Confirmatory Order in the matter of SMS Techsoft (India) Limited

WTM/RKA/ISD/35/2015 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1), 11(4) AND 11B OF THE SEBI ACT, 1992 AND SECTION 12A OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 - IN THE MATTER OF SMS TECHSOFT (INDIA) LIMITED. In respect of: Sl. No. Name PAN 1 SMS Techsoft (India) Limited AAECA1954G 2 Akash Jagadish Vital ATYPA8648K 3 Jagadish Vital ACJPJ5747L 4 Anita Srinivasabhatt Kadanthalai ABUPA2184Q 5 Dashrathkumar Keshaji Khatri ACFPK3128C 6 Devaraj Siddiah Pera Naidu ACGPD9190G 7 Dilipbhai Jaswantlal Gajjar ADVPG4094Q 8 Mr. Rajesh Ranka ACUPR5573R 9 K Rajagopal AGCPR8130L 10 S Rajaganesh ALBPR2586E 11 Bafna S R AFXPB6525P 12 Chhaya Umeshchandra Trivedi AHDPT3058P 13 Meenaben Natubhai Thakkar AHWPT5940M 14 Mitesh Kanaiyalal Thakkar AHQPT0178H 15 Mukeshbhai Shantilal Thakkar AJBPT8789M 16 Mulchand Ganeshmal Jain ABBPJ6373M 17 Natubhai Shantilal Thakkar AHWPT5944R 18 Navinchandra Kanubhai Thakkar ADUPT1264A 19 Suresh Nenmalji Malvi AKMPM4951C 20 Vaishali Natvarlal Thakkar AMJPT1242N 21 Vinod Jain AEDPJ4235P 22 Dharmendra Rikhavchand Shah AAEHD6246F 23 Kanubhai Narandas Thakkar ADZPT3418R 24 Alakaben Kirtibhai Shah CPAPS2335R 25 Himadri Kamleshbhai Shah AZYPS5654H 26 Himanshu Prafulchandra Shah ANEPS9445A 27 Kaliyaben Himansu Shah BFQPS1462A 28 Karan Kirtibhai Shah BQYPS0082D 29 Keval Kirtikumar Shah DFNPS6796L 30 Kirtikumar Rasiklal Shah AKQPS8463F 31 Minaben Prafulbhai Shah COYPS9153J 32 Pruthvi Himanshu Shah DCAPS6011N 33 Vinit Kamleshkumar Shah BOIPS2506E 34 Nila Rajeshkumar Shah BSLPS2675B 35 Mahavirsingh N Chauhan AQOPC6330R 36 Maheshchandra Chunilal Shah AIOPS3870Q 37 Manjulaben Maheshchandra Chunilal Shah AFSPS6606M

Order in the matter of SMS Techsoft (India) Ltd.

Appearances: 1. Mr. Rajesh Ranka 2. Mr. Dharmendra R. Shah 3. Mr. Dilip J. Gajjar 4. Mr. Himanshu Shah and Mr. Vishal Acharya (Advocate) representing Mr. Himanshu Shah and 9 Family Members Entities from 24 to 33.

1. Vide ad interim ex-parte order dated November 05, 2013 (hereinafter referred to as the “interim order”), SEBI restrained the below mentioned 37 entities, (hereinafter collectively referred to as the "noticees" or individually by their respective names), from accessing the securities market and further prohibited from buying, selling or dealing in securities or any instrument exchangeable or convertible into securities, directly or indirectly, in any manner whatsoever, till further directions: Table 1: Noticees and their details Sl. No. Name PAN 1. SMS Techsoft (India) Limited AAECA1954G Hereinafter referred to as "SMS Techsoft/company" 2. Mr. Akash Jagadish Vital ATYPA8648K 3. Mr. Jagadish Vital ACJPJ5747L 4. Ms. Anita Srinivasabhatt Kadanthalai ABUPA2184Q Entities at Sl. No. 2-4 hereinafter collectively referred to as "promoters" or individually by their respective names; (of these, Mr. Akash Jagadish Vital and Mr. Jagadish Vital were the promoters/directors) 5. Mr. Dashrathkumar Keshaji Khatri ACFPK3128C 6. Mr. Devaraj Siddiah Pera Naidu ACGPD9190G 7. Mr. Dilipbhai Jaswantlal Gajjar ADVPG4094Q Entities at Sl. No. 5-7 hereinafter collectively referred to as "independent directors" or individually by their respective names 8. Mr. Rajesh Ranka ACUPR5573R 9. Mr. K. Rajagopal AGCPR8130L 10. Mr. S. Rajaganesh ALBPR2586E 11. Mr. Bafna S. R. AFXPB6525P 12. Ms. Chhaya Umeshchandra Trivedi AHDPT3058P 13. Ms. Meenaben Natubhai Thakkar AHWPT5940M 14. Mr. Mitesh Kanaiyalal Thakkar AHQPT0178H 15. Mr. Mukeshbhai Shantilal Thakkar AJBPT8789M 16. Mr. Mulchand Ganeshmal Jain ABBPJ6373M 17. Mr. Natubhai Shantilal Thakkar AHWPT5944R 18. Mr. Navinchandra Kanubhai Thakkar ADUPT1264A 19. Mr. Suresh Nenmalji Malvi AKMPM4951C 20. Ms. Vaishali Natvarlal Thakkar AMJPT1242N 21. Mr. Vinod Jain AEDPJ4235P 22. Mr. Dharmendra Rikhavchand Shah AAEHD6246F 23. Mr. Kanubhai Narandas Thakkar ADZPT3418R 24. Ms. Alakaben Kirtibhai Shah CPAPS2335R 25. Mr. Himadri Kamleshbhai Shah AZYPS5654H 26. Mr. Himanshu Prafulchandra Shah ANEPS9445A

27. Ms. Kaliyaben Himansu Shah BFQPS1462A 28. Mr. Karan Kirtibhai Shah BQYPS0082D 29. Mr. Keval Kirtikumar Shah DFNPS6796L 30. Mr. Kirtikumar Rasiklal Shah AKQPS8463F 31. Ms. Minaben Prafulbhai Shah COYPS9153J 32. Mr. Pruthvi Himanshu Shah DCAPS6011N 33. Mr. Vinit Kamleshkumar Shah BOIPS2506E 34. Ms. Nila Rajeshkumar Shah BSLPS2675B 35. Mr. Mahavirsingh N. Chauhan AQOPC6330R 36. Mr. Maheshchandra Chunilal Shah AIOPS3870Q Entities at Sl. No. 8-36 hereinafter collectively referred to as "preferential allottees" or individually by their respective names 37. Ms. Manjulaben Maheshchandra Chunilal Shah AFSPS6606M 2. The interim order was passed taking into account facts as described therein and summarised inter alia as under:- (a) SEBI noticed an outburst of Short Text Messages (SMS) during February – March 2013, mentioning therein buy recommendation for the scrip of SMS Techsoft. (b) It was noticed that on March 15, 2012, SMS Techsoft had made further issue of 3,00,00,000 equity shares of `10/- each at a price of `10/- each through preferential allotment to the promoter Mr. V. Jagadish and his wife and son, namely, Ms. Anita Srinivasbhatt Kadsanthalai and Mr. Akash Jagadish Vital who are also disclosed as promoters of the company, and also to 28 other entities.

(c) Majority of the allottees in the preferential allotment were Ahmedabad based entities. From the respective KYC documents, it was noted that 27 out of the 28 allottees (i.e., except Mr. Dharmendra Rikhavchand Shah) had a common mobile number, i.e., '9825032074' and a common e-mail address, i.e., 'rajranka8@yahoo.com'. The said mobile number and email address belong to Mr. Rajesh Mangilal Ranka; (d) The other allottee, i.e., Mr. Dharmendra Rikhavchand Shah had transferred 25 lac shares of the company to another allottee, namely, i.e., Mr. Maheshchandra Chunilal Shah. (e) The said 28 allottees and Mr. Rajesh Ranka were connected with each other on the basis of factors as described in the interim order. (f) Mr. Rajesh Ranka, an employee of SMS Techsoft, is the authorized signatory for its bank account with ING Vysya Bank. He is, thus, connected with the company as its employee. Shri Rajesh Ranka had funded the preferential allotment to all the allottees including the three promoters. (g) Most of the 28 allottees (i.e., allottees other than the promoters) had opened their respective accounts with ING Vysya Bank in the 1st week of March 2012, i.e., just before the preferential allotment.

These allottees did not have financial capabilities commensurate with the amount purportedly paid towards the preferential allotment. (h) On March 03, 2012, Mr. Rajesh Ranka had transferred `1,00,00,000/- from his bank account number ‘139003201012322’ with Nav Nirman Co-operative Bank to the bank account number ‘139003201016137’ jointly held by Mr. Maheshchandra Chunilal Shah and his wife Ms. Manjulaben Maheshchandra Chunilal Shah (hereinafter referred to as "Manjulaben") with Nav Nirman Co-operative Bank. On the same day, Mr. Maheshchandra Chunilal Shah transferred the same amount to the bank account number ‘673011005933’ of the company with ING Vysya Bank against which he was allotted 10,50,000 preferential shares. (i) On March 05, 2012, the company transferred back the same amount of `1,00,00,000/-to Manjulaben (bank account number ‘673010029662’ with ING Vysya Bank). Manjulaben thereafter transferred the same or approximately same fund again and again to 19 allottees (i.e., the three promoters and the entities from serial number 1 to 16 mentioned in the Table No. 3 of the interim order) from March 05, 2012 to March 13, 2012, i.e., just before the preferential allotment of shares on March 15, 2012. (j) On receipt of the funds from Manjulaben, the respective allottee transferred the same to the company.

Each time the allottee made payment for his/her allotment to SMS Techsoft, the same fund was transferred back by it to Manjulaben. Manjulaben again transferred the fund to another allottee who in turn transferred the said amount to the company. In this pattern, `1,00,00,000/- received by Manjulaben from Mr. Rajesh Ranka through the company was circulated amongst Manjulaben, these 19 allotees and SMS Techsoft repeatedly. (k) In respect of preferential allotment to a set of other 10 allottees, (viz., entities from serial no. 18 to 27 as mentioned in Table no. 3 of the interim order), it was noted that on March 12, 2012, the company transferred the requisite funds to Manjulaben who transferred back the same to the company towards allotment of shares to these 10 allottees on the same day. The fund transferred by the company to Manjulaben and then back to the company was circulated again and again in the same manner with regard to the allotment to said 10 allottees. (l) On March 17, 2012, i.e., after the allotment of the equity shares, SMS Techsoft transferred `1,00,00,000/- to the bank account number ‘139003201016137’ jointly held by Mr. Maheshchandra Chunilal Shah and his wife Ms. Manjulaben with Nav Nirman Co-operative Bank.

On March 19, 2012, `1,00,00,000/- was transferred from the said joint account to the account of Mr. Rajesh Ranka. (m) A different mode of fund circulation amongst the company and the allottee Ms. Nila R. Shah was noted wherein: - On March 03, 2012, Mr. Rajesh Ranka had transferred `99,50,000/- to Ms. Nila R. Shah who was allotted 9,95,000 shares by SMS Techsoft in its purported preferential allotment; - On the same day Ms. Nila R. Shah transferred this money to the company; - On March 20, 2012, the company transferred back the said amount of `99,50,000/- to Ms. Nila R. Shah; - On March 21, 2012, Ms. Nila R. Shah transferred this money back to Mr. Rajesh Ranka. (n) The preferential allotment was designed merely as a book entry wherein Mr. Rajesh Ranka circulated `1,99,50,000/- back and forth between the company, other allottees in the purported preferential allotment by the company. The scheme/plan was a camouflage to give misleading impression that many people had subscribed to the shares of SMS Techsoft by paying the consideration to the company. In fact, the entire allotment money funded by Mr. Rajesh Ranka had been returned to him in the whole plan without the company getting the proceeds of preferential allotment.

Effectively, 3,00,00,000 new equity shares have been issued in the names of 31 allottees without receipt of any consideration for the shares allotted in the purported preferential allotment. (o) The company had misrepresented annual reports for the financial years 2011-12 and 2012-13 that the proceeds of the purported preferential allotment has been utilised to purchase land worth `30,00,00,000/-. (p) Once the lock in period for the shares allotted under purported preferential allotment expired on March 12, 2013, the entities related to Mr. Rajesh Ranka started creating artificial volume in the scrip by trading amongst themselves and, thereafter, offloading these shares to common investors. (q) It was noted from the annual report of the company for the respective financial years that for the financial year 2011-12, Mr. V. Jagdish, the promoter and managing director of SMS Techsoft was also the Chairman of the Audit Committee and for the financial year 2012-13, Mr. Akash Jagdish Kadandale, another promoter and director of SMS Techsoft, was the Chairman of the Audit Committee in violation of clause 49 of the Equity Listing Agreement which stipulates that the Chairman of the Audit Committee shall be an independent director.

(r) Apart from the fact that SMS Techsoft does not physically exist at the registered/corporate addresses as already explained above, it is observed that though the company claims to have a web-site at www.aklsoft.com, the same is non-functional. As such there is nothing on this web site except a spam page. This is non-compliance with the requirements of the provisions of clause 54 of the Equity Listing Agreement which requires that the company should maintain a functional web site containing basis information about the company e.g. details of its business, financial information, shareholding pattern, etc. 3. It was, thus, prima facie, observed that: (s) The promoters/directors of the company were acting in concert with Mr. Rajesh Ranka by issuing new equity shares of the company through preferential allotment to the aforesaid connected entities without receipt of full consideration. These connected entities offloaded these shares in the market by indulging in trading in an artificial, manipulative and unfair manner. (t) Thus, the aforesaid entities have, prima facie, violated: - Section 12A (b) and(c) of the SEBI Act and regulations 3(a), (b), (c) and (d), 4(1) and (2)(a), (f) and (g) of the PFUTP Regulations; - Regulation 77(1) of the ICDR Regulations; and - Clauses 49, 54 of the Listing Agreement read with section 21 of Securities Contracts (Regulation) Act, 1956. 4. Pursuant to the interim order, thirty four noticees (Serial Nos. 1 to 34) filed their replies.

