sebi:15295

SEBI · SEBI · 2001-03-31 · Madhukar, Whole Time Member

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Facts / Headnote

Debarred from buying, selling and dealing in securities market for a period of three years

Provisions invoked

• s. 11B
• s. 11(4)
• s. 19

Regulations

• Reg. 11
• Reg. 4(a)
• Reg. 199

Holding

The SEBI Whole Time Member held that Warner Multimedia Limited, its promoters and associated entities created an artificial market and false volumes in the scrip of WML in violation of Regulation 4(a) and 4(b) of the SEBI (PFUTP) Regulations 1995, and debarred all thirteen noticees from buying, selling and dealing in the securities market for three years with immediate effect.

Full text

3) Kailash Prasad Purohit, 4) Vaishno Trade Link Private Limited, 5) Godavari Commerce Private Limited, 6) M/s Pragati Merchant, 7) Success Merchant Private Limited, 8) Rolex Merchant Private Limited, 9) Govardhan Jain, 10) Mumbadevi Finance and Investment Company Private Limited, 11) M/s Safal Investments, 12) Gaje Singh Chahl 13) Arun Goyal. IN THE MATTER OF TRADING IN THE SHARES OF M/s. WARNER MULTIMEDIA. 1.0 Pursuant to an investor complaint in 2001 with regard to the delay in the dematerialization of the shares in the scrip of M/s. Warner Multimedia Ltd. (herein referred to as WML), Securities and Exchange Board of India (hereinafter referred to as SEBI) conducted investigations into the affairs relating to buying, selling and dealing in the shares of WML. 1.1 Investigations revealed that the company Warner Multimedia (hereinafter referred to as WML) its promoters and associated entities namely Jagadish Prasad Purohit, Kailash Prasad Purohit, Vaishno Trade Link Private Limited, Godavari Commerce Private Limited, M/s Pragati Merchant, Success Merchant Private Limited, Rolex Merchant Private Limited, Govardhan Jain, Mumbadevi Finance and Investment company Private Limited, M/s Safal Investments, Gaje Singh Chahl and Arun Goyal (hereinafter referred to as promoters and associated entities) have tried to

mislead and delay the investigations by submitting wrong information about the distribution of shareholding to the BSE and not submitting the information about the share transfer details and the list of shareholders. Also WML had not appeared before the investigating authority despite being summoned repeatedly. 1.2 The Investigation further revealed that the company WML has falsely stated the promoter holding in the distribution schedule that was submitted to the stock exchange. The list of shareholders asked for from the registrar has not been submitted. However, it has been observed from the distribution schedule submitted by WML that as on 30.09.2000, just 63 shareholders were controlling 72.86% stake in the company. As per the distribution of shareholding submitted by WML to BSE, promoters holding as on 31.03.2001 is shown as just 29.52%. But as on this date, the promoters had pledged 20,02,000 shares (23.40% of the total share capital of WML) to B P Jhunjhunwala. But he along with his son Harshvardhan Jhunjhunwala is shown as public shareholders. As these shares were kept with the B P Jhunjhunwala as pledge only, the actual ownership is with the promoters only. 1.3 The investigation further revealed that the entities such as Safal Investment Ltd. and Vaishno Trading Pvt. Ltd. have been included in the Non-promoter Bodies Corporate list as per the distribution of shareholding dated 31.03.2001 filed by the company with BSE. The shareholding of these Non-promoter Bodies Cor

received all RTA details on July 14, 2002 itself, whereas it has stated in its letter dated July 24, 2002 that it has yet to receive the complete details from the RTA. The details regarding shares received for transfer/demat/endorsement, date of dispatch, date of transfer/endorsement etc. which was sought from WML have also not been submitted to SEBI till date. It has been found that there was considerable delay in the dematerialization of scrips of WML at the company’s end. While on one hand the shares owned by the entities associated with the promoters were being dematerialized on a priority basis i.e. within a week, there was considerable delay in dematerialization of the scrip owned by the public shareholders by about 90 days. 1.6 The investigation further revealed that the analysis of the details submitted by the dematerialization registrar, Maheshwari Datamatics (MDPL) and by the complainant B P Jhunjhunwala revealed that the dematerialization requests for shares numbering 9, 02,100 sent by the complainant’s depository participant on December 27, 2000 and January 2, 2001 to the company WML were not received by MDPL till January 31, 2001. As per the details of B P Jhunjhunwala neither the dematerialized shares have been received in their account nor have the shares been returned with the objection. Further, analysis of dematerialization details received from MDPL to dematerialize or not to dematerialize the shares of the public was even up to 100 days. However, this was

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