Confirmatory Order in respect of Baba Bhoothnath Trade and Commerce Pvt Ltd in the matter of IPO of Taksheel Solutions Ltd

1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) had, pending investigation, vide an ad-interim ex-parte Order dated December 28, 2011 (hereinafter referred to as the Order), inter alia prohibited M/s. BABA BHOOTHNATH TRADE AND COMMERCE PVT LTD., Stock Broker (BSE (SEBI REG NO: INB011411734) AND NSE (SEBI REG NO: INB231411738) (herein referred to as BBTC) from buying, selling or dealing in any securities, in any manner whatsoever, in the proprietary account, till further directions, in the IPO matter of Taksheel Solutions Ltd. The order also stated that the entity may file its objection and seek personal hearing, if it so desire, within 21 days of the date of order.

2. BBTC filed its written submissions vide letter dated January 12, 2012. An opportunity of personal hearing was granted to BBTC on March 16, 2012, when Shri Rajesh Kedia, director BBTC along with his authorised representative Shri Vinay Chauhan appeared on behalf of BBTC and made submissions. The submissions made by BBTC in its letter dated January 12, 2012 are summed up as under:

• Rosevalley Merchandise Pvt Ltd.(herein referred as RVM) is one of their client and the amount of 1.6 crore was transferred towards its pay-in obligation. • The amount transferred by RVM for meeting its trading obligations cannot be linked to the alleged trading by us in the scrip of Taksheel. • As on October 20, 2011, an amount of 1.78 crore was due from RVM. The said receipt of 1.60 crore was adjusted for the said outstanding of 178.33 lac. • The amount of 45 lac transferred from the account of Silverpoint Infratech Pvt Ltd,(herein referred as SPI) was borrowed in ordinary course of business. It was a loan transaction with SPI and could not concluded that it had received funds from Taksheel.

During the hearing on March 16, 2012, the representatives of BBTC re-iterated the above submissions and also informed that vide the referred order, SEBI prohibited BBTC only to buy, sell or deal in any securities in proprietary account, but the exchanges are not permitting BBTC to enter into agreements into fresh clients and accordingly requested SEBI to clarify the same. On this limited issue, SEBI, vide letter dated April 11, 2012, has clarified that there is “no prohibition on BBTC from entering into agreement with fresh clients in terms of the referred order".

3. Further, on March 19, 2012, BBTC filed copy of loan agreement dated October 12, 2011, to substantiate its assertions that the transfer of funds from SPI to its account was a borrowing in the ordinary course of business.

4. I have considered all the submission made by BBTC vide its letter dated January 12, 2012 and also the submissions made during the course of hearing. I have also gone through the agreement dated October 12, 2011 entered into between BBTC and SPI.

5. At this point, the limited issue to be considered is whether, the ad-interim ex parte directions issued vide order dated December 28, 2011 against BBTC should be continued, modified or revoked in any manner.

6. Before proceeding further, it would be necessary to revisit the facts of the case. Taksheel Solutions Ltd (hereinafter referred to as Taksheel) came out with its IPO for issue of 55,00,000 equity shares of face value of 10 each. The issue price of the IPO was at a price of 150 each, aggregating to 82.50 crore. On the day of listing i.e. October 19, 2011, it was observed huge volatility in price and transaction volume and accordingly SEBI initiated investigation in the matter. The prima facie findings of the investigation included that Taksheel and its directors had made various misstatements in the offer documents, hidden vital pieces of information and have also made material inaccurate and untrue statements, siphoned off part of IPO proceeds in a circuitous route to certain entities and operators in order to enable them to absorb losses incurred by them in the process and lack of adequate and independent due diligence on the part of PNB Investment Services Ltd.

7. It was observed by the investigation that on the day of listing i.e. October 19, 2011, BBTC had traded in Taksheel scrip through its proprietary account and suffered loss of 64.21 lacs. The summary of trades of BBTC is given as below: SI. Client Name Buy Vol. Buy Value Sell Vol Sell Net Balan Net Loss * Buy No Value Buy ce qty vol. Vol. selling % in price term (in ) s of issu e size) 1 Baba Bhootnath 110000 14206982 110000 7785525 0 64,21,457 2.00 Trade and commerce Pvt. Ltd

8. Further, it was also noted by the investigation, from the bank account of BBTC that on October 20, 2011, Taksheel had transferred 45 lacs to BBTC through SPI, which was then credited to BBTC settlement account on October 21, 2011 to meet settlement obligation. Thus, it was clear that SPI bank account was used as a channel to transfer the IPO proceeds to BBTC to trade in Taksheel scrip on the day of listing, which is further substantiated from the point that there is no client-broker relationship between SPI and BBTC. It was also noted that RVM had also transferred 1.60 crore to BBTC of the IPO proceeds received from Taksheel through different entities. The aforesaid details are presented below.

Taksheel Solutions- IPO- 19/10/11- Rs. 80.50 crore

Silverpoint Infratech Ltd 19/10/11- Rs. 23 crore

Snehsil Marketing P ltd Anubhav Infra ltd Sugam Vinimay P Ltd 20/10/11- Rs. 4.445 cr 20/10/11- Rs. 4.85 cr 20/10/11- Rs. 2.147 cr

Baba Bhoothnath 20/10/11- Rs. 45 lac Rosevalley Merchandise P ltd 20/10/11- Rs. 2 crore (sugam) 20/10/11- Rs. 4 crore(Snehsil) 20/10/11-Rs.4.445cr(Anubhav) Baba Bhoothnath Broker settlement acc- Rs. 45 lacs 21/10/11 Baba Bhoothnath 22/10/11-Rs. 1.60 cr

9. Pursuant to personal hearing, BBTC, as mentioned earlier, vide its letter dated March 19, 2012 has submitted a copy of the loan agreement entered with SPI, which inter alia states that " the agreement between BBTC and SPI is for unsecured loan entered on October 12, 2011, wherein SPI, shall act as the investor and will provide a loan amount not exceeding 50 lac as and when needed to BBTC for carrying on its business without any security or with security".

10. The agreement between SPI and BBTC as referred above, does not provide any information on exact amount to be borrowed, repayment tenure and the rate of interest. Further, it also gives a hint of an open agreement, wherein, even the timing of loan transaction is not defined. These factors lead to the conclusion that the agreement is a sham agreement, created post facto, only to give a color of genuineness to the transfer of funds from SPI to BBTC, which were later on used to deal in Taksheel scrip in a fraudulent manner. BBTC has also failed to demonstrate that it had not dealt in Taksheel shares in a fraudulent manner. Therefore, considering the facts and circumstances and also the submission made by BBTC, I do not find any merit in vacating or modifying the Order dated December 28, 2011, at this stage.

11. After considering the findings of investigation and replies & submission made by BBTC, I, 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 11(B) thereof, hereby confirm the directions issued vide the ad-interim ex-parte order dated December 28, 2011 in the IPO matter of Taksheel Solutions ltd., against Baba Bhoothnath Trade & Commerce Pvt Ltd.-Stock Broker (BSE (SEBI REG NO: INB011411734) AND NSE (SEBI REG NO: INB231411738).

12. I also note that the investigation in the matter is under progress. SEBI shall expeditiously complete the investigation in the matter, in the interest of justice and thereafter shall take appropriate actions in accordance with law

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: MAY 11, 2012