Vide letter dated January 06, 2014, Mr. Himanshu Shah on behalf of himself and his 9 family members, requested inspection of documents, which were relied upon by SEBI while passing the aforesaid interim order. Inspection of the said documents was granted to him on January 10, 2014. On the said date, Ms. Mamta (Advocate), the authorised representative of Mr. Himanshu Shah and his 9 family members, inspected the said documents. Thereafter, at her request, the copies of the documents inspected by her were provided. 5. With respect to Ms. Nila Rajeshkumar Shah, one Mr. Rajeshkumar Shah, claiming to be her husband, replied that Ms. Nila R. Shah has passed away on February 26, 2012. He also submitted copy of her death certificate issued by the Municipal Corporation of Ahmedabad. 6. An opportunity of hearing was granted to all the entities on January 13, 2014. Only Mr. Rajesh Ranka appeared for the personal hearing. Mr. Himanshu Shah and his 9 family members requested for inspection of documents which were relied upon by SEBI while passing the interim order, cross examination of the concerned persons from Banks, viz. ING Vysya Bank Limited and NavNirman Co-operative Bank and Monarch Research and Brokerage Private Limited, and signature verification by Forensic Laboratory.

7. Another opportunity of hearing was granted to the noticees on February 06, 2014. However, none of the noticees appeared for the said hearing. Thereafter, another opportunity of hearing was granted to 26 entities (except Mr. Himanshu Shah and his 9 family members, and Ms. Nila R. Shah) on August 20, 2014. Mr. Rajesh Ranka, Mr. Dharmendra R. Shah and Mr. Dilip J. Gajjar appeared for the hearing on the said date and made their submissions. 8. An opportunity of personal hearing was also granted to Mr. Himanshu Shah and his 9 family members (noticees from serial no. 24 to 33 in the table given above) on December 11, 2014. Mr. Himanshu Shah alongwith Mr. Vishal Acharya (Advocate) appeared for the said hearing and made his submissions.

9. The submissions and replies of the noticees is summarised, inter alia, as under: A. Sms Techsoft: (i) SMS Techsoft submitted that its registered office at '325, Patel Road Ram Nagar, Coimbatore-641009' is working. (ii) On the day of inspection by BSE, none of the staff were present on the said premises as they had gone out on picnic. (iii) With respect to pricing of preferential allotment, SMS Techsoft contended that as per SEBI regulations it could not issue the shares at a discount to the face value of the shares and at the time of preferential allotment the face value of the shares of the company was `10/-. Therefore, it issued the preferential allotment at `10/- per share. (iv) Mr. Maheshchandra Shah, who is head of its Gujarat operations, is an appropriate person to reply to the queries regarding preferential allotment. (v) With respect to utilisation of proceeds of preferential allotment, SMS Techsoft contented that it had entered into an agreement with Mr. Prakash Thakkar for acquisition of land for `30 crore subject to clearances from the concerned government department. For the said deal, it entered into a tripartite agreement with Ms. Manjulaben Shah and Mr. Prakash Thakkar, wherein it was decided that the money for acquisition of land shall remain in the acccount of Ms. Manjulaben Shah till the time Mr. Prakash Thakkar bring all the necessary clearances with respect to the land.

SMS Techsoft further stated that Mr. Prakash Thakkar failed to bring the clearances and, therefore, the deal was cancelled in September 2013. Thereafter, it decided to invest in database for development of IT enabled services. (vi) It had not follow the Corporate Governance guidelines while constituting the audit committee and its website was also not functional as per clause 54 of the Equity Listing Agreement. However, it has reconstituted its new audit committee and also made its website functional. (vii) SMS Techsoft also admitted that it had wrongly mentioned in its Annual Report 2011-12 that it has a bank account in Standard Chartered Bank. B. Promoters of SMS Techsoft: (i) Mr. V. Jagadish, vide his letter dated November 19, 2013, submitted that SMS Techsoft wanted to expand its business in Gujarat. Since the company was facing shortage of funds, Mr. V. Jagadish met Mr. Maheshchandra Shah for funding requirement, who agreed to bring good amount of capital for the company and also promised a large office space for the company on commission basis. Thereafter, Mr.

Maheshchandra Shah was appointed as Business Head of Gujarat operations. Mr. V. Jagadish also stated that since Mr. Maheshchandra Shah was delegated the task of raising capital for SMS Techsoft and as Mr. V. Jagadish himself is from non finance background, Mr. Maheshchandra Shah shall be in better position to answer queries relating to capital raised. (ii) Further, Mr. V. Jagadish vide affidavit dated June 26, 2014 submitted that Mr. Rajesh Ranka is merely an employee of the company and he is no where associated with the preferential allotment made by the company. He Further submitted that the mobile number ‘9825032074’ and e-mail ID 'rajranka8@yahoo.com' belong to the company and the same were used to correspond with Mr. Rajesh Ranka. (iii) Mr. Akash Jagadish Vittal and Ms. Anitha Srinivasabhatt Kadanthalai in their respective replies have merely informed the number of shares they have subscribed to the preferential allotment. They also stated that they have not sold any shares of the company during the examination period. C. Directors of SMS Techsoft: The independent directors of the company, as mentioned at serial nos. 5 to 7 in the table 1 above, submitted that they know Mr. Maheshchandra Shah, who approached them and requested them to become the independent director of the company with no responsibility and liability.

They have not signed any annual report or document since the year 2007. D. Mr. Rajesh Ranka: (i) He is not related to any director, promoter and allottees of SMS Techsoft. (ii) As regards fund transactions from his bank statement, he has given loan to Mr. Maheshchandra Chunilal Shah and Ms. Nila R. Shah on interest. (iii) With regard to the allegation of his E-mail ID and mobile number mentioned in the KYCs of all the preferential allottees, he submitted that he does not know how his E-mail ID and mobile number was mentioned by other entities. He has not subscribed to the shares of the company nor he has traded in the scrip. (iv) He is a part time employee of SMS Techsoft since last 15 years looking after marketing of the company. He is an authorized signatory of the company with ING Vysya Bank. However, he has not signed any cheque of the company. (v) During the hearing on January 13, 2014, Mr. Rajesh Ranka submitted that he had arranged a loan of `1,99,50,000/- for Mr. Mahindra Shah from Jhaveri Trading during the time of preferential allotment, which he has returned to Jhaveri Trading after 15-20 days.

(vi) Further, during hearing on August 20, 2014, he submitted that he is holding an account with Nav Nirman Co-operative bank. He also submitted that Mr. Maheshchandra Shah is having the cheque book of his said bank account and Mr. Maheshchandra Shah informed him that an amount of `1,99,50,000/- has been transferred in his account. E. Preferential Allottees: The preferential allottees from serial nos. 9 to 33 mentioned in the table 1 above, made the following submissions: (i) The entities at serial nos. 9 and 10, as mentioned in table 1 above, submitted that they subscribed to the preferential allotment of SMS Techsoft as they are long term friends of the promoters of SMS Techsoft. They also submitted that they are still holding the shares of the company. (ii) The entities from serial nos. 11 to 23 submitted that they had rented their demat/broking/bank accounts to Mr. Maheshchandra Shah for a sum of `15,000/-per month. Hence, they are not aware as well as responsible of any activities taking place in their accounts. (iii) Entities from serial nos. 24 to 33, as mentioned in table 1 above, vide replies dated November 20, 2013, January 06, 2014 and December 11, 2014, inter alia submitted that they have not signed any account opening forms of Nav Nirman Co-operative Bank, ING Vysya Bank and DP and broking account with Monarch Research and Broking Private Limited (hereinafter referred to as ‘Monarch’).

However, they admitted that they had given the copies of their PAN card, address proof and photo ID, with an intention to open a demat account, to their friend, Mr. Biren Dave, who in turn gave these documents to a company secretary Mr. Anish Shah. Since they had provided only the copies of their documents, they did not ask Mr. Biren Dave to return their documents. They were not aware that the fictitious accounts have been opened in their names and trading has taken place. There was no physical verification by the bank staff while opening the account. they also contended that the signatures on account opening forms are forged. They have also filed criminal complaint with the Commissioner of Police, Ahmedabad against some entities, namely, Monarch, ING Vysya Bank Limited, The Nav Nirman Co-operative Bank Limited, Mr. Anish Shah and Mr. Biren Lalitkumar Dave for cheating and forgery on January 04, 2014. They also requested for cross examination of the employees of the stock broker and bank where the accounts have been opened and also requested for forensic verification of the signatures.

Further, vide letter dated November 21, 2013, they admitted that they received demat statement by post but they never opened the said demat account.

10. At the outset, I find that the principles of natural justice have been followed in so far that all the noticees were given an opportunity to file written submission and attend hearing to present their case in the present proceedings. I, therefore, proceed to deal with the replies/submission of the noticees before me. 11. I am of the view that before proceeding in the matter on its merit, it would be in the fitness of the thing to first decide the preliminary issue as to whether in view of the death of Ms. Nila R Shah, the present proceedings against Ms. Nila R Shah, would continue or abate. In Girijanandini Vs Bijendra Narain (AIR 1967 SC 2110), the Hon’ble Supreme Court observed that in case of personal actions, i.e., the actions where the relief sought is personal to the deceased, the right to sue will not survive to or against the representatives and in such cases the maxim actio personalis moritur cum persona (personal action dies with the death of the person) would apply. It is also relevant to refer to the decision of Hon’ble Securities Appellate Tribunal (SAT) in Chandravadan J Dalal vs. SEBI (Appeal No. 35/2004 decided on June 15, 2005) whwrein it was held as under: “The appeal abates since the appellant during the pendency of the appeal died on 29th November 2004. The appeal accordingly abates.

