Order against Om Associates and Bhavani Trading Company under Section 11B and 11 (4) of Securities and Exchange Board of India Act, 1992 in the matter of RTS Power Corporation Limited

1. Securities and Exchange Board of India (hereinafter referred to as SEBI), vide an ex-parte ad-interim order dated June 5, 2009, in the matter of RTS Power Corporation Limited (hereinafter referred to as the company), for the reasons stated therein, inter alia, restrained Om Associates and Bhavani Trading Company from accessing the securities market and prohibited them from buying, selling or dealing in securities market, directly or indirectly, till further orders. The said order also provided an opportunity to the aggrieved parties to file their objections, if any, within fifteen days. However, Bhavani Trading Company have not filed any objections, so far, in respect of the findings of ex-parte ad interim order dated June 5, 2009. Om Associates, vide letter dated June 18, 2009 inter alia requested SEBI to grant time upto July 15, 2009. Thereafter, vide letter dated November 4, 2009, Om Associates inter alia requested for a copy of its statement for enabling it to submit its reply in the matter. The circumstances which led to the passing of the ex-parte order dated June 5, 2009 against various persons/entities including Om Associates and Bhavani Trading Company and their prima facie role in the alleged market manipulation in the shares of the company on February 11, 2009, have been explained in detail in the said order.

It is pertinent to note that, SEBI had received complaints from certain stock brokers informing that some of their clients failed to fulfill their respective pay-in obligations after buying substantial number of shares of the company on February 11, 2009. Their total pay in obligation was to the tune of Rs. 9,14,49,113/-. Needless to say, such defaults are a serious threat to the functioning of the securities market and as a market regulator, it is the duty of SEBI to interfere and take appropriate measures/actions including directions against the persons who were found involved in such transactions. As already explained in the ex-parte order, substantial volume of shares of the company were traded in the month of February 2009, particularly on February 11. The said increase was not supported by any fundamentals of the company. It was observed that Mr. Mukesh G. Konde, Mr.Ashok Narayan Waje and Mr. Nitesh Ashok Jadhav had traded in the shares of the company on February 11, 2009. They were found to be the major buyers on the said date and had defaulted in their payment obligations. An analysis of the Bank account statements of Mr. Mukesh G. Konde, Mr.Ashok Narayan Waje, Ms.Hetal Patel and Nashik Branch), Mr. Nitesh Ashok Jadhav, and apparently related entities such as Sunspark Securities Private Limited, Om Associates, Bhavani Trading and Darshan Trading revealed that there were fund transfers among them.

The details of such fund transactions executed amongst the above mentioned persons/entities have been explained in the ex-parte order. It was already observed in the ex-parte order that Mr. Mukesh G. Konde, Mr.Ashok Narayan Waje and Mr. Nitesh Ashok Jadhav were able to fulfill their obligations towards the initial margin money only after receiving funds from Om Associates or Bhavani Trading Company. Mr. Mukesh G. Konde, Mr.Ashok Narayan Waje and Mr. Nitesh Ashok Jadhav had returned Rs. 19 lakh, Rs. 9.90 lakh and Rs. 19.22 lakh respectively to Bhavani Trading Company after February 11, 2009. I note that during the course of investigation, summons dated May 14, 2009 was issued to Om Associates to appear before the Investigating Authority on May 19, 2009. However, vide letter dated June 5, 2009, Om Associates had requested for another date for personal appearance in response to the said summons. Thereafter, Om Associates, vide letter dated November 4, 2009 inter alia requested SEBI for a copy of its statement. However, I note that SEBI had not recorded the statement of Om Associates in respect of the present matter and that its statement seems to have been recorded by SEBI in respect of another matter.

Thus, affording a copy of the statement would not be pertinent to this case.

2. The investigation in the matter is not yet concluded and the same is still in progress. The available material on record justifies the continuation of the directions passed against Om Associates and Bhavani Trading Company under the ex-parte order dated June 5, 2009, till the completion of the investigation. No convincing objections were made by Om Associates for revoking the directions issued against it. Bhavani Trading Company, despite sufficient opportunities chose not to respond to the ex–parte order. Therefore, till the completion of such investigation, I do not consider it fit to interfere with the directions passed by SEBI vide order dated June 5, 2009.

3. In view of the foregoing, I, 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 confirm the directions issued vide the ad-interim ex-parte order dated June 5, 2009 in the matter of RTS Power Corporation Limited against Om Associates and Bhavani Trading Company.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: NOVEMBER 27, 2009