Order in respect of Advance Hovercraft & Composites India Ltd. and Shri Prashant Kumar- in the matter of Shonkh Technologies International Limited

ORDER Under sections 11, 11B and 11(4) of the SEBI Act, 1992 read with clause 17 of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 and regulations 107 and 111 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 in respect of Advance Hovercraft & Composites India Ltd. and Shri Prashant Kumar-in the matter of Shonkh Technologies International Limited.

1. The Securities and Exchange Board of India (hereinafter referred to as “SEBI”) received a reference from Serious Fraud Investigation Office (hereinafter referred to as “SFIO”) alleging inter alia that Advance Hovercraft & Composites India Limited (hereinafter referred to as “AHCIL”), one of the promoters of Shonkh Technologies International Limited (hereinafter referred to as “STIL”) had violated the erstwhile Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred to as “the DIP Guidelines”) by dematerializing and selling certain shares of STIL, which were under the lock-in period, through its front entities in the securities market in a fraudulent manner. Based on this reference, SEBI conducted an investigation into the dealings in the shares of STIL. 2. Pursuant to the investigations, a show cause notice (SCN) dated May 21, 2012 was issued to AHCIL and Mr. Prashant Kumar (hereinafter collectively referred to as the "noticees" or by their respective names) as to why suitable directions including direction for debarment from buying, selling or dealing in securities for a specified period should not be issued against them under sections 11, 11(4) and 11B of the SEBI Act read with clause 17 of the DIP Guidelines (since rescinded) and regulations 107 and 111 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as the “ICDR Regulations”). 3. The SCN was issued in view of the following facts and background:- (a) STIL was incorporated in 1984 in the name of Gaurav Trading and Financing Limited. Its name was later changed to Shreejee Yatayat India Limited (hereinafter referred to as “SYIL”). In July 2000, the SYIL decided to make a foray into the fast growing business of software and related activities by acquiring a running business undertaking of a software Company named Shonkh Technologies Limited (hereinafter referred to as “STL”), an unlisted company.

(b) SYIL, vide notice dated July 13, 2000 informed its members that STL "has been negotiating with the Company for sale of its entire software business undertaking as a going concern in consideration of the Company issuing on a preferential basis 15,273,093 equity shares to the shareholders of STL in proportion of their current shareholding in STL” and this was being considered for strategic purposes as the SYIL felt that such a restructuring would greatly enhance its business and profit. (c) SYIL, in its Extra Ordinary General Meeting (EGOM) held on July 14, 2000, passed a resolution according approval to the above proposal of acquiring the entire business undertaking of STL and allotment of 15,273,093 equity shares of `10/- each at a premium of `60/- per share to the 55 shareholders of STL in proportion of their current shareholding in STL. SYIL made the said preferential allotment of its shares on July 18, 2000 wherein promoters of STL received preferential allotment as described in the following Table: Table 1- Preferential Allotment to Promoters of STL

Name of the promoter No. of Shares Distinctive Numbers Ankur Cultivators Private Limited (ACPL) 1,956,810 2240001 – 4196810 AHCIL 1,950,000 4198611 – 6146810 Total no. of shares 3,906,810 (d) As a consequence of the preferential allotment, the management control of SYIL came in favour of AHCIL and ACPL who were the promoters of erstwhile STL. Out of total 15,273,093 equity shares of SYIL allotted on July 18,200, AHCIL was allotted 1,950,000 shares, which amounted to 12.77% of the total allotted shares. (e) SYIL, after the purchase of entire business of STL, changed its name to 'Shonkh Technologies International Limited' (STIL) on July 27, 2000. STIL got the said shares listed at the Bombay Stock Exchange Ltd. (hereinafter referred to as “BSE”) on August 2, 2000 and at Delhi Stock Exchange Limited (hereinafter referred to as “DSE”) on August 16, 2000. (f) In terms of clause 13.3 of the DIP Guidelines (since rescinded), shares allotted on preferential basis to promoters were required to be kept under lock-in period for three years from the date of allotment, i.e., till July 17, 2003. Thus, 1,950,000 shares allotted to AHCIL were not to be sold /transferred/ hypothecated by it till expiry of the said lock-in period.

(g) The aforesaid 1,950,000 shares were allotted to AHCIL in physical form and nine share certificates bearing no. 4927 to 4935 were issued to it. AHCIL was having a beneficiary account bearing no. ‘10058478’ with the depository participant, Vivek Financial Focus Limited. On perusal of the statement of this beneficiary account it was observed that AHCIL had tendered 19,50,000 shares for dematerialization on December 5, 2001 and the same were dematerialized and credited in its beneficiary account on December 7, 2001. Subsequently, AHCIL had transferred 19,50,000 shares to three beneficiary accounts i.e. Karma Automobiles Limited (6,00,000 shares), Excellent Computers Private Limited (5,00,000 shares) and Niranjan Constructions Private Limited (8,50,000 shares) during December 14, 2001 to March 19, 2002 as shown in the following Table: Table 2 - Transfer of locked-in shares of STIL by AHCIL Date Particulars Credit Debit Balance 07/12/2001 By dematerialization 19,50,000 0 19,50,000 14/12/2001 To Indus Portfolio/ 10068854 2,00,000 17,50,000 (Karma Automobiles Limited ) 19/12/2001 To Vivek Financial focus/ 10047318 4,00,000 13,50,000 (Niranjan Constructions Private Limited) 20/12/2001 To Indus Portfolio/ 10068854 4,00,000 9,50,000 (Karma Automobiles Limited ) 20/12/2001 To Indus Portfolio/ 10071236 5,00,000 4,50,000 (Excellent Computers Private Limited) 11/02/2002 To Vivek Financial focus/ 10047318 2,00,000 2,50,000 (Niranjan Constructions Private Limited) 19/03/2002 To Vivek Financial focus/ 10047318 2,50,000 0 (Niranjan Constructions Private Limited)

(h) The above three entities, after receiving 19,50,000 shares from AHCIL, sold 10,40,000 shares (i.e., 8,50,000 shares through Integrated Master Securities and 1,90,000 shares through Abhipra Capital). (i) It was noted that in the minutes of the board meeting of SYIL held on July 18, 2000, it was clearly mentioned that 19,50,000 shares allotted to AHCIL shall remain locked-in for a period of three years from the date of the allotment and the allotment letters/share certificates issued shall bear, on their face, the fact that these shares shall remain locked in till July 17, 2003. In the said Board meeting, the Board authorized its directors, Mr. Prashant Kumar and Mr. Ram Ratan Chowdhary, inter alia, to sign on the share certificates and to do all acts to give effect to the completion of preferential allotment.

(j) On July 19, 2000, SYIL made application to BSE for the listing of aforesaid 15,273,093 shares allotted in its preferential allotment including the shares allotted to AHCIL and ACPL. BSE informed its members about the listing of those 15,273,093 shares with effect from August 2, 2000 with advice that 39,06,810 shares bearing distinctive No. 22,40,001 to 61,46,810 are not transferable upto July 17, 2003 and would not be good delivery till then. It was also stated in the BSE notice that STIL had informed that the certificates in respect of such shares have been enfaced with a stamp regarding their non-transferability period. (k) Mr. Prashant Kumar in his statement to SFIO on August 17, 2007 confirmed that the shares held by AHCIL were enfaced with “Lock-in” in conformity to the stock exchange listing approval. However, it is noted that in Dematerialization Request Form (hereinafter referred to as “DRF”) no. 56070 Mr. Prashant Kumar had declared that -“I/We also hereby declare that the securities surrendered by me/us for dematerialization are free from any lien or charge or encumbrance and represents the bona fide securities of the company to the best of my/our knowledge and belief.” In that regard he had submitted that:- i. AHCIL was controlled and managed by (Late) Mr. Sanjay Mohan Agarwal, Chartered Accountant. ii.

He himself had signed the blank demat request form but denied filling the contents/details mentioned in the said DRF. iii. He handed over share certificates along with blank transfer deeds to Mr. Sanjay Mohan Agarwal. iv. Neither he nor STIL, ACPL, AHCIL and its directors had any role in the dematerialization of lock-in shares of AHCIL and may not derive any benefit out of it and it seems the handiwork of (Late) Mr. Sanjay Mohan Agarwal only. Mr. Prashant Kumar was authorized in the board meeting of SYIL dated July 18, 2000 to do all acts, deeds to give effect to the resolution of preferential allotment. Mr. Prashant Kumar had also signed the DRF for both the promoters, i.e., AHCIL & ACPL as “Director/Authorised signatory”. Thus, Mr. Prashant Kumar was connected with SYIL at the time of allotment of shares and AHCIL at the time of dematerialization of shares. (l) It was also observed that, pursuant to the allotment of 19,50,000 shares, AHCIL vide letter dated July 19, 2000 authorized SYIL to take all such necessary actions for complying with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as “the Takeover Regulations”).

In pursuance of the same, vide letter dated July 26,2000, SYIL filed a report under regulation

3(4) of Takeover Regulations and also forwarded a copy of the resolution passed by its Board of Directors mentioning clearly about the lock-in shares for AHCIL. (m) Thus, AHCIL was clearly aware about the lock-in condition imposed on 19,50,000 shares, allotted on preferential basis by SYIL under promoter’s quota. 4. On the basis of above, it was alleged that the share certificates were dematerialized by AHCIL with the intention of selling them in the market. It was further alleged that AHCIL and Shri Prashant Kumar, former director of AHCIL & SYIL, have violated the clause 13.3 of the DIP Guidelines by transferring the locked-in shares, after dematerialization of the same despite knowing that the shares were under lock–in for a period of 3 years till July 17, 2003. 5. The SCNs were returned undelivered. I note that attempt was also made to serve the SCNs upon the noticees through substituted service by affixing them at the last known addresses of the noticees. A copy of the SCN was also posted on SEBI website. Further attempts to serve the SCNs were made by sending them to alternate addresses of the noticees.

However, the same were also returned undelivered. An advertisement was published in the Delhi edition of a national newspaper with wide circulation on August 09, 2013. Vide letter dated September 12, 2013 AHCIL requested a copy of the SCN. Vide letter September 20, 2013, a copy of the SCN was forwarded to AHCIL at its address mentioned in its letter dated September 12, 2013. However, the same was returned undelivered with remarks “no such company”. A scanned copy of the SCN was also sent on October 01, 2013 at the email address provided by AHCIL in its aforementioned letter. AHCIL responded vide letter dated October 04, 2013 again requesting for a copy of the SCN citing non-receipt of SCN. A copy of the same was again forwarded to the same address provided by AHCIL on October 17, 2013 which was again returned undelivered. On October 29, 2013 a copy of the SCN was delivered to AHCIL by hand delivery through SEBI Delhi office at the address provided by AHCIL. Vide letter dated October 26, 2013, AHCIL submitted that the management of the company had decided to file a consent application in the matter within two weeks time and that the matter be kept in abeyance till the time consent application is decided upon.

6. Vide letter dated November 28, 2013, an opportunity of personal hearing was granted to the noticees on January 07, 2014 which was returned undelivered. A scanned copy of the notice of personal hearing was also sent to the noticees at the email address provided by AHCIL. An attempt to hand deliver the hearing notice was also made through SEBI Delhi office. However, the owner of the premises refused to accept the notice stating that no such person was available/ stayed at that address, hence hearing notices were served through affixture.

7. I note that the noticees did not respond to the hearing notices on any occasion. I also note that there is no consent application filed by AHCIL which is pending before SEBI at any stage. In the facts and circumstances of this case, I find that the noticees have been given ample opportunity to present their case before SEBI but the noticees have not taken any step or shown any willingness to do the same. I, therefore, find that the principle of natural justice has been adequately complied with and as such this is a fit case for continuing the proceedings on the basis of material available on record. 8. I have carefully considered the SCNs and other relevant materials available on record. I note that a resolution was passed in the Extra Ordinary General Meeting (EGOM) of SYIL held on July 14, 2000 to acquire the entire business undertaking of STL and to allot 15,273,093 equity shares of `10/- each at a premium of `60/- per share to the 55 shareholders of STL in proportion of their current shareholding in STL. Pursuant to the approval at the EGOM, SYIL made the preferential allotment of its shares on July 18, 2000 wherein promoters of STL, namely, ACPL and AHCIL received 19,56,810 and 19,50,000 shares respectively.

9. I note that consequent to the preferential allotment in SYIL on July 18, 2000, its management control came in favour of Ankur Cultivators Private Limited (Ankur) and AHCIL who were the promoters of erstwhile STL. Thereafter, on July 27, 2000 SYIL changed its name to STIL. Thus, Ankur and AHCIL became promoters of SYIL/STIL. Hence, the shares allotted to them were to be locked-in and non-transferable for a period of 3 years, i.e., till July 17, 2003 in terms of clause 13.3 of the DIP Guidelines (since rescinded). The provision of clause 13.3 of the DIP Guidelines is enumerated hereunder: “13.3 Non-transferability of financial instruments 13.3.1 (a) The instruments allotted on a preferential basis to the promoter/ promoter group as defined in Chapter VI in (Explanation I, II and III to clause 6.8.3.2) of these guidelines (and the shares allotted to such promoter / promoter group pursuant to exercise of options attached to warrants issued on preferential basis), shall be subject to lock-in of 3 years from the date of their allotment. (b)In any case, not more than 20% of the total capital of the company, including capital brought in by way of preferential issue, shall be subject to lock-in of three years from the date of allotment.” 10. I further note that at the time of preferential allotment on July 18, 2000, the board of directors of SYIL had resolved that the shares allotted to Ankur and AHCIL shall be locked-in till July 17, 2003. Further, while granting listing permission with respect to the shares allotted on preferential basis in this case, BSE had also notified its members that 3,906,810 shares allotted to Ankur and AHCIL shall not be transferable upto July 17, 2003 and shall not be good delivery in the market till then.

SYIL/STIL had confirmed to BSE that the certificates with regard to these shares had been enfaced with stamp regarding their non-transferability. 11. I note that Mr. Prashant Kumar was a director of STIL and AHCIL during the period July 13, 2000 to December 31, 2004 and December 10, 2001 to December 2004, respectively. I further note that in the aforesaid board meeting of SYIL held on July 18, 2000, Mr. Prashant Kumar was authorised to sign the share certificates and to do all acts to give effect to the completion of preferential allotment. I also note that Mr. Prashant Kumar in his statement to SFIO on August 17, 2007 has confirmed that the shares held by AHCIL were enfaced with “Lock-in” in conformity to the stock exchange listing approval. However, despite having the knowledge about the shares being under the lock-in till July 17, 2003 in terms of clause 13.3 of the DIP Guidelines (since rescinded), Mr. Prashant Kumar signed the DRF no. 56070 seeking dematerialization of 19,50,000 shares on behalf of AHCIL that were issued to it pursuant to preferential allotment. I, therefore, find that Mr. Prashant cooperated and aided AHCIL to dematerialise the non-transferable shares so as to enable it to sell these shares during the lock-in period.

12. In view of the aforementioned facts, I find that AHCIL was fully aware that 19,50,000 shares allotted to it on preferential basis in physical form were locked-in and non-transferable till July 17, 2003. However, it dematerialised those shares on December 05, 2001 and transferred them to Karma Automobiles Limited (6,00,000 shares), Excellent Computers Private Limited (5,00,000 shares) and Niranjan Constructions Private Limited (8,50,000 shares) between December 14, 2001 and March 19, 2002 who in turn sold 10,40,000 shares in the market through Integrated Market Securities and Abhipra Capital. 13. In the facts and circumstances as described in the SCN it is safe to infer that AHCIL with the active involvement of Mr. Prashant Kumar dematerialised the 19, 50, 000 shares allotted to it pursuant to preferential allotment and thereafter transferred the dematerialised shares during the lock-in period to various entities between December 14, 2001 and March 19, 2002, as enumerated in Table 2 above. I, therefore, find that by transferring these shares during the lock-in period, AHCIL and Mr. Prashant Kumar have contravened the provisions of the clause 13.3 of the then applicable DIP Guidelines, listing conditions stipulated by BSE and the decision of board of directors of the SYIL/STIL.

14. I, however, note that the violations in the instant case pertain to the year 2001 and 2002. The only charge against the noticees is that they have transferred shares when they were under lock-in. There is no charge or allegation in the SCN that the noticees indulged in the fraudulent or unfair trade practice. Considering these facts and circumstances, I am of the view that a warning to the noticees will be commensurate with violation charged in the SCN. These findings are, however, without prejudice to charges and findings in any other proceedings against the noticees.

15. I, therefore, in exercise of the powers conferred upon me by virtue of section 19 read with sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 read with clause 17 of the then Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 and regulations 107 and 111 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, hereby warn the noticees to be careful and cautious in the conduct of its stock broking activity and to adhere to and comply with all the statutory provisions while carrying out its activities in the securities market. The present proceedings are disposed of accordingly.

Sd/- DATE: November 20th, 2015 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA