In the matter of M/S Simplex Holdings Ltd. and its directors

1.1 A Co-ordination and Monitoring Committee (hereinafter referred to as the ‘CMC’) was set up jointly by the Department of Company Affairs (hereinafter referred to as ‘the DCA’) and the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) in 1999 in respect of companies which have raised money from the public and are not traceable thereafter. These companies were identified / referred as “vanishing companies”. Seven Task Forces for each region were also set up consisting of officers of DCA, SEBI and the concerned Stock Exchange to assist the CMC in identifying “vanishing companies” in the region and recommending the action to be taken by DCA and SEBI against such companies.

1.2 In the fifth meeting of the CMC held on 01.06.2000, the criteria for identifying “vanishing companies” was laid down as under:

a. Companies which have not complied with listing requirements / filing requirements of Stock Exchange / Registrar of Companies (hereinafter referred to as “RoC”) respectively for a period of 2 years.

b. Where no correspondence has been received by the Exchange from the company for a long time. c. Where no office of the company is located at the mentioned registered office address at the time of Stock Exchange inspection.

1.3 In the meeting of the co-ordination and Monitoring Committee held on 25.02.2003, the list of Vanishing Companies was reviewed and M/s Simplex Holdings Ltd (hereinafter referred to as SHL) was identified as one of the companies falling in the aforesaid criteria and was therefore categorized as “vanishing company”.

2.1 SHL came out with a public issue of 7,50,000 equity shares of Rs 10/-each for cash at par through its prospectus dated 18.04.1995. The issue opened on 12.06.1995 and closed on 22.06.1995. It was stated in the prospectus that initial listing applications were made to the Stock Exchanges at Delhi and Ludhiana for permission to deal in shares. At page 7 of the prospectus, the objects of the issue were given as:

i) To consolidate its capital base and to augment its long term resources to meet the needs of its business of investment in securities, leasing, inter corporate deposits, bill discounting by infusion of long term funds in the form of equity capital.

ii) To get the shares listed on recognized Stock Exchange.

iii) To meet the expenses of the proposed issue.

2.2 In the prospectus, the registered office of SHL was mentioned as 219, Park View Plaza, 32 Park Area, Ajmal Khan Road, Karol Bagh, New Delhi – 110 005. Shri Sharad Pathak, Shri Sanjay Kapoor and Shri Sandeep Anand were mentioned as the directors of the company.

2.3 It was informed to SEBI by the Delhi Stock Exchange that the company had not been complying with the post – issue listing requirements like submission of report and annual accounts etc. The exchange had also reported that their officers visited the office premises of the company at the last known address, i.e. 219, Park View Plaza, Azmal Khan Road, New Delhi – 110005 but found that the company does not exist there.

2.4 To ascertain the whereabouts of the company and its promoters / directors, letters dated 13.04.1999 were written by SEBI to the Lead Managers to the Issue i.e. Master Trust Limited (MTL), Registrar to the Issue i.e. Inhouse Share Registry, Bankers to an Issue i.e Punjab National Bank and Advisors to the Issue i.e. Kumra Bhatia & Co. (Chartered Accountants) as mentioned in the prospectus. MTL vide letter dated 26.04.1999 informed SEBI that after the receipt of SEBI letter dated 13.04.1999, they had interacted with one of the person who was the promoter - director of the company at the time of the Public Issue. He was contacted at his office 219, Park View Plaza, Azmal Khan Road, New Delhi 110005. They also mentioned in their letter that at that point of time registered office of the Company was B-23, Ansal Tower, 38, Nehru Place, New Delhi.

2.5 Inhouse Share Registry vide letter dated 21.04.1999 informed SEBI that they were no longer acting as Share Transfer Agent of the company and as per records available with them, the registered office of the company was 219, Park View Plaza, 32 Park Area, Azmal Khan Road, Karol Bagh, New Delhi 110005.

2.6 Kumra Bhatia & Co., the Adviser to the issue, vide letter dated 26.04.1999 replied that at the time of going for the public Issue the constitution of the Board of Directors was (a) Shri Sandeep Anand (b) Shri Sharad Pathak (c) Shri Sanjay Kapoor and registered office of the company was located at 219, Park View Plaza, 32 East Park Area, Azmal Khan Road, New Delhi – 5.

2.7 DSE vide its letter dated 21.05.1999 informed that the company had its registered office at Ajmal Khan Road which was subsequently moved to Nehru Place. It was further informed by DSE that the management of the company had been handed over to a group of Directors namely, Shri P Dinakaran and Capt. Mahindran by virtue of an agreement. Subsequently, Shri Amulya Mandal was co-opted on the Board of Directors of the company.

