G.N.Bajpai, - (1.) INVESTIGATIONS were conducted by the Securities and Exchange Board of India (hereinafter referred as SEBI) into abnormal price and volume movement in the scrip of M/s. Vertex Machineries Ltd. (hereinafter referred as "VML"), on the Stock Exchange, Mumbai (hereinafter referred to as "BSE"). VML came out with a public issue of 2,05,00,000 equity shares at par, of which 78,40,000 equity shares were given to the promoters, their relatives & friends on firm allotment basis, while the balance 1,26,60,000 equity shares were offered to the public. The maiden public issue, which opened for subscription between 15/02/1996 and 19/02/1996, got subscription to the extent of 90.56% of the public offer INVESTIGATIONS revealed that there were irregularities in the public issue. INVESTIGATIONS brought out that group companies of VML directly and indirectly subscribed in the public issue of VML to the extent of around 89% of the total shares allotted. Thus, there was hardly any genuine subscription from the public and shares were cornered with promoters/their group entities. INVESTIGATIONS also revealed that promoters had not brought in their part of the contribution as shown in the prospectus shares worth Rs.8.18 crores were issued when contribution brought in by the promoters was only Rs.1.52 crores.
(2.) Investigations brought out that Shri. Suresh Sharma Managing Director of VML approached a group of persons /entities including Shri. Anil Agarwal for selling shares of VML. It was seen that 2,00,000 shares of VML which were standing in the name of Progressive Securities Pvt. Ltd. (hereinafter referred as 'PSPL), an associate company of Vertex, were given to group of persons /entities (5) including Shri. Anil Agarwal for sale. A Memorandum of Understanding (hereinafter referred as 'MOU') was also entered between PSPL and each of the above mentioned person /entity of the group. As per the terms and conditions of MOU, Shri. Agarwal like the other four persons /entities were to be given 40,000 shares of VML along with duly signed transfer deeds for the purpose of selling them in the market with a view to maximise the profit earned there from. It was further agreed that Shri. Agarwal would submit all transaction particulars from time to time to the Director of PSPL. Minimum price for this transaction was fixed at Rs.12 per share and any profit earned above this value was to be distributed in the proportion of 60:40 among PSPL and Shri. Agarwal respectively. The terms and conditions were similar to terms and conditions of other four persons /entities of the group approached by Managing Director of VML. After receiving the shares, Shri. Agarwal started trading in those shares through the counter of Shri. H. J. Choksi, Shri. Mukesh Mansukhlal Kothari, (all members-BSE). It was also seen that Shri. Mukesh Kothari dealt for Shri. Anil Agarwal through the counter of M/s. Libord Securities, member - BSE. Shri. Anil Agarwal also routed few trades through the Ishwar Trading & Investment who further transacted through the counter of M/s. Dahyabhai Shares, member-BSE. The details of Shri. Anil Agarwal's transactions are as follows: SETT. NO. Buy Position Sell Position Net Position Buy Position Sell Position Net Position BROK. MUKESH KOTHARI M/s. DAHYABHAI SHARES Intermediary - - JUDGEMENT_217_TLSB0_20020.htm SETT. NO. Buy Position Sell Position Net Position Buy Position Sell Position Net Position BROK. LIBORD SECURITIES H. J. CHOKSI Intermediary Mukesh Kothari Ishwar Trading & Investment JUDGEMENT_217_TLSB0_20021.htm Buy Position Sell Position Net Position GRAND TOTAL 3,99,700 4,40,200 -40,500
(3.) IT was observed that Shri. Anil Agarwal resorted to trading through brokers Mukesh Kothari (which in turn dealt through Libord Securities) and H. J. Choksi in Settlement No.B03 and off loaded 40,000 shares. Shri. Anil Agarwal stated that at this juncture, he received instruction from Shri. Suresh Sharma not to off load the shares so fast. IT was stated that he was asked to purchase back these shares and was assured that the prices would go up in the subsequent settlements. On the basis of instructions of Shri Sharma, it was claimed by Shri. Anil Agarwal that he again started dealing in the scrip of VML after settlement B03. His gross trading position was 2,68,800 shares in Settlement No.B05 and 3,38,300 shares in Settlement No.B06. The cumulative Gross & Net positions across all seven settlements was 8,39,900 & (-40,500) respectively. Continuous buying by Shri. Anil Agarwal along with other MOU participants during these settlements resulted in price being taken artificially to high of Rs.80/-;