TaxTMI 
TaxTMI 
2014 (12) TMI 1438
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....s.178 as on December 12, 2013 (i.e. a decrease of 40% in 96 trading days). Subsequently, on December 13, 2013, the equity shares of First Financial were split in the ratio of 1:10 and thereafter, the price of the scrip fell from Rs. 17.7 (effective price as a result of Stock split) to as low as Rs.7 with huge increase in trading volume during December 13, 2013 to March 31, 2014 ("Patch 3"). An illustration of the price/volume movement in the scrip of First Financial during the Examination Period and afterwards is given below: Chart - I : Price-volume movement in the scrip of First Financial 3. First Financial had a share capital of Rs. 37,47,600 comprising 3,74,760 equity shares of Rs.10/- each as on September 30, 2011. On December 08, 2011, First Financial made a preferential allotment of 54,50,000 equity shares at the price of Rs. 20/- per share (hereinafter referred to as the "1st preferential allotment"). Thereafter on April 28, 2012, it made another preferential allotment of 24,50,000 equity shares at the price of Rs. 20/- per share (hereinafter referred to as the "2nd preferential allotment"). Thus, in total, First Financial allotted 77,00,000 equity shares to 83 person....
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...., normally could be made if the allottees had a nexus with First Financial and its directors/promoters and the issue of these shares was under a prior arrangement between them. 5. As a part of the inquiry, SEBI advised BSE to conduct surprise inspection at the registered office of First Financial to determine inter alia, the following: a. Whether the company exists at the registered office/corporate office; b. Whether any operations of the company are conducted at the said address. 6. Accordingly, BSE, on October 31, 2014, conducted a surprise inspection at the registered office of First Financial (i.e. Old no. 24, 2nd Floor, New no. 45, Venkata Maistry Street, Mannady, Chennai, Tamil Nadu - 600 001) when it was revealed that the said premise was occupied by another firm in the name of M/s Carewell Enterprises and no officials/employees of First Financial were available at the time of the said inspection. On further inquiry, it was learnt that First Financial had recently shifted its base to Mumbai. On November 07, 2014 BSE also conducted an inspection of the corporate office of First Financial (i.e. 1513 & 1514, Maker Chamber V, 221, Nariman Point, Mumbai -....
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....ain entities primarily through first trades during this period. It was noticed that these entities by putting 1 or 2 trades per day with negligible/ very less quantity of buy order contributed significantly to the price rise. From LTP analysis, it was observed that price of the scrip increased from Rs. 5.35 to Rs.263.45 mainly through first trades in 115 instances. 10. It was observed that in Patch 1, out of a total of 115 instances of trades establishing new high price in the scrip, top four entities namely, Prem Lata Nahar, Shyam Kanheyalal Vyas, Bharat Bagri Bagri and Sumitra Devi Agrawal established new high price on 69 instances. The contribution of these four entities in establishing new high price was Rs. 185/- out of total price rise of Rs. 258/-, which constitutes 72% of the total new high price. The details of contribution to price rise by these four entities during Patch 1 are as under: Table I : Contribution to price rise in Patch 1 by top four entities. Client PAN Client Name Pos Contribution (in %) Tot Pos Contribution in Securities Pos LTP Contribution of the Client as a buyer Count of LTP AFAPN8764M Prem Lata Nahar 29.01 258.35 ....
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....rokers acting in connivance under a pre-planned arrangement had artificially increased the price during the lock-in period. 13. During Patch 2 (February 11, 2013 to December 12, 2013), the price of the scrip of First Financial opened at Rs. 263.45 on February 11, 2013 and closed at Rs. 178.45 on December 12, 2013. The scrip touched a high of Rs. 300 on June 06, 2013. During this period, the scrip was traded with an average volume of 41,252 shares per day and total volume of 86,21,776 shares in 209 trading days. As compared to Patch 1, in Patch 2 the average volume increased by 179256% (1793 times) and average price increased by 193 %. 14. On analysis of trading activity during Patch 2, certain entities related/connected to First Financial were found to be the net buyers to the preferential allottees and thereby created artificial demand for the supply of shares from preferential allottees. Their inter- relationship/connection were noted from the Know Your Client (KYC) details, their bank statements, off-market transactions amongst them and the information available on the Ministry of Corporate Affairs ("MCA") website. Considering the large number of these related/connected en....
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....ton Finance Ltd is Rabi Paul who is also director in Amrit Sales Promotion Pvt Ltd. * Bazigar Trading Pvt Ltd has common ph no with Amrit Sales promotion and common address with Manimudra Vincom Pvt Ltd * Fund transfer between Forever Flourishing Finance and Pine animation * Common e-mail id [email protected] 8 BLUE CIRCLE SERVICES LTD. AAACB2131L 9 MANIMUDRA VINCOM PRIVATE LTD. AADCM4316K 10 AMRIT SALES PROMOTION PVT LTD. AACCA3220D 11 SYMPHONY MERCHANT PVT LTD AADCS5411K 12 BAZIGAR TRADING PRIVATE LTD. AABCB3052B 13 PINE ANIMATION LTD. AAECM0267A 14 FOREVER FLOURISHING FINANCE & INVESTMENT PVT LTD AAACF4311Q 15 ASTABHUJA CONSTRUCTION PRIVATE LTD. AADCN9427C * The directors of these companies are common namely Narendra Joshi and Ratan Pandit. * Ratan Pandit and Anita Jhunjhunwala are directors in Ruby Traders exporters Ltd * Anita Jhunjhunwala is director as well shareholder of Subham Communication in which S Krishna Rao is also a shareholder * As S Krishna Rao was director of First Financial Services duri....
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....l & Uttam Banerjee Further there have o ff-market transfer of shares among themselves . * As observed from KYC details they have common phone no and e-mail id i.e 9830041787 & bishwanath1951 @ gmail.com 24 HARI OM SUPPLIERS PRIVATE LTD. AABCH2251E 25 GOLDSTAR TRACOM PRIVATE LTD. AADCG8045K 26 KALAKAR COMMERCIAL PRIVATE LTD. AADCK9346B 27 SWARNAPRIYA VANIJYA PRIVATE LTD AAJCS0595E 28 SURBHIKA VYAPAAR PRIVATE LTD. AAJCS0680C * Most of these companies are Shareholders of Surbhika vyapaar pvt Ltd. Among others Ritesh Enclave Pvt Ltd and Ritesh Properties Pvt Ltd are shareholder of Surbhika Vyapaar who are also promoter of Dynamic Portfolio Management & Services Ltd 29 NANDAN KANAN IRON AND STEEL PRIVATE LTD. AABCN8968J 30 ANCHAL VYAPAAR PRIVATE LTD. AAFCA2480C 31 BNA COMMERCE PRIVATE LTD. AABCB0727D 32 SANCHAY TRADECOMM PRIVATE LTD. AAPCS2005M 33 SANCHAY TREXIM PRIVATE LTD. AAPCS1999E 34 STARDOX VINIMOY PRIVATE LTD. AAECS0352C * As observed f....
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....ahoo.co.in is the common e-mail id for santosh kumar shah, madsan agencies and shree sudarshan castings Further they share common address 49 MADSAN AGENCIES (P) LTD. AACCM0579K 50 MOTOREX FINANCE PVT. LTD. AACCM1042R 51 MIDNIGHT AGENCIES PVT LTD AABCM6864G 52 EAST INDIA SECURITIES LTD. AABCE2412N 53 VALUE AND WORTH AAFFV5756K 54 SHREE SUDHARSHAN CASTINGS PVT LT AADCS9429B 55 MINIMUM SHARES AND SECURITIES PRIVATE LTD. AAGCM0970Q * All these clients had bought huge number of shares of First financial through Narayan Securities. The Director of Narayan securities namely Amit Saraf was the Preferential allottee of First Financial during the Examination Period. * Further another preferential allottee namely Pawan kumar Bajaj is also connected to Amit Saraf as they are common director in Avyaan Capital private Ltd. * These entities also share a common address. * Rajani Investment Pvt. Ltd. And R. K. Investment Pvt. Ltd. Are also the shareholders of Minimum Shares and Securities Pvt. Ltd. 56 RAJANI INVESTMENT PRIVATE LTD AABCR2....
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....290800 2 GIRIRAJ PRASAD MANIHAR 25000 25000 500000 7318400 6818400 3 KRISHAN KUMAR DAGA 50000 50000 1000000 14531750 13531750 4 N K AGARWAL &SONS 100000 100000 2000000 29379910 27379910 5 RAMESH KUMAR DAGA 50000 50000 1000000 14512000 13512000 6 NARESH GARG 250000 120100 5000000 34696990 29696990 7 SANGEETA GARG 200000 178000 4000000 50261750 46261750 8 TUSHAR DHIRAJLAL MEHTA 50000 50000 1000000 13973771 12973771 9 MASTER TRUST LTD. 75000 85000 1500000 17624650 16124650 10 HASHMUKHBHAI B PATEL HUF 375000 35000 7500000 10071508 2571508 11 H N PARWAL 50000 50000 1000000 14688550 13688550 12 SANJAY DAGA 50000 50000 1000000 14528000 13528000 13 KETAN DHIRAJLAL KAPASI 75000 75000 1500000 22073918 20573918 14 DRAKE PROPERTIES PRIVATE LTD. 50000 50000 1000000 14534250 13534250 15 ANIL AGRAWAL HUF 250000 249900 5000000 72540759 67540759 16 BITTHAL DAS PARWAL 50000 50000 1000000 14705....
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....000 50000 1000000 14718700 13718700 46 DHEERAJ KRISHNA AGARWAL 50000 52500 1000000 15495975 14495975 47 RAJINDER KUMAR SINGHANIA 50000 50000 1000000 14683020 13683020 48 PARVEEN PARVEEN SINGHANIA 50000 50000 1000000 14736600 13736600 49 SURESH KUMAR KHANDELIA 112500 112500 2250000 31245539 28995539 50 MANJU KHANDELIA 100000 100000 2000000 27897219 25897219 51 PREM JAIN 125000 125000 2500000 36623649 34123649 52 HARNEESH KAUR ARORA 50000 50000 1000000 14524450 13524450 53 GAURAV JAIN 125000 125000 2500000 36310325 33810325 54 SUNITA CHAUDHARY 150000 150000 3000000 40657450 37657450 55 SANJIV CHAUDHRY 150000 150000 3000000 40755752 37755752 56 GOPALBHAI PARSHOTAMBHAI DUNGARANI 200000 200000 4000000 58319451 54319451 57 NANDITA BHAVESH MADIYAR 50000 50000 1000000 14744850 13744850 58 SANTOSH MANIHAR 25000 25000 500000 7355600 6855600 59 VINAL ARVIND KAPASI 75000 75000 1500000 22067915 ....
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.... Patch 2. In any market, a sudden supply if not matched by similar demand leads to price fall. Considering the same, any rational investor would not have dumped a large number of shares without facing the risk of a significant price fall until and unless he was sure of the demand side absorbing the supply. In this peculiar case, the entities of First Financial Group created the demand against the supply from the preferential allottees. In the whole process, the principle of price discovery was kept aside and the market lost its purpose. It is evident from the above analysis that the Financial group entities provided a hugely profitable exit to the allottees. This could be only possible if the allottees, First Financial entities and First Financial and its promoter/ directors were hand in glove with each other. The said finding is also corroborated by the fact that in few instances/ cases, it is observed that the buyers are related /connected entities of preferential allottees. 19. During Patch-3 (December 13, 2013 to March 31, 2014) i.e pursuant to the stock split, price of the scrip opened at Rs. 17.7 on December 13, 2013 and fell to as low as Rs. 7 as on March 31, 2014. During....
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....679; To expand the segment of Corporate Advisory Service like exploring refinancing alternatives of the clients and advising better sources of funds available. ● To enter in to the spectrum of Loan / Debt Syndication, which is the need of the hour for all corporate and to provide a comprehensive suite of advisory services packaged with resource raising. ● To enter in to segment of arranging Equity Placement / Strategic partners for corporate clients. ● To expand the geographies of the company by penetrating to the major clients such as Mumbai and Delhi by opening the branches therein. 22. From an examination of the P&L account for the period 2011-12 and 2012-13 it is observed that there is no receipt of advisory fee. Which implies that the company did not enter into any fee based activities which it had stated in the resolution for approval of preferential allotment by shareholders. Further, from an examination of the balance sheet of First Financial for the FY 2011-12 and 2012-13 it is observed that the company has no fixed assets and no capital work in progress. As far as expansion of geography by opening branches in Mumbai and Delh....
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....also pertinent to mention that several preferential allottees such a those belonging to the Singal family, namely Brij Bhushan Singal, Neeraj Singal, Ritu Singal and Uma Singal (who were allotted 7,50,000 shares by First Financial at a cost price of Rs. 1.5 crore) indirectly received the funds back from First Financial in the name of investment by First Financial or otherwise .. One such instance (mentioned in the above Table) is where Rs. 1.5 crore have been transferred to Marsh Steel Trading Ltd and Vision Steel Ltd for the purpose of investment as indicated in Annual Report of FY 2011-12 whose promoters are Singal family. Thus the above events prima facie indicates that money received through preferential allotment were again routed to the same source i.e. Singal family. Inquiry also revealed that members of Singal family have been preferential allottees in such type of companies which have a history similar to that of First Financial . From the above facts, it prima facie emerges that a number of entities who were the preferential allotees in the present case, were regularly investing in companies for namesake and the money invested by them in these companies was being returned....
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....ntial allotment that has resulted into huge profitable exit to the preferential allottees of such a stock that has hardly any intrinsic value. 27. It was also observed that the entities, to whom funds were transferred by First Financial, included two private companies namely, Chiraag Suppliers Pvt. Ltd and Nandlal Vyapaar Pvt. Ltd who were related/connected to First Financial and to whom Rs. 1 crore of was transferred during the Examination Period. It was observed from MCA database that among others, S Krishna Rao and Stanley Gilbert Mekhasingh, who were also directors of First Financial, held shares in these two companies at that point of time. 28. From the analysis of bank statements and financial statements, it is observed that funds received as proceeds of preferential allotment were immediately transferred to various entities on the same day or next day and was never retained in the company for expansion of its business or execute its future plans as envisaged in the special resolution passed under section 81(1A) of the Companies Act, 1956. The company representative/ company also could not satisfactorily explain the nature of conduct of its business and the final purpos....
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....eligible for long term capital gains. From the observations of preliminary inquiry it is inter alia noted that :- a) the fund brought in by way of preferential allotment was utilised for purposes other than those disclosed and extended by way of purported loans to companies through informal arrangements; b) even when substantial number of shares i.e. 77 lakh shares were locked-in and non transferable / tradable, price of the scrip increased substantially to the extent of 5160% with small chunk of volume / purchases by certain entities; c) After the expiry of the lock-in period (i.e. in Patch 2), the average volume increased astronomically to the extent of 179256% (1793 times) and average price increased by 197%. Such increase in volume was mainly on account of matched trading amongst First Financial group entities and allottees d) 80 out of the 83 preferential allottees sold total 6995530 shares allotted to them by First Financial at the price increased on account of the aforesaid manipulative trading in Patch 1; e) The funds required for purchase of shares by the First Financial group entities had been provided to them through layering ....
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....rther note that, First Financial group entities and allottees traded amongst themselves as substantiated by their matching contribution to net buy and net sell in Patch 2. There was no change in the beneficial ownership of the substantial number of traded shares as the buyers and sellers both were part of the common group and were acting in league/concert to provide LTCG benefits to the allottees. I prima facie find that First Financial group and allottees used securities market system to artificially increase volume and price of the scrip for making illegal gains to and to convert ill-gotten gains into genuine one. 36. I am of the considered view that the schemes, plan, device and artifice employed in this case, apart from being a possible case of money laundering or tax evasion which could be seen by the concerned law enforcement agencies separately, is prima facie also a fraud in the securities market in as much as it involves manipulative transactions in securities and misuse of the securities market. The manipulation in the traded volume and price of the scrip by a group of connected entities has the potential to induce gullible and genuine investors to trade in the scrip a....
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....person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely :- (a) indulging in an act which creates false or misleading appearance of trading in the securities market; (b) dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss; ......... (e) any act or omission amounting to manipulation of the price of a security; .......... (g) entering into a transaction in securities without intention of per....
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....rice rise from August 2014 onwards i.e. from Rs.9 to Rs.23 almost 155% increase. The price of the scrip is currently around Rs.23 per share and the holders including preferential allottees and buyers (exit providers), who are holding around 7,70,00,000 shares (post split), may potentially gain around Rs.177 crore. Unless prevented they may use the stock exchange mechanism in the same manner as discussed hereinabove for the purposes of their dubious plans as prima facie found in this case. In my view, the stock exchange system cannot be permitted to be used for any unlawful/forbidden activities. Considering these facts and the indulgence of a listed company in such a fraudulent scheme, plan, device and artifice as prima facie found in this case, I am convinced that this is a fit case where, pending investigation, effective and expeditious preventive and remedial action is required to be taken by way of ad interim ex -parte in order to protect the interests of investors and preserve the safety and integrity of the market. 41. In view of the foregoing, in order to protect the interest of the investors and the integrity of the securities market, I, in exercise of the powers conferre....
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.... GIRISHBHAI PATEL HUF AALHP0436L 45 RITESH AGARWAL HUF AAMHR6805C 46 HARJEET SINGH ARORA AAMPA0474C 47 SARLA DHIRAJLAL MEHTA AANPM7722Q 48 SAMIR HARSHADRAI DOSHI AAQPD2202F 49 KAMAL KHEMKA AAQPK0916R 50 KULBIR SINGH AATPS8757M 51 BHARATBHAI NATHABHAI BUHA AAWPB3665Q 52 SUNDER SOMANI AAWPS1022L 53 KARUNA ATAL ABHPA0900D 54 DHEERAJ KRISHNA AGARWAL ABHPA9593N 55 RAJINDER KUMAR SINGHANIA ABRPS7928R 56 PARVEEN SINGHANIA ABRPS7929Q 57 SURESH KUMAR KHANDELIA ABSPK3417A 58 MANJU KHANDELIA ABSPK3421A 59 PREM JAIN ABZPJ4150C 60 HARNEESH KAUR ARORA ACJPA6923B 61 GAURAV JAIN ACKPJ4330N 62 SUNITA CHAUDHARY ACLPC7278D 63 SANJIV CHAUDHRY ACLPC7284P 64 GOPALBHAI PARSHOTAMBHAI DUNGARANI ACOPD6501F 65 NANDITA BHAVESH MADIYAR ACOPM4635R 66 SANTOSH MANIHAR ACSPM8149E 67 VINAL ARVIND KAPASI ADQPK1014P 68 SURESH KUMAR KALANI ADRPK7629M 69 ASHOKBHAI NATHABHAI BUHA AECPB5885J 70 BRIJ BHUSHAN SINGAL AEFPS6298M 71 NARAYAN PRASAD MUNDHRA AENPM3873N 72 SHILPA AG....
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....LAVE PRIVATE LTD AABCG9641D 122 LINTON CONSULTANTS PRIVATE LTD AAACL5784F 123 SANTOSH KUMAR SHAH ALGPS0859J 124 MADSAN AGENCIES (P) LTD. AACCM0579K 125 MOTOREX FINANCE PVT. LTD. AACCM1042R 126 MIDNIGHT AGENCIES PVT LTD/VIJAY KUMAR SHAH AABCM6864G 127 EAST INDIA SECURITIES LTD. AABCE2412N 128 VALUE AND WORTH AAFFV5756K 129 MINIMUM SHARES AND SECURITIES PVT LTD AAGCM0970Q 130 RAJANI INVESTMENT PRIVATE LTD. AABCR2457G 131 R K INVESTMENT PRIVATE LTD. AABCR2488R 132 DYNAMIC PORTFOLIO MANAGEMENT & SERVICES LTD AAACD9125E 133 RITESH COMMERCIAL HOLDINGS LIMITED AABCR1974J 134 RITESH PROJECTS PRIVATE LTD AADCR6224M 135 BURLINGTON FINANCE LIMITED AABCB2575P 136 BLUE CIRCLE SERVICES LIMITED AAACB2131L 137 MANIMUDRA VINCOM PRIVATE LIMITED AADCM4316K 138 AMRIT SALES PROMOTION PVT LIMITED AACCA3220D 139 SYMPHONY MERCHANT PVT LTD AADCS5411K 140 FOREVER FLOURISHING FINANCE & INVESTMENT PVT LTD AAACF4311Q 141 NAVDURGA INVESTMENT CONSULTANTS PVT LTD AACCN9567A 142 TOPLIGHT COMMERCIALS /TARA CHAND AGARWAL AABCT1....