Order against Shri Arun Kumar Bajoria, M/S. Mega Stocks Ltd., M/S. Mega Resources Ltd., M/S. The Hoogly Mills Company Ltd. in the scrip of Bombay Dyeing And Manufacturing Company Ltd

1 The scrip of Bombay Dyeing and Manufacturing Company Ltd. (hereinafter referred to as ‘Bombay Dyeing’) witnessed a significant price rise accompanied with significant increase in volume during the period May to June 2000. It was found that the price of the scrip which was in the range of Rs. 40 to Rs. 45 during the period April to May 2000 went to Rs. 100 during August 2000 and subsequently to Rs. 120 during October 2000.

2 In view of the above, SEBI conducted investigations into the buying, selling and dealing in the scrip of Bombay Dyeing during the period October 1999 to October 2000 vide order dated November 15, 2000 under SEBI Act, 1992 read with SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 (hereinafter referred to as “PFUTP Regulations”).

3 Investigations revealed that Shri Arun Kumar Bajoria and his associate entities namely Mega Resources Ltd., Mega Stocks Ltd. and The Hoogly Mills Company Ltd. (hereinafter referred to as “Bajoria Group”) transacted in the scrip of Bombay Dyeing and cornered substantial quantities of floating stocks in the scrip by making purchases for large quantities constituting 13.85% of the capital of the company as on September 21, 2000. It was further found that the Bajoria Group dealt in the scrip of Bombay Dyeing in large quantities, through different brokers and sub-brokers, mainly in the names of Mega Stocks Ltd. and Mega Resources Ltd. and The Hoogly Mills Company Ltd. Investigations further revealed that the Bajoria Group did not only make purchases, they had also been selling shares to book profits and reduce the price of acquisition of shares of Bombay Dyeing. It was alleged that the Bajoria group while dealing in the above scrip during the relevant period had violated the provisions of Regulation 4 (a) of PFUTP Regulations.

4 Accordingly, show cause notices (SCNs) dated January 29, 2003 and May 09, 2003 were issued to Shri Arun Kumar Bajoria, Mega Resources Ltd., Mega Stocks Ltd. and The Hoogly Mills Company Ltd. under section 11B of the SEBI Act, 1992 read with Regulation 11 and 12 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 asking them to show cause as to why suitable directions including debarring from dealing in securities or accessing capital market for a specific period or any other suitable direction as may be deemed fit and proper should not be issued against them.

5 Mega Resources Ltd. vide their letter dated March 20, 2004 replied to the aforesaid show cause notice and stated as follows:

5.1 That SEBI had issued directions under Regulation 44 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Section 11(b) of the SEBI Act, 1992 vide order dated August 29, 2001, inter alia debarring Shri Arun Kumar Bajoria and others from accessing the capital market or from dealing with directly or indirectly in securities for a period of one year from the date of passing of the order. That appeals were preferred by them against the said order before the Hon’ble Securities Appellate Tribunal and by an order dated March 19, 2002 the Tribunal has set aside the order of August 29, 2001. That SEBI still persisted and instituted adjudication proceedings and vide an order dated September 25, 2001, a penalty of Rs. 2.50 lakh was levied upon them and though aggrieved by such order they without prejudice to their rights paid the penalty. Now it appears that SEBI again is pursuing a matter where on two earlier occasions they have been penalised.

5.2 They have not indulged in any market manipulation or have not practiced in any unfair manner and therefore, the show cause notice should not be proceeded further.

5.3 That any increase in price of the scrip is not the responsibility of Shri Arun Bajoria. There are no persons acting in concert with Shri Bajoria in acquiring shares of Bombay Dyeing. Shri Bajoria and any person allegedly acting with him purchased insignificant no. of shares compared to the total shares of Bombay Dyeing.

5.4 That any increase in price of the shares of BDMCL during the period from May to June 2000, is by reason of natural market force. During that time, the market index of shares had increased. There was a ‘Bull Run’ in the market. The BSE Sensex increased from 3,900 on May 23, 2000 to 4,639 on June 12, 2000. Bombay Dyeing had declared a profit of Rs. 43.16 crore for the financial year 1999-00 on June 01, 2000 and had paid 30% dividend. Also it was the first time after 4 years when profits had fallen drastically from Rs. 117 crore in 1995-96 to 20 crore in 1998-99 that the company’s performance had shown a turnaround. It is but natural for the share price to increase after such a stupendous performance.

5.5 They stated that the price of many shares had increased during the time and there can be no inference that all such price increase was by reason of any manipulation.

5.6 It was denied that Shri Arun Kumar Bajoria has acted in concert with the entities in acquiring shares in Bombay Dyeing and that Shri Arun Kumar Bajoria cornered substantial quantities of floating stock in the scrip by making purchases for large quantities as alleged or at all. It was also denied that Shri Arun Kumar Bajoria dealt with in the scrip of Bombay Dyeing in large quantities and that there has been any transactions with intention to manipulate the prices of the scrip of Bombay Dyeing. Purchases made by Shri Arun Kumar Bajoria in any of the companies alleged in the SCN have been negligible compared to the subscribed and paid up capital of the company and the actual volume of trading at both the National Stock Exchange and the Bombay Stock Exchange.

5.7 Further it was denied that acquisition of shares of Bombay Dyeing by Shri Bajoria for a quantity of 13.85% of the paid up capital was to hike prices or sell them through green mail tactics at artificially raised price to the existing management/strategic investors as alleged or at all. Such accusations are vague, without any particulars and no reliance can be placed thereon. The maximum no. of shares purchased were 56,77,326 shares on September 21, 2000 and even on October 21,2000 our holding was 54,67,213. It was also denied that Shri Bajoria sold shares to book profits or reduce the price of acquisition of shares of BDMCL.

6 Shri Arun Kumar Bajoria had vide his letter dated ‘Nil’ replied to the show cause notice and made similar submissions as stated above. Mega Stock Ltd. and The Hoogly Mills Ltd. did not reply to the show cause notices.

7 The entities were accorded several opportunities of personal hearing before the Competent Authority. However, extensions/ adjournments were sought for one reason or the other. In the meantime, Shri Arun Kumar Bajoria expired on March 28, 2008. Therefore, one last opportunity of personal hearing was granted to Mega Resources Ltd. Mega Stocks Ltd. and The Hoogly Mills Company Ltd. on October 17, 2008 wherein the authorised representatives of the said entities appeared and made submissions similar to those contained in their reply to the SCNs.

8 I have carefully considered the investigation report, the show cause notices issued, the submissions of the entities and other relevant material available on record. My findings are as under :

8.1 I note that vide letter dated October 13, 2008 the Solicitors of Bajoria group informed SEBI that Shri Arun Kumar Bajoria expired on March 28, 2008. A copy of death certificate dated March 28, 2008 was also enclosed for reference and record. I am of the view that since the proceedings were initiated against the alleged personal acts of omission and commission of a person who is no more alive to face the penalty, the present proceedings against Late Shri Arun Kumar Bajoria are liable to be abated without going into merit of the case. Hence, the present proceedings against Late Shri Arun Kumar Bajoria stands abated.

8.2 As far as other entities are concerned, from a perusal of the investigation report, I note that the scrip of Bombay Dyeing witnessed a significant price rise accompanied with significant increase in volume during the period May to June 2000. The price of the scrip which was in the range of Rs. 40 to Rs. 45 during the period April to May 2000 went to Rs. 100 during August 2000 and subsequently to Rs. 120 during October 2000.

8.3 The investigations have revealed that Late Shri Arun Kumar Bajoria had started acquiring the shares of Bombay Dyeing from December 08, 1999 in large quantities in the names of his associate entities namely Mega Resources Ltd., Mega Stocks

Ltd. and The Hoogly Mills Company Ltd. I note that Late Shri Arun Kumar Bajoria vide his letter dated August 29, 2000 confirmed that he was holding Directorship in the aforesaid companies and he was also the chairman of Mega Resources Ltd.

8.4 I note that the dealings of Bombay Dyeing shares were made on both the stock exchanges i.e BSE and NSE. From the analysis of the dealings of the Bajoria group, it is observed that the Bajoria group acquired around 56,77,326 shares of Bombay Dyeing constituting 13.85% of the capital of the company as on September 21, 2000. I also note that the investigations revealed that the Bajoria Group did not only make purchases, they had also been selling shares to book profits and reduce their price of acquisition of shares of Bombay Dyeing.

8.5 I note from the SCNs that it was alleged that the Bajoria group had created an artificial market in the scrip of Bombay Dyeing by buying and selling shares in the scrip and that their transactions were with an intention to artificially raise the prices of the scrip and to induce others to buy or sell shares of Bombay Dyeing. These alleged acts were found to be in violation of Regulations 4(a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 which reads as :

No person shall – effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person.

8.6 I further note that the investigation report is silent regarding the prices at which the orders were placed by the Bajoria group. Also it is observed that the Bajoria group had not only purchased but also sold shares of Bombay Dyeing. From the facts and circumstances of the case, I am of the view that there is no material evidence on record to show that the deals executed by the Bajoria group artificially raised the price of the scrip and induced others to buy or sell shares of Bombay Dyeing.

9 Having regard to what has been stated above, I, in exercise of the powers conferred upon me, hereby dispose of the show cause notices issued under section 11 and 11B of the SEBI Act 1992 read with Regulation 11 and 12 of the SEBI (PFUTP) Regulations, 1995 read with Regulation 13(2) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 to Mega Stocks Ltd., Mega Resources Ltd and The Hoogly Mills Company Ltd. The proceedings against Late Shri Arun Kumar Bajoria in this matter also hereby stands abated for the reasons stated hereinabove.

Date: 28.11.08 T. C. NAIR Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA