Confirmatory Order in the matter of Mishka Finance and Trading Limited

WTM/RKA/ISD/48/2016 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN THE MATTER OF MISHKA FINANCE AND TRADING LIMITED

IN RESPECT OF:

Sl. No. Name of the entity PAN 1 Mr. Amit Singh BABPS7447D 2 Badamisati Apartments Private Limited AAFCB4546A 3 Function Financial Consultants Private Limited AABCF5486H 4 Cheroot Vanijya Pvt. Ltd. AAECC9285A 5 Dhlriti Traders Private Limited AAECD8235D 6 Esha Securities Limited AAACE2862P 7 Blue Horizon Commosales Private Limited AAFCB0211J 8 Helot Properties Private Limited AACCH8885R 9 Helpful Investment Advisory Private Limited AACCH4303G 10 Kapeeshwar Vintrade Pvt. Ltd. AAECK7329P 11 Overload Financial Advisory Pvt. Ltd. AABCO6950F 12 Reachsmart Construction Pvt. Ltd. AAGCR4662J 13 Samridhipurn Services Private Limited AATCS4365E 14 Sebika Commodities Private Limited AARCS9144H 15 Sinjan Overseas Private Limited AAMCS8721P 16 Swarnprakash Traders Pvt. Ltd. AATCS6718D 17 Topwell Properties Private Limited AADCT8403C 18 Wonder Procon Private Limited AABCW0317N 19 Mr. Arunavo Mukherjee ATIPM7500N 20 Indrawati Nirman Private Limited AADCI5139E 21 Dhyaneshwar Dealers Private Limited AAECD8010E 22 Goldensight Traders Private Limited AAFCG4773J 23 Reachsmart Dealtrade Pvt. Ltd. AAFCR9881C 24 Sulabh Impex Ltd. AAICS7362Q

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

Order in the matter of Mishka Finance and Trading Limited 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 allottees 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 completion of compulsory lock-in period, the preferential allottees 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 the Exit Providers and the preferential allottees 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 Limited, (i.e., the preferential allottees), 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 Mishka increased 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 Mishka was with the promoters, the promoter related entities and the preferential allottees.

(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 allottees 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 allottees and the promoter related entities. (i). The said price movement was not backed by fundamentals of Mishka and 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, including 24 entities mentioned above (hereinafter referred to as "noticees"), from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. 4. Vide the interim order SEBI also advised the noticees that they may file their objections, if any, within twenty one days from the date of the said order and, if they so desire, to avail themselves of an opportunity of personal hearing before SEBI, on a date and time to be fixed on a specific request, received from them. 5. I note that though the copy of the interim order was served to the noticees, except to Badamisati Apartments Private Limited and Dhlriti Traders Private Limited, either through courier or through their respective brokers, but the Noticees have failed to submit their reply till date. Moreover, the advertisement was published in the Times of India and Nav Bharat Times (Mumbai Edition) on November 10, 2015 for Dhlriti Traders Private Limited and in the Telegraph and Sanmarg (Kolkata Edition) for Badamisati Apartments Private Limited on November 07, 2015 intimating them about the interim order and the date of personal hearing.

The interim order also advised the noticees to request for an opportunity of hearing, if required. However, though an opportunity of personal hearing has been granted to the noticees but none of the noticees appeared for the personal hearing. As regards Esha Securities Limited, it has been brought to my notice that the said company is under liquidation. Further, none of the noticees have sought an opportunity of hearing till date. I note that although more than ten months have elapsed since the interim order has been passed, but the noticees chose not to submit their reply nor sought an opportunity of personal hearing till date. Therefore, in my opinion, an ample time has been provided to the noticees to respond to the interim order and to seek an opportunity of personal hearing, and hence, I am constrained to proceed with the matter on the basis of the material available on record. 6. I have considered the allegations levelled against the noticees and have perused the documents available on record. I note that in the instant case, the directions issued against the noticees are interim in nature and have been issued on the basis of prima facie findings.

SEBI had issued directions vide the interim order in 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 noticees vide the interim order, need to be confirmed, vacated or modified in any manner, during pendency of investigation in the matter. 7. The facts and circumstances of the instant case indicate beyond doubt the modus operandi employed by MIshka, its directors, its promoters, preferential allottees, promoter related entities and Exit Providers, wherein Mishka in nexus with the preferential allottees made façade of preferential allotment and the promoters of the company transferred their holding to the entities belonging to promoter related entities. After the expiry of the lock-in period, the Exit Providers provided the exit opportunity to the preferential allottees and promoter related entities by buying the shares of Mishka at artificially increased prices. In the whole process, the entities of Exit Providers provided a hugely profitable exit to the preferential allottees and the promoter related entities.

Hence, the preferential allottees and the promoter related entities with the aid of the Exit Providers misused the stock exchange mechanism to exit at a high price in order to book illegitimate gains with no payment of taxes as long term capital gain (LTCG) is tax exempt under section 10(38) of the Income Tax Act, 1961. Further, the interim order especially discusses the manner in which the preferential allottees and the promoter related entities sold their shares pursuant to abnormal increase in price in a manipulative way and made huge illegitimate profit in the whole event. It is in this background and the facts and circumstances, I find that the acts and deeds of Mishka, its directors, its promoters, preferential allottees, the promoter related entities and the Exit Providers are fraudulent and in contravention of the Securities Laws. 8. I also note that investigation in the matter is in progress and appropriate decision, in accordance with law, would be taken after completion thereof. As prima facie found in the interim order, Mishka, its promoters, its directors, preferential allottees, the promoter related entities and the Exit Providers have acted in connivance for implementation of dubious plan, device and artifice that has led to the misuse of stock exchange mechanism to artificially increase price and volume of the scrip to provide illegitimate gains to the preferential allottees and the promoter related entities in order to claim LTCG benefits that has not only eroded the market integrity but has also been detrimental to the interests of investors who might have been lured to invest in the scrip due to such manipulative and fraudulent trading in the scrip and price movement.

I, therefore, do not find any reason to revoke or modify the directions of the ad interim ex parte order dated April 17, 2015 in the matter of Mishka Finance and Trading Limited against the noticees. 9. I, therefore, in exercise of the powers conferred upon me under section 19 of the SEBI Act, read with sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued vide the ad interim ex-parte order dated April 17, 2015 against the following entities:

Sl. No. Name PAN 1 Mr. Amit Singh BABPS7447D 2 Badamisati Apartments Private Limited AAFCB4546A 3 Function Financial Consultants Private Limited AABCF5486H 4 Cheroot Vanijya Pvt. Ltd. AAECC9285A 5 Dhlriti Traders Private Limited AAECD8235D

6 Esha Securities Limited AAACE2862P 7 Blue Horizon Commosales Private Limited AAFCB0211J 8 Helot Properties Private Limited AACCH8885R 9 Helpful Investment Advisory Private Limited AACCH4303G 10 Kapeeshwar Vintrade Pvt. Ltd. AAECK7329P 11 Overload Financial Advisory Pvt. Ltd. AABCO6950F 12 Reachsmart Construction Pvt. Ltd. AAGCR4662J 13 Samridhipurn Services Private Limited AATCS4365E 14 Sebika Commodities Private Limited AARCS9144H 15 Sinjan Overseas Private Limited AAMCS8721P 16 Swarnprakash Traders Pvt. Ltd. AATCS6718D 17 Topwell Properties Private Limited AADCT8403C 18 Wonder Procon Private Limited AABCW0317N 19 Mr. Arunavo Mukherjee ATIPM7500N 20 Indrawati Nirman Private Limited AADCI5139E 21 Dhyaneshwar Dealers Private Limited AAECD8010E 22 Goldensight Traders Private Limited AAFCG4773J 23 Reachsmart Dealtrade Pvt. Ltd. AAFCR9881C 24 Sulabh Impex Ltd. AAICS7362Q

10. Accordingly, the directions issued vide para 36 of the interim order dated April 17, 2015 shall remain in force till further directions. 11. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.

Sd/-

DATE : APRIL 13th, 2016 RAJEEV KUMAR AGARWAL PLACE : MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA