Order against the non-executive directors and promoters of Mega Corporation Ltd
- CitationWTM/TCN//IVD1//2008
Ratio decidendi
The rule this decision rests on
Where an investigation finds no evidence that a promoter or non-executive director engaged in market manipulation in the scrip, and no material connecting that person to the brokers or clients who traded in it, or to entities that traded in it, or to any holding of the company's shares by that person, no further directions are warranted against that person. A non-executive director who is not responsible for the day-to-day operations of the company is not made subject to further directions in respect of trading in the company's scrip where the evidence does not otherwise implicate him.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
1 Mega Corporation Limited (hereinafter referred to as MCL / the company) is a public limited company which is listed on the Bombay Stock Exchange Limited (BSE). Between January 2005 and September 16, 2005, the price of the scrip moved up sharply from Rs. 5.25 to Rs. 41.10 representing a rise of around 663%. It was observed that such marked increase in the price and trading volumes during the aforesaid period was not accompanied by any positive corporate developments or significant changes in the economic fundamentals of the company. In view of the above, SEBI initiated investigation into the buying, selling and dealing in the scrip of MCL. 2 On the basis of preliminary findings of investigation, SEBI passed an ad interim ex-parte order dated October 24, 2005 under section 11B, 11(4) (b) and 11D against 56 entities pending investigation with a direction as under: a) The promoters of the company viz., Crayons Global Finance Ltd., Himanshu Mehta, Vimi Investments and Finance Ltd., Kunal Lalani Beena Mehta, RN. Mehta, Hiten Mehta, Odyssey Corporation Ltd., Pooja Equisearch Pvt. Ltd. and directors of the company Kunal Lalani, Himanshu Mehta, Surendra Chhalani, H M Lalani, N K Nayak, K S Venkataraman, S L Golchha and Sachin Mehra were directed not to buy, sell or otherwise deal in securities of Mega Corporation Ltd, directly or indirectly, till further directions in this regard and Mega Corporation Ltd was further directed that it shall not issue any equity shares or any other instrument convertible into equity shares, in any manner, or shall not alter its capital structure in any manner, till further directions. b) The clients viz. Ajit Suryavanshi, Ritedeal Trading Company Pvt Ltd., Vishal Kumar Textiles P Ltd., Amar Adhav, Dadasaheb Gavhane, Dattu Shitole, Rightstar Trading Company Pvt. Ltd., Deepak Narvekar, Deepak Todkar, Fine Line Mercantile Co. (P) Ltd., Ganesh Raut, Haresh Posnak, Jagdish Parab, Jay Shah, Jaydeep Mane, Jayesh Waghela, Kiran Dhanavade, Lokesh Kapoor, Mahesh Kokate, Premkumar Singh, Stockholm Mercantile Co Pvt. Ltd., Rajkishore Singh, Ramdas Kshirsagar, Sharpline Trading Co Pvt. Ltd., Topflag Exports Pvt. Ltd., Ranjan Mandal, Sandeep Kadam, Santosh Jagtap, Santosh Narvekar, Santosh Pawar, Umesh Choukekar, Vijay Suryavanshi, Vivekanand Patankar, Nirmal Jain, Mahendra Gopal Gorivale, Laxmans Singh Saijari and Patric Xess were directed not to buy, sell or otherwise deal in securities of Mega Corporation Ltd., directly or indirectly, till further directions. c) The clients Vishal Kumar Textiles P. Ltd, Amar Adhav, Deepak Narvekar, Deepak Todkar, Ganesh Raut, Jay Shah, Jayesh Waghela, Stockholm Mercantile Co. Pvt. Ltd., Rajkishore Singh, Sharpline Trading Co. Pvt. Ltd., Umesh Choukekar were directed not to buy, sell or otherwise deal in any securities, directly or indirectly, till further directions. d) The Stock Brokers viz., India Bulls Securities Ltd., Fortis Securities Ltd., Ruchiraj Shares and Stock Brokers (P) Ltd., who contributed significant volumes in the trading of shares of the company while dealing on behalf of the interconnected clients were directed not to buy, sell or otherwise deal in securities of Mega Corporation Ltd. till further directions. e) The Depositories shall not give effect any transfer of shares of Mega Corporation Ltd. lying in the beneficial owner accounts of the entities mentioned at paragraph 5.1 (a) and 5.1 (b) of the interim order. f) The Depositories shall not give effect to any transfer of any securities lying in the beneficial owner accounts of the entities mentioned at paragraph 5.1 (c) of the interim order.” 3 These entities were given opportunity of personal hearing and also of filing their objections.
4 Mega Corporation, its directors, promoters and clients filed their objections against the ex-parte order on February 3, 2006, Shri Kunal Lalani, Managing Director, Shri Himanshu Mehta, Director, Shri Surendra Chalani, Whole Time Director Shri Mukesh Singhal, Manager, Finance and Shri Jagdish Khanna, Chartered Accountant attended the hearing on behalf of the promoters and the directors and made their submissions.
5 After careful examination of the facts and circumstances and relevant materials on record, the aforesaid ad interim ex parte order passed under section 11(4) (b) and 11B of the SEBI Act, 1992 was confirmed against all the persons mentioned hereinabove in Para 2 of this vide order dated July 24, 2006. Formal investigation relating to buying, selling or dealing in the shares of the company was ordered by Chairman, SEBI on July 12, 2006 to ascertain inter-alia whether the aforementioned Promoters and Non- Executive Directors are guilty of violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. 6 Having considered the facts and circumstances leading to the investigation, the investigation report, the interim order, the objections filed and the oral as well as the written submissions made on behalf of the parties, I do not find sufficient evidence against the Promoters of the company viz., Crayons Global Finance Ltd., Vimi Investments and Finance Ltd., Beena Mehta, R. N. Mehta, Hiten Mehta. Odyssey Corporation Ltd., Pooja Equisearch Pvt. Ltd. and the Non-Executive Directors viz., N. K. Nayak, Sachin Mehra, S. L Golchha, H. M. Lalani and K. S. Venkataraman for any market manipulation in the scrip of the company. There is no material to suggest that they were connected to either the Stock — brokers or their clients who traded in the scrip of MCL nor were they connected with the entities that traded in the scrip of MCL. They had not invested in the shares of MCL. The non-executive Directors were not responsible for day to day operations of the company. 7 Having regard to the facts and circumstances, the investigation report, the submissions made and other material on record, I do not find it necessary to issue any further directions against the entities namely, the Promoters of the company viz., Crayons Global Finance Ltd., Vimi Investments and Finance Ltd., Beena Mehta, R.N. Mehta, Hiten Mehta, Odyssey Corporation Ltd., Pooja Equisearch Pvt. Ltd. and the Non-Executive Directors viz., N. K. Nayak, Sachin Mehra, S. L. Golchha, H. M. Lalani and K. S. Venkataraman who are not involved in the day to day operations of the company. The matter is finally disposed of accordingly. 8 This order shall come into force with immediate effect.
DATE: 28.02.2008 T. C. NAIR WHOLE TIME MEMBER PLACE: MUMBAI SECURITIES AND EXCHANGE BOARD OF INDIA
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free