Securities Appellate Tribunal
In Re: Mega Corporation Ltd. vs Unknown on 24 October, 2005
ORDER
G. Anantharaman, Member
1. Background 1.1 Spurt in price and trading volume of certain companies often referred to as "mid cap" or "small cap" companies, in a short period of time, have been engaging the attention of SEBI and the stock exchanges for some time. Such trading activity 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. One such company whose shares have shown a significant increase in price as well as trading volumes in a short period of time is Mega Corporation Ltd. (the Company), which was listed on BSE in February 1996.
1.2 The trading history of the shares of the company (after the stock split w.e.f. September 26, 2002) showed that while there was limited trading in the shares till December 2004 the volume shot up dramatically from January 2005 onwards. After the stock split in August 2002, the shares of the company were traded in the range of Rs. 1.90 to Rs. 5.72 during the period September 2002 to December 2004, and the average monthly volume in the shares was around 15,720 shares during the period September 2002 to December 2004, accounting for only around 0.016% of the total equity capital. The very low turnover ratio clearly demonstrated lack of wide spread investor interest in this shares till that time. Subsequently, during the period from January 2005 to September 16, 2005 the price of the scrip moved sharply from Rs. 5.25 to Rs. 41.10 representing a rise of around 683% accompanied by a equally sudden spurt in average monthly volume thousand times over the previous period to around 1,56,22,538 shares. The marked increase in price and trading volume during the months from January 2005 to March 2005 was not accompanied by any positive corporate developments /announcements /actions .
1.3 In view of the circumstances under which the price and trading volume of the shares of the company increased and the manner in which the persons connected to the promoters transacted in the shares of the company, warranted an immediate investigation by SEBI.
1.4 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 March 26, 1985 as a Public Limited Company with its registered address at: N-18 (Mkt.), Greater Kailash-I, New Delhi-110048 in the name of Assam Impex Ltd. The company made a public issue of 1.50 lakh equity shares of Rs. 10 each for cash at par on September 8, 1986. The shares were then listed on Guwahati Stock Exchange (Regional). The name of the company was changed from Assam Impex Ltd. to Vibgyor Corporation Ltd. on December 19, 1996. In the year 1996, the company listed its securities (Rs.10 crore equity capital) and the equity shares were admitted on BSE w.e.f. February 8, 1996. At that time the company was stated to be engaged in the business of trading in securities. The name of the company was further changed from Vibgyor Corporation Ltd. to Mega Corporation Ltd. on May 10, 1999. In the year 2003, the company informed to BSE that their major business activities were service based i.e Media, Radio Taxi and others. During the years 2002-03 and 2003-04 the company was engaged in the business of Radio Taxi Services and Media Sales. On July 29, 2005 shareholders of the company by postal ballot passed a resolution for amendment of Memorandum of Association by adding a sub-clause relating to hospitality business, airways services and foreign exchange, money changer business etc. 2.2 The shareholding pattern filed by the company for the quarter ended June 2005, the total equity capital of the company was Rs. 10 crore comprising of 10 crores shares of Rs. 1/- each. As mentioned earlier, the face value of shares was split from Rs. 10/- each to Rs. 1/-each and the price was adjusted for stock split w.e.f. September 2002.
2.3 According to the disclosures of shareholding pattern made by the company to the BSE the promoter entities/individuals included Crayons Global Finance Ltd ., Odyssey Corporation Ltd. Pooja Equisearch Pvt. Ltd., Vimi Investments and Finance Ltd., and Himanshu Mehta, Kunal Lalani, Beena Mehta, R.N. Mehta, Hiten Mehta,. It is also observed that Persons Acting in Concert hold 0.01% of the shareholding though their details have not been disclosed in the shareholding pattern filed by the Company with BSE.
2.4 The Board of Directors of the company described in the annual report for the year 2004-05 are as follows:
2.5 It is evident from the quarterly shareholding pattern submitted to the stock exchanges that there was no substantial difference in the shareholding of the promoters whose shareholding was 50.55% for the quarter ended December 2004 and 50.29% for the quarter ended June 2005. However, shareholding of private corporate bodies and public holding underwent substantial change during this period. While the ho lding of Private Corporate Bodies has reduced from 26.97% to 10.2%, there was an increase in the holding of public from 22.48% to 30.51%. The shareholding pattern for the quarter ended December 2004 and June 2005 is given below:
Table 1: Board of Directors of the Company
----------------------------------------------------- Kunal Lalani Chairman & Managing Director
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Hemanshu Mehta Vice Chairman Surendra Chhalani Executive Director H M Lalani Director N K Nayak Director K S Venkataraman Director S L Golchha Director Sachin Mehra Director
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Table 2: The shareholding pattern of the Company, for the quarter ended December 2004 and June 2005
----------------------------------------------------------------------------------- Category As on December 31, As on June 30, 2005 2004
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No. of % of No. of Shares % of Share
Shares Share Holding
Holding
----------------------------------------------------------------------------------- Total Promoters 505,39,560 50.54 502,85,560 50.29 Persons Acting in Concert 10,000 0.01 9,000 0.01 Private Corporate Bodies 269,69,116 26.97 101,95,015 10.2 Indian Public 224,81,322 22.48 395,09,423 39.51 NRIs/OCBs 2 0 1,002 0
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2.6 Among non promoters, who hold more than 1% of the share capital as on June 2005, is Fortis Securities Ltd., GMR Infrastructure Ltd. and Indiabulls Securities Ltd. Further it was also noticed that holdings of GMR Infrastructure Ltd. decreased by 3,78,000 shares from 2.09% (20,88,500 shares) as on March 31, 2005 to 1.71% (17,10,500) as on June 30, 2005, . Vintel Securities (P) Ltd. was holding 2.11% (21,06,245 shares) as on March 31, 2005, however its name does not appear in the list of share holders holding more than 1% of the equity capital of the company as on June 30, 2005.
Financial performance of the Company 2.7 The annual results filed by the Company for the last four years are given below:
Table 3: The annual results filed by the Company (Figures in Rs Cr.)
-------------------------------------------------------------------------- Particulars March-05 March-04 March-03 March-02
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Net Sales 14.02 3.45 - - Interest Earned, Operating Income - - 5.88 5.53 Other Income 0.04 0.88 1.30 1.86 Total Income 14.06 4.32 7.18 7.39 Interest Expanded * - - -0.03 -0.01 Operating Expenses - - -6.08 -6.12 Expenditure -2.83 -3.41 - - Operating Profit 11.23 0.91 1.07 1.25 Interest -0.02 -0.02 - - Gross Profit 11.20 0.89 - - Depreciation -0.73 -1.18 -1.46 -1.22 Profit before Tax 10.47 -0.29 -0.40 0.03 Tax -1.23 0.12 0.05 -0.09 Profit after Tax 9.24 -0.17 -0.35 -0.07 Net Profit 9.24 -0.17 -0.35 -0.07 Equity Capital 10.00 10.00 10.00 10.00 Reserves 11.14 1.89 2.06 2.41 EPS (in Rs) 0.92 -0.02 -0.04 - Nos. of Shares - Non Promoters 49704440 49495000 49495000 4863300 Percent of Shares - Non Promoters 49.7 49.5 49.5 48.63
----------------------------------------------------------------------- * As given in BSE web-site 2.8 The analysis of the profit and loss of the Company for the financial year 200405 showed that income from investments was Rs. 10.08 crore, accounting for around 72% of the total income of the Company in that year, as compared to nil for the financial year ended 2003-04. it is indeed surprising that the major part of the income for the year should have come from investment in shares when the Company had specifically requested BSE, vide its letter dated July 11, 2003, to make necessary change in BSE website to change its major business activities from "finance and investment" to "service based activities". In contrast, in the two previous two years the major income of the Company (75% in 2002-03 and 82% in 2003-04 ) was from the business of media & radio taxi services.
