Confirmatory order agaisnt Rosevalley Merchandise pvt Ltd., its directors and overall Financial Consultants Pvt Ltd and its directors in the matter of Taksheel Solutions Ltd

WTM/PS/03/IVD/ID-08/APR/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Section 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of IPO of Taksheel Solutions Limited In respect of Rosevalley Merchandise Pvt. Limited its directors Mr. Anil Sharma, Mr. Biraj Sonakar and Overall Financial Consultants Pvt. Limited its directors Mr. Anup Kumar Sharma, Mr. Manoj Kumar Pandit 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') upon noticing wide fluctuations in the price of the scrip of Taksheel Solutions Limited (hereinafter referred as 'Taksheel') initiated a preliminary investigation. Taksheel came out with an Initial Public Offering (hereinafter referred to as 'IPO') of 55,00,000 shares of ₹10 each. The said IPO opened on September 29, 2011 and closed on October 04, 2011. The issue price was fixed at ₹150 each, aggregating to ₹82.50 crore. The shares of Taksheel, issued in its IPO, were listed on the Bombay Stock Exchange (hereinafter referred to as 'BSE') and the National Stock Exchange (hereinafter referred to as 'NSE') on October 19, 2011. The preliminary investigation inter alia revealed that Taksheel made various mis-statements in the offer document and failed to disclose vital pieces of information. It was also revealed that there were inaccurate and untrue statements in the electronic media when the issue was open for subscription. Further, it was observed that certain entities inter alia namely Rosevalley Merchandise Pvt. Limited (hereinafter referred to as 'Rosevalley'), Shreya Multitrade Pvt. Limited, Baba Bhootnath Trade and Commerce Pvt. Limited (hereinafter referred to as 'Baba Bhootnath') and Overall Financial Consultants Pvt. Limited (hereinafter referred to as 'Overall') had traded in the scrip of Taksheel on October 19, 2011 i.e., the first day of trading/ listing and incurred substantial losses. Such huge losses were prima facie found to be offset through layered transactions from Taksheel.

2. In view of the preliminary findings of the investigation in the matter, SEBI, vide an ad interim ex-parte order dated December 28, 2011 (hereinafter referred to as the 'interim order') inter alia prohibited Rosevalley and its directors namely Mr. Anil Sharma and Mr. Biraj Sonakar;

Overall and its directors namely Mr. Anup Kumar Sharma and Mr. Manoj Kumar Pandit (hereinafter collectively referred to as 'the entities' and individually by their respective names) from buying, selling or dealing in the securities market, in any manner whatsoever, till further directions. The persons/ entities against whom the interim order was issued, were advised that they may file their objections, if any, within twenty one (21) days from the date of the said order and also avail opportunities of personal hearing, if they so desire.

3. Rose Valley and Overall filed objections to the interim order, vide their letters dated October 19, 2012 and June 20, 2012 respectively and had sought an opportunity of personal hearing. Further, vide letters dated November 28, 2012 and November 29, 2012, Overall and Rosevalley respectively requested that the replies filed by them to the interim order be also treated as reply of the respective directors. The submissions of the entities have been summarized below: a. Rosevalley vide its reply, took the following arguments: - It had no link/ relation/ connection with any promoters/ directors/ associates of Taksheel. The trades executed in the scrip of Taksheel were genuine and in the due course of business. It's trading in the scrip was independent and from its own sources of funds. - It had traded through Indiabulls Securities Limited and had suffered a loss to the tune of ₹2,09,77,760 by selling the shares of Taksheel. However, there was no pre-determined plan to deliberately book such losses. The loss incurred was market driven. - It has not been provided with relevant trade-order log details which are necessary to elucidate its trading pattern in the scrip of Taksheel on the particular days. - Rosevalley and Overall were incorporated together and as one of the directors of Overall is a distant relative of one of its director, the residential address was shared amongst them.

However, there was no meeting of minds between the companies with regard to the alleged transaction in the scrip of Taksheel. There is no financial transaction between Rosevalley and Overall. - It had no link/ connection with any of the entities in the chart mentioned on page 28 of the interim order except the ones with which it had business. - The transfer of ₹2 crores by Sugam Vinimay Pvt. Limited (hereinafter referred to as 'Sugam') was a short term loan and was repaid in 4 days, for which no interest was charged. The transfer of ₹5 crores by Anubhav Infra Limited (hereinafter referred to as 'Anubhav') was share subscription money which the management of Rosevalley had decided to allot 2,50,000 shares to Anubhav at ₹200 per share. - The fund transfer of ₹4 crore by Snehsil Marketing Pvt. Limited (hereinafter referred to as 'Snehsil') was also for share subscription of Rosevalley. The management of Rosevalley had decided to allot 50,000 shares to Snehsil at a price of ₹200 per share. Thereafter the remaining funds were returned back to Snehsil on October 25, 2011. - Sugam, Anubhav and Snehsil had lent/ forwarded the respective amounts for business purposes and the same had nothing to do with the trading in securities. - It had no knowledge about the source of such funds for Sugam, Anubhav and Snehsil.

The receipt of ₹10.85 crore from these three entities was in regular course of business and such funds were never utilised in the share market. - As regards the payment of ₹1.60 crore made to Baba Bhoothnath on October 22, 2011, the same was the pay-in obligation to the said entity, being one of its designated brokers. As on October 20, 2011, an amount of ₹1.78 crore was outstanding from its side to Baba Bhoothnath and the transfer of ₹1.60 crore was adjusted by it for the outstanding amount.

b. Overall vide its reply, took the following arguments: - It had no link/ relation/ connection/ nexus with Taksheel or its promoters/ directors - It had traded in the scrip of Taksheel and have suffered a loss of ₹4,01,12,136 on the day of listing. It had used its own funds to trade in the scrip of Taksheel. - The trades executed through Baba Bhoothnath, J.M. Financial Services Pvt. Limited and Grishma Securities Limited were done in the normal course of transactions through its own funds. - Rosevalley and Overall were incorporated at the same registered office address having common address of one of the directors, however, there was no meeting of mind with regard to the transactions in the scrip of Taksheel. - It had no link with the alleged transactions of Rosevalley. - There had been no financial transaction between Overall and any of the alleged entities.

4. In view of the submissions, Rosevalley and Overall requested that the directions issued against them vide the interim order should not be continued. Before proceeding further, an opportunity of personal hearing was granted to Rosevalley and Overall on February 04, 2013. However, on the date fixed, both Rosevalley and Overall failed to turn up for the personal hearing without any prior intimation to SEBI. I note that these entities have not asked for another opportunity of personal hearing. Therefore, I proceed further with the matter.

5. I have considered the respective submissions of Rosevalley and Overall made vide their replies/ objections filed and the relevant material available on record. The limited issue to be considered at this stage is whether the ad-interim ex-parte directions issued against them vide the interim order needs to be confirmed, vacated or modified in any manner, in so far as it relates to the entities.

6. I note that the interim order has discussed about the trades of Rosevalley and Overall in the scrip of Taksheel. It has been observed that Rosevalley had traded through Indiabulls Securities Limited and Overall had traded through Baba Bhoothnath, J.M. Financial Services Pvt. Limited and Grishma Securities Pvt. Limited in the scrip of Taksheel on the day of its listing. Rosevalley and Overall were the top two net buyers on October 19, 2011 and had together suffered losses to the extent of ₹6.10 crore. The summary of the trades of Rosevalley and Overall are as under: S. Client Buy Buy Sell vol. Sell Net Balance Net loss Buy vol. in No. vol. value (₹) value (₹) buy qty sell (₹) terms of price (₹) issue size 1. Rosevalley 4,50,000 6,11,51,608 3,00,0003,48,00,000 1,50,000 35.83@ 2,09,77,760& 8.18% 2. Overall 14,56,446 173173387 13,12,184 127897388 1,44,262 35.80* 4,01,12,136 $ 26.48% @- Rosevalley sold the balance 1,50,000 shares on October 21, 2011 at an average price of ₹35.83. &- Calculation of net loss of Rosevalley = (Sell value – buy value – balance qty. value of 1,50,000, sold on October 21, 2011). *- Sold 1,44,242 qty. shares as on October 21, 2011, weighted average price of ₹35.80 and the balance qty. of 20 shares were not sold by the entity till October 31, 2011. The value of balance 20 shares were also calculated at ₹35.80. $ - Calculation of net loss of Overall= (sell value – buy value-balance qty. value of 1,44,262 shares sold on October 21, 2011).

7. It is observed that Rosevalley and Overall had common registered office address. Further, the address of Mr. Biraj Sonkar, director, Rosevalley i.e., 5 F/3, Ratan Sarkar’s Garden Street, Kolkata, 700007, West Bengal matches with the address of Mr. Anup Kumar Sharma, director Overall. This address is also shared by Mr. Anil Sharma, director, Rosevalley. In this regard, I note the submission that Rosevalley and Overall were incorporated together and as one of the directors of Overall is a distant relative of one of the directors of Rosevalley, the residential address was shared amongst them. This submission is not convincing as three directors out of four had common address.

It is further observed that Rosevalley and Overall have beneficial owner accounts and broker client accounts with one Karuna Financial Services Private Limited, a Kolkata based broker and share a common phone number i.e. 9594352222. Rosevalley and Overall have another broker-client account with J.M. Financial Services Pvt. Limited, here also a common mobile number i.e., 9836494311 has been given. The details hint to the close connection between Rosevalley and Overall.

8. I note that on October 19, 2011 i.e., the first day of trading, Taksheel had transferred ₹23 crore from the IPO proceeds to one Silverpoint Infratech Pvt. Limited. Out of this, ₹11.40 crore was transferred by Silverpoint Infratech Pvt. Limited to the entities namely Snehsil, Sugam and Anubhav on October 20, 2011. These entities transferred ₹10.85 crore to Rosevalley on October 20, 2011 itself. An analysis of the ledger account of Rosevalley (held with its stock broker which was submitted by Rosevalley) shows that ₹1.50 crore and ₹4.65 crore were credited to it on October 17, 2011. Prior to the credit of such sums, the client ledger of Rosevalley showed a debit balance of ₹1,461. Therefore, it appears that the amount was transferred well in advance i.e., on October 17, 2011, for the trade to be carried out by it in the scrip of Taksheel. From the client ledger of Rosevalley, it is also noted that the first obligation in the account of Rosevalley after the credit of abovesaid sums was for the trades carried out by it in the scrip of Taksheel on October 19, 2011. From the interim order, I note that the financials of Silverpoint Infratech Pvt. Limited were not good and does not support any large financial borrowing. The entire financial arrangement using Silverpoint Infratech Pvt. Limited appears to be suspicious, considering the fact that part of the IPO proceeds have found way into the accounts of Rosevalley, thus enabling it to absorb the losses suffered due to the trading in the scrip of Taksheel on the day of listing.

9. I have considered the submissions of Rosevalley regarding allotment of its shares to Anubhav and Snehsil in lieu of the money received from these two entities. I have seen the application form, purportedly submitted by Anubhav for the subscription of the shares of Rosevalley and note that certain basic details such as the date of submission of the application are missing in it and the same raises serious doubt about its veracity. Though, it has been claimed by Rosevalley that the fund transfer of ₹4 crore by Snehsil was for its share subscription, however, no proof for allotment of such shares to Snehsil has been produced. As regards, the submission regarding the loan availed from Sugam by Rosevalley, I note that no document in support of such claim has been provided. In the absence of such crucial documents it is difficult to conclusively say that the amounts were received by Rosevalley in the normal course of business.

10. I note the submission of Rosevalley and Overall that there was no meeting of minds between these two companies with regard to the trading in the scrip of Taksheel and the trades were in normal course of business. It is observed that Rosevalley and Overall have not denied incurring of losses in the scrip of Taksheel. I have considered the submission of both the entities and note that the said order was passed at a preliminary stage as an interim measure. The objections made by the entities would be considered in detail in the respective proceedings which are being initiated.

Having seen the volume contributed by these entities and the circumstances which led to the passing of the interim orders, the individual acts of the entities under these circumstances cannot be isolated from the case, rather the focus should be on the case in its entirety and it is the ultimate goal of manipulators that should be critically assessed. I note that the investigation in the matter have been completed and SEBI is in process of contemplating appropriate proceedings against the entities that are found guilty. Thus, at present, I am of the considered view that it would not be appropriate to give any conclusive findings as to any of the facts or submissions made by the entities.

11. Therefore, I do not find it fit to modify/ revoke the ad interim directions issued vide Order dated December 28, 2011 with respect to Rosevalley, its directors and Overall, its directors. I am convinced that the directions in the interim order in respect of the entities need to be continued, till further directions. Needless to say, the same would be reviewed upon conclusion of all the proceedings in the matter. I note that the interim order was issued after taking into consideration, the prima facie fraudulent, abusive and manipulative activities committed by certain persons identified in the said order.

12. I, therefore, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued vide the ad-interim ex-parte order dated December 28, 2011 in the IPO matter of Taksheel Solutions Limited against Rosevalley Merchandise Pvt. Limited [PAN No: AAECR 3349C], its directors namely Mr. Anil Sharma [PAN No: BFYPS 4464N] and Mr. Biraj Sonakar [PAN No: BLZPS 6412H] and Overall Financial Consultants Pvt. Limited [PAN No: AABCO 1577E] its directors namely Mr. Anup Kumar Sharma [PAN No: BLEPS 0813B] and Mr. Manoj Kumar Pandit [PAN No: AQOPP 1860D].

13. This order shall remain in force till further directions.

Date: APRIL 26, 2013 PRASHANT SARAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOAD OF INDIA