Decided on March 10,2003



G.N.Bajpai, - (1.) INVESTIGATIONS were conducted by SEBI into the alleged market manipulation in the scrip M/s. Kamal Overseas Ltd (KOL). INVESTIGATIONS brought out that the shares of KOL were listed for trading on NSE w.e.f October 9, 1996. The trading activity in the scrip was very thin and sporadic, so much so that only 1200 shares of the company were traded between October 9, 1996 and April 15, 1997. Trades took place only on 6 days during this period and the share price moved in a narrow range of Rs.75 to Rs.81.
(2.) Suddenly from April 22, 1997 onwards, which was the last trading day of Settlement No. 16/1997, trading activity picked up in the scrip and a volume of 10,200 shares was recorded wherein the price moved up to Rs. 82. The next two settlements viz. No. 17/1997 (April 23 to April 29, 1997) and No. 18/1997 (April 30 to May 6, 1997) saw feverish trading activity in the scrip with trading volumes of 7,53,600 shares and 11,97,100 shares respectively. A Show Cause Notice was issued to Shri Milan Shah, under Section 11B of SEBI Act, 1992 read with Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 asking him to explain as to why suitable direction, including directions for debarring him from accessing the capital market and dealing in securities for a suitable period should not be issued by SEBI for the above-mentioned violations.
(3.) SHRI Milan Shah submitted his reply vide letter dated 26th September 2002. It was submitted that : His dealings with SHRI Rakesh Sheth & Kinglet were in his capacity of Whole time Director of Anagram Securities Ltd. All the transactions relating to shares of KOL were carried out through structured organization of people working for and on behalf of ASL. ASL had undertaken the transaction of sell of shares of KOL after obtaining the physical delivery of shares on behalf of its client on NSE as a part of normal trading, in the open market and on NSE terminal. SEBI's investigation itself revels that there was one single buyer viz. Kinglet. No other person had bought the shares of KOL and hence no one else has suffered any loss. It was ASL's serious intention to sell the shares on NSE which gets demonstrated by the fact that ASL had ensured before selling the shares to take the physical delivery of shares and same were in fact delivered to NSE in pay-in. This in no way mean that ASL has indulged in any act, which is calculated to create a false or misleading appearance of trading on the securities market. The fact that shares had thin volume prior to large volume in itself does not prove any fraudulent trading, specially in view of the fact that shares of KOL were admitted for trading in October 1996 only. To the best of his knowledge and information, undertaking the matched transaction is not illegal. The very fact that he took the decision of extending funding of Rs.90 lacs and Rs.150 lacs to Kinglet process that it was his sincere and honest intention to ensure that Kinglet does not default under any circumstances and hence there is no loss to National Security Clearing Corporation (NSCC). With this precise intention in mind SHRI Milan Shah sought the permission of NSE to square-off the sale position in vallan No. 18 even at the risk of loss of Rs.240 lacs to ASL and facing the consequences of such loss. It is KCS who committed breach of agreement of not depositing the amount of Rs.150 lacs with NSE. He further submitted that if at all there was any collusion and/or attempt to defraud NSCC, it was a collusion between SHRI Rakesh Sheth (RS) and SHRI Kirit C Shah (KCS) and he was at the receiving end and made party to the scheme of arrangement conspired by RS and KCS.;

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