SECURITIES APPELLATE TRIBUNAL
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(1.) INVESTIGATIONS were conducted by SEBI into the alleged price manipulations and irregularities in the public issue of M/s Hitechi Jewellery Industries Ltd. (hereinafter referred to as HJIL), during the period from December 1996 to April 1997 in the National Stock Exchange, (NSE).
1.1 The company, HJIL had come out with a public issue of 23,33,700 equity shares of Rs.10 each for cash at par aggregating to Rs. 233.37 lacs. The issue had opened for subscription on 12th April 1994 and closed on 23rd April 1994. From the records the issue was shown to have been subscribed to the extent of 95.36% (22,25,580 equity shares). On application only Rs.1.25 was to be paid by the applicants as per the terms of the prospectus. Thus the total application money received was shown to be Rs.27,81,975.
(2.) Investigations revealed that the shares of Hitechi Jewellery had commenced trading at NSE on October 18, 1995 at Rs.174 with thin and sporadic volumes. The average daily volume of the scrip till first week of May' 96 was only 270 shares. The scrip, which was essentially illiquid had witnessed a surge in volumes during December 1996 - April 1997 especially in four settlements viz. Sett. Nos. 1996036, 1996041, 1996044 and 1996045 at NSE. Large delivery based trades during this period deviant from the general trend of deliveries was found to be associated with this scrip. It was observed that the trades were thin and volumes were poor on BSE during this period. The scrip which was quoting at Rs.150 during Sett. No. 1996044 moved to Rs.282 during Sett. No. 1997010 and had touched a high of Rs.304 during Sett. No. 1997009. It was seen that Junior Nifty (based on Mid-Cap Stocks) had showed an increase of 15.80% whereas HJIL price had showed an increase of 69% during the same period. It was also seen that approximately 70% of trades were concentrated with select brokers. On the basis of these, it appeared that the trading in HJIL at NSE were irregular and manipulative. Investigations were undertaken into this and it was found that a set of entities had created artificial market in the scrip of HJIL and artificially increased its price.
Pursuant to the detailed investigation conducted by SEBI, a show cause notice was issued vide letter dated September 23, 2002 to Shri Samir Zaveri. In the aforesaid show cause notice Shri Samir Zaveri was alleged with violation of the provisions of Regulation 4 (a) (c) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. He was also asked to show cause as to why suitable directions including prohibiting him from dealing in securities for a suitable period, in the interest of investors and capital market, should not be issued under Section 11 B of SEBI Act, 1992 read with Regulations 11 & 12 of Securities and Exchange Board of India (Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995.
A reply was received from Samir Zaveri on October 17, 2002 denying all allegations against him in the show cause notice. Further, he also stated that the transactions done by him in the shares of HJIL was only for earning the commission and that he had no knowledge about the price movement of the scrip or the intention of other parties.
3.1 He also denied having any involvement in circular trading or creation of artificial volume. According to him, unless it is established that he has received any benefit other than brokerage or finance charges, the allegations against him would be incorrect. He also mentioned that he did not have any knowledge of how Gazi Securities or Vinayak Investment had put the settlement system of the exchange at risk. Hence, he submitted that no directions should be issued against him and that all the charges against him be dropped.
(3.) AN opportunity of hearing was granted to Shri Samir Zaveri on 30th April, 2003. No one represented Shri Samir Zaveri.;
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