sebi:MO/8/ID/10/2003

SEBI · SEBI · 2000-11-06 · 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

Prohibited Sanjay Garg and Sapna Garg from buying, selling or dealing in securities, directly or indirectly, for a period of two years with immediate effect.

Provisions invoked

• s. 11
• s. 19
• s. 11(3)

Regulations

• Reg. 11
• Reg. 4(a)

Parties

• Sanjay Garg
• Sapna Garg

Holding

Sanjay Garg and Sapna Garg, acting in concert with linked clients through sub-broker RSVL, executed manipulative trades in the scrip of the company in violation of Regulations 4(a), (b) and (c) of the SEBI (PFUTP) Regulations, 1995, and are prohibited from buying, selling or dealing in securities for two years.

Full text

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. 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.   T h e  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, Chairman, SEBI ordered on March 22, 2002, a formal investigation into the affairs relating to the bu

In the absence of the information regarding the person deputed to represent on behalf of the deponents, the statement of the person carrying those letters was recorded. He identified himself as Mr. Birendra Singh S/o Harish Chandra Singh. It was found that the said person worked for M/s Brijesh Atre & Co., practising Company Secretary. He did not know either about Mr. Sanjay Garg, Ms. Sapna Garg, or RSVL and stated that he had no idea regarding their dealings in the scrip of the company. 2.3  Further, information was called from the exchanges as regards the transactions carried out by the brokers on gross basis and net basis, while the order log and trade log of trades in the scrip of the company was analyzed to ascertain the element of market manipulation in the trading of scrip of the company.  Information was also called 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  Sanjay Garg, his wife and the company asking them to show cause as to why sui

basis it could not be stated that they have traded in concert with the company or had any connection with it. They further denied that RSVL and the company had a common address. They further requested that a personal hearing be granted to them. Accordingly they were advised to appear before me for a personal hearing held on September 9, 2003. On the said date, Mr Vijesh Atre, Practicing Company Secretary appeared on behalf of Shri Sanjay Garg and his wife and reiterated the submissions made earlier by them in their reply to the show cause notice.  4.1 I have carefully considered the facts and circumstances of the case and the material available on record which includes the facts leading to the investigations, findings of investigation as communicated in the show cause notice dated June 09, 2003 submissions made on behalf of Shri Garg and his wife  in their reply dated July 03, 2003 and during the hearing  held before me. 4.2 On a cumulative analysis of the same, I have noted that a nexus clearly exists between Shri Sanjay Garg, his wife and the company and the persons who carried out several transactions in the scrip of the company including RSVL, which held upto 11% stake in the capital of the company.   The following details bring out that linkage.          As per the distribution schedule filed by the company with the stock exchange in terms of the filing requirement under the Listing agreement, RVSL held upto 11% stake in the capital of the company.          The address o

Source: SecMarx — sebi:MO/8/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.