Confirmatory order in respect of Mr. Manharlal Narottamdas Shah in the matter of Mishka finance and trading limited

Appearance for the Noticee: Mr. VikasBengani 1. Pursuant to detection of a huge rise in the traded volume and price of the shares of Mishka Finance and Trading Limited {formerly known as Pyramid Finance and Trading Limited and hereinafter referred to as "Mishka"} on Bombay Stock Exchange Limited ("BSE") during the period from February 14, 2013 to December 31, 2014 (hereinafter referred to as "examination period"), Securities and Exchange Board of India ("SEBI") undertook a preliminary inquiry in the dealings in the said scrip. 2. Upon preliminary examination, it was prima facie observed that Mishka and persons in charge of its affairs created a facade of preferential issue of equity shares of around ₹6.74 crore in order to provide fictitious long term capital gains ("LTCG") to Mishka’s preferential allotees and promoter related entities (i.e. entities to whom Mishka’s promoters transferred their shares in physical form)so as to convert their unaccounted income into accounted one. It was observed that after the release of compulsory lock-in period, the preferential allotees and the promoter related entities were provided exit at a high price by the entities related/connected amongst themselves and with Mishka (hereinafter referred to as "Exit Providers"). In the process Exit Providers and allotees artificially increased the volume of the scrip and misused securities market system for making illegal gains and to convert ill-gotten gains into genuine one to avail fictitious long term capital gains. The modus operandi used by these entities is as under: a) As on September 30, 2011, Mishka had only 7 shareholders (5 under promoters and 2 under public category). b) Thereafter, the aforesaid 7 shareholders transferred a total of 4,96,000 shares to 452 entities i.e. the promoter related entities directly/indirectly during 2011-2013. c) In the meantime, Mishka allotted 7,93,700 shares under preferential allotment to 46 related/associated entities including 1 promoter, viz. Pearl Arcade Trading Private Order in the matter of Mishka Finance and Trading Limited

Limited, (i.e. the preferential allotees), at an exorbitant premium of ₹75/- per share on September 24, 2012. d) Then, on February 06, 2013, Mishka announced bonus shares in the ratio of 7:1. As a result, the share capital of Mishkaincreased to 1,03,33,600 shares. e) Thereafter, suddenly trading started in the scrip of Mishka from February 14, 2013. In Patch 1, i.e. from February 14, 2013 to February 14, 2014, the price of the scrip gradually increased from ₹5.50/- to ₹499/- (unadjusted) and ₹49.90/- (adjusted) with very low volume. f) Prior to February 14, 2013, the entire share capital of Mishkawas with Promoters, Promoter related entities and Preferential allotees. g) Once the price of the scrip increased exponentially, Mishka announced a stock-split in the ratio of 1:10 on January 16, 2014 to make a passage for preferential allotees to exit since the stock split would reduce the per share price and increase liquidity. h) One month after the stock split, i.e. from February 17, 2014 59 entities, connected / related, directly or indirectly, to Mishka, started providing hugely profitable exit to the preferential allotees and promoter related entities. i) The said price movement was not backed by fundamentals of Mishkaand its financials.

3. In this backdrop, SEBI, vide an ad interim ex-parte order dated April 17, 2015 (hereinafter referred to as “interim order”), restrained Mishka along with other 128 entities, from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. 4. While the proceedings pursuant to interim orderweregoing on, an appeal was filed before the Hon'ble Securities Appellate Tribunal ("the Hon'ble SAT") by Mr. Manharlal Narottamdas Shah (hereinafter referred to as the “Noticee”) challenging the interim order. Hon'ble SAT, vide its order dated September 9, 2015, disposed of the said appeal after taking note of SEBI’s statement that a confirmatory order in respect of the Noticee in accordance with law will be passed by SEBI within a period of six weeks from September 9, 2015. In terms of said order of Hon'ble SAT, I deem it necessary to dispose of these proceedings in respect of the Noticee. 5. The Noticee had filed his reply in the matter vide letter dated May 05, 2015. An opportunity of personal hearing was provided to the Noticee on July 07, 2015 when his authorized representative appeared and made submissions on his behalf.

The reply/submissions of the Noticee are, inter alia, as under: a) He is 78 years old and is suffering from life-threatening diseases. He had suffered a paralytic attack and has lost his voice. Replying on medical records, he has submitted Order in the matter of Mishka Finance and Trading Limited that he is undergoing treatment for the said diseases and is in urgent need of funds. b) He has not acted as a "Exit Provider" to the preferential allottees. Further, he is not related/connected with the promoters of Mishka and the preferential allottees. c) On July 30, 2013, he had purchased 50 shares of Mishka in physical form from his broker, Roongta Stock Rising Private Limited, for a consideration of ₹1500. He also submitted the copy of receipt and bank statement in support of the same. d) He is not the part of Group of entities who were either involved in pushing the price up of the scrip and providing exit to the preferential allottees and promoter related entities. e) With respect to the purchase transaction of 11,650 shares of Mishka, he has submitted that he sold shares of few companies aggregating to ₹8,76,359 on July 01, 2014. Out of these sell proceeds he purchased 11,650 shares aggregating ₹ 6,45,552 of Mishka.

He used his independent judgement while buying the shares of Mishka. 6. I have considered the allegations against the Noticee, his reply and the material available on record. I note that in the instant case, the directions issued against the Noticee are interim in nature and have been issued on the basis of prima facie findings. SEBI had issued directions vide the interim orderin the matter in order to protect the interests of investors in the securities market. Detailed investigation in the matter is still in progress. Thus, the issue for consideration at this stage is whether the interim directions, issued against the Noticee vide theinterim orderneed to be confirmed, vacated or modified in any manner, during pendency of investigation in the matter. 7. With regard to the allegation in the interim order that the Noticee is connected / related to Mishka, its promoters/directors and the Mishka group as he directly / indirectly purchased shares in physical form from the promoters of Mishka the Noticee has submitted that on July 30, 2013 he purchased 50 shares of Mishka in physical form for a consideration of ₹1500 from a stock broker viz; Roongta Stock Rising Private Limited and not from the promoters of Mishka.

Be whatever it may, the fact remains that those shares were purchased through off-market transactions from the promoters of Mishka and nexus between the Noticee and promoters can not be ruled out at this stage merely because of involvement of a stock broker as claimed by the Noticee. 8. Admittedly, during the Examination period, the Noticee had bought 11,650 shares of Mishka, in respect whereof, all his purchase orders matched with the sale orders of the preferential allotees. In this connection, the Noticee has submitted that he sold shares of few companies aggregating to ₹8,76,359 on July 01, 2014. Out of these sale proceeds he purchased 11,650 shares of Mishka on July 3, 2014 aggregating to ₹6,45,552. A perusal of the transaction of the Noticee for the relevant time (i.e. July 01, 2014 to July 03, 2014) Order in the matter of Mishka Finance and Trading Limited revealed that the Noticee had sold the shares of 5 companies aggregating to ₹10,63,808.60 and bought the shares of 2 companies including Mishka aggregating to₹10,51,741.50. The details of the said transactions of the Noticee are as under:

Sale Transactions by the Noticee Date Scrip Name No. of Shares Sold Sale Value 01/07/2014 Aban Offshore Ltd. 340 259645.80 01/07/2014 Pearl Agriculture Limited 100 42000.00 01/07/2014 Reliance Industries Ltd 200 202300.00 Tata Consultancy Services 01/07/2014 Ltd. 140 335304.60 01/07/2014 Tata Motors Ltd. 500 219850.20 02/07/2014 Pearl Agriculture Limited 11 4708.00 Total 1063808.60 Purchase Transactions by the Noticee No. of Shares Date Scrip Name Bought Buy Value 01/07/2014 Rander Corporation Ltd. 2000 135826.50 02/07/2014 Rander Corporation Ltd. 2000 137000.00 Mishka Finance and Trading 03/07/2014 Limited 11650 641915.00 03/07/2014 Rander Corporation Ltd. 2000 137000.00 Total 1051741.50