2.9 Since the balance sheet of the Company for the year ended March 2004 did not show any investment in quoted equity shares it implied that the profit from investment in quoted shares was from trading, because the shares would have been acquired by the Company during that year only.
2.10 As the balance sheet of the Company as of March 31, 2005, did not given any detail of the income generated from the investments, these were obtained from the Company after vigorous follow up. It was gathered from the information submitted by the Company that the profit of around Rs 10.08 crores was resulted from the sale of shares of three companies i.e. Lakshmi Overseas Ltd., Karuna Cables Ltd and IFSL Ltd. Two of these companies viz. Karuna Cables Ltd and IFSL Ltd. were only "mid cap" or "small cap" companies. It is very peculiar for a Company, who barely managed to post operational profits for the previous 3 years, to make huge investments in a penny stocks like Karuna Cables Ltd. and IFSL Ltd., which were volatile, had very little liquidity and were trading at a very low price. It is worthwhile to mention that SEBI has already passed an interim order under section 11B and 11(4) (b) of SEBI Act, 1992, in the case of IFSL Ltd for alleged manipulation in the scrip. Clearly these shares were acquired and sold by the Company during the year within a short period.The selection of these three shares for making such a huge investment certainly raises doubt about the investment policy of the company. The non disclosure of above investment details in Annual Report or to the stock exchange further fortifies this doubt. It is gathered from the subsequent correspondence with the Company that sale consideration for the above mentioned sale of shares was received only after April 2005 but was accounted for in the previous year. The Company is yet to provide details such as nature of transaction for acquiring the shares (market or off market deal), payment made and received for purchase and sale of the shares etc. 2.11 It was curious enough that a company, whose major income for the previous years was from media and radio taxi services, had recorded such a high income from investments, which is not their core business activity. But the fact that the extraordinary financial results of the Company for the financial year 2004-05, was not from its main business activities, but from trading in "stocks of small and infrequently traded companies could not have been ascertained from the public disclosures or from the disclosures made available by the Company on the BSE's web site, as no details of investments were given in their disclosures. Disguising the real cause of profit was a crafty way of misleading investors to believe that the profits generated for the year 2004-05 were from their major business activity of Radio Taxi operations.
2.12 In the entire process, it appears that the company and the Chartered Accountant of the company has not followed the normal accounting practices and have provided misleading information in the Balance Sheet and to the stock exchanges. A reference is being made to the Institute of Chartered Accountants of India to examine the role and practice followed by the Chartered Accountant in preparing the annual report of the Company.
Major Corporate Announcements 2.13 The major corporate announcements of the company during the period April 2005 to September, 2005 are as follows:
Table 4: Statement of corporate announcements made by the Company
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Date & time Major Announcements Thursday, April 07, 2005 Mega Corporation launches worldwide 1:21:56 PM outbound packaged tour service provider
Mega Corporation Ltd has announced that it is launching an exclusive first of its kind 24 hours 'Mega Holidays', a worldwide outbound packaged tour service provider.
Mega Holidays would cover regions across the world such as Alaska-Canadian Rockies, Honululu-USA, Russia-Scandinavia, South & East Africa, Australia-New Zealand, China, Far East, Europe etc. The company intends to operate across 25 cities in India through its marketing offices which are to be set up by the end of the year. By April 2005, the company will have 8 offices across India in Delhi, Jaipur, Chandigarh, Ludhiana, Bangalore, Chennai, Hyderabad and Kolkata.
Mega Corp targets to achieve revenue of INR 1000 million in first year with Net Profit of INR 200 million.
The packaged tour service is in exclusive collaboration with GEM Tours, which has over 15 years of experience in International Travel Industry and has operations across the Globe and is one of India's largest International Tour Operators. The company organizes Cruise Tours across all the continents and its tour programs spans 7-30 days, including travel, accommodation, food, sight seeing and taxes etc. Wednesday, April 20, 2005 Mega Corporation to enter forex service 4:01:36 PM with launch of 'Mega Forex' Mega Corporation Ltd has on April 20, 2005 announced that it is entering Forex service with the launch of "Mega Forex"
brand. The Company has applied with RBI for the license to operate foreign exchange business. Combined with recent initiatives and proposed plans, the Company is all set to become full service Tourism Industry player. The Forex market, which is at $5-6 billion, is growing by at least 20% triggered by increasing international traffic. The growth in Forex business is likely to be faster than the pace of increase in traffic because spend levels of Indian going abroad is rising fast. Indians are rated among the top five spenders in markets like Singapore, Australia, New Zealand, Hong Kong, Dubai etc, especially the shopoholic holidaymakers. Outbound travel from India in 2004 was pegged at about 5.5 million, up 18%. The Company expects to grab 5-10% market share in 1-2 year time span. The Company plans to start Forex business on a nationwide network. To begin with, there would be 4 branches in Mumbai, 6 in Delhi, 3 each in Bangalore and Chennai, 2 each in Hyderabad and Kolkata, 1 each in Pune, Ahmedabad, Kochi, Tiruananthpuram, Vizag.
Thursday, June Mega Corporation fixes Book Closure 30, 2005 12:50:44 PM Tuesday, August 16, 2005 Mega Corporation Outcome of AGM Mega 7:02:34 PM Corporation Ltd has informed BSE that the members at the 20th Annual General Meeting (AGM) of the Company held on July 16, 2005, inter alia, have accorded to the following: 1. Adoption of Balance Sheet of the Company as at March 31, 2005, the Profit & Loss Account of the Company for the year ended on that date and the reports of the Board of Directors and Auditors thereon. 2. Reappointment of Mr. Himanshu Mehta, Mr. Surendra Chhalani & Mr. Hulas Mal Lalani, as Directors of the Company, liable to retire by rotation. 3. Re-appointment of M/s Sipani & Associates, Chartered Accountants, as Auditors of the Company to hold office from the conclusion of this meeting till the conclusion of the next Annual General Meeting of the Company. 4. Appointment of Mr. Kunal Lalani as Managing Director of the Company for a period of 3 years w.e.f. June 30, 2005. 5. Increase in Authorised Share Capital from Rs 10,00,00,000/-to Rs 30,00,00,000/- by addition thereto 20,00,00,000 Equity Shares of Re 1/-each which shall rank Pari Passu in all respects with the existing Equity Shares of the Company and consequential amendment in Memorandum & Articles of Association of the Company. 6. Authority to the Board to issue, offer and allot equity Shares / Fully and / or Partly Convertible Bonds and / or Debentures / any securities convertible into Equity Shares, whether optionally or otherwise, with or without warrants convertible into equity shares and / or Depository Receipts and / or any other financial instruments / Securities convertible into equity shares ("Securities"), in India or abroad (i.e. in international markets) for an aggregate amount not exceeding Rs 5000 million, if any as may be determined by the Board by way of Public Issue through prospectus or through any other mode on preferential basis or private placement basis as the case may be at such time or times as the Board may think fit and whether, with or without premium as may be decided by the Board and on such terms
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2.14 There were no major announcements by the Company in the years 2003 and 2004. There was flurry of announcements by the Company from January 2005, about diversification of business activities, accompanied by sudden rise in the volume and the price of the shares. The ambitious new ventures included worldwide outbound packaged tour , forex service, etc. In this process the Company also made profit projections such as "Mega Corp targets to achieve revenue of INR 1000 million in first year with Net Profit of INR 200 million". Clearly for a company which had poor track record pf performance and poor liquidity and trading volume on the exchange and which had sought to show high level of profitability from trading in "penny stocks" the announcements of profit projections from ventures which were yet to begin was not only too premature, but mischievously misleading and done with the sole purpose of luring the investors to buy its shares.
2.15 It is also noted that the Company, in its AGM held on July 16, 2005, has increased its authorized capital from Rs 10 Crore to Rs 30 Crore and authorized the board to issue, offer and allot equity Shares / Fully and / or Partly Convertible Bonds and / or Debentures / any securities convertible into Equity Shares, whether optionally or otherwise, with or without warrants convertible into equity shares and / or Depository Receipts and / or any other financial instruments / Securities convertible into equity shares ("Securities"), in India or abroad (i.e. in international markets) for an aggregate amount not exceeding Rs 500 crore, if any as may be determined by the Board by way of Public Issue through prospectus or through any other mode on preferential basis or private placement basis as the case may be at such time or times as the Board may think fit and whether, with or without premium as may be decided by the Board and on such terms. The company has not made any subsequent announcements in this regard to BSE.
3. Findings of investigations Analysis of Trades
3.1 The analysis of the trade data and the trading details of top brokers dealing the shares during the period April 1, 2005 to September 16, 2005 revealed that:
i) India Bulls Securities Ltd. (Clg. No. 907) had a significant contribution in the trading of these shares and accounted for major concentration of 32.81% (25207341 shares), 28.53% (21920167 shares) and 30.43% (3287174 shares), of the gross purchase, gross sales and net purchase respectively.
ii) Fortis Securities Ltd. (Clg. No. 3004) had a concentration of 19.17% in net purchase and
iii) Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg. No. 380) had a concentration of 12.74% in net sales.
iv) Analysis of trading by the clients of the top brokers during the aforesaid period revealed that some of the clients were connected to each other in terms of common address, common contact number or association though client companies of which the individuals are directors. It is suspected that amongst these, some clients appear to have some linkages to the promoters. The details of such clients and their linkages are given below:
Table 5: Clients and their inter connectivity Client Name Name of broker through who, the client dealt in the Address as per the records of broker Contact number Connection scrip Fortis Securities Ltd. (Clg.no.3004) Kalpataru Chamber Gr Floor, Office No 5 Nanik Matwani Marg Mumbai 56546666 Ajit Suryavanshi appearing as common person in respect of clients at sr. no. 1, 2 & 3. Address of clients mentioned at Jagdari Bhaiya Chawl,
1. Ajit Suryavanshi Koldongri, Sahar Road, Andheri(E), Mumbai Sr No. 1, 8, 9, 11, 22, 29, 31 is same.
Phone number of clients Ruchiraj Shares mentioned at Sr No. 1,2,4,6, 8, and Stock Brokers 9,10,11, 13, 16, 19, 20, 21, 23, (P) Ltd. (Clg.no.380) 56546666 24, 25, 26, 29, 30, 31, 32, 33 are same.
B-Wing, Flat No.11, 2nd Floor, Phone number of clients Monani Appartment, Near mentioned at Sr No. 1,2,4,6, 8,
2. Ritedeal Chandan Talkies, Juhu, 9,10,11, 13, 16, 19, 20, 21, 23, Trading Mumbai - 400 049 24, 25, 26, 29, 30, 31, 32, 33 are Company Pvt same.
Ltd (Ajit Galaxy Broking Address of clients mentioned at Suryavanshi) Ltd.(Clg.No.513) 56546666 Sr No. 2, 10 are same.
B-102, Padmavati Palace, Phone number of clients
3. Vishal Kumar Ruchiraj Shares Nanda Patker Road, Vileparle mentioned at Sr No. 3, 4, 13, Textiles P Ltd and Stock Brokers (E), Mumbai 16, 17, 24 is same.
(Dir:Ajit (P) Ltd.
Address of clients mentioned at Suryavanshi) (Clg.no.380) 56546670 Sr No. 3, 7 are same.
UTI Securities Ltd. (Clg.no.767) Sani Dayas Chawl Andheri East Mumbai 56546670 Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same. Phone number of clients
4. Amar Adhav India Bulls Securities Ltd. (Clg.no.907) Saroj Hiralal Bldg Koldongari Gali No 1 Sahar Road Andheri(E) Mumbai 56546666 Action Financial Sadevbind Hiralal Chawl Services (India) Koldongri Andheri (East) mentioned at Sr No. 3, 4, 13, Ltd. (Clg.no.444) Mumbai 16, 17, 24 is same.
A-12 Dhankar Chawlmani Received 20 lakh shares from Npadapanvel Navi Mumbai promoter related entity Crayon Advertising and then transferred 10 lakh shares to client India Bulls mentioned at Sr. 1 (Ajit
5. Dadasaheb Securities Ltd.
Suryavanshi) through off Gavhane (Clg.no.907) market deals .
India Bulls Securities Ltd. (Clg.no.907) Room No 24 Datt Krupa Soc Plot No 44 Sec No 6 New Panvel Navi Mumbai 56546666 Dattu Shitole appearing as common person in respect of clients at sr. no. 6 & 7. Phone number of clients Joindre Capital Dattu shitole- room no. 24, Services Ltd.
dattkrupa soc plot no. 44, sector mentioned at Sr No. 1,2,4,6, 8, (Clg.no.89) no. 6, New panvel mumbai 9,10,11, 13, 16, 19, 20, 21, 23,
6. Dattu Shitole K & A Securities (P) Ltd. (Clg.no.936) Wajhnagar Panvel Raigad Mumbai-400069 0225654678 24, 25, 26, 29, 30, 31, 32, 33 are same.
