Securities Appellate Tribunal
In Re: Prime Property Development ... vs Unknown on 29 September, 2005
ORDER
G. Anantharaman, Member
1. Background 1.1 Sudden spurt in price and trading volume of certain companies in a short period of time often referred to as "mid cap" or "small cap" companies have been engaging the attention of SEBI and the stock exchanges for some time. It has also been noticed that several such companies have been making a flurry of seemingly favourable price announcements detailing proposed corporate developments, status of business, projects and status thereof. It was also noticed that several such announcements are not mandated under law. It has further been noticed that curiously the promoter shareholding in several companies has decreased in the backdrop of such announcements indicating that promoters have taken advantage of price rise and benefited from it. Trading in such companies has been under the surveillance of SEBI and the stock exchanges to determine whether the trading volumes and price rise have been the result of unfair trade practices or market manipulation.
1.2 One such company whose shares have shown a significant increase in prices as well as trading volumes in a short period of time is Prime Property Development Corporation Ltd. (the company). The shares of the company were listed on the BSE in July 1995. The trading history of the shares of the company showed that shares of the scrip were thinly traded. During the period January to December 2004, trading took place only on 136 days with a number of trades in range of minimum one to maximum number of trade 68. The share price moved in a range of Rs 13 to Rs. 29 while correspondingly, the volumes were in the range of two shares to 22900 shares per day.
1.3 For the period, January to June 2005, a largely similar trading pattern was observed; which was sporadically broken by isolated and infrequent trades at levels of Rs 25 to 35. High volumes were also observed on these infrequent trading days. The share price thereafter moved by quantum jumps from range of Rs. 30 in June 2005 to levels of Rs. 310 in September 2005. This phenomenal jump of around 900 % was seen over a small period of only around 60 trading days. The applicable circuit filter in the scrip was 10%, which was revised to 5% on 8th July 2005. The scrip had hit the upper circuit filter limit on almost all days in July / August 2005. The scrip was transferred to T group w.e.f. 15/7/05. A sharp rise in volumes traded was also noticed during this period. The volume traded in the scrip was 500 shares as on June 20, 2005 and touched an incredible high of 3,89,866 shares on August 03, 2005. Thereafter, the average volume traded continued to be in the range of more than 1,00,000 shares per day. During this time, the company also issued a flurry of announcements. The company has announced "completion of prestigious projects" in July 2005 and then in August 2005. Further, it issued announcements of several expected changes in company equity structure and business operations. It is pertinent to note that the share price which had reached levels of Rs. 53 in the first week of July 2005 subsequently sharply burgeoned to levels of Rs 300 in the background of several announcements detailing proposed business plans and completion of projects as well as changes in the equity structure. It was further observed that promoters & directors had undertaken transactions in the shares of the company during the period June to September 2005. In view of the price movement, circuit filters have also been imposed by the stock exchanges on the trading in the scrip. With effect from March 1, 2005, the circuit filter was reduced from 20% to 10% and thereafter, as recently as July 8, 2005, the circuit filter was reduced from 10% to 5%.
1.4 The circumstances as elucidated above namely - meteoric increases in price and trading volumes of the shares, the flurry of market friendly announcements issued by the company and transactions by the promoters and directors of the company during this period warranted an immediate investigation by SEBI. While the investigation is still in progress, the preliminary findings are given in the following paragraphs.
