sebi:WTM/RKA/ISD/134/2015

SEBI · SEBI · 2013-01-29 · Rajeev Kumar Agarwal, Whole Time Member

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Facts / Headnote

Confirmed interim restraint against the noticees with permission for mutual fund transactions, corporate action benefits, and supervised sale of non-suspended securities with proceeds in interest-bearing escrow till further directions

Provisions invoked

• s. 11
• s. 19
• s. 12A

Regulations

• Reg. 3

Parties

• Amresh A. Mody
• Hasumati Mody
• Anil Rajat Agarwal & Sons (HUF)

Holding

The ad-interim ex-parte restraint against the noticees is confirmed and continued till further directions, subject to limited relaxations to subscribe/redeem mutual fund units, avail corporate actions, and sell non-suspended holdings under stock exchange supervision with proceeds in escrow.

Full text

Order in the matter of Radford Global Limited Page 2 of 12 price rise of almost 7442% in the scrip during Pre-Patch-I. (d) Post stock-split on January 28 , 2013, the share price of Radford opened at `49.20/-, rose to a high of `86/- and closed at `74.95/- during the period January 29, 2013 to July 23, 2013 ("Patch-I"). During Patch-I, the average volume increased by 5,05,066% (i.e., 5050 times), from 98 shares per day to 4,95,063 shares per day and the price increased by 74.8% during the same period, i.e., from `49.20/- to `86/-. During the period July 24, 2013 to March 24, 2014 ("Patch-II"), the price of the scrip continuously fell from `74.10/- to `4.89/- i.e. a fall of approximately 93.4%. Also the volumes have again decreased by 67% of the volume of Patch-I. Thus, the price in the scrip had increased prior to the expiry of the lock-in period on the shares held by the aforesaid allottees. After the expiry of the lock-in period, the price and volume in the scrip increased substantially. Such sharp rise in price and volume of the scrip was not supported by any acceptable market factor such as fundamentals, trading history, corporate announcements , etc as discussed in the interim order but was on account of non-genuine and manipulative trading in the scrip by certain entities. (e) A group of entities was acting as buyers in Patch-I in order to provide exit (“exit providers”) to preferential allottees and in the process creating artificial volume. Most of the trades were taki

Order in the matter of Radford Global Limited Page 3 of 12 (ii) Then, just prior to the expiry of lock-in of shares issued on preferential basis, Radford made a stock-split to facilitate preferential allottees to exit, on expiry of the lock-in, since the stock split would reduce the per share price and increase liquidity. (iii) After the expiry of lock-in, the preferential allottees sold the shares to entities connected/related, directly or indirectly, to Radford Group & Suspected Entities, thereby raking in huge profits. (h) It was, thus, prima facie observed that the preferential allottees acting in concert with Radford Group & Suspected Entities misused the stock exchange system to generate fictitious long term capital gains( LTCG). In the process, Radford Group & Suspected Entities and preferential allottees artificially increased the volume and price of the scrip and misused securities market system for making illegal gains and to convert ill-gotten gains into genuine one.

Order in the matter of Radford Global Limited Page 4 of 12 (3) There was no such emergency situation warranting such an ex-parte order. SEBI failed to find any such urgency in the current matter as the cause of action had already been completed 18 months before the interim order. (4) They have invested in the preferential allotment of Radford in the normal course from their own contribution based on presentation to them in this regard by an official of Radford. (5) They did not have any nexus with Radford and its directors/promoters. Also, they were not connected to the Radford Group & Suspected Entities, LTP Contributors and other preferential allottees. Connection has not been established based on any documentary evidence. The interim order was passed merely on the basis of suspicious, doubts, surmises, presumptions, assumptions and conjectures and without any evidence against them. (6) As the shares issued by way of preferential allotment were under lock-in for a period of 1 year, the noticees could sell the shares after 1 year on BSE, which provides an anonymous platform where buying and selling party was not known to each other. (7) Hence, the noticees were totally unaware whether the buyers were related to Radford or otherwise and the sale proceeds were utilised towards professional/investment purposes. (8) The noticees did not act in concert with Radford Group & Suspected Entities and misused the stock exchange system to generate fictitious LTCG. They did not use the s

Source: SecMarx — sebi:WTM/RKA/ISD/134/2015. 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.