2.8 SEBI then vide letters dated 01.06.1999 asked Shri Sanjay Kapoor, Shri Sharad Pathak and Shri Sandep Anand, the directors of the company at the time of public issue, about the whereabouts of the company. Shri I. K. Kapoor, father of Shri Sanjay Kapoor vide letter dated 16.06.1999 informed SEBI that his son Shri Sanjay Kapoor expired on 07.06.1999. In this regard, he also furnished a copy of his death certificate and further stated that as per his information, Shri Sanjay Kapoor remained a Director of the Company till January 1997 and the accounts and records up to 31.03.1996 had duly been filed with the RoC and other departments till 1996. Shri Sharad Pathak vide letter dated 15.06.1999 replied to SEBI that he resigned from the directorship of the company on 01.10.1996. Shri Sandeep Anand informed SEBI vide his letter dated 30.06.1999 that he resigned from Directorship of the company on by rotation at the AGM held on 29.09.1996.

2.9 Due to continuous non-submission of various reports and non compliance of Post listing requirements, trading in the shares of the company was suspended from LSE and DSE w.e.f. 17.05.2000 and 09.01.2002 respectively and this was communicated to SEBI by LSE and DSE vide their letters dated 17.05.2000 and 29.10.2003 respectively. The non compliance of the listing agreement by the said company was in violation of the provisions of section 21 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as SCRA).

2.10 SEBI vide its letter dated 25.07.2003 requested RoC, NCT of Delhi & Haryana to furnish the current address of the company, names and addresses of the present directors. The RoC, vide letter dated 22.08.2003 furnished the registered address of the company as 501 Ashok Bhawan, 93 Nehru Place, New Delhi – 110019 and informed its directors as Shri Amulya Mandal, Shri P. Dinakaran and Captain Mahindran.

3.1 In light of above non compliances, show cause notices dated 05.09.2003 were issued by SEBI to SHL and its directors calling upon them to explain why action, as may be deemed fit, under the provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act) and the SCRA specially directions under section 11B of the SEBI Act, interalia prohibiting them from dealing and accessing the capital market should not be passed against them. Vide aforesaid SCN, the company and its directors were also asked to indicate if they desire a personal hearing. Status of the SCN issued to SHL and its directors is given below:-

S. Name of Entity Address Status of No. SCN Sent 1 M/s Simplex 501, Ashok Bhavan 93, Returned holdings Ltd Nehru Place, New Delhi-undelivered 110019. 2 Shri P Dinakaran E-5/6, Malviya Nagar, New Letter Delhi-110017. returned undelivered with comment “left without address”

3 Shri Amulya (1) G-1335, C R Letter Mandal Park, New Delhi-returned 110019. undelivered with comment “Left without address”. 4 Capt. Mahindran (SCN not issued on 05.09.2003 due to non availability of address.) 5 Shri Sharad J-132, Ashok Vihar, Delhi- Delivered Pathak 110052 6 Shri Sandeep 688, Double Storey, New Delivered Anand Rajinder Nagar, New Delhi- 110060. 7 Sanjay Kapoor (Expired on 07.06.1999 as informed by his father vide letter dated 16.06.1999)

3.2 Vide letter dated 12.09.2003, Shri Sandeep Anand replied that he had retired by rotation as Director of the company on 17.07.1995 and thereafter he was not associated with the company. Vide letter dated 07.11.2003 he forwarded the copy of Form No. 32 filed with the RoC.

3.3 Vide letter dated 09.09.2003 Shri Sharad Pathak replied that he had resigned as Director of the Company on 12.08.1996 and thereafter he was not associated with the company. He also enclosed the copy of Form No. 32 filed with the RoC.

3.4 Thereafter, SEBI vide its letter dated 28.01.2005 again requested RoC, NCT of Delhi & Haryana to furnish the details in respect of the last filed documents by SHL and its latest available registered office address along with the names and addresses of its directors. The RoC, vide letter dated 25.02.2005, informed SEBI that the company had not filed any document after 1999 and as per Form No. 18 filed on 11.12.1997 by the company, w.e.f. 01.12.1997, the registered office of the company had been changed from B-23, Ansal Tower, 38, Nehru Place, New Delhi to 501, Ashok Bhawan, 93, Nehru Place, New Delhi-110019. Vide the said letter ROC also informed address of Captain Mahinderan. Accordinly show cause notice dated 02.03.2005 was issued by SEBI to Captain Mahinderan. Letter returned as undelivered with remarks “left without address”.

3.5 As no response was received from the company and some of its directors, a public notice in this regard was issued on 17.08.2006 in the Indian Express, New Delhi Edition. However, no response to the said public notice was received.

4.1 I have carefully considered the facts of the case, SCN issued and other material available on records. I note that SCNs had been issued to SHL and its directors. However, the notices addressed to SHL were returned with an endorsement ‘Return undelivered ’ and the notices addressed to its directors 2 and 3 mentioned in the table at para 3.1 and that to director namely Captain Mahinderan mentioned at para 3.4 returned with endorsement “left without address”. A public notice in this regard was also issued on 17.08.2006 in the Indian Express, Delhi Edition. However, no reply has been received either from the company or any of these directors to the said public notice. In view of the above circumstances, I am of the view that SEBI has made all possible attempts to effect service upon the company and its directors, but of no avail. Therefore in the specific circumstances of this case, I hold that the company and some of its directors remain untraceable despite best efforts on behalf of SEBI to trace them.

4.2 Since the company is not traceable at its known registered office, no business is being carried on there and since, the company has not been complying with the listing agreement nor replying to correspondence from the exchange or from SEBI, the presumption is irresistible that the funds raised by the company during its public issue have been put to uses other than those for which they were promised to be used in the offer document. It is also clear that SHL has been identified as a “vanishing company” by the CMC as per the criterion laid down. The failure of the company to submit the reports, annual accounts and other reports and information to the stock exchange is in violation of the provisions of the Listing Agreement read with section 21 of SCRA.

4.3 I further note that Shri Sharad Pathak vide letter dated 15.06.1999 and Shri Sandeep Anand vide letter dated 30.06.1999 informed SEBI that they had resigned as Director of the Company on 01.10.1996 and 29.09.1996 respectively. I, however, note that Shri Sharad Pathak and Shri Sandeep Anand vide their subsequent letters dated 09.09.2003 and 12.09.2003 informed SEBI that they had resigned as the director of the company on 12.08.1996 and 17.07.1995 respectively. To support this they enclosed a copy of Form No. 32 filed with the RoC. Therefore, I find that there are some discrepancies in the information provided by Shri Sharad Pathak and Shri Sandeep Anand with respect to the date of their resignation from the company. However, from the perusal of the copies of Form 32 submitted by them, I find that Shri Sharad Pathak and Shri Sandeep Anand had resigned from the company on 12.08.1996 and 17.07.1995 respectively and thus no action needs to be taken against them.

4.4 It is a matter of grave concern that some companies raise money from the public and then remain untraceable. These violations and the non-traceability of the companies of this kind are detrimental to the interest of investors and also to the integrity of securities market. Besides, they also erode the confidence of the investors and the credibility of the capital market, which calls for suitable preventive action. Therefore, it would be necessary in the interest of investors and for the healthy growth of the securities market, that companies such as SHL and their directors who remain untraceable after raising money from the public should be restrained from accessing or being associated with securities market in future. Such a preventive step would protect the investors from being duped by unscrupulous vanishing companies/entities. The above measure would also help in restoring confidence of investors and promoting integrity of securities market as it would give signal to the market that the fly by night operators will not be allowed to access and participate in the securities market.

4.5 The Supreme Court in Radheyshyam Khemka & Anr v. State of Bihar (1993) 3 SCC 54, observed as follows:

"Originally the concept of a company implied an association of persons for some common object having a juristic entity separate from that of its members. In due course the gap between the investors in such companies and those in charge of management widened. A situation has been reached today where in the bulk of the companies many individuals who have property rights as shareholders and to the capital to which they have directly or indirectly contributed, have no idea how their contributions are being utilised. It can be said that the modern shareholder in many companies has simply become a supplier of capital. The savings and earnings of individuals are being utilised by persons behind such corporate bodies, but there is no direct contact between them. The promoters of such companies are not even known to many investors in shares of such companies. It is a matter of common experience that in some cases later it transpires to the investors that the promoters had the sole object to form a bogus company and foist it off on the public to the latter’s detriment and for their own wrongful gain. In this process the public becomes the victim of the evil design of the promoters who enrich themselves by dishonest means without there being any real intention to do any business...."

The Securities Appellate Tribunal (SAT) also in Appeal No. 5/2000 in the matter of Status Management Services Ltd. v. SEBI, has observed that “there can be no two views on question of taking deterrent action in accordance with the procedure established by law, against those companies which had duped the public and vanished.”

4.6 It is relevant to note that in Appeal no. 7/2000 in the matter of Integrated Amusements Ltd. v. SEBI, the Securities Appellate Tribunal (SAT) has clarified that SEBI is legally invested with the requisite authority under sections 11 and 11B of the SEBI Act 1992, to pursue appropriate course of action against the vanishing companies and its promoters and directors. This position has been expressly further clarified by section 11(4) of the Act, as inserted by the SEBI (Amendment) Act, 2002.

4.7 It is felt in the above circumstances that unless SHL and its directors Shri P. Dinakaran, Shri Amulya Mandal and Captain Mahindran are restrained from accessing the securities market for some period of time, there is every possibility that they may again raise money from the investors on some other pretext and /or name and then dupe them. However, notwithstanding such direct debarring, the directors of SHL may resort to floating new companies, acquiring existing companies or using companies in which they hold substantial interest to raise money from the public.

5.1 Therefore I, in exercise of the powers conferred upon me under section 11 and 11B of SEBI Act, hereby restrain SHL and its directors, Shri P. Dinakaran, Shri Amulya Mandal and Captain Mahindran from accessing the securities market either directly or indirectly and also prohibit them from buying, selling or otherwise dealing in securities in any manner whatsoever, for a period of five years. This order shall come into force with immediate effect.

DATE: 27-11- 2007 PLACE: MUMBAI T .C. NAIR WHOLE TIME MEMBER SECURITIES EXCHANGE BOARD OF INDIA