sebi:WTM/RKA/ISD/80/2016

SEBI · SEBI · 2015-04-17 · Rajeev Kumar Agarwal, 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

Interim directions confirmed subject to interim reliefs already granted

Provisions invoked

• s. 11
• s. 11(4)
• s. 19
• s. 11(1)

Parties

• Ms. Rohini Patwardhan

Holding

The Whole Time Member confirmed the interim directions issued vide the ad interim ex parte order dated April 17, 2015 against the Noticee, subject to interim reliefs already provided to her.

Full text

Order in the matter of Mishka Finance and Trading Limited Page 2 of 13 d) Then, on February 06, 2013, Mishka announced bonus shares in the ratio of 7:1. As a result, the share capital of Mishka increased to 1,03,33,600 shares. e) Thereafter, suddenly trading started in the scrip of Mishka from February 14, 2013. In Patch 1, i.e. from February 14, 2013 to February 14, 2014, the price of the scrip gradually increased from ₹ 5.50/- to ₹ 499/- (unadjusted) and ₹ 49.90/- (adjusted) with very low volume. f) Prior to February 14, 2013, the entire share capital of Mishka was with Promoters, Promoter related entities and Preferential allotees. g) Once the price of the scrip increased exponentially, Mishka announced a stock-split in the ratio of 1:10 on January 16, 2014 to make a passage for preferential allotees to exit since the stock split would reduce the per share price and increase liquidity. h) One month after the stock split, i.e. from February 17, 2014, 59 entities, connected / related, directly or indirectly, to Mishka, started providing hugely profitable exit to the preferential allotees and promoter related entities. i) The said price movement was not backed by fundamentals of Mishka and its financials.

Order in the matter of Mishka Finance and Trading Limited Page 3 of 13 5) She is a regular investor in various asset classes since several decades. She has investments in shares, mutual funds, bonds, debentures and such other financial instruments. Her investments in shares are more than ₹ 2 crore and in Mutual funds is more than ₹ 3 crore. 6) She has earned profits as well as suffered losses by investing in securities market. For instance, she has suffered huge loss by investing in NSEL. 7) Her Investments in securities were handled by Late Mr. Ashok Jain, father of her sub- broker. Mr. Ashok Jain advised her to buy the shares of Mishka based on a newspaper advertisement as well as based on his research. At the time of investing in the scrip of Mishka, he reminded her about the investment made in Colgate and in the odd lot shares of Sesa Goa, which have provided them good returns. Further, she was offered a price of ₹ 30/- per share of Mishka whereas the preferential allotment of Mishka took place at ₹ 85/-. Therefore, she invested a small amount of ₹ 75,000/- in Mishka by buying 2,500 shares. Later on March 21, 2013, she was forced to purchase 20,000 shares of Mishka at a price of ₹ 5.77/- from her daughter as her daughter was going abroad. 8) She held the shares of Mishka for more than 16 months. Since the price of Mishka stopped increasing from February 2014, Mr. Ashok Jain started selling the shares during February 2014-March 2014 on her behalf. 9) She had sought certain

Order in the matter of Mishka Finance and Trading Limited Page 4 of 13 through an advertisement, could identify as to whether the shares that are being advertised could be misused for manipulation. Secondly, SEBI could have been more prompt to prevent price rise if it was considered as improper. In that case no seller would have got enviable profits and there would be no occasion to cast doubts on genuine sellers like her. 15) The order fails to establish relationship in any manner except the untenable ground of being purchaser of shares in off market transaction. 16) Why the exit providers would enrich her at their own costs by buying the shares, knowing that the price they pay is actually not the price of the share? They would have purchased the shares anticipating the future growth prospects in the scrip. 17) Since many of shares are held for long, we always sell and get LTCG and such a happening is not on account of any design on manipulation. She is not a "trader" in that sense. 18) It is observed many times that such orders have caused huge financial losses to the affected parties and you reverse the order after some time saying that there was no fault. Though there are many such cases, one such case pertains to the matter of Littilestar Vanijya Pvt. Ltd. where you blocked the demat account through a similar ex parte ad interim order on August 3, 2012 and reversed it on November 9, 2012. During this period the holding of the affected company faced severe devaluation. 19

Source: SecMarx — sebi:WTM/RKA/ISD/80/2016. 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.