sebi:17112

SEBI · SEBI · 1996-05-17 · G. N. Bajpai, Chairman, Securities and Exchange Board of India

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

Facts / Headnote

Show-cause notices substantiated; M/s Yes Investments prohibited from accessing capital markets for 3 years; Shri Deepak Chudasma debarred from dealing in securities for 3 years.

Provisions invoked

• s. 11
• s. 11(1)
• s. 69
• s. 77

Regulations

• Reg. 11
• Reg. 4(a)

Parties

• M/s Yes Investments
• Shri Deepak Chudasma (partner/proprietor of Yes Investments)

Holding

M/s Yes Investments and its proprietor Shri Deepak Chudasma were held to have engaged in fraudulent and unfair trade practices, including price manipulation and creating a false market in SSRCL shares, and were prohibited from accessing capital markets / dealing in securities 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

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 Prarthana 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, Prarthana 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 Prarthana Engineering in violating the provisions of Section 69 of Companies Act, 1956, the terms of the prospectus and the provisions of SEBI - DIP Guidelines 1992 by giving a misleading impression that

on to the seller for circulation in the system. Consequently same share certificates were being routed in the market through various brokers. It was also found that some of the shares sold in the market belonged to promoters and these were issued to them prior to public issue. This further corroborates the nexus between promoters and the operators who were offloading shares in the market i.e. Yes Investment, Albless, AIAPL, Scallop, etc. It was also noticed that when the BSE Sensex was falling, share price of SSRCL was showing upward movement. The company had not started production and there was no justification for a rise in price to the extent of Rs.41/- for the maiden issue. Directors of SRCCL in connivance with AIAPL, Scallop, Albless, M/s. Yes Investments and Prarthana Engineering. created a false market in the shares of SRCCL by first cornering the shares through buy back arrangement with the financiers and then indulging in large trading through various brokers knowing fully well that they was hardly any floating stock. In view of the above, show-cause notices were issued to M/ sYes Investments and its partner /properitor Shri Deepak Chudasma for having violated Regulation 4(a) (b) (c) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 read with Section 11(1) and 11(2)(b) & (e) of SEBI Act, 1992. M/s Yes Investments and its partner /properitor Mr. Chudasma were asked as to why suitable directions inclu

Source: SecMarx — sebi:17112. 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.