7. Dattu Shitole India Bulls B-102 Padmavati Palace, Nanda 55731000 Dattu Shitole appearing as Rightstar Securities Ltd.
Patkar Road, Vile Parle (East), common person in respect of Trading (Clg.no.907) Mumbai clients at sr. no. 6 & 7.
Company Pvt Address of clients mentioned at Ltd Sr No. 3, 7 are same.
8. Deepak Narvekar UTI Securities Ltd. (Clg.no.767) R N 5 Ballu Bhaiya Chawl Lane No 1 Koldongri Sahar Road Andheri East Mumbai.
56546666 or 56546669 Address of clients mentioned at Sr No. 1, 8, 9, 11, 22, 29, 31 are same. Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23, No-5 Gr Flr Kalpataru Chambe Nanik Motwani Lane Opp HDFC Bank Fort Mumbai 24, 25, 26, 29, 30, 31, 32, 33 are same.
India Bulls 022 Phone number of clients Securities Ltd.
56546666 mentioned at Sr No. 8, 16, 27, (Clg.no.907) 28 are same.
No-5gr Flr Kalpataru Chambe 56546666 Address of clients mentioned at UTI Securities Ltd.
Nanik Motwani Lane Opp or Sr No. 1, 8, 9, 11, 22, 29, 31 (Clg.no.767) HDFC Bank Fort Mumbai 56546668 are same.
Phone number of clients mentioned at Sr No. 9, 15,22, are same. Phone number of clients
9. Deepak Todkar No-5gr Flr Kalpataru Chambe Nanik Motwani Lane Opp HDFC Bank Fort Mumbai mentioned at Sr No. 1,2,4,6, 8, India Bulls 9,10,11, 13, 16, 19, 20, 21, 23, Securities Ltd.
56546668 24, 25, 26, 29, 30, 31, 32, 33 are (Clg.no.907) same.
B/2, Flat no.11 ,Monami Apartment near Chandan Talkies, Juhu Mumbai Ganesh Raut appearing as common person in respect of clients at sr. no. 10 &
11. Address of clients mentioned at Sr No. 2, 10 are same.
10. Fine Line Phone number of clients Mercantile Co.
mentioned at Sr No. 1,2,4,6, 8, (P) Ltd.
India Bulls 9,10,11, 13, 16, 19, 20, 21, 23, (Dir:Ganesh Securities Ltd.
24, 25, 26, 29, 30, 31, 32, 33 are Raut) (Clg.no.907) 56546666 same.
India Bulls No-5gr Flr Kalpataru Chambe Ganesh Raut appearing as Securities Ltd.
Nanik Motwani Lane Opp common person in respect of (Clg.no.907) HDFC Bank Fort Mumbai 56546666 clients at sr. no. 10 & 11.
Address of clients mentioned at Baburao Pahilvan Chawl, Lane No.1/13, Sahar Road, The address Sr No. 1, 8, 9, 11, 22, 29, 31
11. Ganesh Raut Koldongri, Andheri (East), Mumbai updated in UCC are same.
Phone number of clients Galaxy Broking Ltd.(Clg.No.513) database is the same that is above.
mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
12. Haresh Posnak Peninsular Capital Market Ltd. (Clg.no.156) 118/8 ,Majestic Shopping Centre, Girgaum, Mumbai Introduced by Vinod Khetan (Mistry Group observed in Betal Global)
13. Jagdish Parab NNM Securities (P) Ltd.(Clg.no.539) Jay Shriram Apts Kharegaon Kalwa West Thane) 56346666 Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are India Bulls 404jay Sreeram Appt Phakhadi 932405538 Securities Ltd.
Kharegaon Kalwa (W)Mumbai 0 same.
(Clg.no.907) Pune Rd Thane Insight Share Jay Shriram Apts Kharegaon Phone number of clients Brokers (P) Kalwa West Thane) mentioned at Sr No. 3, 4, 13, Ltd.(Clg.no.946) 56546670 16, 17, 24 is same.
1134 Girdharilal No Khancho Found connected with
14. Jay Shah India Infoline Securities Ltd.
Khadia Ahmedadbad 982402595 2 promoters of IFSL who had transferred IFSL shares to clients mentioned at sr.
(Clg.no.179) 3,6,7,8,11,13,16,21,23.
A/5 Shivshakti Rahivanshi Phone number of clients
15. Jaydeep India Bulls Sangh Sambhaji Ngr Chembur mentioned at Sr No. 9, 15,22, Mane Securities Ltd.
Mumbai are same.
(Clg.no.907) 56546668 India Infoline Room No 28 Bldg No1 Gautam Phone number of clients Securities Ltd.
Ngr Dadasaheb Phal Ke Rd mentioned at Sr No. 1,2,4,6, 8, (Clg.no.179) Mumbai 56546670 9,10,11, 13, 16, 19, 20, 21, 23,
16. Jayesh Waghela Peninsular Capital Market Ltd. (Clg.no.156) Gautamnagar, Dadashaebphalkeraod, Roomno.28, Bldgno.1 Dadar,Mumbai 56546669 24, 25, 26, 29, 30, 31, 32, 33 are same.
Phone number of clients mentioned at Sr No. 3, 4, 13, 16, 17, 24 is same.
Room No 28 Bldg No1 Gautam India Bulls Ngr Dadasaheb Phal Ke Rd Phone number of clients Securities Ltd.
Mumba mentioned at Sr No. 8, 16, 27, (Clg.no.907) 56546666 28 are same.
17. Kiran Dhanavade India Bulls Securities Ltd. (Clg.no.907) Nagesh Wadi Ghatla Villagechembur Mumbai 56546670 Phone number of clients mentioned at Sr No. 3, 4, 13, 16, 17, 24 is same.
Juhu Sameep, Juhu-Versova Link Road, Andheri(W), Mumbai On April 13, 15 & 19, 2005, Lokesh Kapoor received 10,49,990 shares, 3,80,000 shares and 1,95,000 shares Ruchiraj Shares respectively in the off market and Stock Brokers from Dadasaheb Gavhane and
18. Lokesh Kapoor (P) Ltd. (Clg.no.380) Sandeep K Pawar (client mentioned at Sr. No. 5 &
30) India Bulls 100 Saldhari Chawlkoldongari Saha R Roadandheri(E) Mumbai Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23,
19. Mahesh Securities Ltd.
24, 25, 26, 29, 30, 31, 32, 33 are Kokate (Clg.no.907) 56546666 same.
C/O New Pushpa Bihar Bldg Phone number of clients
20. Premkumar Singh Networth Stock Broking Ltd.(Clg.No.197) 159 Mumbai 56546666 mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
C / 18 Asha Building Dixit Road Mumbai Rajkishore Singh appearing as common person in respect of clients at sr. no. 21 &
22.
21. Stockholm Phone number of clients Mercantile Co Pvt Ltd. (Rajkishore Joindre Capital Services Ltd.
mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are Singh) (Clg.no.89) 56546666 same.
No-5gr Flr Kalpataru Chambe Rajkishore Singh appearing as Nanik Motwani Lane Opp Hdfc common person in respect of
22. Rajkishore Fortis Securities Bank Fort Mumbai clients at sr. no. 21 & 22.
Singh Ltd. (Clg.no.3004) 56546668 Address of clients mentioned at Sr No. 1, 8, 9, 11, 22, 29, 31 are same.
Phone number of clients mentioned at Sr No. 9, 15,22, are same.
B Wing Flat No 2 2nd Floor Monami Apartmennt Juhu Mumbai Ramdas Kshirsagar appearing as common person in respect of clients at sr. no. 23, 24 & 25.
Phone number of clients
23. Sharpline Trading Co Pvt Ltd (Ramdas Kshirsagar) Insight Share Brokers (P) Ltd.(Clg.no.946) 56546666 mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
Networth Stock Broking Ltd.(Clg.No.197) Room No 229 Geeta Nagar Navy Nagar Mumbai 56546666 Ramdas Kshirsagar appearing as common person in respect of clients at sr. no. 23, 24 & 25. Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23,
24. Ramdas Kshirsagar G Floor 229 Geeta Nagr Navy Nagar Colaba Mumbai 24, 25, 26, 29, 30, 31, 32, 33 are same.
Phone number of clients UTI Securities Ltd.
mentioned at Sr No. 3, 4, 13, (Clg.no.767) 56546670 16, 17, 24 is same.
D-708 Crystal Plazaandheri Link Rd Oppfame Adlabsandheri(W) Mumbai Ramdas Kshirsagar appearing as common person in respect of clients at sr. no. 23, 24 & 25.
Phone number of clients
25. Topflag Exports Pvt Ltd (Ramdas Kshirsagar) India Bulls Securities Ltd. (Clg.no.907) 56546666 mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
India Bulls Flat 701 7th Flr Blue Mountan Telephone Phone number of clients Securities Ltd.
Bldg Andheri Mumbai no.5654666 mentioned at Sr No. 1,2,4,6, 8,
26. Ranjan Mandal (Clg.no.907) 6 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
Ruchiraj Shares C-32, Blue Mountail, Flat No.701, Shastri Nagar, and Stock Brokers Andheri(W), Mumbai Received shares in off market (P) Ltd.
from Santosh Pawar and Ajit (Clg.no.380)
-as above-
Suryavanshi,
27. Sandeep Kadam India Infoline Securities Ltd. (Clg.no.179) 16 A Hirji Bhoj Raj Chawl Ghodap Deo 1st Floor Room No 27 Mumbai 56546669 Phone number of clients mentioned at Sr No. 8, 16, 27, 28 are same.
Ruchiraj Shares Mominpada, Dinkar Chawl, Phone number of clients and Stock Brokers New Panvel, New Mumbai, mentioned at Sr No. 8, 16, 27, (P) Ltd.
Mumbai 28 are same.
28. Santosh (Clg.no.380) 56546669 Received 11.20 lakh shares Jagtap K & A Securities Santosh Jagtap A/12,Mohin Plaza Ohankar Chawl New from Dadasaheb Gavhane who had received the same from (P) Ltd.
Panvel Naige D Mumbai-
promoter related entity Crayon (Clg.no.936) 400069 Mumbai
-as above-
Advertising.
29. Santosh Narvekar India Bulls Securities Ltd. (Clg.no. 907) Kalptaru Chamber Gr Floor Office No 5 Nanik Motwani Marg Mumbai 56546666 Phone number of clients mentioned at Sr No. 1,2,4,6, 8, Kalptaru Chamber Gr Floor Office No 5 Nanik Motwani Marg Mumbai 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
Address of clients mentioned at Fortis Securities Sr No. 1, 8, 9, 11, 22, 29, 31 Ltd. (Clg.no.3004) 56546666 are same.
30. Santosh Pawar India Bulls Securities Ltd. (Clg.no.907) 8devraj Jagmohan Chawl Kaldongri Rd No 1sahar Rd Andheri(E) Mumbai 56546666 Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are Fortis Securities Devraj Jagmohan Chal Sahar Ltd. (Clg.no.3004) Road Andheri East Mumbai same.
No-5 Gr Flr Kalpataru Chambe Nanik Motwani Mg Opp Hdfc Bank Fort Mumbai Phone number of clients mentioned at Sr No. 1,2,4,6, 8, 9,10,11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
India Bulls Address of clients mentioned at
31. Umesh Choukekar Securities Ltd. (Clg.no.907) 56546666 Sr No. 1, 8, 9, 11, 22, 29, 31 are same.
Room 4 Jagadhari Yadav Phone number of clients
32. Vijay Suryavanshi CSL Stock Broking (P) Ltd.(Clg.no.323) Chawl Koldongri Sahar Road Lane No1 Andheri (East) Mumbai 56546666 mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23, 24, 25, 26, 29, 30, 31, 32, 33 are same.
Flat No E-5 1st Flr Sai Wadi Phone number of clients India Bulls Vikas Soc Telligully N S Phadke Rd Andheri (E) mentioned at Sr No. 1,2,4,6, 8, 9, 10, 11, 13, 16, 19, 20, 21, 23,
33. Vivekanand Securities Ltd.
Mumbai 24, 25, 26, 29, 30, 31, 32, 33 are Patankar (Clg.no.907) 56546666 same.
It is significant that the clients mentioned at serial number 3, 4, 8, 9, 11, 14, 21, 22 and 23 who appear to be interconnected have been involved in the market manipulation in the scrip of IFSL Ltd and were debarred from dealing in the shares of IFSL Ltd. The fact that their names are appearing in the trading of Mega Corporation Ltd., and have contributed to the significant volume only confirms the suspicion that they have been collectively planning operation of manipulation of shares of several companies. In the interest of the investors' protection and for ensuring the market integrity it is necessary to take urgent steps to firmly curb such concerted attempts of market manipulation.
Analysis of off market transactions 3.2 Larger numbers of off market trades in the share of the company were noticed in the shares of this Company during January to September, 2005. A sample analysis of the off market trades reported at NSDL for the period April 2005 and May 2005 showed that some of the above mentioned apparently connected entities had also indulged into off market trades in large quantity. The major off market deals reported at NSDL for the period April 2005 and May 2005 are given below:
Table 6: Off market deals of connected entities Date Transferred from Transferred to Shares 01-Apr-05 DEEPAK SHARMA UMESH B CHOUKEKAR 1000000 04-Apr-05 NIRMAL JAIN DADASAHEB N. GAVHANE 2000000 05-Apr-05 Kamla H Kathuria (1202700100008220) VIJAY S WAPILKAR 3000000 07-Apr-05 RAYCHAND TANI PREMKUMAR A SINGH 1070150 07-Apr-05 KHODIYAR INDUSTRIES LIMITED RAYCHAND TANI 100000 07-Apr-05 Vintel Sec Pvt Ltd (1202700100023207) UMESH B CHOUKEKAR 1163237 07-Apr-05 Vintel Sec Pvt Ltd (1202700100023207) RAYCHAND TANI 649000 08-Apr-05 RAYCHAND TANI DADASAHEB N. GAVHANE 799000 08-Apr-05 Abhayraj Shukla (1202700100003961) RAMDAS KSHIRSAGAR 1262620 13-Apr-05 UMESH B CHOUKEKAR AJIT S.SURYAVANSHI 5000000 13-Apr-05 AJIT S.SURYAVANSHI FORTIS SECURITIES LTD 5000000 13-Apr-05 PRAKASH HANUMANT YADAV LOKESH INDER KAPOOR 1049990 15-Apr-05 DADASAHEB N. GAVHANE LOKESH INDER KAPOOR 380000 15-Apr-05 DADASAHEB N. GAVHANE AJIT S.SURYAVANSHI 1000000 15-Apr-05 DADASAHEB N. GAVHANE SANTOSH R. JAGTAP 1120000 15-Apr-05 FORTIS SECURITIES LTD AJIT S.SURYAVANSHI 3550000 16-Apr-05 UTI SECURITIES LIMITED UTI SECURITIES LIMITED 150737 18-Apr-05 UTI SECURITIES LIMITED DEEPAK SHANKAR TODKAR 795470 18-Apr-05 UTI SECURITIES LIMITED RAMDAS KSHIRSAGAR 256232 18-Apr-05 UTI SECURITIES LIMITED DEEPAK ANANT NARVEKAR 625725 18-Apr-05 UTI SECURITIES LIMITED AMAR YUVRAJ ADAV 696465 19-Apr-05 INDIABULLS FINANCIAL SERVICES LTD.
PANKAJ NARENDRA SHAH 2500000 19-Apr-05 SANDEEP K. PAWAR LOKESH INDER KAPOOR 195000 20-Apr-05 UTI SECURITIES LIMITED RAMDAS KSHIRSAGAR 283708 20-Apr-05 UTI SECURITIES LIMITED DEEPAK ANANT NARVEKAR 117938 20-Apr-05 INDIABULLS FINANCIAL SERVICES LTD.
PANKAJ NARENDRA SHAH 2000000 20-Apr-05 1301190000003643 (unknown) RANJAN MANDAL 150570 21-Apr-05 RANJAN MANDAL RAJKISHOR SINGH 554800 21-Apr-05 INDIABULLS SECURITIES LTD.
INDIABULLS FINANCIAL SERVICES LTD.
1986500 22-Apr-05 INDIABULLS FINANCIAL SERVICES LTD.
INDIABULLS SECURITIES LTD.
2182275 25-Apr-05 TRUSTED SHARE AND INV. LTD.
KAMLESH RASIKLAL PATEL 150000 26-Apr-05 Prem Prakash Thanvi (1202020000001282) RAYCHAND TANI 250000 26-Apr-05 SANDEEP K. PAWAR VISHWAS KOHLI 133500 27-Apr-05 RAMDAS KSHIRSAGAR SANTOSH K. PAWAR 300000 27-Apr-05 AJIT S.SURYAVANSHI TEJASH JAYANTILAL THAKKAR 200000 28-Apr-05 KAMLESH RASIKLAL PATEL KHODIYAR PIPE PVT. LTD.
150000 28-Apr-05 TEJASH JAYANTILAL THAKKAR INDIABULLS SECURITIES LTD.
200000 29-Apr-05 INDIABULLS FINANCIAL SERVICES LTD.
INDIABULLS SECURITIES LTD.
259689 29-Apr-05 KHODIYAR PIPE PVT. LTD.
RAYCHAND TANI 150000 30-Apr-05 INDIABULLS SECURITIES LTD.
INDIABULLS FINANCIAL SERVICES LTD.
314119 04-May-05 RAYCHAND TANI 1202700100004703 100000 04-May-05 INDIABULLS FINANCIAL SERVICES LTD.
INDIABULLS SECURITIES LTD.
438806 05-May-05 SUNITA BAID ITI Financial Services Limited 260000 05-May-05 INDIABULLS FINANCIAL SERVICES LTD.
INDIABULLS SECURITIES LTD.
127050 06-May-05 RAYCHAND TANI PREMKUMAR AJABALAL SINGH 199317 06-May-05 Abhayraj Shukla (1202700100003961) RAMDAS KSHIRSAGAR 207875 07-May-05 INDIABULLS FINANCIAL SERVICES LTD.
INDIABULLS SECURITIES LTD.
231793 10-May-05 VIVEKANAND DAJI PATANKAR AMBIENCE LEASEINVEST (P) LTD 200000 11-May-05 1301190000003643 (unknown) SANTOSH R. JAGTAP 387200 Dealings in shares of Mega Corporation by the entities connected with associate company of Mega Corporation.
3.3 The Company had shown Crayons Advertising Ltd. as one of their associate companies its Annual Report for the year 2004-05. It was found that the following persons, who had each dematerialized around 25-30 lakh shares during the same time were having the same address as that of the associate company, evidencing a connection between them and the Company.
3.4 The above four connected entities had maintained their beneficiary account with ICICI Bank and have collectively dematerialized 1.05 crore shares of Mega Corporation Ltd. during March 22-24, 2005 when the price of the share was around Rs 13-14/-. Subsequently, as shown in Table 7, they transferred 70 lakh shares, to the inter connected entities, named in Table 5. These entities then dealt in the shares of the company in the manner given below:
Table 7: Names of persons with common address as that of Crayon Advt.
Name and address Connection with Crayons Advertising Ltd.
Details of dealings in Mega Corporation.
Nirmal Jain C/o Crayons Advertising Ltd 3, Hemu Castle Dadabhai Rd, Nr Gokhlibai Sch Vile Parle, Mumbai-400056 Address same as that of Crayons Advertising Dematerialized 25 lakh shares on 24-Mar-05 and transferred 20 lakh shares to Dadasaheb N. Gavhane on 4-Apr-05.
Laxman Singh Saijari C/o Crayons Advertising Ltd B-23, Greater Kailash-I New Delhi-110048 Address same as that of Crayons Advertising Dematerialized 25 lakh shares on 22-Mar-05 and transferred 10 lakh shares to Umesh B Choukekar on 31-Mar-05.
Patrix Xess, C/o Crayons Advertising Ltd B-23, Greater Kailash-I New Delhi-110048 Address same as that of Crayons Advertising Dematerialized 30 lakh shares on 22-Mar-05 and transferred 20 lakh shares to Umesh B Choukekar on 31-Mar-05.
Mahendra Gopal Gorivale C/o Crayons Advertising Ltd 3, Hemu Castle Dadabhai Rd, Nr Gokhlibai Sch Vile Parle, Mumbai-400056 Address same as that of Crayons Advertising Dematerialized 25 lakh shares on 24-Mar-05 and transferred 20 lakh shares to Prakash Hanumant Yadav on 30-Mar-05.
i. On April 15, 2005 Dadasaheb Gavhane (as mentioned in serial number 5 or table 5) has transferred 10,00,000 shares in off market to Ajit S. Suryavanshi, who on the same day sold 10,00,000 shares in the market through the member Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg. No. 380), the major counter party to the trade was Pankaj Shah dealing through the member India Bulls Securities Ltd. (Clg. No. 907).
ii. On April 15, 2005 Dadasaheb Gavhane transferred 11,20,000 shares in off market to Santosh Jagtap, who on the same day sold 11,20,000 shares in the market through the member Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg. No. 380), the major counter party to the trade was Pankaj Shah and Kajal Shah dealing through the member India Bulls Securities Ltd. (Clg. No. 907).
iii. On April 13, 15 & 19, 2005, Lokesh Kapoor received 10,49,990 shares, 3,80,000 shares and 1,95,000 shares respectively in the off market from Prakash Yadav, Dadasaheb Gavhane and Sandeep K. It was observed that the client Lokesh Kapoor had net sell position of 10,49,990 shares, 3,80,000 shares and 1,95,000 shares. Hence, it is evident that the shares are received in off market to complete market obligations.
iv. Dadasaheb Gavhane, who appears to be the major coordinator in the dealing of the shares, bought only 50,000 shares in the market but has heavily dealt in off market, but he cumulatively received 61,09,000 shares and transferred 53,00,000 shares between April 4, 2005 to June 30, 2005. He had received 4,00,000 shares in off market from India Bulls Securities Ltd. (Clg. No. 907) on June 8, 2005, whereas he had a purchase position of only 50,000 shares cumulative on August 29 and 30, 2005.
3.5 It is noticed that majority of connected clients dealing in the market have received and transferred shares in off market deals. It is also noticed that large number of shares of the company have moved to and fro between Indiabulls Financial Services Ltd and Indiabull Securities Ltd. through off market deals. The natures of such transaction are being further looked into.
Trading by the Clients Connected to each other and Promoters 3.6 It was seen that most of the above connected clients have dealt through more than one broker. As mentioned at paragraph No. 2.16, some of the clients had received shares directly or indirectly from the entities connected to company Mega Corporation. The details of their trading during the period April 2005 to September 2005 is as follows:
Table 8: Details of trading by clients connected to each other and to the promoters Client Name Broker Buy Sell
1. Ajit Suryavanshi Fortis Securities Ltd. (Clg.no.3004) 418100 1640000 Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg.no.380) 90724 1000000
2. Ajit Suryavanshi Ritedeal Trading Company Pvt Ltd Galaxy Broking Ltd.(Clg.No.513) 817951 1065750
3. Vishal Kumar Textiles P Ltd (Dir:Ajit Suryavanshi) Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg.no.380) 1809207 1334940
4. Amar Adhav UTI Securities Ltd. (Clg.no.767) 1738050 1800828 India Bulls Securities Ltd. (Clg.no.907) 2767509 4293991 Action Financial Services (India) Ltd. (Clg.no.444) 199796 193360
5. Dadasaheb Gavhane India Bulls Securities Ltd. (Clg.no.907) 50000 India Bulls Securities Ltd. (Clg.no.907) 90000 Joindre Capital Services Ltd. (Clg.no.89) 1284762 448817
6. Dattu Shitole K & A Securities (P) Ltd. (Clg.no.936) 250000 50000
7. Dattu Shitole Rightstar Trading Company Pvt Ltd India Bulls Securities Ltd. (Clg.no.907 2964530 429950
8. Deepak Narvekar UTI Securities Ltd. (Clg.no.767) 581040 895132 India Bulls Securities Ltd. (Clg.no.907) 970518 460300
9. Deepak Todkar UTI Securities Ltd. (Clg.no.767) 1135577 1037880 India Bulls Securities Ltd. (Clg.no.907) 391005 50300
10. Fine Line Mercantile Co. (P) Ltd. (Dir:Ganesh Raut) India Bulls Securities Ltd. (Clg.no.907) 5308678 1595901 India Bulls Securities Ltd. (Clg.no.907) 1397205 1015171
11. Ganesh Raut Galaxy Broking Ltd.(Clg.No.513) 901000 1342085
12. Haresh Posnak Peninsular Capital Market Ltd. (Clg.no.156) 454183 454183
13. Jagdish Parab NNM Securities (P) Ltd.(Clg.no.539) 177902 99395 India Bulls Securities Ltd. (Clg.no.907) 59020 224000 Insight Share Brokers (P) Ltd.(Clg.no.946) 1583800 770565
14. Jay Shah India Infoline Securities Ltd. (Clg.no.179) 1 179601
15. Jaydeep Mane India Bulls Securities Ltd. (Clg.no.907) 52750 India Infoline Securities Ltd. (Clg.no.179) 585553 612000
16. Jayesh Waghela Peninsular Capital Market Ltd. (Clg.no.156) 1637837 1113900 India Bulls Securities Ltd. (Clg.no.907) 77000 480000
17. Kiran Dhanavade India Bulls Securities Ltd. (Clg.no.907) 313400
18. Lokesh Kapoor Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg.no.380) 398660 1705650
19. Mahesh Kokate India Bulls Securities Ltd. (Clg.no.907) 42600
20. Premkumar Singh Networth Stock Broking Ltd.(Clg.No.197) 270000 99094
21. R Singh Stockholm Mercantile Co Pvt L. Joindre Capital Services Ltd. (Clg.no.89) 1233464 2495711
22. Rajkishore Singh Fortis Securities Ltd. (Clg.no.3004) 3156465 1702605
23. Ramdas Kshirsagar Sharpline Trading Co Pvt Ltd Insight Share Brokers (P) Ltd.(Clg.no.946) 1796383 3582558
24. Ramdas Kshirsagar Networth Stock Broking Ltd.(Clg.No.197) 220000 40250 UTI Securities Ltd. (Clg.no.767) 924868 1108428
25. Ramdas Kshirsagar Topflag Exports Pvt Ltd India Bulls Securities Ltd. (Clg.no.907) 329000 4481439
26. Ranjan Mandal India Bulls Securities Ltd. (Clg.no.907) 44660 Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg.no.380) 1541190 761421
27. Sandeep Kadam India Infoline Securities Ltd. (Clg.no.179) 55000 450000
28. Santosh Jagtap Ruchiraj Shares and Stock Brokers (P) Ltd. (Clg.no.380) 1109800 1526800 K & A Securities (P) Ltd. (Clg.no.936) 460000 175409
29. Santosh Narvekar India Bulls Securities Ltd. (Clg.no.907) 60600 Fortis Securities Ltd. (Clg.no.3004) 110700 17500
30. Santosh Pawar India Bulls Securities Ltd. (Clg.no.907) 65000 Fortis Securities Ltd. (Clg.no.3004) 1642000 1510000
31. Umesh Choukekar India Bulls Securities Ltd. (Clg.no.907) 2850757 4064678
32. Vijay Suryavanshi CSL Stock Broking (P) Ltd.(Clg.no.323) 500000 265000
33. Vivekanand Patankar India Bulls Securities Ltd. (Clg.no.907) 505985 212000 Total 45318970 46891852 3.7 Collective gross purchases and gross sales of above connected clients represent around 59% (45318970 shares) and 60% (46891852 shares) of the total market gross quantity of 768,35,415 shares during the period April 1, 2005 to September 16, 2005. Thus these entities, all connected to the promoters and to each other had accounted for major trading volume in the share for period of five and a half months.
3.8 It is seen that these apparently connected clients through large off market deals during the period April1, 2005 to September 16, 2005 amongst themselves and dealing through multiple brokers generated large trading volumes. Around the same period large quantities of shares were also transferred to these apparently interconnected clients by the entities connected to the company. By entering into such a large quantity of circular trading, these entities brought about a sudden spurt in the volume of the company and the average monthly volume which languished around 15,000 shares between September 2002 to December 2004 soared 1000 times to around 1,50,00,000 shares between January 2005 to September 2005. The entities connected with the promoters through a web of off market deals transferred shares amongst themselves in a bid to obfuscate the audit trail and then dealt in the stock market and were thus able to sustain an average of 59% of the trading volumes for a period of nearly five and half months. The increase in volumes and the price was supported by a flurry of corporate announcements and future profit projections -an archetypal strategy meticulously crafted by the promoters and their associates as is seen in other cases of "small cap" companies, against which SEBI has initiated action. These volumes were adequate enough to induce the investors to deal in the shares of the company. The preliminary analysis of the dealing in the shares of the company by the connected clients and the promoters showed that they attempted to create a false market thereby violating the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003 3.9 In case of IFSL Ltd, SEBI vide order dated September 28, 2005 had directed brokers viz. Indiabulls Securities Ltd., Insight Share Brokers Pvt. Ltd., Fortis Securities Ltd, Joindre Capital Services Ltd., India Infoline Securities Pvt. Ltd., Ruchiraj Share Stock Broker and Penninsular Capital Market Ltd. not to buy, sell or deal in securities of IFSL Ltd. on behalf of the promoters & directors of IFSL Ltd and the clients. It is pertinent to mention that the names of these brokers have again appeared as major brokers dealing in the shares of Mega Corporation Ltd. and also dealing on behalf of clients, some of whom were also found to have dealt in the shares of IFSL Ltd. Of these, Indiabulls Securities Ltd., Fortis Securities Ltd. and Ruchiraj Share Stock Broker contributed significant volume by trading in the shares of the company while dealing on behalf of the interconnected clients and same cannot be dismissed as purely fortuitous.
4. Conclusion
4.1 The absence of wide spread investor interest in the share of the company since September 2002 to December 2004, coupled with the sudden increase in share price and volume since January 2005, the quantum jump in profit from the income generated from non-core business activity and from dealing in selected penny stocks by the company, together with a flurry of corporate announcements (such as entering in to the business of worldwide outbound packaged tour, forex service, etc., in which the company had no apparent track record) and also managing a web of off-market deals to transfer of large quantities of shares by the entities connected to the company to a group of interconnected clients, who in turn dealt heavily in the market and thereby contributed to the sudden rise in trading volumes and the corresponding price rise, clearly indicate a careful designing and orchestration of a plan by the promoters, to make personal gains at the expense of investors by enticing them to participate in the trading of the shares of the company and by possibly churning their own holdings.
4.2 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. In the meantime, in view of the disconcerting developments as above impacting the market and to save the investors and the securities market from further acts of the concerned entities which brooks no delay, it is highly essential to issue an interim order.
5. Order 5.1 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) that the promoters of the company viz, Crayons Global Finance Ltd., Himanshu Mehta, Vimi Investments and Finance Ltd., Kunal Lalani, Beena Mehta, R.N. Mehta, Hiten Mehta, Odyssey Corporation Ltd. Pooja Equisearch Pvt. Ltd. and directors of the company Kunal Lalani, Hemanshu Mehta, Surendra Chhalani, H M Lalani, N K Nayak, K S Venkataraman, S L Golchha and Sachin Mehra are hereby directed not to buy, sell or deal in securities of Mega Corporation Ltd, directly or indirectly, till further directions in this regard and Mega Corporation Ltd is further directed that it shall not issue any equity shares or any other instrument convertible into equity shares, in any manner, or shall not alter its capital structure in any manner, till further directions in this regard.
b) That the clients viz. Ajit Suryavanshi, Ritedeal Trading Company Pvt Ltd, Vishal Kumar Textiles P Ltd, Amar Adhav, Dadasaheb Gavhane, Dattu Shitole , Rightstar Trading Company Pvt Ltd, Deepak Narvekar, Deepak Todkar, Fine Line Mercantile Co. (P) Ltd., Ganesh Raut, Haresh Posnak, Jagdish Parab, Jay Shah, Jaydeep Mane, Jayesh Waghela, Kiran Dhanavade, Lokesh Kapoor, Mahesh Kokate, Premkumar Singh, Stockholm Mercantile Co Pvt L., Rajkishore Singh, Ramdas Kshirsagar, Sharpline Trading Co Pvt Ltd, Topflag Exports Pvt Ltd, Ranjan Mandal, Sandeep Kadam, Santosh Jagtap, Santosh Narvekar, Santosh Pawar, Umesh Choukekar, Vijay Suryavanshi, Vivekanand Patankar, Nirmal Jain, Mahendra Gopal Gorivale, Laxmans Singh Saijari and Patric Xess are hereby directed not to buy, sell or deal in securities of Mega Corporation Ltd, directly or indirectly, till further directions in this regard.
c) That the clients Vishal Kumar Textiles P Ltd, Amar Adhav, , Deepak Narvekar, Deepak Todkar, Ganesh Raut, Jay Shah, Jayesh Waghela, Stockholm Mercantile Co Pvt L., Rajkishore Singh, Sharpline Trading Co Pvt Ltd, Umesh Choukekar as mentioned in para 3.1(iv) below Table 5 are hereby directed not to buy, sell or deal in any securities, directly or indirectly, till further directions in this regard.
d) That the Stock Brokers viz., India Bulls Securities Ltd., Fortis Securities Ltd., Ruchiraj Shares and Stock Brokers (P) Ltd., who contributed significant volume in the trading of shares of the company while dealing on behalf of the interconnected clients are hereby directed not to buy, sell or deal in securities of Mega Corporation Ltd. on behalf of the promoters, directors and clients mentioned at para No. 5.1 (a), 5.1 (b) and 5.1 (c) hereinabove, directly or indirectly, till further directions in this regard.
e) And Further that the Depositories shall not give effect to any transfer of shares of Mega Corporation Ltd. lying in the beneficial owner accounts of the entities mentioned at paragraph 5.1 a) and 5.1 b) above
f) And Further that the Depositories shall not give effect to any transfer of any securities lying in the beneficial owner accounts of the entities mentioned at paragraph 5.1 c) above.
5.2 All the above directions shall take effect immediately and shall be in force until further orders.
5.3 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.