoti Anil Trevadia ABWPT8000C 16. Ms. Tanvi Bhavik Trevadia AFAPT5888A 17. Mr. Bimal J. Desai AAKPD3160A 18. Ms. Jyotsna Jitendra Desai AHPPD4223L 19. Mr. Yogesh Popatlal Thakkar AAPPT1825P 20. Ms. Babita Mittal AAIPG4573G 21. Mr. Mukesh Mittal AJGPM2125D 22. Ms. Renu Aggarwal AAEPA1694C 23. Mr. Tarun Aggarwal AOQPA9034E 24. Ms. Renu Mittal AGMPM1488Q 25. Mr. Santosh Aggarwal ABAPA4548E 26. Mr. Mohan Mittal APFPM0496Q 27. Nishit Agarwal Ben Trust AABTN3350K 28. Ms. Pinky Agarwal ACGPA7438L 29. Pratik Agarwal Ben Trust AABTP7516K 30. Mr. Hitesh Mangilal Jain AABPJ2835R
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31. Mr. Rajendra Mangilal Jain ACPPJ9853R 32. Mr. Shailesh Mangilal Jain AAAPJ6765F 33. Ms. Kalpita Luniya AAAPL9611J 34. Mr. Hukamsingh B. Rajpurohit AABPR9949J 35. Mr. Dilip Chotalal Morzaria AADPM9919M 36. Mr. Hari Kishan Suderlal Vermani AAJPV4754H 37. Ms. Mayuri Darshan Bhanushali AKJPB8572F 38 Sushant Investments/Mr. Sunil Tukaram Bhardkar ACAFS8650G 39. Ms. Shilpa Aggarwal AEXPA1230M 40 Ms. Ritu Singal ABHPS3711M 41. Mr. Brij Bhushan Singal AEFPS6298M 42. Mr. Neeraj Singal ANRPS7986B 43 Ms. Uma Singal ANRPS7987A 44. Mr. Ashok B. Jiwrajka AACPJ3610K 45. Mr. Dilip B. Jiwrajka AAGPJ8756J 46. Mr. Surendra B. Jiwrajka AACPJ4316L 47. Mr. G. M. Prasanna Kumar AHEPG0025A 48. Mr. G. S. Anith Kumar ADPPK9874N 49. Mr. Lingaraju G. M. AEYPM5850Q 50. Mr. Praveen Kumar Agarwal ACSPA4725A 51. Praveen Kumar Agarwal HUF AAIHP6229C 52. Mr. Naresh Nemchand Shah ACRPS0182J 53. Ms. Ujwala Namdev Mane AAEPM5924H Exit Providers, i.e., Radford Group & Suspected Entities 54. Devatma Distributors Pvt. Ltd. AADCD7140G 55. Anjali Suppliers Pvt. Ltd. AAJCA1784D 56. Rangan Vincom Pvt. Ltd. AAGCR1715E 57. Katyani Commodities Pvt. Ltd. AAECK6244R 58. Ladios Trading Pvt. Ltd. AACCL3868N 59. Avlokan Dealcom Pvt. Ltd. AALCA1583G 60. Devakantha Trading Pvt. Ltd. AADCD7044B 61. Shelter Sales Agency Pvt. Ltd AASCS1797F 62. Udbal Mercantile Pvt. Ltd. AABCU2648C 63. Amrusha Mercantile Pvt. Ltd. AALCA0340D 64. Runicha Merchants Pvt. Ltd. AAECR0580M 65. Signet Vinimay Pvt. Ltd. AAMCS1712Q 66. Winall Vinimay Pvt. Ltd. AAACW8004B 67. Sanklap Vincom Pvt. Ltd AAMCS1711P 68. SKM Travels Pvt. Ltd. AAICS0688K 69. Scope Vyapar Pvt. Ltd. AAICS6023N 70. Spice Merchants Pvt. Ltd. AAPCS7492G 71. Apex Commotrade Pvt. Ltd. AAJCA4459K 72. Kingfisher Properties Pvt. Ltd. AAECK3394G
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73. Topwell Properties Pvt. Ltd. AADCT8403C 74. Esquire Enclave Pvt. Ltd. AACCE7065J 75. Radison Properties Pvt. Ltd. AAFCR2818B 76. Shivkhori Construction Pvt. Ltd. AAPCS7850L 77. Limestone Properties Pvt. Ltd. AACCL0133G 78. Natural Housing Pvt. Ltd. AADCN6251G 79. Divyadrishti Merchants Pvt. Ltd. AABCD8147K 80. Divya Drishti Traders Pvt. Ltd. AABCD8146J 81. Dhanraksha Vincom Pvt. Ltd. AADCD6028P 82. Ridhi Vincom Pvt. Ltd. AAECR9858C 83. Dhanleela Investments & Trading Company Ltd. AAACR1770P 84. Blue Circle Services Ltd. AAACB2131L 85. Pine Animation Ltd. AAECM0267A Mishka Finance and Trading Ltd. (Formerly known as: 86. AAACP2548R Pyramid Trading And Finance Ltd.) 87. Amrit Sales Promotion Pvt. Ltd. AACCA3220D 88. Burlington Finance Ltd. AABCB2575P 89. Symphony Merchant Pvt. Ltd. AADCS5411K 90. Bazigar Trading Pvt. Ltd. AABCB3052B 91. Manimudra Vincom Pvt. Ltd. AADCM4316K 92. Vibgyor Financial Service Pvt. Ltd. AAACV8378B 93. Jayant Security & Finance Ltd. AAACJ4848G 94. Trimurthi Finvest Ltd. AAACT6383N 95. Purvi Finvest Ltd. AABCP6564C 96. East West Finvest Ltd./ Sharad Dharak AAACE6834D 97. East West Finvest Ltd. AADCE1236G LTP Contributors 98. Ms. Prem Lata Nahar AFAPN8764M 99. Mr. Taran Kumar Rungta ASVPR5947G Radford Sellers 100. Ms. Manisha Jayesh Shah AOBPS1451C 101. Ms. Artiben Kansara ATWPK6701D 102. Mr. Sunil Mohanlal Kansara ANFPK3652G
98. Having dealt with the contentions of the noticees as aforesaid, I note that majority of them have raised concern over challenges in running their activities on account of ban and consequent freezing of their demat accounts. Many of these entities have pleaded for removal of the restraint imposed vide the interim order or at least allow them partial relief of permitting trading in securities other than those involved in this case. It is worth mentioning that the case in hand is peculiar as large number of entities have been restrained and the ongoing investigation in the matter may take time in completion. I have been conscious that the restraint order should not cause disproportionate hardship or avoidable loss to the portfolio of the noticees. That is why several relaxations, such as allowing investment in mutual fund units, permission to liquidate existing portfolio and keep the proceeds in escrow