2. Preliminary Findings The company - business, board of directors, shareholding pattern 2.1 The Company was incorporated on 23rd December 1992 as Akhil Holdings Pvt. Ltd. As per the information available with the exchange, the company was engaged in fund based as well as non fund based financial services like Investment Banking, NRI Investment counselling, Bill Discounting / Inter Corporate Deposits. The name of the company was subsequently changed to Shrenik Securities Ltd in 1996. Thereafter, in June 2000, an open offer was made by Padamshi. L. Soni, Manish Soni and Vishal Soni to acquire upto 10,03,700 equity shares at a price of Rs. 4/- per share for fully paid up shares and acquired the company. The company had reportedly diversified their business activities in the field of computer software and allied activities pertaining to Information Technology, and the name of the company was changed to Soni Softech Ltd in September 2000. Thereafter, once again, as the company has reportedly expanded in the business of builders and contractors to acquire and develop landed property, the company has subsequently changed its name to its present name - Prime Property Development Corporation Ltd. vide certificate of incorporation dated 16th November 2001. As per information available from the capital line database, the Chairman of the company is Mr Padamshi L Soni. Mr Manish P Soni and Vishal P Soni are the Executive Directors. The other directors on the Board of directors of the company are Prakash D Shah, Siraj M Somji, Nitin R Kilawala and Viren C Mikshita. The shareholding pattern of the company (more than 1% shareholding) is tabulated below 2.2 It is seen from the above that the promoter shareholding increased from 54.62% to 54.95% from the period March 2005 to June 2005. Examination of disclosures made to the stock exchanges by the company (in terms of regulations 7 of SEBI (Substantial acquisition of shares and Takeovers) Regulations) brings out that Shri. Padamshi L. Soni has acquired 27668 (0.29%) equity shares of the company by Market Purchase from 20th June, 2005 to 30th June, 2005. After this acquisition, his shareholding in the Company stood increased to 43,76,421 (43.86%) shares. It was brought out that these purchases were made in the background of favourable corporate results announced by the company for the quarter ended June 2005.
Table 1: Shareholding pattern
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Category March 2005 June 2005
No. of Shares (%) No. of Shares (%)
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Promoters Holding
Indian Promoters 5462277 54.62 5495032 54.95
-Padamshi L. Soni 4348566 43.49 4381321 43.81
-Prabhavati P. Soni 813711 8.14 813711 8.14
-Manish P. Soni 100000 1.00 100000 1.00
-Vishal P. Soni 100000 1.00 100000 1.00
-Dimple M. Soni 100000 1.00 100000 1.00
Non-Promoters Holding
Institutional Investors,
Mutual Funds and UTI Banks,
Financial Institutions,
InsuranceCompanies, FII -- -- -- --
Private Corporate Bodies 1564358 15.64 1487853 14.88
-Minal Finances Pvt. Ltd. 959372 9.59 850000 8.50
-Midas Jewels Pvt. Ltd. 422797 4.23 499999 5.00
Indian Public 2931432 29.31 2982010 29.82
-Siraj M. Somji
-Ramesh U. Ramchandani 250000 2.50 250000 2.50
-Rameshchand Devshi Dagha 276937 2.77 161291 1.61
-Manorama T. 168600 1.69 161200 1.61
-Shabbir M. Somji 200000 2.00 200000 2.00
-Alis Lokhandwala 100000 1.00 100000 1.00
-Dilshad S. S. 100000 1.00 100000 1.00
-Shainaz S. S. 100000 1.00 100000 1.00
-M. A. Somji 100000 1.00 100000 1.00
-Vrajraj S Morarjee 180000 - 1.80 - 180000 1.80
356298 3.56
NRIs / OCBs 39915 0.40 31665 0.32
Any Other - Clearing Member 2018 0.02 3440 0.03
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TOTAL 1,00,00,000 100.00 1,00,00,000 100.00
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Financial Performance: The financial results of the company are tabulated as under
Table 2: Financial performance Rs. lakhs
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Sr. No. Particulars June 2005 QUA June 2004 QUA Mar 2005 QUA Mar 2004 QUA
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1. Sales 850.00 250.00 827.00 352.00
2. Other Income 36.29 9.03 28.74 0.00
3. Total Income 886.09 259.03 855.74 352.00
4. PAT 201.23 10.12 102.83 26.07
5. Equity 1000.00 1000.00 1000.00 1000.00
6. EPS (Rs.)(Annualized) 8.04 0.40 4.12 1.04
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2.3 The above tabulation brings to the fore several material findings as under:
1. The results of the company for the quarter ended June 2005 showed that the profit for the quarter ended June 2005 (Rs. 201.23 lakhs) is more than the profit for the entire year 2005 (Rs. 140 lakhs) as well as for the year 2004. (Rs. 95.2 lakhs)
2. It was observed that the profits of the company have increased from Rs. 10.12 lakhs during quarter ended June 2004 to Rs. 201.23 lakhs during quarter ended June 2005, a rise of 1888%.(over the same quarter the previous quarter)
3. Sales have increased from Rs. 250.00 lakhs during June 2004 to Rs. 850.00 lakhs during June 2005, a rise of 240% and the total income has increased from Rs. 259.03 lakhs during June 2004 to Rs. 886.09 lakhs during June 2005, i.e. by 242%.
