sebi:CO/207/ISD/03/2004

SEBI · SEBI · 2003-03-12 · G. N. Bajpai, Whole Time Member

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

Provisions invoked

• s. 11B
• s. 4(3)

Regulations

• Reg. 4
• Reg. 11

Parties

• Promoters of Aftek Infosys Ltd.

Holding

The order alleges that Aftek Infosys Ltd. and its promoters violated clauses (a)-(d) of Regulation 4 of the PFUTP Regulations, 1995 by colluding with Ketan Parekh entities to manipulate the price of the scrip through artificial shortage of floating stock, circular trading, and financing-cum-option agreements. The text provided does not include the final operative disposition or penalty.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER UNDER SECTION 11B OF SEBI ACT, 1992 READ WITH REGULATION 11 OF SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 1995 AGAINST THE PROMOTERS OF AFTEK INFOSYS LTD.  CO/207/ISD/03/2004 4.2            Aftek and its promoters colluded with Ketan Parekh entities to make available to them substantial hold in the scrip at a very low compared to market price. This facilitated price manipulation by Ketan Parekh as there was consequential low floating stock d period. The company also fixed its no delivery period from 15/11/99 to 3/12/99 to coincide with the date of compulsory demat w from 29/11/99. This further reduced the floating stock in the market. At this time, Ketan Parekh entities indulged in large purchase transactions which in absence of floating stock led to artificial increase in price. Investigations revealed that Ketan Parekh entit substantial net sale position during the no delivery period and fulfilled their delivery obligations in demat form by exercising acquire the shares for which they had advanced funds to Aftek. 4.3                      Ketan Parekh entities indulged in circular trading, large buy and sell transactions, putting orders at a price much higher tha traded price. This led to sudden price rise from Rs. 477.75/- to Rs. 1815/- during November 12,1999 to December 15,1999 and continued to rise thereafter. This could not

offload the same in convenient stages and not in one go. They were to buy-back the shares. The shares allotted to IDBI had a period of three years which expired in 1998. The promoters submitted that ever since the allotment in Public Issue, they never bou sold their shareholding in the market and maintained their stake in the company despite the fact that the share prices shot up lucrative level of Rs.5,000/- in March 2000 when IT stocks all over the world and also within the country experienced unprecedented trend. 5.3      The promoters stated that sometime around October 1998, Aftek had plans to raise funds through private placement route for whic Smifs Capital Markets Ltd. (“Smifs”) were to act as consultants. The necessary authorization for private placement was obtained shareholders at the Annual General Meeting held on 30 December 1998. However, since Smifs failed to complete the assignment the expected time-frame, Aftek appointed M/s. Triumph International Finance India Ltd., Mumbai (“Truimph”) as their Lead Manage the Preferential Issue. Triumph successfully placed 15,00,000 shares of Aftek at a price of Rs.36.50 per share in January 1999 raisi paid up capital to Rs.5,74,07,000/-. In this Preferential Issue, Promoters stated that they were allotted 1,00,000 equity shares to them to maintain their shareholding in the increased share capital base. 5.4      The promoters stated that at that point of time, it was not at all contemplated by them what had subsequently tran

and that too in abnormal circumstances explained above. The promoters submitted that this forced them to take the decision of b back the shares to avoid possible hostile take over in the interest of the company and the shareholders. 5.9 The promoters submitted that it was not completely true that they approached only Ketan Parekh but in fact one of them i.e. Mr. Dhuru knows Mr. Jayesh Parekh of JDP Shares and Finance Ltd. (JDP) and dialogue had been initiated on the basis of likely p Rs.150/- per share suggested by promoters to IDBI. The promoters contended that the sudden offer of IDBI to sell at a whopping p Rs.477.75 in a suspicious manner had put the promoters on alert and forced the arrangement of funds which resulted in provision of in the form of identical transactions. The promoters stated that the statement given by two of them i.e. Mr. Nitin Shukla and Mr. P Broota to SEBI should not be taken to conclude that the lending parties belonged to Ketan Parekh though they believed it to be thi The promoters contended that whether or not the lending parties belong to Ketan Parekh is a matter of technical investigation and c be decided on the basis of someone’s perceptions. The promoters further contended that the financing-cum-option agreements naturally had to be identical since they were drafted by same consultant and were to be signed at a very short notice and it is also appreciated that as a matter of fact the financiers were private commercial parties whose sold objec

Source: SecMarx — sebi:CO/207/ISD/03/2004. 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.