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account and even utilize 25% of the proceeds for meeting exigencies, etc. have been made in the past. Now at this stage, considering the facts and circumstances of this case and submissions/oral arguments made before me, I deem it appropriate to make further relaxations so as to address the issues of the personal and business exigencies or other liquidity problems.
99. Considering the above, I, in exercise of the powers conferred upon me under section 19 of the SEBI Act, read with sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued vide the ad interim ex parte order December 19, 2014 and ad interim ex parte order dated November 09, 2015 as against the aforesaid 102 noticees except that they can:- (a) enter into delivery based transactions in cash segment in the securities covered in NSE Nifty 500 Index scrips and/ or S&P BSE 500 scrips; (b) subscribe to units of the mutual funds including through SIP and redeem the units of the mutual funds so subscribed; (c) deal in Debt/Government Securities; (d) invest in ETF; (e) avail the benefits of corporate actions like rights issue, bonus issue, stock split, dividend, etc.; (f) tender the shares lying in their demat account in any open offer/delisting offer under the relevant regulations of SEBI.
100. Further considering business and personal exigencies and liquidity problems submitted by the restrained entities I allow them further relaxations/reliefs as under:- (a) They are permitted to sell the securities lying in their demat accounts as on the date of the interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange, in orderly manner under the supervision of the stock exchanges so as not to disturb the market equilibrium and deposit the sale proceeds in an interest bearing escrow account with a nationalized bank. (b) They may deal with or utilize the sale proceeds lying in the aforesaid escrow account under the supervision of the concerned stock exchange as provided below:-
(i) the sale proceeds may be utilised for investments permitted in para 99; (ii) upto 25% of the value of the portfolio as on the date of the interim order or the amount* in excess of the profit made /loss incurred or value of shares purchased to give exit, whichever is higher, may be utilized for business purposes and/or for meeting any other exigencies or address liquidity problems etc. * The amount will include the value of portfolio in the demat account Explanation: For the purposes of determining the portfolio value of the entities, the value of portfolio of securities lying in the demat account/s (individual and
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joint both) on the date of the interim orders after excluding the value of shares that have been suspended from trading as on the date of the communication shall be considered. For NBFCs and stock brokers the value of portfolio shall exclude the value of clients' securities lying in their demat accounts.
(c) The aforesaid reliefs shall be subject to the supervision of exchanges and depositories. The stock exchanges may use this existing mechanism available for implementing the similar interim relief earlier granted to some of the entities.
101. It is, however, clarified that the aforesaid exceptions/relaxation/reliefs shall be available (a) to the aforesaid 102 noticees and those restrained entities in respect of whom the confirmatory orders have already been passed as mentioned in para 9 above; and (b) the common interim reliefs already granted in the matter earlier are subsumed in the aforesaid general relaxations/reliefs. The specific reliefs granted if any, to any of the noticees shall remain in operation.
102. This order is without prejudice to any enforcement action that SEBI may deem necessary against the aforesaid noticees on completion of the investigation in the matter.
103. This order shall continue to be in force till further directions.
104. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.
Sd/-
DATE: AUGUST 26th , 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA
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