sebi:MO/7/ID/10/2003

SEBI · SEBI · 2003-06-09 · A.K. Batra, Whole Time Member

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

Facts / Headnote

Company prohibited from accessing the capital market and buying, selling or dealing in securities for a period of two years; directed under section 11D to cease and desist from violating regulation 26 of SEBI (Depositories and Participants) Regulations, 1996 regarding processing of dematerialization requests within the stipulated period.

Provisions invoked

• s. 11
• s. 19
• s. 11(3)
• s. 11D

Regulations

• Reg. 11
• Reg. 4
• Reg. 4(a)
• Reg. 26

Parties

• Alfavision Overseas (India) Limited

Holding

The company was found to have violated Regulations 4(a), (b) and (c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 and Regulation 26 of the SEBI (Depositories and Participants) Regulations, 1996, and was prohibited from accessing the capital market for two years and directed to cease and desist from violating Regulation 26.

Full text

exchange and examine the possibility of manipulation of the price of the scrip due to the delay in the dematerialization of the shares of the company. Thereafter BSE submitted the investigation report covering the period from November 6, 2000 to January 5, 2001 (relevant period). 1.4  The said report inter- alia noted that the price of the scrip at the BSE increased from Rs. 4.60 as on November 06, 2000 to Rs.19.15 as on December 29, 2000.  The report further stated that major volumes in the scrip had been created by the sub-brokers of one of its member called MPSE Securities Ltd.  These sub-brokers were also the members of MPSE. However amongst the said sub-brokers, major volumes were found to have been created by M/s Ravi Vishu Securities Ltd (for brevity’s sake referred to as RVSL), an entity stated to be connected to and an associate of the company. The report also noted certain instances where the trades of related persons were found to have matched. Based on these reports, it was surmised that there was a possibility that these trades were fictitious and meant to create artificial volumes and increase the price of the scrip of the company. The report further noted that the ultimate clients of MPSE Securities and the other brokers who had traded in the scrip during the said period were connected or associated with the company.  2.1            In view of the above facts, the Chairman, SEBI ordered on March 22, 2002, a formal investigation into the affairs relating to the

obtained the information from Intime Spectrum Registry Ltd to examine the issue of the dematerialization of the company as well as from the Central Depository Services (I) Ltd and National Securities Depository Ltd (for brevity’s sake referred to as the ‘CDSL’ and ‘NSDL’ respectively). On perusal of the same, it was noted that the price of the scrip of the company which was put under compulsory dematerialized trading for all investors with effect from October 30, 2000, started rising immediately thereafter. 3.1  Based on the findings of the investigation, a notice dated June 9, 2003 was issued by SEBI to the company asking it to show cause as to why suitable directions be not issued under regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with Section 11 & 11B of the SEBI Act, 1992 including a direction to debar it from accessing the capital market for a particular duration. The company was also asked to show cause as to why a direction under Section 11D of SEBI Act, 1992 should not be issued against it directing it to cease and desist from violating the provisions of the byelaws of the Depository and SEBI (Depository and Participants) Regulations, 1996, in respect of processing of dematerialization requests within  the stipulated period. The company was directed to reply to the said notice within 21 days of the receipt thereof failing which it would be presumed that it has nothing to say in th

manipulation of the shares of the company. The company had appointed Sanjay Garg as its Chief Executive to expedite the dematerialization of shares of the company. However, as Sanjay Garg refused to join the company, the process of de-materialization was affected. As such, the delay in the dematerialization of shares was mainly due to the non- availability of an experienced person to handle the work and due to the new concept introduced in the market relating to dematerialization. It was submitted that the company had no relationship with Sanjay Garg and did not have any knowledge about the manipulation of shares of the company.   3.3 Refuting the contention that they had not co-operated during the investigation proceedings, the company also denied that they left the place of recording of statement without the permission of the investigation officer. The company further requested that a personal hearing be granted to them. Accordingly the company was advised to appear before me for a personal hearing held on September 9, 2003. Despite the same, on the said date, neither did anyone appear on behalf of the company, nor did the company send any request for adjournment. 4.1  In view of the above, I proceed to pass this order on the basis of the facts and circumstances of the case and the material available on record which includes the facts leading to the investigation, submissions made by the company and its personnel during the investigation, the findings  of the investigation

Source: SecMarx — sebi:MO/7/ID/10/2003. 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.