The penalty imposed on the original appellant being personal in nature also abates.” 12. The violations alleged to have been committed by Ms. Nila R. Shah relates to the period from March 15, 2012 to October 18, 2013. The interim order was passed against the said noticee on November 05, 2013, whereas Ms. Nila R. Shah died on February 26, 2012. Thus, the proceedings were initiated against the personal acts of omission and commission of a person who is no more to face the charges. In view of the foregoing, I am of the view that the proceedings against Ms. Nila R Shah are liable to be abated without going into the merits of the case. 13. I have carefully considered the allegations in the interim order in respect of other noticees and their submissions. The limited issue to be considered in this order is as to whether the directions issued vide the interim order need to be continued, revoked or modified in any manner. 14. I note that SMS Techsoft has contended that its registered office at '325, Patel Road Ram Nagar, Coimbatore' is working and that its employees had gone on picnic when the officials of BSE had visited the premises.

I note that the copy of the interim order dated November 05, 2013 and letter dated December 27, 2013, which were sent on its registered office, were returned undelivered with remarks “Party Shifted”. With respect to its submissions with regarding the purported land deal, I find that only after receipt of SEBI's e-mail dated

September 11, 2013, SMS Techsoft disclosed to BSE on September 13, 2013 that it had terminated the land deal due to title deficiency. Even if its argument that it intended to utilize the proceeds of preferential allotment in buying a land were to be accepted, I find that the amount worth `30 crore was not transfered back to the company from Ms. Manjulaben Shah once the land agreement was cancelled. Further, the company has not provided any documentary evidence in support of its claim that it had utilized the proceeds of preferential allotment towards acquiring database for its business development. Hence, this appears to be an afterthought in an attempt by SMS Techsoft to cover up for its misdeeds. Moreover, the website 'www.aklsoft.com', which SMS Techsoft claimed to be working, still appears to be non functional. In view of these facts, I find that the contentions made by SMS Techsoft regarding its office, utilization of proceeds of preferential allotment and working website are false and as such are rejected on merit. 15. The promoters of SMS Techsoft including Mr. V. Jagadish have claimed that they are not from finance background and hence are not aware about the funding of preferential allotment.

I note that Mr. V. Jagadish was the Chairman of Audit Committee of the company for the financial year 2011-12 when SMS Techsoft received the proceeds of preferential allotment. Further, the submissions made by Mr. V. Jagadish, vide letters dated November 19, 2013 and June 26, 2014, are contradictory in nature. On the one hand, Mr. V. Jagadish claimed that he does not know anything about the funding of preferential allotment and on the other hand, he admits that he had asked Mr. Rajesh Ranka to raise around `2 crore for purchasing the land. However, as discussed in the interim order, the company neither purchased the land nor the money was used for purchasing the land. Instead the money was circulated between the company, Ms. Manjulaben Shah and the preferential allottees including the promoters themselves for the purported preferential allotment. In view of these facts, I reject the contentions of Mr. V. Jagadish, Mr. Akash Jagadish and Ms. Anita Srinivasabhatt Kadanthalai. 16. With respect to the submissions made by the independent directors of SMS Techsoft (from Serial Nos. 5 to 7) I note that by virtue of accepting the directorship of the company, the entities have also taken the responsibility of the acts and omissions of the company.

A Company though a legal entity cannot act by itself, it can act only through its director. They are expected to exercise their power on behalf of the company with utmost care, skill and diligence. The Hon'ble Supreme Court, while describing what is the duty of a director of a company, held in Official Liquidator v. P. A. Tendolkar (1973) 1 SCC 602 that: "...a Director may be shown to be placed and to have been so closely and so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of business of the company even though no specific act of dishonesty is provide against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company even superficially..." 17. In the instant case, Mr. V. Jagadish, Mr. Akash J. Vittal, Mr. Devaraj Siddiah Pera Naidu, Mr. Dilip Gajjar and Mr. Dashrathkumar Khatri are not only the directors of the company but also are the part of its Audit Committee. As per the listing agreement, the role of Audit committee inter alia includes "Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible."

In view of these facts, I find that the directors of SMS Techsoft, including the independent directors, were aware about the non-utilization of the proceeds of the preferential allotment for lan purchase and as such have failed to perform their above mentioned duties and have allowed the company to fabricate the figures in its Annual Reports and to make wrong disclosures, which have already been illustrated in the interim order. Thus, the directors of SMS Techsoft cannot escape from the obligation of the board of directors with regard to their fiduciary duties towards SMS Techsoft and its shareholders. In this regard, the observation of the Hon’ble SAT in the matter of Mr. N. Narayanan vs SEBI (order dated October 05, 2012) is worth mentioning:

“With the changing scenario in the corporate world the concept of corporate responsibilities is also rapidly changing day by day. The director of a company cannot confine himself to lending his name to the company but taking light responsibility for its day to day management. While functions may be delegated to professionals, the duty of care, diligence, verification of critical points by directors cannot be abdicated. The directors are expected to have a hands on approach in the running of the company and take up responsibility not only for the achievements of the company but also the failings thereto.” 18. With respect to the contentions made by Mr. Rajesh Ranka, I note that he circulated approximately `1,00,00,000/- back and forth between the company, 27 preferential allottees connected to him and the 3 promoters of the company, who were also acting hand-in-glove with Mr. Rajesh Ranka, through Ms. Manjulaben in the purported preferential allotment by the company. He also circulated `99,50,000/- through Ms. Nila R. Shah (who is also connected with him) to the company and then back to him.

Through this modus operandi by circulating `1,99,50,000/- total 3,00,00,000 equity shares worth `30,00,00,000/- were allotted by SMS Techsoft to 31 allottees including its three promoter. Further, the amounts funded by Mr. Rajesh Ranka for the purpose of the said purported preferential allotment had been returned to him. The flow of funds from Mr. Rajesh Ranka to Ms. Manjulaben Shah and then among Ms. Manjulaben Shah, the company and the preferential allottees has already been illustrated in the interim order. I also find that Mr. Rajesh Ranka has already admitted that he is the authorised signatory of the company. With respect to the contention of Mr. Rajesh Ranka that he does not know any of the preferential allottees and he is not aware how his e-mail ID and mobile number has been mentioned in the KYCs of the preferential allottees, I note that vide its e-mail dated January 10, 2014 BSE has stated that confirmation with regard to the trades executed by 20 clients, who had mentioned the e-mail ID and mobile number of Mr. Rajesh Ranka, were sent to the mobile number and e-mail ID of Mr. Rajesh Ranka.

Hence, the claim of Mr. Rajesh Ranka that he does not know anyone does not stand. In this regard, I note that the Hon'ble SAT has, in many cases such as Classic Credit Ltd. vs. SEBI (SAT Appeal no. 68/2003, Order dated December 8, 2006), Classic Credit Ltd. vs. SEBI (SAT Appeal no. 76/ 2003, Order dated January 9, 2007) and Veronica Financial Services Ltd. vs. SEBI (SAT Order dated August 24, 2012), held that connection/relations can be established on the basis of factors like relationship, common addresses, e-mails, telephone numbers, fund transfer, etc. In view of these facts and circumstances, I find that Mr. Rajesh Ranka is connected to the company, its promoters and the 27 preferential allottees are connected to each other as described in the interim order. 19. Further, I find that the submissions made by Mr. Rajesh Ranka during the hearing dated January 13, 2014 and August 20, 2014 are contradictory in nature. While making submissions on January 13, 2014, Mr. Rajesh Ranka submitted that he had arranged loan of `1,99,50,000/- for Mr. Maheshchandra Shah from Jhaveri Trading for few days, whereas on August 20, 2014, Mr. Rajesh Ranka submitted that Mr. Maheshchandra Shah had the cheque book of his Nav Nirman Co-operative bank and Mr. Maheshchandra Shah informed him that an amount worth `1,99,50,000/- has been deposited in his bank account.

Therefore, the contentions made by Mr. Rajesh Ranka do not stand on merit. I, therefore, reject the same. 20. I note that Mr. V. Jagadish vide affidavit dated June 26, 2014 has admitted that mobile no. ‘9825032074’ and e-mail ID ‘rajranka8@yahoo.com’ is mobile number and E-mail ID of the company for making correspondence with Mr. Rajesh Ranka. I find that the said mobile number and E-mail ID was also mentioned on the KYCs of all the preferential allottees and the confirmation of trades was also sent on the same mobile number and e-mail ID by BSE. I, therefore, find that SMS Techsoft, its promoters, directors, Mr. Maheshchandra Shah and Mr. Rajesh Ranka, while acting together as a group, adopted fraudulent device and artifice to defraud the genuine shareholders of the company by falsely portraying the transactions as a genuine preferential allotment and by creating artificial volume in the shares of the company. Hence, I reject the submissions made by SMS Techsoft, its promoters, directors and Mr. Rajesh Ranka. 21. With respect to the contentions of Mr. K. Rajagopal and Mr. S. Rajaganesh that they do not know the promoters of the company or Mr. Rajesh Ranka, I nte that not they are only known to the promoters of the company but also share common address with Mr. Rajesh Ranka, who is the master mind of the whole scheme.

Some of the noticees have contended that they had given their demat/bank/broking account on rent. I note that renting of demat/broking account is illegal. Further, even if these noticees had given their demat/broking account on rent, it does not absolve them from any liability arising from misuse of these accounts. Some of the preferential allottees, viz., Mr. Himanshu Shah and his family members, have admitted that they had given their documents for opening a demat account and that they were receiving demat statement by post. I, therefore, find that they were aware that demat account has been opened in their name and is active. I also find that they have taken action only when they received the copies interim order. In view of these facts and circumstances, I reject the contentions of all the preferential allottees. 22. The allegation against the noticees in the interim order is that they had acted as a group, traded amongst themselves and placed orders at a price higher than the last traded price (LTP) in scrip of SMS Techsoft. I note that the noticees have not disputed their transactions as alleged but have rather contended that they either have rented their demat/banking/broking account to Mr. Mahindra Shah or have alleged that the accounts opened in their names are forged.

I find that renting of accounts is illegal in nature and hence, it does not absolve the entities from the liability arising from misuse of the accounts. Further, the noticees who had contended that their signatures were forged while opening the accounts, I note that the noticees have admitted that the documents for opening the accounts had been provided by them. Moreover, in such cases, the onus of proving their claim of forged documents lies on such noticees. In view of these facts, I find that the noticees have acted in concert with each other as a group and have manipulated the price as well as volume of the scrip by placing trades at a price above LTP and by trading among themselves. 23. I note that Trading at LTP variation and trades among themselves are not illegal per se. However, considering the relationship amongst the noticees, their activities need to be viewed in totality which has been duly considered in the interim order. In view of these facts, I find that the concerted trading amongst the connected/elated entities of Mr. Rajesh Ranka group in the scrip had led to creation of artificial volume and unnatural increase in price of the scrip as found in the interim order.

24. I note that, at this stage, noticees have failed to give any plausible reasoning/explanation for their acts as dealt with in the interim order and have not been able to make out a prima facie case for revocation or modification of the interim order. I also note that investigation in the matter is going on and appropriate decision, in accordance with law, would be taken after completion thereof. In this case, it has been inter alia found in the interim order that the Rajesh Ranka Group acting in concert, indulged in fraudulent and manipulative trading by way of trading amongst themselves, trading at prices above LTP, etc. thereby creating unnatural and artificial volumes in the scrip of SMS Techsoft and manipulated its price. As prima facie found in the interim order, the concerted tradings of the connected entities under a premeditated plan or strategy not only erode the market integrity but also are 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 trend. 25. In view of these facts and circumstances of the case, I find that the noticees have not been able to make out a prima facie case for revocation or modification of the interim order and the material available on record justifies the continuation of the directions passed against them under the interim order.

26. 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 and section 12A of the the Securities Contracts (Regulation) Act, 1956, hereby confirm the directions issued vide the ad interim ex-parte order dated November 05, 2013 against the following entities:

S. No. Name PAN 1. SMS Techsoft (India) Limited AAECA1954G 2. Mr. Akash Jagadish Vital ATYPA8648K 3. Mr. Jagadish Vital ACJPJ5747L 4. Ms. Anita Srinivasabhatt Kadanthalai ABUPA2184Q 5. Mr. Dashrathkumar Keshaji Khatri ACFPK3128C 6. Mr. Devaraj Siddiah Pera Naidu ACGPD9190G 7. Mr. Dilipbhai Jaswantlal Gajjar ADVPG4094Q 8. Mr. Rajesh Ranka ACUPR5573R 9. Mr. K. Rajagopal AGCPR8130L 10. Mr. S. Rajaganesh ALBPR2586E 11. Mr. Bafna S R AFXPB6525P 12. Ms. Chhaya Umeshchandra Trivedi AHDPT3058P 13. Ms. Meenaben Natubhai Thakkar AHWPT5940M 14. Mr. Mitesh Kanaiyalal Thakkar AHQPT0178H 15. Mr. Mukeshbhai Shantilal Thakkar AJBPT8789M 16. Mr. Mulchand Ganeshmal Jain ABBPJ6373M 17. Mr. Natubhai Shantilal Thakkar AHWPT5944R 18. Mr. Navinchandra Kanubhai Thakkar ADUPT1264A 19. Mr. Suresh Nenmalji Malvi AKMPM4951C 20. Ms. Vaishali Natvarlal Thakkar AMJPT1242N 21. Mr. Vinod Jain AEDPJ4235P 22. Mr. Dharmendra Rikhavchand Shah AAEHD6246F 23. Mr. Kanubhai Narandas Thakkar ADZPT3418R 24. Ms. Alakaben Kirtibhai Shah CPAPS2335R 25. Mr. Himadri Kamleshbhai Shah AZYPS5654H

26. Mr. Himanshu Prafulchandra Shah ANEPS9445A 27. Ms. Kaliyaben Himansu Shah BFQPS1462A 28. Mr. Karan Kirtibhai Shah BQYPS0082D 29. Mr. Keval Kirtikumar Shah DFNPS6796L 30. Mr. Kirtikumar Rasiklal Shah AKQPS8463F 31. Ms. Minaben Prafulbhai Shah COYPS9153J 32. Mr. Pruthvi Himanshu Shah DCAPS6011N 33. Mr. Vinit Kamleshkumar Shah BOIPS2506E 34. Mr. Mahavirsingh N. Chauhan AQOPC6330R 35. Mr. Maheshchandra Chunilal Shah AIOPS3870Q 36. Ms. Manjulaben Maheshchandra Chunilal AFSPS6606M Shah 27. Accordingly, the directions issued vide para 35 of the interim order dated November 05, 2013 shall remain 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: MAY 7th, 2015 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA