Order against Oracle Credit Ltd and its directors in the case of Oracle Credit Ltd

DIRECTIONS UNDER SECTION 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATIONS 11 AND 13 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 2003, IN THE MATTER OF ORACLE CREDIT LIMITED

1. On noticing unusual price rise in the shares of Oracle Credit Limited (hereinafter referred to as the Company) during the period between April 9, 2001 and February 7, 2002 at the Delhi Stock Exchange Limited (hereinafter referred to as DSE), the Securities and Exchange Board of India (hereinafter referred to as SEBI) had conducted an investigation into the trading in the shares of the Company for the aforesaid period. The investigations revealed that the share price of the Company had increased from Rs. 3.20 on April 9, 2001 to Rs. 79.90 on February 7, 2002. This increase was not supported by the fundamentals of the Company. It was found that Om Vijay Nivesh Private limited (hereinafter referred to as OVNPL) was an active client who had dealt in the shares of the Company through certain stock brokers in the month of July 2001. It was revealed that Mr. Amit Jain (director of OVNPL) and Mr. Ashok Jain (Promoter/director of the Company) are brothers. Further, as per the prospectus of the Company dated April 20, 1995, Mrs. Meena Jain, wife of Mr. Ashok Jain was also a director of OVNPL.

It was alleged that OVNPL was an associate of the promoters of the Company. The investigation conducted by SEBI observed that OVNPL had purchased and sold 199 shares and squared off its transactions during the period July 17, 2001 to July 20, 2001 and was alleged to have increased the share price of the Company from Rs.36.44 to Rs.45.96. It was also found that on July 24, 2001, OVNPL had placed buy and sell orders in the shares of the company simultaneously, through two different stock brokers. It was alleged that OVNPL had traded in the shares of the Company with the intention of increasing the share price and that it took the lead in the manipulation at the behest of the Company. OVNPL was found to be a net seller on various days during the relevant period while the price was moving up steadily. It was inter alia alleged that OVNPL had traded in the shares of the Company with the intention of increasing the share price and that it took the lead in the manipulation at the behest of the Company. It was further alleged that OVNPL was linked to the Company by way of common director and that a director of the Company and OVNPL are brothers.

In view of the above, it was alleged that OVNPL had apparently taken the lead in the manipulation at the behest of the Company and its promoters. Therefore, it is alleged that the directors in control of the Company violated Regulations 4(a), 4(b) and 4(c) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as the PFUTP Regulations). Thereafter, a show cause notice dated November 23, 2004 was issued to Company requiring the Company and its promoter directors, Mr. Ashok Jain and Mrs. Meena Jain to show cause as to why they should not be restrained from accessing the securities market and prohibit them from dealing in the securities market for an appropriate period. Subsequently, the Company, vide letter dated December 6, 2004 (signed by Mr. Ashok Jain) filed its reply. Thereafter, an opportunity of hearing was provided to the Company and OVNPL on December 12, 2008, Mr. Ashok Jain appeared for the Company on the said date and made submissions. However, as there was no representation from OVNPL or its directors, another opportunity of hearing was provided to OVNL on June 24, 2009, but none appeared on behalf of OVNPL.

2. The issue for consideration is whether the Company and its promoter directors, Mr. Ashok Jain and Mrs. Meena Jain are liable for a direction under Section 11B of the Securities and Exchange Board of India Act, 1992 as contemplated in the show cause notice. The fact that the share price of the Company had increased from Rs.3.20 on April 9, 2001 to Rs.79.90 on February 7, 2002 is not in dispute before me.

There is no allegation in the show cause notice that the directors of the Company had dealt in the shares of the Company during the relevant time. The allegation in the show cause notice was that the trades of OVNPL which resulted in manipulation were at the behest of the Company and its promoters. The trade details of OVNPL were mentioned in the show cause notice. As regards the linkages between the Company and OVNPL, it was mentioned in the show cause notice that Mrs. Meena Jain (director of OVNPL) was also the promoter director of the Company. It was also stated that Mr. Amit Jain (director of OVNPL) is the brother of Mr. Ashok Jain, promoter/director of the Company. It was also stated in the show cause notice that as per the shareholding pattern filed with DSE at the time of the public issue of the Company, OVNPL shared the same address as that of Mr. Ashok Jain and Mrs. Meena Jain.

3. The Company in its reply dated December 6, 2004 inter alia stated that none of its directors had sold any shares of the Company. It further submitted that, the Company and/or its directors were not involved in any manner in the transactions. It also stated that none of its directors were the directors of OVNPL and that Mrs. Meena Jain had resigned from the directorship of OVNPL on August 16, 1996. According tto the Company, OVNPL was holding only 0.003% of its total paid up capital as on March 31, 2001. It also contended that neither the Company nor its directors received any benefit from the alleged transactions. The Company also denied the allegation that it was connected with OVNPL. The allegation was that OVNPL apparently took the lead in the manipulation in the shares of the Company at the behest of the Company and its promoters. It was further alleged that the trades of other clients were at the behest of the promoters of the Company. The said apprehension was on the basis of the nexus the Company had with OVNPL. The Company had denied the alleged connection it had with OVNPL. According to the Company, Mrs. Meena Jain had resigned from the directorship OVNPL on August 16, 1996. The transactions in the shares of the Company had taken place in the year 2001. Apart from leveling allegation against the Company on the basis of the connection, the role of the Company and its directors, in the manipulation was not brought out clearly in the show cause notice to prove the charges leveled in the show cause notice. There is nothing in the show cause notice to link the Company with the artificial trading which resulted in the manipulation in the shares of the Company. In this regard, I also note the submissions of the Company that it (including its directors) was not involved in any transactions and that they had not received any benefit from such alleged transactions. In the absence of sufficient material to substantiate the fact that the trading was at the behest of the Company or its promoters, I am of the view that they are entitled for the benefit of doubt in the matter. Accordingly, I dispose of the show cause notices dated November 23, 2004 issued against the Company and its directors, as directed hereinbelow.

4. In view of the foregoing, I, in exercise of powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Section 11B thereof and Regulations 11 and 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 hereby dispose of the show cause notice dated November 23, 2004 issued to Oracle Credit Limited and its promoter directors, Mr. Ashok Jain and Mrs. Meena Jain, without any directions.

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

PLACE: MUMBAI DATE: MARCH 26, 2010