sebi:8171/24/9

SEBI · SEBI · 1998-01-15 · V. K. CHOPRA, WHOLE TIME MEMBER

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Facts / Headnote

Minor penalty imposed: suspension of certificate of registration for 3 months

Provisions invoked

• s. 11
• s. 19

Regulations

• Reg. 7
• Reg. 13(4)
• Reg. 4
• Reg. 4(a)

Parties

• M/s Shrikant G. Mantri

Holding

The Noticee, M/s Shrikant G. Mantri, was found to have violated Regulation 4(a), (b) and (c) of the PFUTP Regulations and Regulation 7 read with Clauses A(3) and A(4) of the Code of Conduct under Schedule II of the Stock Brokers Regulations. A minor penalty of suspension of the Noticee's certificate of registration for a period of three months was imposed.

Full text

1.0 BACKGROUND 1.1 Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted an investigation into the abnormal price and volume movement in the scrip of Nedungadi Bank Ltd. (hereinafter referred to as “NBL”) at Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange (NSE). 1.2 Investigations revealed that the scrip which was being traded around Rs 56/- on January 15, 1998 moved to Rs 91.90 on March 25, 1998 i.e. an increase of 64% in a period of about 2 months. The said price rise was coupled with increased volumes. On February 18, 1998, a total of 2,54,400 shares were traded on BSE as against volume of 15,000 shares only in January 1998. On analyzing of the trading details obtained from NSE and BSE, it was observed that a set of brokers traded in large volumes for common clients in the scrip of NBL during the period under consideration. 1.3 Investigation also revealed that the shares of NBL were first sold on spot deals to certain entities and subsequently purchased back at higher prices through the market. This was done by a group of entities to raise finance using the stock exchange trading mechanism and the price was thus artificially inflated using the said trading pattern. It was observed that R K. Banthia, a BSE broker later on corporatised as M/s Harvestdeals Securities Ltd (hereinafter referred to as ‘HSL’), First Custodian Fund (India) Limited (hereinafter referred to as ‘FCFIL’) and S. G. Mantri (hereinafter referred to as ‘Noticee’

2.1 SEBI after considering the Investigation Report initiated Enquiry proceedings against the Noticee and other two brokers HSL and FCFIL. Accordingly, Enquiry Officer was appointed to enquire into the violations allegedly committed by the Noticee under the provisions of Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to in short as “Stock Brokers Regulations”), Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 (hereinafter referred to in short as “PFUTP Regulations”), Securities and Exchange Board of India Act, 1992 (hereinafter referred to in short as “SEBI Act”) and Memorandum and Articles of Association of the Company, Regulations and Bye-laws of BSE. 2.2 The Enquiry Officer recorded the submissions made by the Noticee during the course of enquiry proceedings and relevant submissions of the Noticee are also reproduced hereunder: · “The show cause notice is based on erroneous assumption that my firm, Harvestdeal Securities Ltd. (HSL) and First Custodian Fund (I) Ltd. (FCFIL) are one entity. · I deny the allegation that Shri Rajendra Kumar Banthia mainly or at all looks after the affairs of SGM. I take strong objection to your classifying me as Banthia Group. · My firm might have taken loans or given loans to HSL or FCFIL as with other brokers of the exchange which is a normal trade practice. Further, we undertook busine

soundness of my client. Further, I had maintained high standards of integrity, promptitude and fairness in my broking business. · M/s Shrikant G. Mantri is a sole proprietary concern active since 1991 having Membership No. BSE-738 and I am the principal decision maker of the firm. I am not connected, associated and / or interested in First Custodian Fund (India) Ltd., and Harvestdeal Securities Ltd. My brother Mr. Sushil Kumar Mantri is a Director of First Custodian Fund (India) Limited. · I have reported all off market transactions to BSE. Copies of which are annexed with my reply. · As you have relied upon the statement of Mr. C.K. Shah, I am producing herewith a letter dated 3.2.2003 which shows that Mr. C.K. Shah never interacted with Mr. R.K. Bhanthia and / or any other person and did not give any order to him for purchase and sale of any shares of Nedungadi Bank Ltd. Clients used to speak and place orders for buying and selling of the shares to Mr. N. Popat designated Director of the company. · I have been dealing with First Custodian Fund (I) Ltd., because the said firm is a member of NSE and I am member of BSE. At the relevant period of time the settlement period at BSE and NSE was weekly settlement with different trading days and hence in order to take advantage of arbitrage, I used to deal with them at NSE. I had dealt with them in other scrips also as a client. Further they were dealing with me as clients at BSE. I never had a client-broker relationship with Harves

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