9. From the above, it is difficult to totally rule out the possibility of any role of the Noticee in the scheme (as found in this case) especially in light of the following facts: i. During the examination period the Noticee had sold 29 shares during Patch 1i.e. the period when the price of the scrip was increased through very low volume. Out of the 4 transactions, in 3 transactions the counter client was Mr. ShyamKanheyalalVyas, who has been classified as a LTP contributor in the interim order and has also been debarred from accessing the securities market for alleged price manipulation in the scrip of Mishka. ii. The Noticee placed 12 buy orders only on July 03, 2015 all of which matched with the sell orders placed by the preferential allottees. iii. In order to buy the shares of Mishka, a fundamentally weak company, the Noticee sold the shares of the companies which are fundamentally strong. The said decision of the Noticee does not come across as a rational one. Order in the matter of Mishka Finance and Trading Limited iv. A major portion (42.29%) of the Noticee’s portfolio is comprised of the shares of Mishka and Radford Global Limited.

It is pertinent to note that an interim orderdated December 19, 2014 has been passed in the matter of Radford Global Limited in which the same modusoperandi has been applied by a set of entities as used in case ofMishka. 10. I note that the Noticee, at this stage, has failed to give aplausible reason/explanation for the charges as described in the interim order and for complete removal of restraint. The investigation in the matter is going on. I, therefore, in this case, reject the prayer for setting aside the interim order or for complete removal of restraint imposed by it. Considering the particular facts and circumstances of this case, I am of the view that the restraint imposed on the Noticee by the interim order cannot be completely removed at this stage. 11. It is noted that the purpose of the interim order was to restrain/prevent the Noticee from indulging in similar activities of misuse of the stock exchange mechanism for purposes other than genuine trading. In this case about 6 months have elapsed since the interim order and the Noticee has been restrained from buying, selling or dealing in all securities, either directly or indirectly in any manner till further directions.

This is a special type of case where several entities have been restrained on the basis of prima facie findings. The facts of this case are complex and entail examination of various transactions in shares under investigation. I am of the view that certain relaxations within the spirit of order dated September 9, 2015 passed by Hon'ble SAT so as to avoid any irreparable loss to the Noticee may be given without compromising with the purpose and effect of the interim order. 12. I, therefore, in exercise of the powers conferred upon me under section 19 read with sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, hereby confirm the directions issued vide the ad interim ex parte order qua the Noticee herein subject to permitting him to: A. subscribe to units of the mutual funds including through SIP and redeem the units of the mutual funds so subscribed; B. avail the benefits of corporate actions like rights issue, bonus issue, stock split, dividend, etc. C. sell the securities lying in their demat accounts as on the date of the interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange, in orderly manner under the supervision of the stock exchanges so as not to disturb the market equilibrium and deposit the sale proceeds in a interest bearing escrow account with a nationalised bank.

Order in the matter of Mishka Finance and Trading Limited

13. It is further directed that the sale proceeds lying in the aforesaid escrow account shall be dealt with and utilised under the supervision of the concerned stock exchange as provided hereunder:- i. the sale proceeds may be kept in a fixed deposit with a nationalised bank or may be utilised for subscription to units of the mutual funds which shall always be held in the demat form and if such units are redeemed the proceeds thereof shall be credited to the aforesaid escrow account or may be utilised for subscription to the units mutual funds; ii. the Noticee may utilise upto 25% of the value of his portfolio as on the date of the interim order for their business purposes and/or for meeting other exigencies. 14. For the purposes of determining the portfolio value of the Noticee, the value of portfolio of securities lying in the demat account/s (individual and joint both) on the date of the interim order after excluding the value of shares that have been suspended from trading as on the date of this order shall be considered. 15. This order shall continue to be in force till further directions. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.

Sd/-

DATE: October 21st, 2015 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in the matter of Mishka Finance and Trading Limited