2.4 It is also important to point out here that the auditor of the company is M/s Vora & Associates, Chartered Accountants and it has been brought out elsewhere in this order that entities related to auditor as well as to the promoters /directors have transacted in the shares of the company during this period. Details in this connection are discussed in subsequent pages. Further, on these results the company had for the first time declared a dividend of 10% for the year 2004-05 as well as an interim dividend of 20% for the year 2005-06.
Public Announcements 2.5 It is significant to note that as a part of the Notes to June 2005 quarter results, it has been indicated that "the company is planning to construct mini shopping mall in a Prime location near to railway station in western suburb of Mumbai, which will command high returns due to locational advantage". This is one more instance of price favourable and investor inducing statements made by the company during this period without any apparent reasons or supporting details. Around this time, the company has announced many operational/business developments and simultaneously it also announced the expected changes in equity structure. These announcements are detailed as under:
2.6 It is noticed from the above the announcements fall in 2 categories - relating to business developments and those relating to change in equity structure. In connection with business developments, the announcements appear to be highly detailed with specific reference to returns and effect on the bottom line. The company is also repeating the common refrains of "purchasing plots in prime location" and "The Company is in an
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Date Particulars
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1/7/05 Prime Property Development Corporation Ltd has informed BSE that the Board ofDirectors of the Company at its meeting held on June 30, 2005, inter alia, has recommended a maiden Dividend of 10% amounting to Rs 100 lacs (excludingDividend Tax) for the financial year ended March 31, 2005, subject to approval ofmembers.
14/7/05 Prime Property Development Corporation Ltd has informed BSE that it hascompleted a prestigious project 'Prime Avenue' at Vile Parle (West) adjacent toNanavati Hospital comprising of two buildings, one fully residential and the otherresidential -cum-
commercial. The project is a landmark property in that area. The company has retained the two very spacious commercial units on the ground floor and first floor about 10,000 sq. ft. per floor and earns regular rental income. Thecompany has already completed a highly prestigious commercial project 'PrimePlaza' on the S. V. Road - Santacruz. Another project at S. V. Road Santacruz,namely, 'Prime Centre' is nearing completion and the Ground and First floorshowroom of about 7000 sq. ft. will also be retained by the Company for regularlease income and capital appreciation. The Company has other projects at VileParle and Juhu, and is constantly looking out for new projects at Prime locations.
Its prestigious beach project near Juhu is indeed the most beautiful, spacious,expensive, property for the high net worth customers. It has acquired a primeproperty near station on western suburb and is planning to construct a minishopping mall, which will command high returns due to locational advantage,which shall improve the bottom line.
16/8/05 Prime Property Development Corporation Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on August 23, 2005, inter alia,to consider the following business:1. To approve the Directors Report of the Company and to decide the date ofAnnual General Meeting for the year ended March 2005. 2. To increase Authorised Share Capital of the Company and to split Equity Shares of the Company.3. To increase the resources of the Company amounting to Rs 1500 million to Rs 2000 million by way of issue of further capital at premium with the consent of shareholders and subject to approval of appropriate authorities under section 81(1) of the Companies Act, 1956.4. To increase borrowing powers of the Board of Directors. 5. To review and recommend ceiling of remunerations payable to Executive Directors and commission payable to Independent Directors and Chairman.Proposal received for Development of properties in other cities.
17/8/05 Prime Property Development Corporation Ltd has informed BSE that the Board ofDirectors of the Company at its meeting to be held on August 23, 2005, inter alia, will also consider to propose interim dividend for the year 2005-06.
23/8/05 Prime Property Development Corporation Ltd has informed BSE that the Board of Directors of the Company at its meeting held on August 23, 2005, have adoptedfollowing business subject to approval of Shareholders and appropriate authority ifany:1.
