sebi:17104

SEBI · SEBI · 1996-05-17 · G. N. Bajpai, Chairman

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

Facts / Headnote

M/s Scallop Investments and Leasing (P) Ltd. prohibited from accessing the capital markets for three years; its Director Shri Amrish Valia debarred from dealing in securities for three years.

Provisions invoked

• s. 11(1)
• s. 69
• s. 77

Regulations

• Reg. 11
• Reg. 4(a)

Parties

• Scallop Investments and Leasing (P) Ltd.
• Amrish Valia

Holding

M/s Scallop Investments and Leasing (P) Ltd. and its Director Shri Amrish Valia were found to have created a false market in the shares of SSRCL by buying and selling in concert with other operators with a view to induce other investors to trade, and were consequently prohibited from accessing the capital markets and debarred from dealing in securities respectively for three years each.

Full text

Investigations were conducted by SEBI into the alleged price manipulations and irregularities in the public issue of M/s. Suryadeep Salts, Refinery & Chemicals Works Ltd. (hereinafter referred to as "SSRCL"). Investigations revealed that above referred eight applications were made through stock invests which were issued by the Global Trust Bank, Bandra Branch. The eight applicants were Surendra Somani, Rakesh Naval, Chandra M. Singhi, Raj Basantani, Seema Basantani, Madhukar Patil, Ajay Verma and Kewal Verma. Investigations with the aforesaid applicants revealed that this was a financing arrangement and and it was not a case of genuine subscription in the public issue of SSRCL. These 8 applicants entered into an arrangement with one YES Investments, according to which, they were to apply for shares in the public issue of M/s Suryadeep Salt Refinery and Chemicals Works Ltd and on allotment, shares were to be returned to M/s YES Investments who would pay back the amount subscribed in the shares alongwith interest @ 18% pa . It was stated by the applicants that they had received back their money alongwith the interest and in turn they had issued power of attorney in favour of the nominee of M/s. YES Investments. If the shares allotted to these financiers namely, Surendra Somani, Rakesh Naval, Chandra M. Singhi, Raj & Seema Basantani, Madhukar Patil, Ajay and Kewal Verma are excluded from the total subscription, then the public issue is subscribed only to the extent of 6.28% whil

the guise of subscription to SSRCL. It was also seen that M/s YES Investments also charged Rs.5,70,000 to act as a conduit in arranging these loans disguised as subscription. Investigations revealed that the account of M/s Prarthana Engineering was introduced by Dr. Rajendrasinh Rathod- Director of SRCCL and it appeared that this account was opened merely to facilitate transfer of money from SSRCL to M/s YES Investments. The credit entries in the account of Prarthana Engineering are on account of transfer of monies from SSRCL. A sum of Rs.1.19 crore was transferred on 10.5.96 from account of SSRCL to account of Prarthana Engineering This amount in turn was transferred by Prathana Engineering by way of demand draft to the account of M/s YES Investments on the same day. Likewise, further funds have been transferred from account of SSRCL to account of Prarthana Engineering first and then from the account of Prarthana Engineering to the account of M/s YES Investments almost simultaneously. It is clear from analysis of the bank accounts of SSCRL, Prathana Engineering, YES Investments and these 8 applicants that the company i.e SSRCL purchased its own shares in violation of Section77 of Companies Act, 1956 and didn’t utilise the funds for which it had approached public. SSRCL and its Directors thus colluded with M/S Yes Investments and M/S Prarthna Engineering in violating the provisions of Section 69 of Companies Act, 1956, the terms of the prospectus and the provisions of SEBI -

Further, investigations revealed that approximately 90,000 shares formed the traded floating stock and these very shares were being traded by Scallop, Allbless through their associates at the counters of different brokers. Interestingly, it was noticed that shares having distinctive numbers (20671-28970, 30071-45070, 85071-110070, 70071-82470, 82571-85070, 61171-69570, 137071-147570) were being either bought or sold by these entities during various settlements. It was noticed that the shares which had been sold by AIAPL during the settlement no. 6, 7 & 8 were in the names of Kaveriben Mehta, Narharlal Bhatt, Samir Dholkia, Doshi Ashish, Nagin Waghela and Shital Desai. These shares were off loaded in Settlement no.7 by Shri. Hemendra Shah. The shares received by AIAPL during settlement no.12 bore the same distinctive numbers as that of certificates which were delivered during previous settlement Nos.6, 7 and 8. Settlement no.10 &11 were "no-delivery" period, the actual delivery of shares were taken during Settlement no.12. Shares delivered after "no delivery" period should be accompanied with new transfer deed issued any day after the book closure and these shares should be duly transferred in the name of last holder. In this case it was observed that the shares received at the end of book closure were in the name of persons who actually sold those shares during settlement no.7 i.e. prior to book closure. This shows that buyer and seller were acting in collusion and shares pur

Source: SecMarx — sebi:17104. 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.