M.S.Sahoo, - (1.) ON noticing certain irregularities in transactions in shares issued through initial public offerings (IPOs) made during the period 2003-2005, before their listing on the stock exchanges, the Securities and Exchange Board of India (SEBI), pending investigations, vide an ad interim ex-parte order dated April 27, 2006, which itself was a show cause notice (SCN), directed certain persons, including Mr. Netanand Bhambu, Netanand Surajram Bhambu-HUF, Anand Netanand Choudhary-HUF, Ms. Vinita Choudhary and Ms. Sarvani Choudhary (hereinafter collectively referred to as "noticees"), not to buy, sell or deal in the securities market, including in IPOs, directly or indirectly, till further directions. In the said SCN, it was alleged that the noticees acted as 'financiers' to a key operator, namely, Ms. Roopalben Panchal in the IPOs of Nandan Exim Ltd. (Nandan) and FCS Software Solutions Ltd. (FCS).
(2.) The noticees submitted their replies to the SCN and availed an opportunity of personal hearing before the then Whole Time Member on March 21, 2007. While further proceedings in the matter were in process, the noticees, vide application dated January 31, 2008, applied to SEBI for settlement of the pending proceedings through a consent order. SEBI, however, vide letter dated July 07, 2008 declined to settle the matter through consent order. I, therefore, now proceed to dispose of the matter on merits. On completion of investigation, SEBI issued fresh SCNs dated December 01, 2008 under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 (SEBI Act), alleging that the noticees employed fraudulent, deceptive and manipulative practices to corner the shares meant for retail individual investors (RIIs) in the IPOs of Nandan and FCS and made unlawful gains by selling the shares so cornered. It also alleged that the noticees acted as financiers in these two IPOs. These acts were in violation of Section 12A of the SEBI Act and Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003 (SEBI PFUTP Regulations). Accordingly, it called upon the noticees to show cause as to why suitable directions, including disgorgement of unlawful gains, should not be issued against them.
(3.) MR. Netanand Bhambu, vide letter dated December 22, 2008, submitted a common reply on his behalf and on behalf of four other noticees. In the said reply, the noticees denied that they had cornered the shares in the said IPOs. They also stated that they had never funded any key operator and had no funding transactions between them and the key operator during the period 2003-05, as alleged. They further stated that they were not aware of the modus operandi of the key operator.;