Interim Dividend of 20% (i.e. Rs 2/- per share) for year 2005-06. 2. Authorised Share Capital of the Company to be increased from Rs 100 million to Rs 200 million to facilitate further issue of Capital in future.3. Considered, approved and recommended splitting of shares of Rs 10/- each, into 2 shares of Rs 5/- each, fully paid up. Accordingly, no. of shares will increase from 1,00,00,000 of Rs 10/- each to 2,00,00,000 of Rs 5/- each. 4. To augment resources of the Company, an amount not exceeding Rs 2000/-million by way of further public / rights / preferential issue of capital / GDR issue atpremium subject to approval of shareholders under section 81 (1) of the Companies Act 1956 and other appropriate authorities.5. Increasing Borrowing Powers of the Board of the Directors up to Rs 6000 millionsubject to approval of Shareholders.6. Considered Business Plans and to diversify ventures to various other locations in Mumbai and other major cities.
25/8/05 Prime Property Development Corporation Ltd has informed BSE that the Registerof Members & Share Transfer Books of the Company will remain closed fromSeptember 26, 2005 to September 30, 2005 (both days inclusive) for the purpose of payment of dividend and Annual General Meeting of the Company.
2/9/05 Prime Property Development Corporation Ltd has informed BSE that the Companyhas purchased a plot of land admeasuring about 4000 sq. yards at a prime location at Mumbai. The Company proposes to construct super luxurious residentialapartments with all modern amenities. The expected realization from this projectwill be about Rs 500 million. The project will be completed in the year 2006-07. The Company is in advance stage of negotiating / finalizing a few more propertiesin prime localities of Mumbai.
12/9/05 Prime Property Development Corporation Ltd has informed BSE that the Companyhas purchased one more plot of land admeasuring about 3100 sq. yards at a prime location at Mumbai. The Company proposes to construct super luxuriouscommercial shopping mall.
The expected realization from this project will be aboutRs 600 millions. The project will be completed in the year 2006-07. The Company is in an advanced stage of negotiation and is finalizing a few more properties inprime localities of Mumbai.
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advanced stage of negotiation and is finalizing a few more properties in prime localities of Mumbai". This seems indicative of presenting a rosy picture of the state of affairs of the company. It has been also noted that during the period of investigation the price of the scrip had hit the upper circuit limit on all the days, which also include the days of announcements. These announcements are in the nature of presenting favourable corporate performance and likely to attract investor interest and in fact resulted in creating increasing demand for this scrip which led to an unusually sharp increase in price & volume.
Analysis of trading pattern in the shares of company 2.7 The analysis of trading pattern for the period July 1, 2005 to September 12,2005 has been carried out. From the findings of investigation, the clients have been categorised into groups. Group I comprises trading clients related to the company, promoters & director (Siraj Somji). Group II comprises other clients related to each other. The broker wise transactions of these clients are as given below:
2.8 It is observed that these entities sold as many as 19,18,990 shares on a gross basis and 1550713 shares on a net basis. This comprises around 15% of the paid up capital of the company. Further, these total purchases of these clients accounted for 4.29% of the total market volume and total sales accounted for 22.31% of the total market volume. Additionally, it was also noticed that a client Vrajraj Morarjee, dealing through the broker Table 3: Trading details of promoter/directors and related entities (Group I)
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Name Broker Buy Qty Sell Qty Connection
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Shabbir Somji B. D. Shah - 265500 These clients have the
Securities same address A/201,
Ltd.(44) Kanti Apts, MountMerry
Mansukhlal 51000 15000 Road, Bandra (W),Mumbai.
M. Upadhyay Siraj Somji is a
(424) director of the company
Shabbir BHH Securities - 149550 Prime
Shainaz Pvt. Ltd. (51) Property Development
Corporation Ltd. Also
Somji Mehandi BHH Securities - 25000 these entities have a
Alibhai Pvt. Ltd. (51) common telephone numbers
Mansukhlal M. 17000 - 26430436 & 26518080
Upadhyay (424)
Mangal Keshav - 274800
Securities Ltd.
(491)
SirajSomji M/s. Harikishan - 290400
Hiralal (267)
Mansukhlal 50950 -
M. Upadhyay (424)
Dilshad S. Somji Mansukhlal M. 51000 - The entities Minal
Upadhyay (424) Finance Pvt. Ltd. and
Ajmera Associates 2147 152147 Midas Jewels Pvt. Ltd.
Pvt.Ltd. (911) have a common address
and a common director
Shainaz M. Somji Mansukhlal M. 25050 - Rajesh B Vora. The
Upadhyay (424) telephone numbers
22005934and 22063289
Minal Agencies Manoj Javeri 47100 4545 available from client
Pvt. Ltd. Stock Broking registration forms of
Pvt. Ltd. (421) these clientsare
S. M. Shah (625) - 25000 registered in the name
of theauditors of the
Midas Jewels Manoj Javeri - 285000 company, Vora
Pvt. Ltd. Stock Broking &Associates. Madhusudan
Pvt. Ltd. (421) Securities Ltd.,
Minal Finance S. M. Shah (625) 69030 382048 MinalAgencies Pvt. Ltd.,
Pvt. Ltd. Minal FinancePvt. Ltd.
(MayurVora) were introduced by Mayur
Madhusu dhan S. M. Shah (625) 55000 50000 Vora - a partner in the
Securities Ltd firm Vora and
---------------------------------------------------- Associated, the
Total 368277 1918990 auditorsof the company.
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S. M. Shah is also found to be connected to the company as he was introduced by Shri Soni Padamshi L., the Chairman of the company. This client has bought 600 shares and sold 353950 shares.
2.9 The following common clients appeared to be connected / related to each other, have dealt in the scrip, during the period under investigation.
Table 4: Trading details of connected clients (Group II)
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Client Name Broker Buy Qty Sell Qty Connection
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Pratap Sanghvi B. D. Shah Securities Ltd. (44) 99644 42450 Pratap Sanghvi,
BHH Securities Pvt. Ltd. (51) 49600 49600 SandeepShah and Hitesh
Ajmera Associates Pvt. Ltd.(911) 225278 280525 Vora have the same
Hitesh Vora B. D. Shah Securities Ltd.(44) 0 10000 telephone
BHH Securities Pvt. Ltd. (51) 8275 20000 number25673553. The
M/s. Harikishan Hiralal (267) 614469 575688 clients Chetan Mehta and
Manherlal Vora Ventura Securities Ltd. (307) 59500 16500 Amit Pandya have thesame
Ajmera Associates Pvt. Ltd.(911) 464236 441736 address Also the clients
SandeepPravin Shah Ventura Securities Ltd. (307) 33709 6500 Chetan Mehta and Hitesh
Mansukhlal M. Upadhyay(424) 912079 899588 Vora have the same
Chetan Mehta Indiabulls Securities Ltd. (907) 505179 166859 telephone number56334830
From the client
registration form of
Pratap Sanghvi
andJitendra Salot given
by thebroker B. D. Shah
Securities Ltd.(44) it
was observed thatthey
were introduced byRajesh
Chunnilal Kuvadia. Mehta
Consultancy,Jaswantrai
Mehta, Nisha Mehta and
Dhanlaxmi Mehta have the
same address. From the
client registrationform
of Chetan Mehta, givenby
the broker Indiabulls
Securities Ltd. (907) it
Amit Pandya Indiabulls Securities Ltd. (907) 94995 15000 wasobserved that he was
Mehta Consultancy Indiabulls Securities Ltd. (907) 136827 69255 introduced by Nisha Mehta Indiabulls Securities Ltd. (907) 50000 17051 JigneshJaswantrai Mehta Jaswantrai Mehta Indiabulls Securities Ltd. (907) 100000 0 having thesame address Dhanlaxmi Mehta Indiabulls Securities Ltd. (907) 20000 10000 as that of Mehta
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Total 3373791 2620752
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2.10 It is observed that these entities sold as many as 2620752 shares on a gross basis and purchased 3373791 shares.
2.11 The above analysis establishes the following connections between the clients which are material to the case. These are ? Hitesh Vora is son of Manherlal Vora. Manherlal Vora and Pratap Sanghvi may be connected as they have same address. It also appears that Chetan Mehta and Hitesh Vora may be connected as they have same contact number. Chetan Mehta and Amit Pandya has given same address hence they may also be connected to this extent. A client Sandeep Shah may also be connected to Hitesh Vora as their contact number is same.
? Further, Mayur Vora, Minal Finance Ltd and Minal Agencies Pvt. Ltd may be connected to the auditor of the company as the contact number of these entities is registered in the name of Auditor Vora & Associates.
? Md. Siraj M Somji, Executive director of the company. Dilshaw Somji, Shabbir Somji, Shabbir Shainaz and Siraj Somji seem to be connected to each other as they have same address and phone number.
? Further it is also observed that the client Madhusudan Securities Ltd. and Minal Finance (Rajesh B. Vora / Shrushti Lodaya) were introduced by Mayur Vora, director of Minal Agencies Pvt. Ltd.
? It is pertinent to note that the signature of Mayur Vora on the client registration forms of these clients appears to be same as that on the letterhead of Vora & Associates, the auditors of the company - Prime Property Development Corporation Ltd. where Mayur Vora is a partner. It is also observed that Morarjee Vrajraj, a client was introduced by Shri Soni Padamshi L, the chairman of the company - Prime Property Development Corporation Ltd. All these are the clients of broker S M Shah.
Trade log and order log analysis 2.12 Trade log and order log analysis carried out in the scrip brought out that some brokers had influenced the scrip price through first trades, incremental trades and orders resulting into multiple trades. The following are the brokers along with the clients for whom they have transacted a. Mansukhlal M. Upadhyay- Shabbir Somji, Somji Mehandi Allibhai, Siraj Somji, Dilshad Somji, Shainaz Somji, Sandeep Shah b. M/s. Harikishan Hiralal - Siraj Somji, Pratap Sanghvi, Hitesh Vora, Manherlal Vora c. Ajmera Associates Pvt. Ltd.- Dilshad Somji d. Ventura Securities Ltd. - Manherlal Vora, Sandeep Shah, e. Indiabulls Securities Ltd. - Chetan Mehta, Amit Pandya, Mehta Consultancy, Nisha Mehta, Jaswantrai Mehta, Dhanlaxmi Mehta 2.13 It was also brought out that the brokers dealing for connected clients appeared as buyers on many occasions in such trades influencing the price of the scrip. On the days when the buy orders of these brokers have established the opening price of the scrip, the brokers were the first to place buy orders at upper circuit rates. Also they had placed large number of invalid buy orders at the start of the market. The incremental trades / orders resulting into multiple trades were mainly entered into by these members during the period 1/8/05 to 12/9/05. As brought out earlier, the scrip had hit the upper circuit filter limit on almost all days in July / August 2005.
Self trades 2.14 An analysis of the major self trades was also undertaken. From the trade log it is observed that broker - Indiabulls had undertaken self trades during the last week of the August 2005 (August 24, 29, 30 and 31). Broker -Indiabulls securities Ltd has done self trades for approx 93500 shares for group II clients -Jignesh Mehta, Amit Pandya and Chetan Mehta. It is pertinent to note that during the same period there was sharp rise in price and volume in the scrip.
Shares lying in the beneficiary account of brokers 2.15 A scrutiny of the securities flow (as observed from changes in demat shareholding)bring out that that large number of shares got transferred into beneficiary accounts of certain brokers. The demat shareholding change of major shareholders as per NSDL data is tabulated below:
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Name of shareholder DP ID Client ID 1/7/2005 15/07/2005 1/8/2005 1/9/2005
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Minal Finances Private IN300530 10129792 850000 826100 826100 470090
Ltd.
Minal Agencies PrivateLimted IN300126 10506232 90798 91798 122398 138198
Midas Jewels Pvt Ltd IN301127 16005950 499999 499999 499999 199999
Padamshi L Soni IN300476 10256368 1231321 1236089 1236089 1236089
Prabhavati P Soni IN300476 10051807 113711 113711 113711 163711
Bhavin Jayant Soni IN300530 10139159 20000 20000 20000
Jayant Bhawanji Soni IN300530 10139376 73800 4851 4851 14851
Snehal Jayant Soni IN300530 10139132 20000 10000 10000 10000
Ramesh U IN300100 10163479 161291 9791 1291 1291
Ramchandani
Rameshchand Devshi Dagha IN300183 12682545 161200 128000 119000 50000
Rasik B Salla IN300095 10665883 42000 40000 40000 27900
Shabbir M Somji IN302679 33186138 215000 64000
Shainaz S Somji IN302679 33302315 140000 38000
Shainaz Somji IN302679 33300362 95000 59500
Siraj M Somji IN302679 33295923 101630 87630 38000
Srusti Tilakchand IN300476 40194592 16950 12950 12950 15250
41820827 200000 200000 200000 200000
Vrajraj S Morarjee IN300095 11206726 356298 311498 309898 2948
India Infoline.Com Sec. IN302269 10000013 200 3066
India Infoline.Com
Securities Ltd IN302269 10013120 200 1450 2600 5312
Indiabulls Financial IN302236 10131306 1500 48200 106300 410586
Services Ltd.
Indiabulls Securities IN302236 10180250 1900 13629
Limited
Indiabulls Securities Ltd. IN302236 10131283 250
Madhusudan Securities Ltd IN300011 10637386 50000 50000 5000
Karvy Stock Broking Limited IN300394 10014644 500 800 2499 12386
Karvy Stock BrokingLtd. IN300394 14499568 2705 410
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It is further noticed from the above that brokers - India Info line.com, India Bulls Securities (also known as Orbis Securities) and Karvy stock broking have substantial and increasing quantity of shares in their demat account over the period. The flow of such securities in their demat account needs to be examined further as well as the reasons and other details in respect of the same also need to be looked into.
Similar findings are noticed from an examination of securities flow in the CDSL. The relevant tabulations in this connection are presented below:
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Shareholder Client ID 01072005 01082005 01092005 15092005
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Angel Broking Limited 1203320000000028 3886 11848 9069 Angel Broking Limited 1203320000000066 400 15506 18963 21312 Angel Infin Private Limited 1203320000062556 500 Boi Shareholding Ltd. 1100001000012452 35639 6190 Deepak Ramdas Kothari(Huf) 1201750000047678 72517 72517 Emkay Shares And Stock 1202300000000037 17650 Brokers Pvt.Ltd Jash Securities Pvt Ltd 1301190000003565 22859 14309 Jayanti Sarkar 1203450000006074 500 Jayshree Rajesh Mehta 1202890000005555 500 Magnum Equity Broking Limited Image 1202970000012018 5710 12942 9800 Malti Ranjit Merchant 1301190300005785 1000 Midas Jewels Private Ltd. 1203700000000976 15000 9400 Minal Agencies Private Ltd 1203700000000961 3500 3500 Shikha Shares And Securities Private Limited 1203700000000047 8400 33100 Suresh Uttamlal Pethani 1202890000016833 25325 24000 83549 148102 Sushil Finance Consultants Limited 1202890000000124 3450 Sushil Finance Consultants Ltd(Client A/C) 1202890000000065 8000 71189
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It is further noticed from the above that major securities flow is noticed in the beneficial account of some brokers -Emkay Shares And Stock Brokers Pvt. Ltd, Magnum Equity Broking Limited, Motilal Oswal Securities Ltd. and J. L. Shah Securities Pvt. Ltd. Other non broking entities are also seen to have substantial and increasing quantity of shares in their demat account over the period. The flow of such securities in their demat account needs to be examined further as well as the reasons and other details in respect of the same also need to be looked into.
Non compliant conduct of the company 2.16 Further exchange has also informed us that the company has not compiled with the listing agreements. The company has violated Clause 47 by not informing the exchanges about the appointment of Registrar & Transfer Agent, Clause 49 by not submitting Quarterly Corporate Governance Report for Jun 2005, Mar 2004, Dec 2004, Sept 2004, Jun 2004 & Mar 2004 and Clause 40A by not submitting Disclosures under SEBI(Substantial acquisition of shares and Takeovers) Regulations 6(4) & 6(2). Thus the company has not complied with the substantive provisions of both the Listing agreement as well as Takeover Regulations. The non compliance is repetitive. It is further pertinent to note that in terms of the subject takeover regulations, detailed disclosures have to be made regarding the promoters/ persons acting in concert /controlling shareholders and their shareholding details. These disclosures enable the public at large to ascertain the activities of the company and the transactions undertaken by the promoters. This information is also highly material to the investors and the public at large for the purpose of informed decision making about the state of affairs of the company.
3. Conclusion
3.1 The absence of wide spread investor interest in the share of the company till June 2005, the sudden increase in share price and volume since August 2005, the sudden jump in profits, transactions by auditor related entities, coupled with a flurry of corporate announcements including announcements on dividend /change in equity structure, and about the proposal to implement new projects & purchase of plots of land in prime location , with simultaneous off loading of promoters own holdings in the market clearly indicates a careful strategy and orchestration of a plan by the promoters and auditors of the company to make personal gains at the expense of investors by inducing them to participate in the trading of the shares of the company. This has been facilitated by brokers who have indulged in prima facie self trades, market manipulation and vitiating price discovery by means of first trades, putting buy orders at upper circuit prices and placing invalid buy orders at the start of the market. The buy orders of these brokers have established the opening price of the scrip, the brokers were the first to place buy orders at upper circuit rates. Also they had placed large number of invalid buy orders at the start of the market thus creating an impression of artificial demand for the shares. This resulted in the share price hitting up circuit limits almost every day during the period July to August 2005. Besides, the company is also violative of some of the provisions of the Listing agreement and the SEBI(Substantial acquisition of shares and Takeovers) Regulations and SEBI (Prohibition of Insider Trading) Regulations, 2002 as a result of its non disclosures on promoters /persons acting in concert holdings, control as well as disclosures on promoter sales.
3.2 The preliminary findings as detailed above bring out a prima facie case of violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003. SEBI is initiating formal investigations into the matter. The specific violations of these Regulations can only be established by detailed investigation into the activities of the promoters, brokers and clients who are dealing in the shares of the company. This investigation is a time consuming process and this will require additional time. Meanwhile, there is an urgent need to arrest further fraudulent activity in the shares of the company. The price rise and increased trading interest has enabled the promoters to sell some of their holdings. The company is also non complaint with substantive provisions of the Listing agreement in addition to not disclosing the details of promoters and persons acting in concert n terms of the SEBI (Substantial acquisition of shares and Takeovers) Regulations. If this state of affairs is allowed to continue, it is apprehended that innocent investors would be lured to invest in the shares of the company at the apparently inflated price and thereby providing an opportunity to the present promoters of the company to offload their holding.
4. Order 4.1 Therefore, in exercise of the powers delegated to me by the SEBI Board in terms of Section 19 of the Securities and Exchange Board of India Act 1992 read with Section 11B and 11(4)(b), pending investigation and passing final order, I hereby issue the following directions, by way of ad interim, ex-parte order a. The promoters and directors of the company viz. Mr Padamshi L Soni. Mr Manish P Soni, Vishal P Soni, Prakash D Shah, Siraj M Somji, Nitin R Kilawala and Viren C Mikshita, Siraj M. Somji, Shabbir M. Somji, Dilshad S. S. and Shainaz S. S. be prohibited from buying, selling or dealing in any manner in the shares of the company till further orders are passed by SEBI b. That the clients viz Pratap Sanghvi, Hitesh Vora, Manherlal Vora, Sandeep Pravin Shah, Chetan Mehta, Amit Pandya, Mehta Consultancy, Nisha Mehta, Jaswantrai Mehta, Dhanlaxmi Mehta and Jaswantrai Mehta are hereby directed not to buy, sell or deal in securities of Prime Property developments Ltd. directly or indirectly, till further directions in this regard.
c. That the Stock Brokers viz., Indiabulls Securities Ltd. (formerly Orbis Securities Pvt Ltd), Mansukhlal M. Upadhyay, Harikishan Hiralal, Ajmera Associates Pvt. Ltd and Ventura Securities Ltd are hereby directed not to buy, sell or deal in securities of Prime Property developments Ltd. on behalf of the promoters, directors and clients mentioned at para No. 4.1.a and 4.1. b hereinabove, directly or indirectly, till further directions in this regard.
d. The company is prohibited from accessing capital markets till further orders are passed by SEBI.
4.2 With respect to the role of the auditors - Vora & Associates, Chartered Accountants, the matter may be referred to Institute of Chartered Accountants of India (ICAI) for action as deemed appropriate.
4.3 Further the entities/persons against whom this direction is issued may file their objections, if any, to this order within 15 days from the date of this order and, if they so desire, avail themselves of an opportunity of personal hearing at the Securities and Exchange Board of India, Head Office, First Floor, Mittal Court B wing, Nariman Point, Mumbai 400 021 on a date and at a time to be fixed on a specific request, to be received in this behalf from the entities/persons within 15 days from the date of this order.
This order shall come into force with immediate effect.