sebi:WTM/GA/28/ISD/11/05

SEBI · SEBI · 2005-02-10 · G Anantharaman, Whole-Time Member

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Facts / Headnote

Interim ex-parte directions issued restraining promoters, connected entities, interconnected clients and brokers from dealing in Karuna Cables Ltd securities; company restrained from altering capital structure; depositories directed not to give effect to transfers; investigation ordered to continue.

Provisions invoked

• s. 11B
• s. 19
• s. 3(1)

Holding

SEBI issued an ad interim ex-parte order restraining the promoters of Karuna Cables Ltd, entities connected to them, interconnected clients, and seven stock brokers from buying, selling or dealing in the securities of Karuna Cables Ltd, and further directed the company not to issue equity shares or alter its capital structure, pending completion of investigation.

Full text

1.1 Sudden spurt in price and trading volume of certain companies in a short period of time, often referred to as “mid cap” or “small cap” companies have been engaging the attention of SEBI and the stock exchanges for some time. Such trading has been under the surveillance of SEBI and the stock exchanges to determine whether the trading volumes and price rise have been the result of unfair trade practices or market manipulation. Karuna Cables Ltd. (the company) is one such ‘small cap’ company whose shares witnessed a sharp price variation during the period February 10, 2005 to September 16

Preliminary Findings The company-business, board of directors, shareholding pattern 2.1 M/s Karuna Cables Ltd. (the company) was incorporated in the year 1984 with registered office at: 102, Sanjay Chambers, V.P. Road, Choubal Lane, Opera House, Mumbai-400004, Maharashtra. The company is into the business of manufacturing aluminum sheets / wires / coils, etc. belonging to metal industry. The company is listed on the Stock Exchange, Mumbai (BSE) and the National Stock Exchange, Mumbai (NSE). 2.2 As per the Annual Report of the company for the year ending March 2005 the following are the directors of the company a) Dr Mahendra C Shah Chairman & Managing Director b) Shri Kirti C Shah Promoter & Non-Executive Director c) Shri Jaswant C Shah Promoter & Non-Executive Director d) Shri N S Ranganath Independent and Non-executive Director e) Shri C V V Prasad Independent and Non-executive Director f) Shri Pawan Kr Sanwarmal Independent and Non-executive Director 2.3 The shareholding pattern of the company as on December 31, 2004, March 31, 2005 and June 30, 2005 is as under: Mar 2004 Mar 2005 Jun 2005 Category No.of Shares Held % of Share Holding No.of Shares Held % of Share Holding No.of Shares Held % of Share Holding Promoter's Holding 931635 7.29 931635 7.29 931635 7.29 1.

Inst. Investors 1003150 7.85 1003150 7.85 1003150 7.85 Pvt. Corp. Bodies 3398856 26.6 5965112 46.71 5965112 46.7 Indian Public 7430359 58.2 4863788 38.08 4863788 38.1 NRIs/OCBs 7800 0.06 8115 0.06 8115 0.06 Grand Total 12771800 100 12771800 100 12771800 100 2.4 As per the data provided by the company, subsequent to the public issue in 1996, M/s Ceetee Trading and Leasing Pvt Ltd (Ceetee) was the major shareholder with the holding of 11.09 lakh shares accounting around 5% of the total listed capital. The scrutiny of the DP Account Opening Form of Ceetee revealed that Shri Mahendra C Shah and Ms Hasu Mahendra Shah were the first directors of the company M/s Ceetee Trading and Leasing Pvt Ltd. Subsequently, on June 14, 2003, the company authorized its directors Ms Hasu M Shah and Shri Sanjay B Shah to operate the Depository account. This clearly indicates that M/s Ceetee Trading and Leasing Pvt Ltd is a promoter entity and therefore, their shareholding should be shown under the Promotor’s Holding category. However, the quarterly shareholding report to BSE for the quarter ended March 2004 shows the holding of M/s Ceetee Trading and Leasing Pvt Ltd (479500 shares) and Shri Sanjay B Shah (373900 shares) in the non promoter category. From the shareholding pattern from March 2004 to September 2005, it is observed that there is no change in promoter’s holding; however, by not disclosing the holding of M/s M/s Ceetee Trading and Leasing Pvt Ltd and Shri Sanjay B Shah in the promoter’s

Source: SecMarx — sebi:WTM/GA/28/ISD/11/05. 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.