Dealings in the shares of Eco Friendly Food Processing Park Limited, Esteem Bio Organic Food Processing Limited, Channel Nine Entertainment Limited and HPC Biosciences Limited

WTM/RKA/ISD/65/2016 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND SECTION 12A OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 IN THE MATTER OF DEALINGS IN THE SHARES OF ECO FRIENDLY FOOD PROCESSING PARK LIMITED, ESTEEM BIO ORGANIC FOOD PROCESSING LIMITED, CHANNEL NINE ENTERTAINMENT LIMITED AND HPC BIOSCIENCES LIMITED IN RESPECT OF S/No. PAN Name Category 1 AAECA8718H Ams Powertronic Private Funding Group Limited 2 AIJPD7329J Madhuker Dubey Funding Group 3 AWWPK8525E Satendra Kumar Funding Group 4 ARUPK1589P Sumit Kumar Funding Group 5 AXFPR4439L Ram Prakash Funding Group 6 AAFCM3716M Mayfair Infosolutions Pvt Ltd Funding Group 7 ARVPG7849R Prakash Gupta Funding Group 8 AAACC2840D Core Capital Services Limited Trading Group 9 AAKCA4090M Aavia Buildtech Private Limited Trading Group 10 AHVPA2998M Urvashi Ahalawat Preferential Allottees in HPC 11 AFKPJ4680C Asifa Jamal Preferential Allottees in HPC 12 AQNPG3627J Dhruv Gabba Pre IPO Transferee in HPC 13 ACCPG9426C Naveen Goel Preferential Allottees in HPC 14 AAJPG3068K Nidhi Goel And Chetan Prakash Preferential Allottees in HPC Goel 15 AGBPG6077E Seema Goel Preferential Allottees in HPC 16 ACTPK8257G Sharwan Kumar Preferential Allottees in HPC 17 AOOPK2217F Kuljeet Kaur Preferential Allottees in CNE 18 ARRPS5403K Gurcharan Singh Preferential Allottees in CNE 19 ASRPG5473A Abhishek Gupta Preferential Allottees in CNE

1. Pursuant to detection of huge rise in the traded volumes and prices of the shares of Eco Friendly Food Processing Park Limited (hereinafter referred to as "Eco"), Esteem Bio Organic Food Processing Limited (hereinafter referred to as "Esteem"), Channel Nine

Order in the matter of Four scrips in SME Segment

Entertainment Limited (hereinafter referred to as "CNE") and HPC Biosciences Limited (hereinafter referred to as "HPC") [collectively referred to as "the scrips/the companies] listed on the Small and Medium Enterprise (“SME”) Segment of Bombay Stock Exchange Limited ("BSE") during the period from their respective date of listing of the said scrips till 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 scrips. 2. Upon preliminary examination, it was prima facie observed that the price of Eco increased by 6,265% (approx. 64 times) during the period January 14, 2013 to December 31, 2014 within a span of 234 trading days, the price of Esteem rose by 3,150% (approx. 32 times) during the period February 07, 2013 to December 31, 2014 within a span of 244 trading days, the price of CNE rose by 2,882% (approx. 30 times) during the period March 12, 2013 to December 31, 2014 in a span of 225 trading days and the price of HPC rose by 1,782% (approx. 19 times) during the period March 19, 2013 to December 31, 2014 in a span of 252 trading days.

3. Pursuant to the inquiry, it was observed that despite having poor financials during FY 2010-11 and FY 2011-12, all these companies raised funds through series of preferential allotments during the said period. Further, immediately after issuing shares on preferential basis, Eco, Esteem and CNE issued bonus shares in the ratio of 1:3 and HPC issued bonus shares in the ratio of 1:1. Consequent to the preferential allotments and bonus issues, the share capital of these companies increased manifold. Once the companies substantially increased their respective equity share capital base through preferential allotment(s) and bonus issues, they came out with Initial Public Offers (“IPOs”) in the year 2013 in the SME segment of BSE. It was observed that a set of common entities (“Funding Group”) financed the subscription of several IPO allottees either by directly transferring the amount in the escrow account of the companies on behalf of those allottees or by transferring the amount to the concerned allottees’ bank accounts, who, in turn, applied for shares in the aforesaid 4 IPOs and the subscription monies received in the said IPOs were routed back to the entities of Funding Group by respective company.

It was also noticed that a set of entities related/connected amongst themselves and with Funding Group (hereinafter to be referred as “Trading Group”) was found to be influencing the price of all the scrips primarily through positive last treaded price (“LTP”) contribution by putting 1 or 2 trades per day with negligible/ very less quantity of buy order. It was observed that after the release of compulsory lock-in period, the preferential allotees and the Pre IPO Transferees were provided exit at a high price by Trading Group entities. In the process Trading Group and allotees artificially increased the volume of the scrip and misused the 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) All the companies had very small share capital prior to the year 2011. In the year 2011 and 2012 the companies increased their capital base by issuing shares to several entities, (hereinafter referred to as "preferential allottees"), by way of preferential allotment and later by issuing bonus shares.

Certain preferential allottees transferred their shares in the respective company to several entities (hereinafter referred to as "pre IPO transferees"). b) Thereafter, all the companies came out with IPOs and the entities belonging to Funding Group funded substantial portion of the IPOs. IPO proceeds of the respective IPO were immediately routed back to the entities of the Funding Group by the concerned companies and thus they financed their own IPO and allotted shares without receipt of consideration to the extent they returned the subscription monies to the Funding Group from the IPO proceeds. c) The respective companies had actively concealed the deviation in utilisation of IPO proceeds as they deliberately did not make any disclosures as required under clause 46 of SME Listing Agreement. d) Once the shares were listed on the exchange, Trading Group entities started pushing up the price of the scrip through manipulative trades and increased the prices of the scrips astronomically. e) The said price movement was not backed by fundamentals or any announcements made by the companies. f) Trading Group entities consistently and repeatedly placed buy orders at higher prices than LTP in four fundamentally weak newly listed companies.

After the expiry of the lock-in period, Trading Group entities further purchased shares from preferential allottees and pre-IPO transferees at artificially increased prices. g) In the whole process, entities of Trading Group provided a hugely profitable exit to the preferential allottees and pre IPO transferees. h) Consequently, all the preferential allottees and pre-IPO transferees have collectively made a profit of ₹614 crore.

i) The funds required for purchase of shares by the Trading Group entities had been provided to them through layering of fund transfers from several entities including the entities of the Funding Group. 4. In this backdrop, SEBI, vide an ad interim ex-parte order dated June 29, 2015 and Corrigendum to the Interim Order dated January 04, 2016 (hereinafter referred to as “interim order”), restrained 254 entities, including the aforesaid 19 entities (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. 5. At paragraph 52 of the interim order, the Noticees have been advised that they may file their objections, if any, within twenty one days from the date of this interim order and, if they so desire, 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. 6. I note that the copy of the interim order was returned undelivered for 20 entities including the 10 entities mentioned at S. No. 1 to 10 of the Table above.

Therefore, an advertisement was published in Times of India (Delhi and NCR Edition) and Nav Bharat Times (Delhi Edition) for 19 entities and in Times of India (Lucknow Edition) and Dainik Jagran (Etawah Editiion) for 1 entity on January 16, 2016 intimating about the interim order and the dates of personal hearing fixed on February 02, 2016 and February 11, 2016. However, the aforesaid 10 entities have not communicated till date, even though more than 4 months have passed from the date of advertisement. I also note that even though a copy of the interim order was served to Noticees at S. No. 11 to 19 of the Table above, the said Noticees have failed to submit their reply till date. Further, none of the Noticees have sought an opportunity of hearing till date. 7. It is important to mention that even though more than eleven months have elapsed since the passing of the interim order, the Noticees have chosen not to submit their reply/s nor avail an opportunity of personal hearing till date. In my view, sufficient time has been provided to the Noticees to respond to the interim order and to seek an opportunity of personal hearing.

In these circumstances, in absence of any reply / representation of the Noticees, I proceed with the matter on the basis of the material available on record. 8. I have considered the findings against the Noticees in the interim order and have perused the material 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 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. 9. The facts and circumstances of the instant case as brought out in the interim order prima facie show the modus operandi employed by the companies, their directors, their promoters, preferential allottees, Pre IPO Transferees, Funding Group entities and Trading Group entities, wherein the companies in nexus with the preferential allottees made a façade of preferential allotment and some of the preferential allottees transferred their shareholding to the Pre IPO Transferees.

Thereafter, the entities of Funding Group aided the companies to list their shares on SME segment of BSE by funding the IPOs of these companies. Once the shares of the companies were listed, the entities belonging to Trading Group increased the price of the scrips astronomically through manipulative trading. After the expiry of the lock-in period, Trading Group entities purchased shares from preferential allottees and pre IPO transferees at artificially increased prices. In the whole process, entities of Trading Group provided a hugely profitable exit to the preferential allottees and pre IPO transferees. Hence, preferential allottees and Pre IPO Transferees with the aid of the entities of Trading Group 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. 10. Further, the interim order especially discusses the manner by which preferential allottees and Pre IPO Transferees sold their shares pursuant to abnormal increase in price in a manipulative way and made huge illegitimate profits in the whole event.

It is a settled position of law that preferential allotment of shares is an issue of shares by an issuer to select person or group of persons on a private placement basis unlike a public issue where funds are raised by inviting subscriptions from public in general. It is also a matter of common knowledge that a preferential allotment is made to the persons/entities on a one-to-one basis who are acquainted/familiar with the company and/or its promoters/directors. A company will, in no case, make a preferential allotment to a stranger who just approaches it for allotment of its shares. A preferential allotment is always for the purposes of meeting fund requirements of the concerned company and involves a covert, manifested and planned actions by the concerned parties, i.e.- (a) the company to identify select persons/group of persons who are known to it or its promoters/directors for investing in its share capital, (b) select persons/ group of persons (preferential allottees) exercise due diligence and then finance the fund requirements of the company and subscribe to its shares issued on preferential basis; (c) the company allots shares to the preferential alottes.

11. It is a well-accepted position that a preferential allotment signifies that the allottees agree with the issuer on one-to-one basis to finance its fund requirements and is not an open to all investment opportunity. Such financing pre-supposes nexus and prior understanding amongst the issuer, its promoters/directors and the allottees. A stranger cannot just make investment in a preferential allotment merely on the basis of an advice without having nexus, directly or indirectly, and prior understanding with the company. 12. I note that investigation in the matter is in progress and appropriate decision, in accordance with law, will be taken after completion thereof. As prima facie found in the interim order, the companies, their promoters, their directors, preferential allottees, Pre IPO Transferees, Funding Group entities and Trading Group entities 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 scrips to provide illegitimate gains to the preferential allottees and Pre IPO Transferees 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 scrips due to such manipulative and fraudulent trading in the scrips and price movement.

I, therefore, do not find any reason to revoke or modify the directions of the ad interim ex parte order dated June 29, 2015 in the matter of Eco, Esteem, CNE and HPC as against the Noticees. 13. 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 June 29, 2015 against the following entities: S No. PAN Name Category 1 AAECA8718H Ams Powertronic Funding Group 2 AIJPD7329J Madhuker Dubey Funding Group Private Limited 3 AWWPK8525E Satendra Kumar Funding Group 4 ARUPK1589P Sumit Kumar Funding Group 5 AXFPR4439L Ram Prakash Funding Group 6 AAFCM3716M Mayfair Infosolutions Funding Group 7 ARVPG7849R Prakash Gupta Funding Group Pvt Ltd 8 AAACC2840D Core Capital Services Trading Group 9 AAKCA4090M Aavia Buildtech Trading Group Limited 10 AHVPA2998M Urvashi Ahalawat Preferential Allottees in HPC Private Limited 11 AFKPJ4680C Asifa Jamal Preferential Allottees in HPC 12 AQNPG3627J Dhruv Gabba Pre IPO Transferee in HPC 13 ACCPG9426C Naveen Goel Preferential Allottees in HPC 14 AAJPG3068K Nidhi Goel And Preferential Allottees in HPC 15 AGBPG6077E Seema Goel Preferential Allottees in HPC Chetan Prakash Goel 16 ACTPK8257G Sharwan Kumar Preferential Allottees in HPC 17 AOOPK2217F Kuljeet Kaur Preferential Allottees in CNE

18 ARRPS5403K Gurcharan Singh Preferential Allottees in CNE 19 ASRPG5473A Abhishek Gupta Preferential Allottees in CNE 14. Accordingly, the directions issued vide para 50 of the interim order dated June 29, 2015 shall remain in force till further directions. 15. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.

Sd/-

DATE: June 14th, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA