sebi:17014

SEBI · SEBI · G. N. Bajpai, Chairman, SEBI

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Debarred from dealing in securities for a period of three years with effect from 14/08/02

Provisions invoked

• s. 11B
• s. 11
• s. 77

Regulations

• Reg. 11
• Reg. 4

Parties

• Mr. Madhukar Shetty

Holding

Mr. Madhukar Shetty, as a Director of Alankar Finance Pvt. Ltd. and Agnikamal Finance and Trading Pvt. Ltd., aided, assisted and abetted Krishna Filaments Ltd. and its Directors in manipulating the price of KFL shares, and is hereby debarred from dealing in securities for three years from 14/08/02.

Full text

An unusual spurt in price and volume in the scrip of Krishna Filaments Ltd. (KFL) was observed during the period May-June 1998 at a time when both BSE Sensex and NSE Nifty fell sharply. The price of KFL increased from Rs.153/- on BSE on 15th May 1998 to Rs.311/- on 9th June 1998 in BSE. Investigations were initiated by SEBI to look into the affairs relating to dealings in the scrip of KFL. Investigations revealed that there were large purchases by a set of entities immediately prior to the conversion date (the record date for conversion of OFCDD fell on 13/11/98). Investigations brought out that price of the scrip KFL appears to have been artificially increased to fix conversion price at a higher level. This conversion price was eventually fixed at Rs.144/- per share for non-promoters / other shareholders and Rs.200/- (for promoters and) collaborators. It was revealed that a complicated web of various companies was created by KFL and its directors for making purchase of shares of KFL. These companies also provided smoke screen to hide out identity of persons (Directors of KFL), who artificially increased the price of shares of KFL. KFL and its Directors were aided,assisted and abetted by Alankar Finance, Agnikamal Finance, Adhikash Finance, Kalpit Trading, Stayanand Prasad Finance and Renold Finance. Investigations showed that large quantity of shares of KFL were purchased in 1998 by a set of seven companies, namely Competent Trading, Dominance Trade, Precise Exports, Marvell

associate concern of Krishna Filaments Ltd., on behalf of Mr. K. K. Agarwal, Managing Director of KFL. The fictitious nature of transactions i.e. purchase and sale of machineries /its spare parts is further evident from the fact that there was a net debit balance of about Rs.16.20 crores, which Krishna Filaments Group owed to the group of companies since the last 2/3 years. This amount was not claimed by companies of Dalal and Iyer from Krishna Filaments group as there were no genuine claims by these companies against KFL group companies and these debits had merely arisen on account of issue of fictitious bills and creating book entries (without actual movement of goods). Investigation also revealed that several amounts have been paid to as well as received from Directors of KFL i.e. Mr. K K Agarwal, R K Agarwal, S K Agarwal and O P Agarwal to / by the above mentioned group companies controlled by Mr. Dalal or Mr. Iyer on various occasions. It was also noticed that later the same amount which was received from directors of KFL by various companies of Mr. Dalal & Mr. Iyer was transferred back to KFL and its associate concerns. Thus, the funds received from Directors were ploughed back to KFL / associate concerns through the medium of companies controlled by Mr. Dalal and Mr. Iyer. It was observed that the funds siphoned off through fictitious bills were used to purchase shares of KFL in the name of these companies as under: Name of the Company Qty Amt. (Rs.) Alankar Finance 21

Investigations also brought out that the entire dealing of shares and arrangement of funds relating to purchase of shares by the above mentioned six companies was looked after by Mr. K. K. Agarwal, Managing Director of KFL, directly or through any one of his trusted employees and close confidantes, Mr. Jiten Mehta / Mr. Deepak Thattee. It was gathered during the course of investigations that blank signed cheques were obtained from Mr. Dalal & Mr. Iyer by Mr. K. K. Agarwal. These cheques were used by Mr. K. K. Agarwal / his nominee for payment to the brokers and sub-brokers for purchases of Krishna Filaments Ltd./KVL shares and also for taking out sale consideration received from sale of these shares from the accounts of these companies. The above modus operandi was admitted by Mr. Dalal and Mr. Iyer in their statement recorded from time to time with SEBI. Investigations with brokers and sub-brokers brought out that orders for purchases of shares of Krishna Filaments Ltd. and KVL in the name of these six companies, were given by Mr. Jiten Mehta. It may be recalled that Mr. Jiten Mehta was an employee of KFL group and close confidante of Mr. K. K. Agarwal. Later he became consultant to the KFL group. It was also seen that brokers / sub-brokers received payment for these purchases from Jiten Mehta. Similarly, delivery of these shares (in the name of these six companies) were given by the brokers & sub-brokers to Mr. Jiten Mehta either at his office of KFL at Colaba or at his res

Source: SecMarx — sebi:17014. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.