Directions u/s 11B and 11 (4) of the SEBI Act,1992 in the matter of Konkan Tyres Ltd

1. On noticing abnormal and sudden price rise coupled with an increase in the traded volumes in the shares of Konkan Tyres Limited (hereinafter referred to as the company) during the period between March 1, 2005 and September 21, 2005 (hereinafter referred to as the investigation period), the Securities and Exchange Board of India (hereinafter referred to as SEBI) conducted an investigation in respect of the buying, selling or otherwise dealings in the shares of the company. On the basis of the preliminary findings, SEBI was prima facie satisfied that the beneficiaries of artificial market created for the shares of the company were the promoters and related entities and accordingly, vide an ad interim ex-parte Order dated September 29, 2005, pending investigation and passing of final order, had inter alia directed the promoters and directors of the company, namely, Mr. Ompraksah G. Soni, Mr. Sunil Kumar Menon, Mr. Ramesh Kumar Putta, Mr. Fateh Sinh Solanki, Mr. Narayan N. Iyer, Mrs. Indu Omprakash Soni and other entities such as, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited not to buy, sell, pledge or deal in securities of the company, directly or indirectly, till further directions. The said Order also directed the company not to issue any equity shares or any other instrument convertible into equity shares or alter its capital structure in any manner till further directions. The stock brokers namely M/s. Bhupendra M Bheda, Unique Stock Bro Limited and DSE Financial

Services Limited [members of the Bombay Stock Exchange Limited (hereinafter referred to as BSE)], through whom the promoter entities had traded, were also directed not to buy, sell or deal in the securities of the company on behalf of the promoters and directors, directly or indirectly, till further directions. Subsequently, SEBI, vide an Order dated June 9, 2006 had confirmed the directions imposed vide Order dated September 29, 2005, against all the persons/entities covered under the said Order except in the case of DSE Financial Services Limited. Pursuant to the investigations, SEBI issued a common show cause notice dated March 31, 2009 to the company, Mr. Ompraksah G. Soni, Mrs. Indu Omprakash Soni, Mr. Fateh Sinh Solanki, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited. For the sake of brevity, the aforesaid persons/entities are henceforth collectively referred to as the noticees and individually by their respective names. The findings of the investigation, in brief, as found in the show cause notice are as under:

a. the total shareholding of the company as on March 31, 2005 was 31,74,100 shares, out of which the shares in dematerialized mode were 8,09,220 (25.49%). The total shares in the dematerialized mode went upto 35.65% of the equity capital representing 11,31,420 shares as on September 26, 2005.

b. The promoter holding was reduced as on September 2005 when compared with the shareholding for the previous quarters. This indicated that the promoters and corporate bodies were net sellers and the general investors were net buyers.

c. Two promoters viz. Mr. Omprakash G. Soni and Esskey Rubber Industries Private Limited were found to hold shares under the ‘promoters’ category as well as the ‘non-promoters’ category. Mr. Omprakash G. Soni reduced his holding to 200 shares as of quarter ending March 2007. It appeared that he had sold/transferred shares in violation of the interim orders of SEBI dated September 29, 2005 and June 9, 2006.

d. The company was a loss making unit till the financial year ended March 2005 and did not declare any dividend. It was showing a net profit of Rs.64 lakhs during the quarter ended June 30, 2005, as against a net loss of Rs.25 lakhs during June 30, 2004.

e. The company was found to have made misleading corporate announcements to BSE between May 24, 2005 and August 11, 2005 of its future plans and projects. During the said period, the average traded quantity increased from 7,922 shares during the pre-announcement period to 64,432 shares. Similarly, there was an increase in the share price of the company during the above period.

f. The promoters, directors and entities related with the company viz. Mr. Omprakash G. Soni, Ms. Nimisha Soni, Mrs. Indu Omprakash Soni, Olympic Agro Industries Limited, Mr. Fateh Sinh Solanki and Esskey Rubber Industries Private Limited indulged in several off market transfers/deals among themselves and also with others. Later, they were found to have offloaded their holding directly or indirectly at the expense of common investors. The receiver of shares in the off market transfers from related entities had sold those shares in the securities market.

g. Konkan Capfin Limited did not furnish details of the shares purchased and sold in the market and also did not furnish the details of its depository account. The details of “off-market transactions” were incomplete or confusing and not accompanied by supporting documents.

h. Mr. Omprakash G. Soni, Mrs. Indu Omprakash Soni and Mr. Fateh Sinh Solanki were alleged to have facilitated the manipulation of the share price of the company by making misleading forward looking corporate announcements to create investor interest in the shares of the company. Further, they were also alleged to have furnished incomplete and wrong information to SEBI during the investigation. Mr. Omprakash G. Soni was found to have held shares under promoter category as well as non-promoter category. Prima facie, he was also found to have sold shares during the period when the SEBI restraint order was in force. He was also seen as responsible for the acts of Konkan Capfin Limited and Olympic Agro Industries Limited, entities who made several off-market transactions/transfers of shares to other related entities and sold shares in the market. Mrs. Indu Omprakash Soni was alleged to have facilitated the manipulation of price of the scrip, made misleading corporate announcements, created misleading financial result. She was also involved in off-market sale/transfer of shares and sale of shares in the market.

i. Mr. Fateh Sinh Solanki was found to have received shares in off market transfers, sold those shares in the market and further transferred the sale proceeds to the transferor. He failed to provide the complete details of the transferor of such shares. Later, it was found that the transferor was related to the company. He also furnished wrong, incomplete and contradictory information.

j. Konkan Capfin Limited was involved in off-market transfer of shares to former director of company, Mr. Fateh Sinh Solanki who in turn sold the shares in the market and provided the sale proceeds back to it. It furnished wrong, contradictory, confusing and piecemeal information. Olympic Agro

Industries Limited was also found to be involved in off-market transfer/sale of shares, sold shares in the market and furnished incomplete and wrong information. Esskey Rubber Industries Private Limited was found to have transferred shares in off-market transactions. It was a recipient of shares in off-market and had sold shares in the market. Its holding was shown under the promoter as well as in the public category.

2. In view of the irregularities, the company, Mr. Omprakash G. Soni and Mrs. Indu Omprakash Soni were alleged to have contravened the provisions of the Section 11 C (2) & (3) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act). Further, they were also alleged to have contravened the provisions of Regulations 3 (a), (b), (c) & (d), 4(1) and 4(2) (e), (f) & (k) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP Regulations). Mr. Fateh Sinh Solanki, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited were alleged to have contravened the provisions of the Sections 11 C (2) & (3) of the SEBI Act and the provisions of Regulations 3 (a), (b), (c) & (d), 4(1) and 4(2)(e) of the PFUTP Regulations. The show cause notices called upon the noticees to show cause as to why action in terms of Sections 11(4) and 11B of SEBI Act including directions debarring them from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period of time should not be taken against them. The company, Mr. Ompraksah G. Soni, Mrs. Indu Omprakash Soni, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited filed their replies to the show cause notices issued to them vide separate letters dated April 11, 2009. Mr. Fateh Sinh Solanki filed his reply vide letter dated April 30, 2009. The submissions of the noticees in their aforesaid replies are considered in the later part of this Order. Pursuant to the filing of their replies, an opportunity of hearing was granted to them on July 16, 2009. The said date of hearing was subsequently rescheduled on July 17, 2009, when on the said day, Mr. Omprakash G. Soni appeared and made submissions on his behalf and also on behalf of the company, Mrs. Indu Omprakash Soni, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited. Mr. Sunder Venkataraman was also present during the course of hearing. Mr. Fateh Sinh Solanki was also present for the hearing and made his submissions in the matter. The submissions made by the noticees were on the lines of the replies filed by them.

3. I have examined the show cause notice issued to the noticees, the oral as well as written submissions made by them and other material available on record. My findings in respect of the allegations against the noticees are as under:

4. SEBI had noticed sudden spurt in the share prices and the volumes that were traded in the shares of the company during the investigation period. The rise in the price and volumes were significant as they happened in a short span of time. It is pertinent to note that BSE had categorized the shares of the company in the ‘Z’ group, which would either indicate that the company was non-compliant with any of the specified provisions of the listing agreement or that it was fundamentally weak in terms of net worth, sales, market capitalization and/or profitability. It was found that there was absence of widespread investor interest in the shares of the company from January 1997. In complete contrast, there was a sudden rise in prices and volumes in the scrip without any change in the fundamentals of the company. It was noticed that during the period between March 1, 2005 and September 21, 2005, the share price of the company on BSE opened at Rs.5.70/- and closed at Rs.18.80/-, which was a rise of about 230% in 143 trading days coupled with increase in the traded volumes.

5. One of the main allegations against the company and its directors was that they had made highly attractive and forward looking corporate announcements during the period between May 24, 2005 and August 11, 2005. Needless to say, it was during the investigation period. It was alleged that such announcements were responsible for the artificial price/volume rise of the company’s shares. In this regard, I find from the annual financial details of the company (from its annual reports) that, the net profits for the year ending March 2004, March 2005 and March 2006 were -6.33 (loss) ,0.30 and 0.10 respectively (figures in million). A summary of the annual financial details is tabulated below for reference:

Particulars March 2004 March 2005 March 2006 Sales/Labor charges 53.16 12.00 81.55 Other Income 0.02 - - Total Income 53.18 12.00 81.55 Net Profit -6.33 0.30 0.10 Equity Capital 31.17 31.17 31.17 Reserves & Surplus 4.86 5.17 5.27 (figures in Rs. Million) Further, a summary of the quarterly financial results (un-audited) of the company (as available from BSE) for the quarters ended March 31, 2005, June 30, 2005, September 30, 2004 and December 31, 2005 is also given in the table below:

Particulars Dec 04 March 05 June 05 Sept 05 Dec 05 Net Sales 7.5 2.2 60.9 15 9.9 Total Income 7.5 2.2 15 9.9 Profit after Tax -0.2 -0.1 6.4 1.1 -0.2 Net Profit -0.2 -0.1 6.4 1.1 -0.2 Equity Capital 0.32 0.32 31.9 31.7 31.7 (figures in Rs. Million)

6. From the financial status of the company, it can be seen that the company did not make any profits for the year ending March 2004. In fact the company made a loss to the tune of Rs.63,30,000/-. The company started to show profits only for the quarters ended June 2005 and September 2005. It is averred in the show cause notice that, in the director’s report of the company for the year 2003-2004, it was mentioned that the company was facing labour problems and also faced financial crunch. Due to the said problems, the company had suspended its operation during the second half of the year ended March 31, 2004 and that its properties and other collateral securities including factory building, plant, machinery and stock were possessed by the bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The auditor’s report had mentioned that the company had defaulted in the repayment of its dues to the bank and therefore the account has become a non performing asset (NPA). When the financial status of the company was very poor as recounted above, it is surprising to note that the quarterly un-audited results for the quarter ended June 30, 2005 as furnished by the company to BSE indicated a sudden significant turnaround in its performance.

The company which was loss making till the financial year ended March 2005 and had not declared any dividends for want of profits, had showed a net profit of Rs.64 lakhs during the quarter ended June 30, 2005 as compared to a net loss of Rs.25 lakhs indicated in the quarter ended June 30, 2004. The said ‘profit’ needs to be seen in the backdrop of the fact that the company had suspended its operation during the second half of the year ended March 31, 2004; when all its movable and immovable property had been possessed by the bank under the SARFAESI Act, the labour problem and the financial crunch it was facing. The sudden improvement in the financial performance as claimed by the company for the quarter ended June 2005 did not appear to be credible. The company submitted that in the interest of its shareholders and in view of the improved market condition, it had started its activities by outsourcing its plant (which was closed) and the same was instrumental in the quarterly un-audited results for the quarter ended June 30, 2005 showing a sudden significant turnaround in the performance of the company.

The said submission has not been substantiated by any documents to show that the company’s “plant” was outsourced and that the profits were on account of the same. No outsourcing agreement has been produced before SEBI in these proceedings. In view of the same, I am not convinced by the submission of the company regarding the sudden ‘profits’ made by it.

7. The show cause notice mentions that the company had made certain corporate announcements to BSE about its future plans, which inter alia included - a. the company’s expansion into other automobile industrial products; b. raising Rs.100 million by way of issuing debt instruments in overseas or domestic market for the requirement of its expansion and for acquisitions in its on-going business; c. opening marketing offices overseas; d. acquiring production facilities; e. receipt of order from Mirador Traders, Dubai, UAE for the supply of 20 containers of procured tread rubber having approximate value of Rs.32.50 million; f. increasing the plant capacity by 100% in two months, etc.

The aforesaid highly ambitious, positive and forward looking corporate announcements regarding the future plans and projects of the company were made to BSE between May 24, 2005 and August 11, 2005. I note that during the period March 1, 2005 to May 23, 2005, the share price of the company on BSE opened at Rs.5.70/- and closed at Rs.9.00/-, an increase by 58% in 58 trading days. Thereafter, during the period May 24, 2005 to August 11, 2005, the share price opened at Rs.9.51/- and closed at Rs.23.84/-, was an increase by 151% in the next 58 trading days. I also find that the average daily traded quantity had increased from 7,922 shares during the pre-announcement period to 64,432 shares during the period of announcement. With regard to the same, the company denied making any public corporate announcements either by news letters or in any manner to affect the ‘sensitive index’. It submitted that a copy of such resolutions was given to BSE as the same is mandatory and that because of the rain and natural calamities in the ‘Konkan region’; it was not able to reopen the factory as scheduled.

According to the company, it had approached some local manufacturers to manufacture their products on lease basis to cater to the need of export as well the local market. It further submitted that it had received an export order from M/s. Mirador traders, Dubai for precured rubber and that it had already sent the samples to other overseas buyers for approval. The details of the announcements made by the company were provided to it and was advised to furnish the details and present status of all the claims made by it in those announcements. The company was also required to provide specific comments pertaining to each of the corporate announcements made by it. The company submitted that it had informed the stock exchange of its business plans as a ‘mandatory commitment’ on its part. It submitted that it was awaiting the final order of SEBI in the matter and that once it is absolved of the charges, all the future plans would be put into action as per its announcements. I find that the trade data in respect of the company would indicate that there was an upward movement in its share price and the number of shares traded for the period March 2005 to September 2005 and specifically during the period between May 24, 2005 and August 11, 2005 i.e during the period of announcements.

Needless to say, the increase in price/volume was only due to the announcements made by the company. I also note than on May 24, 2005, the traded volumes were more than 3 times the previous day’s traded volumes. Further, there was a noticeable increase in the share price also. I note that the share price had consistently increased throughout the investigation period and the same witnessed a downward trend only during the last week of September 2005. The company and its directors could not give satisfactory reasons for this abnormal price and volume movement. Merely by asserting that they had no intention to increase the share price and that the market moved as per ‘demand and supply’ would not suffice, more so when it is already established that the company’s financial status was very poor. I am also not convinced by the submissions of the company that the share price increased 230% in 123 trading days and was hardly 1.6% on average daily basis, that was within the permissible limit of 5 % in the ‘Z’ group. Thus, I am of the considered view that the corporate announcements made by the company to the stock exchange about its future plans, which were never intended to be executed by the company, had invited investors into trading in the scrip, thereby increasing the stock price and boosting the trade volumes during the relevant period.

Further, in the absence of any material to prove otherwise, the only logical inference would be that the company and its promoters/directors had issued the announcements for the purpose of propping up the price of the shares of the company and thereafter to off load their shares in an artificially created market. The change in shareholding pattern of the company during March 2005 to September 2005 inter alia indicated in general that the promoters were the net sellers and the ‘Indian Public’ were the net buyers. This would establish that the announcements made by the company had induced the investors to trade in the shares of the company.

8. I find that Mrs. Indu Omprakash Soni, Ms. Nimisha Omprakash Soni (daughter of Mr. Omprakash Soni) and Esskey Rubber Industries Private Limited were shown to be the promoters of the company in the shareholding details for the quarter ended March 2005. It is also found that Mr. Omprakash

G. Soni and his wife Mrs. Indu Omprakash Soni were shown as directors. Mr. Omprakash G. Soni was found to be the director of the company and also in Olympic Agro Industries Limited and Konkan Capfin Limited. The said facts have not been disputed by Mr. Omprakash G. Soni, Mrs. Indu Soni, Esskey Rubber Industries Private Limited, Konkan Capfin Limited and Olympic Agro Industries Limited. It has been admitted that Mr. Omprakash G. Soni was appointed as a director in the board of Olympic Agro Industries Limited and Konkan Capfin Limited. Further, all the persons/entities (Mrs. Indu Omprakash Soni, Esskey Rubber Industries Private Limited, Konkan Capfin Limited and Olympic Agro Industries Limited) except Mr. Fateh Solanki, had authorized Mr. Omprakash G. Soni to represent themselves before SEBI in the matter. These facts would indicate the close nexus among the entities.

9. I note that Mr. Fateh Sinh Solanki, Mrs. Indu Omprakash Soni, Konkan Capfin Limited and Olympic Agro Industries Limited had purchased a total of 1,22,210 shares and sold 5,76,033 shares of the company, resulting in a net sale of 453823 shares during the period when the share price of the company was artificially increased on account of the said corporate announcements by the company. In respect of Mr. Fateh Sinh Solanki, the company vide letter dated October 13, 2005, had stated that he was on its board of directors during August 20, 2003 to October 5, 2003. However, Mr. Fateh Sinh Solanki denied ever being a director in the company. Further, the company provided a copy of resignation letter dated October 5, 2003 sent by Mr. Fateh Sinh Solanki to it. In view of the factual position, Mr. Fateh Sinh Solanki was not a director of the company during the investigation period. However, the charge against him is not in his capacity as a director but as a person who fraudulently and unfairly dealt in the shares of company during the relevant period. As already mentioned herein above, Mr. Fateh Sinh Solanki, Mrs. Indu Omprakash Soni, Konkan Capfin Limited and Olympic Agro Industries Limited had purchased a total of 1,22,210 shares and sold 5,76,033 shares of the company, resulting in a net sale of 4,53,823 shares during the period when the share price of the company was artificially increased. It has been alleged that the company and the related entities/person did not furnish details of the off market transactions indulged by them. It is noted that the information provided by Mr. Fateh Sinh Solanki were full of contradictions. Mr. Fateh Sinh Solanki, vide letter dated October 6, 2007 had submitted the following details of off market transfer of shares as claimed to have been made by him:

Date of transaction Delivery of shares Payments 16-06-2005 25000 NIL 12-07-2005 100000 NIL 14-07-2005 50000 NIL It is pertinent to note that the above mentioned off market transactions of Mr. Fateh Sinh Solanki were during the investigation period that too when the announcements were being made by the company to BSE.

10. When explanations and other clarifications were sought from Mr. Fateh Sinh Solanki, he had stated that there was no off market sales and no payment was made for off market transfer of shares. Mr. Fateh Sinh Solanki contradicted his earlier submissions by saying that he was not aware about the transferor of shares in his account and no payment was made for off-market transactions while in another occasion, he provided the names of the entities in whose account money was transferred as per the instruction of the transferors. Such instances were–transfer of Rs.9,75,000/- to Konkan Capfin Limited on July 26, 2005 and Rs.9,00,000 on August 4, 2005, transfer of Rs.64,500/- and Rs.30,000/- to Mr. Bhupender Singh Sawhney on August 4, 2005 and April 8, 2006 respectively. Mr. Fateh Sinh Solanki provided the name of the depository participant (DP) and the Client ID who had transferred shares in his account but did not provide the name of the transferor. While providing the names of the entities to which money or sale proceeds were given, he had at the same time denied the ‘off-market deals’.

Mr. Fateh Sinh Solanki, vide letter dated April 30, 2009 had submitted that he transacted in the shares of the company for the period–June 16, 2005 to July 20, 2005, and that during the said period the share price moved from Rs.12.50 to Rs.14/- only. He further submitted that such variation cannot be treated as “artificially jacked up” prices. In this regard, it is pertinent to note that during the period March 1, 2005 to September 21, 2005, the share price of the company on BSE went up from Rs.5.70/- to Rs.19.50/- (high on September 21, 2005), an increase of more than 230% in just 143 trading days. Mr. Fateh Sinh Solanki was found to have received 1,75,000 shares from the depository account of Ms. Nimisha Soni (promoter of the company and daughter of Mr. Omprakash G. Soni) and 1,00,000 shares from the depository accounts of Konkan Capfin Limited, the director of which was Mr. Omprakash G. Soni. Thus, Mr. Fateh Sinh Solanki was not only found to have traded in the shares of the company during the period of investigation he was found to have acted in concert in the scheme of things planned and conceived by the company, its promoters/directors and other connected entities.

Thus, Mr. Fateh Sinh Solanki cannot take the plea that he had traded only when the share price was between Rs. 12.50/ to Rs. 14/. Mr. Fateh Sinh Solanki was found to have purchased 52,414 shares and sold 2,26,733 shares, a net sale of 1,74,319 shares. It is already established that the share price of the company was artificially increased during the investigation period. Mr. Fateh Sinh Solanki, having close nexus with the company and Mr. Omprakash G. Soni made unjust gains by selling large number of shares in such artificial market. It needs to be recalled that Mr. Fateh Sinh Solanki had received 1,75,000 shares from Ms. Nimisha Soni (promoter of the company and daughter of Mr. Omprakash G. Soni) and 1,00,000 shares from Konkan Capfin Limited. Thus, from the facts and circumstances and the available material, it is established that Mr. Fateh Sinh Solanki had a definite role to play in the manipulation.

11. The investigation also found off market transfers by the promoters/directors and related entities in the shares of the company. Mrs. Indu Omprakash Soni had received 3,500 shares from the depository accounts of her husband, Mr. Omprakash G. Soni, 5,000 shares from Klassic Tyres Private Limited, 27,325 shares from Mr. Bhupendra M. Bheda, 4,000 shares from Konkan Tradelinks Travels Private Limited and 5,717 shares from one Bhupender Singh Sawhney. Mr. Bhupender Singh Sawhney had received 33,750 shares from the depository account of Konkan Capfin Limited, 44,000 shares from Esskey Rubber Industries Private Limited, 26,000 shares from Mrs. Indu Ompraksh Soni and 25,000 shares from Ms. Nimisha Soni. Olympic Agro Industries Limited had received 58,400 shares from the accounts of Mr. Omprakash G. Soni and 77,000 shares from Esskey Rubber Industries Private Limited. Esskey Rubber Industries Private Limited received 50000 shares from the demat account of M/s. Keval Shares and 20,000 shares from Nirmit Shares Broking Private Limited. It is also noted that Mr. Omprakash G. Soni transferred 58,400 shares to Olympic Agro Industries Limited, 1,00,000 shares to Drishti Securities Private Limited and 3,500 shares to Mrs. Indu Omprakash Soni. As already mentioned above, Mr. Fateh Sinh Solanki had received 75,000 shares from the demat account of Ms. Nimisha Ompraskash Soni and 1, 00,000 shares from Konkan Capfin Limited. Thus, large number of shares were transferred among connected entities including the promoter/director of the company. It was observed that the receivers of shares in off market had sold the shares in the securities market. The following table would illustrate the same:

Sr. Name of the client Name of the Purchase Sale (no. Net sale No. stock broker (no. of of (no. of shares) shares) shares) 1. Mr. Fateh Solanki B. M. Bheda 52414 226733 174319 2. Konkan Capfin Limited B. M. Bheda 23771 176081 152310 3. Olympic Agro Industries Unique 900 51675 50775 Limited 4. Mrs. Indu Omprakash B. M. Bheda 43125 85969 42844 Soni 5. Mrs. Indu Omprakash Unique 2000 35575 33575 Soni 12. All the aforesaid persons were found to be net sellers, which would in turn indicate that they had off loaded shares in the market. In this regard, it was submitted that the sale proceeds were utilized for the revival of the company. Though, the company and its promoters/directors were advised (during the course of hearing) to produce the proof in respect of their claim, they had failed to do so. It was also submitted that the monies received through the sale of shares of Mr. Omprakash G. Soni, Mrs. Indu Omprakash Soni and the monies raised through the sale of shares of Mr. Fateh Sinh Solanki was brought into the organization to revitalize it and that the amount of Rs.24 lakhs has been brought into the organization looking forward into the future prospects of the organization. Even if SEBI were to accept, for the sake of argument, that the sale proceeds were infused into the company for revitalizing it, the same would not in any manner exonerate the company and its directors for their malafide acts. Besides, the submission that the monies received inter alia through the sale of shares of Mr. Fateh Sinh Solanki for the revival of the company would further establish the nexus between Mr. Fateh Sinh Solanki and the company and its promoters/directors.

13. It was further alleged that the person/entities including the company had furnished incomplete information. The information so furnished was not supported by documents like bank statements/depository account statements etc. Konkan Capfin Limited did not furnish details of shares purchased and sold in the market. It also did not furnish its depository account statement. The details of ‘off-market’ transactions furnished by it were found to be incomplete and confusing, not supported by documents like bank statements and demat statements to indicate the flow of money and securities. In addition, the entity had also made off-market transactions/transfers to Mr. Bhupender Singh Sawhney. It also did not furnish documents like bank statements and depository account statements to substantiate its submissions. In their separate and similar replies dated April 11, 2009, it was merely stated that “KCL already submitted the information as required by you”. It is already seen that the said information was wrong or incomplete not supported by any documents.

14. The company and its directors Mr. Omprakash G. Soni and Mrs. Indu Omprakash Soni have not disputed that they did not inform BSE of their future plans by way of positive forward looking announcements. Their only contention was that the information was made available on ‘need to know basis’ and only a copy of the same was furnished to the stock exchange as it was mandatory. It is already brought out in this Order that the company’s fundamentals were not strong to support such price rise of its shares in the market during the period between March 2005 and September 21, 2005. It is very important to note that the share price of the company was in the range between Rs.2.40/- and Rs.5.23/- during January and February 2005. The price started to move up along with the traded volumes from March 2005. The following table (data available in the website of BSE) would show the price, traded volumes for the period – January 2005 to December 2005:

Open High Low Close No. of No. of Total Month Price Price Price Price Shares Trades Turnover(Rs.) January 2005 3.79 4.69 2.40 3.65 36170 155 121,636.00 February 2005 3.17 5.23 2.65 4.84 80810 299 358,228.00 March 2005 5.70 14.00 4.75 7.50 348328 1170 3,398,098.00 April 2005 7.99 8.18 5.12 6.09 50968 176 314,903.00 May 2005 5.21 12.30 5.21 9.47 230669 526 2,280,480.00

June 2005 9.90 13.85 9.35 10.63 498610 1075 5,709,889.00 July 2005 11.50 15.38 10.60 12.75 1515265 2734 20,471,198.00 August 2005 12.25 28.50 12.25 23.29 2904583 7587 61,197,747.00 September 2005 25.00 25.00 13.65 13.65 577134 1821 12,191,336.00 October 2005 12.97 12.97 6.37 6.37 13167 39 139,008.00 November 2005 6.06 7.40 4.05 7.36 192342 407 1,087,446.00 December 2005 7.58 8.50 4.32 4.55 172401 513 1,036,527.00

From the above table, trade concentration is observed during the months starting from May 2005 till September 2005. The announcements by the company were made during the period between May 24, 2005 and August 11, 2005. Consistent price rise coupled with heavy trading is witnessed during the period when the announcements were given by the company to BSE. As already stated above, the company’s fundamentals did not support the price-volume rise. Therefore, it is concluded that the abnormal increase in the share price and the traded volumes were on account of the announcements made by the company. It is noted that the company did not implement any of its plans that were announced to the stock exchange and gave unconvincing reasons for such non-implementation. It is also established that Mr. Fateh Sinh Solanki, Mrs. Indu Omprakash Soni, Konkan Capfin Limited, Olympic Agro Industries Limited had sold substantial quantities of shares during the investigation period in an artificially inflated market. Mr. Omprakash G. Soni and Esskey Rubber Industries Private Limited were found to have sourced shares through off-market receipts and transferred the same to Olympic Agro Industries Limited, Mrs. Indu Omprakash Soni, who in turn sold them in the market making huge profits. The reduction in the shares of the said persons is also evidenced in their reduced shareholding in the company as of September 2005. The table would show that the promoter holding was reduced for the period ending September 2005:

Category As on March 31, 2005 As on June 30, 2005 As on Sept 30, 2005 No. of % of No. of % of No. of % of shares Share shares Share shares Share holding holding holding Promoters 518180 16.33 518180 16.33 307400 9.68 Persons acting in -- -- -- -- 60270 1.90 concert Private Corporate 1265658 39.87 1086435 34.23 825580 26.01 Bodies Indian Public 1360205 42.85 1504324 47.39 1946136 61.31 NRIs/OCBs 10400 0.33 11250 0.35 13800 0.43 Total 3154443 99.38 3120189 98.3 3153186 99.33

From the table above, it is seen that the promoters have reduced their holding, while the ‘Indian public’ have increased their holding. This would mean that the net purchasers were the genuine investors. The same would establish that the innocent investors were lured into trading in the shares of the company during the relevant period.

15. Another charge against Mr. Omprakash G. Soni and Esskey Rubber Industries Private Limited was that, they were holding shares under both the ‘promoter’ as well as ‘non-promoter’ categories. The details of such holding are as below: Name March 31,2005 September 30,2005 Holding under Holding under Non- Holding under Holding under Promoter’s category Promoter’s category Promoter’s Non-Promoter’s category category Mr. Omprakash 67,000 1,00,000 66800 NA* Soni Esskey 1,44,800 76800 NA* NA* (* their holding may be reduced by less than 1%, shown as NA)

It was alleged that the shareholding pattern of the company as submitted to BSE was misleading as the promoters had bifurcated their holding under promoter and as well as the non-promoter category. In this regard, Mr. Omprakash G. Soni, vide letter dated April 11, 2009 had submitted that Esskey Rubber Industries Private Limited was not part of the promoter group and that it belonged to one Nitin Shah. He submitted that the company had no control over the said entity. He denied furnishing false shareholding statements. He further submitted that at the time of transfer of the said entity to Mr. Nitin Shah, the holdings were bifurcated. The submission is not convincing enough to take a different view. Further, Mr. Omprakash G.Soni had submitted that his holding of 66,800 has not changed. From the table above, it can be seen that for the period September 2005, Mr. Omprakash G.Soni and Esskey Rubber Industries Private Limited do not hold any shares under the non-promoter quota. This may be due to the fact that both the said persons had through off-market, transferred shares to others to sale in the market. As no cogent submission has been put forth, I am of the view that Mr. Omprakash G.Soni and Esskey Rubber Industries Private Limited company have held shares in both the categories, thereby misleading the company’s shareholders, general investors and other including BSE and SEBI. The reduction in the holding of shares by Mr. Omprakash G Soni and Esskey Rubber Industries Private Limited could be the outcome of their off-market transfer of shares to related persons/entities.

16. In view of the foregoing, I find as follows:

i. By making such misleading forward looking corporate announcements, the company and its directors, Mr. Omprakash G.Soni and Mrs. Indu Omprakash Soni have manipulated the share price and impacted the manner in which the shares of the company were traded at BSE by inviting investor interest. The said corporate announcements which were not intended to be performed, had influenced the decision making of the investors and induced them to trade in the shares of the company. Thus, the company and its promoters/directors have used such announcements as a scheme to manipulate the shares of the company. ii. The company and its directors had furnished wrong, improper, incomplete information during the investigations.

iii. Further, the company and its directors had shown the promoter holding (in respect of Mr. Omprakash G.Soni and Esskey Rubber Industries Private Limited) in the ‘promoter’ category as well as in the non-promoter (public) category, thereby misleading the stock exchange and the shareholders; iv. Mr. Omprakash G.Soni and Mrs. Indu Omprakash Soni have transferred shares in off-market to related entities. Mrs. Indu Omprakash Soni had also received shares in off-market from related persons/entities, which were sold in an artificially propped up market, thereby making unjust profits; v. Mr. Omprakash G.Soni is also responsible as a director of Konkan Capfin Limited and Olympic Agro Industries Limited, as the said entities have transferred shares in off market to related persons/entities, which had been sold in an artificial market; , vi. Mr. Fateh Sinh Solanki a former director of the company, had received shares in off market from related entities and had sold them in an artificially inflated market. He had also furnished wrong, incomplete and contradictory information; vii. Konkan Capfin Limited indulged in off-market transfer of shares to Mr. Fateh Sinh Solanki, who in turn sold shares in the market. The said entity also provided wrong, contradictory, confusing and piecemeal information during the SEBI investigation; viii. Olympic Agro Industries Limited also indulged in off-market transfer/sale of shares. It failed to furnish correct and complete information during the investigation; Konkan Capfin Limited and Olympic Agro Industries had a common director in Mr. Omprakash G. Soni; Mr. Omprakash G Soni was found to have transferred shares in off-market to Olympic Agro Industries Limited;

ix. Esskey Rubber Industries Private Limited had transferred shares in off market. It had also received shares through off-market. It had sold shares it received in off market and made unjust profit by selling them in an artificially propped up market. Further, it failed to furnish proper and correct information during the investigation. Its holding in the company was shown in the promoter category as well as in the non-promoter categories;

17. The provisions of law charged against the said persons/entities are reproduced herein below: a. Provisions of the SEBI Act - “Investigation - 11C ……………………. (2) Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956 (1 of 1956), it shall be the duty of every manager, managing director, officer and other employee of the company and every intermediary referred to in section 12 or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power. (3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before him or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation. ………. b. Provisions of the PFUTP Regulations - “Prohibition of certain dealings in securities 3. No person shall directly or indirectly— (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made thereunder;

(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made thereunder.

4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:— ………….. (e) any act or omission amounting to manipulation of the price of a security; (f) publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities; ………… (k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors;”

18. In terms of Section 11C (2) & (3) of the SEBI Act, it shall be the duty of every manager, managing director, officer and other employee of the company and every intermediary referred to in section 12 or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorized by it in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power. Further, the Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before him or any person authorized by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation. I note that complete details of off-market transactions, among others, were also sought from the company, its promoters/directors as well as from Mr. Fateh Sinh Solanki, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited.

These entities either did not furnish any details or provided incomplete details. Summons to furnish information were issued to all these entities on September 27, 2007. However, they did not provide complete details. The reminder letters asking specific details/explanations were issued to all these entities vide letters dated November 2, 2007. Mr. Omprakash G. Soni, Esskey Rubber Industries Private Limited, Olympic Agro Industries Limited and Konkan Capfin Limited did not reply while the company vide letter dated November 6, 2007 submitted that its concerned director was out of station. Further reminders were issued to these entities on November 22, 2007. I note that SEBI received a letter dated November 26, 2007 on the letter head of the company on behalf of the said entities seeking extension till the end of month due to prolonged illness of Mr. Omprakash G. Soni. I further note that the company vide letter dated December 15, 2007 (signed by Mr. Omprakash G. Soni) provided information sought by SEBI, although the said information was not complete, but Mr. Omprakash G. Soni, Olympic Agro Industries Limited, Esskey Rubber Industries Private Limited and Konkan Capfin Limited did not provide any further information till the date of completion of investigation and they did not cooperate with the investigation.

They have failed to neither furnish proper information nor produce proper documents as called for by the SEBI investigation. Mr Fateh Sinh Solanki provided the information, but the same was full of contradictions. The above said provisions have been inserted in the SEBI Act to collect useful and proper information during the investigation to have a conclusive finding on an issue. By not doing so, they had hampered the investigations and therefore are liable for contravening the said provisions. In this regard, I note that the Hon’ble Securities Appellate Tribunal in Appeal No.

92 of 2009 [in the matter of Amrut Securities Limited vs. Securities and Exchange Board of India; decided on September 17, 2009] had observed that non-production of documents/records before the investigation officer is a serious wrong as it hampers the investigation that is being carried on by the Board. The noticees need to be severely reprimanded for not co-operating with the investigation. I find that it is most important that every person from whom information is sought should immediately and promptly produce all documents, records and furnish complete information as required for the investigations. If any person is not complying with summons/notices, the investigations would be hindered as a result SEBI would not be able to perform its duties in protecting the investors and the securities market in a proper manner. I also note that the Adjudicating Officer vide order dated August 26, 2009 had imposed a penalty of Rs. 3,00,000/- on Esskey Rubber Industries Private Limited for non furnishing information/documents, in terms of Section 15A(a) of the SEBI Act.

19. The company and its directors, Mr. Omprakash G. Soni and Mrs. Indu Soni have made misleading corporate announcements, which is an artifice or means to create artificial market for the shares of the company and to attract unsuspecting investors into trading in the shares of the company. They were also successful in their attempt as can be seen from their and their related entities act in off loading substantial quantity of shares of the company in the market during the relevant period. Their act had culminated in a ‘fraud’ on the investors who had dealt in the shares of the company. The announcements made by the company and its directors to BSE had influenced the investment decisions of those investors who had dealt in the shares of the company during the relevant period. Their manipulative intent is so very manifest in their conduct when they made announcements of their ambitious future plans and projects to the BSE, created investor interest, artificially created market for the shares of the company and later when the promoters including Mrs. Indu Soni and persons/entities like Mr. Fateh Sinh Solanki (former director of the company), Konkan Capfin Limited, Olympic Agro Industries Limited etc. had offloaded shares in the securities market to their advantage and to the detriment of the genuine, unaware investor. The reduced promoter holding as of September 2005 is unassailable evidence for the same. As the company and its directors, Mr. Omprakash Soni and Mrs. Indu Soni had dealt in the shares of the company in a fraudulent manner, I hold them guilty of having contravened the provisions of Regulations 3 (a), (b), (c) & (d), 4 (1) and 4 (2) (e), (f) & (k) of the PFUTP Regulations. Further, the company and Mr. Omprakash G.Soni violated the provisions of Section 11C(2) & (3) of the SEBI Act.

20. The related persons/entities, namely Mr. Fateh Sinh Solanki, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited had transferred shares to other related entities. The details of such transfers have already been mentioned above. The said entities have also received shares from certain related entities and also from others. I note that the said entities had sold substantial quantities of shares during the investigation period in an artificially inflated market, thereby reaping huge unjust profits. The aforesaid entities have transferred and received securities in off market transactions and had sold them in the stock exchange. The act of the related entities in sourcing shares to the others for enabling them to sell in the market is an act prohibited under Regulations 3 and 4 of the PFUTP Regulations. In view of the same, I am of the view that Mr. Fateh Sinh Solanki, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited had violated the provisions of Regulations 3 (a), (b), (c) & (d), 4 (1) and 4 (2) (e) of the PFUTP Regulations. Further, Konkan Capfin Limited, Olympic Agro Industries Limited and Esskey Rubber Industries Private Limited have also violated the provisions of Section 11C(2) & (3) of the SEBI Act.

21. The act of the promoter directors of the company, Mr. Omprakash Soni and Mrs. Indu Soni in making positive corporate announcements without the intention of performing it is a very serious misconduct. The said misconduct was followed by off market transfers among the promoters and related entities which were further followed by off loading of shares in an artificially created market. The said act of the company and its promoters/directors in manipulating the shares of the company needs to be seriously taken note of and the entities involved have to be accordingly penalized. I note that the Hon’ble Securities Appellate Tribunal in Appeal No. 78 of 2008, decided on December 17, 2008 [in the matter of Gaurav Shah vs. Securities and Exchange Board of India] had observed that when the promoters of a company through their own front entities start manipulating their own scrip, the charge is more serious and those who act in concert with them are equally responsible.

22. The interim directions in the matter were also in respect of Mr. Sunil Kumar Menon, Mr. Ramesh Kumar Putta and Mr. Narayan N. Iyer, who were the independent and non-executive directors of the company. I further note that administrative warning was issued by SEBI to the aforesaid perons. In view of the same and also considering the facts and circumstrances of the case, the interim directions issued against them in terms of SEBI Order dated September 29, 2005 and confirmed vide Order dated June 9, 2006, needs to be vacated in so far as they relate to the aforesaid persons. Similarly, the stock brokers namely M/s. Bhupendra N. Bheda and Unique Stock Bro Limited were also covered under the interim orders. Considering the findings of the investigation in its totality, the interim directions against the said stock brokers also need to be vacated. In view of the above, the proceedings initiated against Mr. Sunil Kumar Menon, Mr. Ramesh Kumar Putta, Mr. Narayan N. Iyer, M/s. Bhupendra N. Bheda and Unique Stock Bro Limited vide orders dated September 29, 2005 and June 9, 2006 in the matter of Konkan Tyres Limited are hereby disposed of as ordered hereinbelow.

23. In view of the foregoing, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11B and 11(4) thereof, hereby restrain Konkan Tyres Limited, Mr. Omprakash G. Soni (Permanent Account Number - AAFPS3052F), Mrs. Indu Omprakash Soni (Permanent Account Number - AMZPS9590G), Mr. Fateh Sinh Solanki (Permanent Account Number - AHLPS4124K), Esskey Rubber Industries Private Limited, Olympic Agro Industries Limited and Konkan Capfin Limited (Permanent Account Number - AAACK3228P) from accessing the securities market and are further prohibited from buying, selling, or otherwise dealing in the securities market, either directly or indirectly for a period of six months

24. The directions issued to Mr. Sunil Kumar Menon, Mr. Ramesh Kumar Putta, Mr. Narayan N. Iyer, M/s. Bhupendra N. Bheda and Unique Stock Bro Limited, vide the Interim Order dated September 29, 2005 by the Securities and Exchange Board of India and later confirmed vide another Order dated June 9, 2006, stands vacated.

25. This order shall come into force with immediate effect.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Place: Mumbai Date: October 30, 2009