MITHANI INVESTMENT THROUGH ITS PROPRIETOR MILAN J MITHANI Vs. SECURITIES & EXCHANGE BOARD OF INDIA
LAWS(SB)-2003-4-9
SECURITIES APPELLATE TRIBUNAL
Decided on April 22,2003

Appellant
VERSUS
Respondents

JUDGEMENT

C.Achuthan, - (1.) THE present appeal is directed against the Respondent's order dated 12.12.2002. By the said order one Hem Enterprises and its proprietor Shri Hasmukh Shah and the Appellant and its proprietor Shri Milan J. Mithani were debarred from "associating with the capital market related activities, dealing in securities, accessing the capital market and associating with any of the intermediaries in the capital market for a period of five years" with effect from the date of the order.
(2.) The direction, as per the impugned order is issued under section 11B of the Securities and Exchange Board of India Act, 1992 (the Act) read with regulation 12 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (FUTP Regulations) against the parties named in the order with reference to their alleged role relating to the public issue made by one company viz. Bharthari Financial Services Ltd. (now known as BT Technet Ltd) (BFS). As per the information furnished by the Respondent in September 1995 BFS made a public issue of 13,50,000 equity shares of Rs.10 each for cash at par for an aggregate sum of Rs.1.35 crores, which remained open from 29.9.95 to 5.10.95. The issue was reportedly oversubscribed by 17.8 times. The concerned stock exchange accorded approval of the 'Basis of Allotment' on 8.12.1995 and granted listing permission on 14.12.1995. The Respondent reportedly received market reports indicating that the listing of BFS's shares was preceded by speculative grey market operations, and the suspects were the promoters and other persons associated with them. In that context the Respondent vide its order dated 24.7.97 ordered an investigation into the matter. The investigation reportedly revealed that BFS acting through its Chairman Shri S. K. Gupta in connivance with one Ashok Chawla, made irregular allotments in the public issue against the applications accompanied by stock invests issued after closure of the issue and the shares irregularly allotted were sold prior to obtaining the "approval of basis of allotment" and "permission for listing" of the shares from the stock exchange.
(3.) BASED on the findings of the investigation, the Respondent issued a show cause notice to the Appellant on 18.3.1999. Though the Appellant did not submit any written submissions, its representative appeared before the Respondent and denied the charges. The Respondent adjudicated the show cause notice holding the Appellant guilty of violating the provisions of section 12 of the Act and rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub brokers) Rules, 1992 (the Stock Broker Rules) for dealing in securities without obtaining certificate of registration from the Respondent. The Appellant was also found guilty of violating the provisions of FUTP Regulations, as it was found to have indulged in fraudulent and unfair trade practices to manipulate the market price by doing grey market transactions in the shares of BFS. It is in the said background the impugned order was passed by the Respondent.;


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