sebi:8304

SEBI · SEBI · 2003-05-23 · V. K. CHOPRA, WHOLE TIME MEMBER

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Facts / Headnote

Penalty of suspension of certificate of registration for a period of two months imposed on the Noticee

Provisions invoked

• s. 19

Regulations

• Reg. 7
• Reg. 13(4)
• Reg. 4
• Reg. 6

Parties

• G R Pandya Sharebroking Ltd.

Holding

The Noticee G R Pandya Sharebroking Ltd. violated Regulation 4(a) to (d) of the PFUTP Regulations and Regulation 7 read with clauses A(1) to (4) of the Code of Conduct under Schedule II of the Stock Broker Regulations by engaging in manipulative trades and creating a false market in PSIL scrip. A penalty of suspension of certificate of registration for a period of two months was imposed.

Full text

1.0 BACKGROUND 1.1 Prabhu Steel Industries Ltd. (hereinafter referred to as “PSIL”) was incorporated as a Private Limited Company on May 29, 1972 and it was converted as a Public Limited Company w.e.f. August 17, 1981. PSIL came out with a public issue in March 1982 and was listed on the Bombay Stock Exchange Ltd (BSE) and Calcutta Stock Exchange (CSE). 1.2 As per the distribution schedule of PSIL as on March 31, 2001, the public shareholding in the company was just 5.79% and rest of the shareholding was controlled by promoters, directors, relatives and their associated entities. Analysis of the financial results for the year 1999 to 2002 given below clearly revealed that performance of the company was not satisfactory since it incurred losses between the years 1999 to 2002 and accumulated losses continued to rise. Particulars Results for Year ended:- March 2002 March 2001 March 2000 March 1999 Total Income 10.75 3.21 4.41 4.25 Total Expenditure 11.10 4.72 5.83 6.28 Profit

EPS (Rs.) -4.93 -20.85 -20 -32.11 Dividend (%) NIL NIL NIL NIL 1.3 It was also observed that the price of PSIL scrip which was Rs.34.50 on September 11, 2000 rose to a high of Rs. 82.50 on April 17, 2001 (a rise of 139%) during the period of 7 months at a time when the financial position of the company as given on page ‘1’ or any other reason justified abnormal rise in the price of the scrip. 1.4 In view of the above, Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted investigations in the matter. Investigations inter alia revealed that the promoters, directors and associated entities of PSIL acting through Rajesh Shah Group and Sarita Choudhary had dealt in the scrip of PSIL in significant quantities with a view to create artificial market in the scrip. Investigations further revealed that the brokers of BSE viz. G R Pandya Sharebroking Ltd. (hereinafter referred to as “Noticee”), Pawankumar Parmeshwarlal (hereinafter referred to as “Pawankumar”) and Manubhai Mangaldas Securities Ltd (hereinafter referred to as “MMSPL”) had transacted in PSIL scrip on behalf of their clients, Rajesh Shah Group (consisting of Shri Rajesh Shah, M/s Loco Securities Pvt. Ltd., M/s Uttam Investments and Shri C N Shah), Smt. Sarita Choudhary and Rajesh Shah respectively and manipulated the price and volumes in PSIL scrip. 2.0 ENQUIRY PROCEEDINGS 2.1 After considering the Investigation Report, SEBI appointed an Enquiry Officer vide Order dated May 23, 2003 to enqui

referred to as “Stock Broker Regulations”) and Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as “PFUTP Regulations”). 2.2 The Enquiry Officer issued a show cause notice dated March 12, 2004 to the Noticee under Regulation 6 of SEBI (Procedure for holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to in short as “Enquiry Regulation”). The said show cause notice was received by Noticee on April 06, 2004, but they chose not to reply. An opportunity of personal hearing was granted to the Noticee by the Enquiry Officer on September 28, 2004 and later on October 20, 2004 but the Noticee did not avail the opportunities of hearing. 2.3 After conducting an enquiry in accordance with the provisions of Enquiry Regulations, the Enquiry Officer submitted a report dated October 28, 2004 wherein he observed that the Noticee violated the provisions of Regulation 4 (a), (b), (c) & (d) of PFUTP and Regulation 7 read with clause A(1), A(3) and A (4) of Code of Conduct as specified in Schedule II of Stock Broker Regulations. He recommended suspension of registration of the Noticee for a period of six months. 3.0 SHOW CAUSE NOTICE 3.1 Pursuant to the receipt of the Enquiry Report, a Show Cause Notice dated November 25, 2004 was issued to Noticee, along with a copy of the Enquiry Report, advising them to show cause as to why the acti

Source: SecMarx — sebi:8304. 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.