Order in respect of Mr. Rajesh Talsania in the matter of Accurate Exports Limited

WTM/KMA/IVD/413/07/2011 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: DR. K. M. ABRAHAM, WHOLE TIME MEMBER ORDER DIRECTIONS UNDER SECTIONS 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATION 11 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 2003 IN RESPECT OF MR. RAJESH TALSANIA IN THE MATTER OF ACCURATE EXPORTS LIMITED 1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) issued a notice dated April 20, 2005, to Mr. Rajesh C. Talsania advising him to show cause as to why action under Sections 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act) should not be initiated against him in respect of the alleged violation of Regulation 6(a) 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). Brief facts as mentioned in the show cause notice (hereinafter referred to as the notice) are as follows. The investigation conducted by SEBI in respect of the buying, selling and dealing in the shares of the Company observed that during the period from January 1, 2001 to March 31, 2002, the price of the scrip ranged between `2 to `0.10 at a time when substantial quantity of shares of the Company was offloaded through select stock brokers. It was further observed that the Company had issued two different notices dated April 3, 2001 signed by the Managing Director, Mr. Dinesh Sharma, calling for an Extra-Ordinary General Meeting (EGM) on April 30, 2001. The following proposals were made in the first notice:

I. An increase in authorised capital from `25 crores to `156 crores, divided into 15.60 crore equity shares of `10 each II. To issue 15.60 crore preferential shares on a swap basis in proportion to 10 shares of the Company for every one share held by the shareholders of Sanidhya Holiday Resorts and Estate Developers Limited and Tissue and Floritac India Limited. III. Resolution to invest in the equity shares of Sanidhya Holiday Resorts and Estate Developers Limited and Tissue and Floritac India Limited on swap basis to acquire total shareholding in the said companies and IV. Shifting of registered office of the Company from Ahmedabad to Vadodara.

The proposals of the second notice were: i. Increase in authorised capital from `25.00 crores to `81.00 crores, divided into 8.10 crore equity shares of `10 each ii. To issue 6 crore preferential shares on a swap basis in proportion to 10 shares of the Company for every one share held by the shareholders of Sanidhya Holiday Resorts and Estate Developers Limited iii. Resolution to invest in the equity shares of Sanidhya Holiday Resorts and Estate Developers Limited on swap basis to acquire total shareholding in the said Company

However, it was observed from the certified true copy of the resolution passed in the EGM held on April 30, 2001, as submitted by the Company to the Ahmedabad Stock Exchange Limited (ASE), that the only resolution passed in the said EGM was regarding the shifting of office to Vadodara. Inspite of the resolution not being approved, on May 11, 2001 and September 11, 2001, the Company had made a listing application to ASE for listing of 6,00,00,000 equity shares and 7,50,00,000 equity shares of `10 each respectively. Subsequently, vide letters dated September 19, 2001 and September 24, 2001, the Company had written to ASE informing that the said allotments were null and void as various regulatory compliances under the SEBI Act and the Companies Act 1956 had not been met. However, substantial quantity of shares had been dematerialised and transferred to various entities during the period between the preferential allotment and the application for listing. The shares issued by the Company were dematerialized by the allottees who then transferred those shares to certain other entities and they in turn, transferred the shares to other set of entities who offloaded the same in the market, without the shares being listed on the stock exchange.

Thus, it was alleged that the Company had fraudulently issued and dematerialized shares over and above its authorized capital of 2,10,00,000 shares. In the said notice issued to Mr. Rajesh C. Talsania, it is alleged that he was one of the main beneficiaries of the shares of the Company that were fraudulently issued and dematerialized. It was mentioned that from his demat statement, it was observed that he had received shares in off-market from various entities who had dematerialized and those shares were then transferred to Mr. Ashish P. Shah and Mr. Anil K. Shah among others for their trades in the market. 2. Mr. Rajesh C Talsania, vide letters dated May 20, 2005 and September 14, 2010 submitted his reply to the said notice. Mr. Rajesh C Talsania was granted opportunities of personal hearing on October 23, 2008 and July 15, 2009. However, the hearing notice sent to his last available address returned undelivered. Therefore, SEBI issued a newspaper advertisement on August 13, 2009, and advised him to respond within 15 days. Mr. Rajesh C Talsania responded to the newspaper advertisement and mentioned that he intends to apply for consent.

The consent application filed him was later rejected. Thereafter, Mr. Rajesh C Talsania appeared in the hearing scheduled on September 21, 2010 and made his submissions. 3. I have considered the notice issued to Mr. Rajesh C. Talsania, his written as well as oral submissions and other material available on record. The allegation in the notice is that he was one of the beneficiaries as he had received the fraudulently allotted shares of the Company in of-market from various persons and transferred the same thereafter to certain others. The notice has alleged him of contravening Regulation 6(a) of the PFUTP Regulations. From the contents of the notice, I find that Mr. Rajesh C. Talsania had received shares from Sanidhya Holiday Resorts and Estate Development Limited, Mr. Jagdish Kantilal Prajapati and Mr. Vijaykumar Dinanath Khanduja to the tune of 1,01,00,000 shares. As per the notice, the said shares were received in off-market. According to Mr. Rajesh C Talsania, the issue and dematerialization of shares were done by the Company and he had no involvement in the same. He further submitted that the transactions of the shares have take place before the irregularities in the allotment thereof were notice.

It is his contention that after September 2001, he had not indulged in any transaction in the shares of the Company and denied contravening Regulation 6(a) of the PFUTP Regulations. He further stated that he had not received any consideration for the off market transactions and that he was not provided with an opportunity of cross examining the persons who made statements against him. He also denied of having colluded with other parties to offload the shares. It was also stated that his involvement was confined only to the extent of use of his demat account and that too for off-market transfer of shares of the Company. According to him, such off-market –in and out–entries recorded meant that they were pass through/ routing arrangement between the parties concerned. In other words, he didn’t purchase/ sell any share of the Company in the market. I have given a thoughtful consideration to such submissions. The notice, though, states that shares were received from various persons has not stated or placed any material to indicate that Mr. Rajesh C. Talsania was aware of the fraudulently issued shares.

As stated above, Mr. Rajesh C. Talsania has submitted that his transactions in the shares of the Company had taken place before the irregularities were noticed and that he did not enter into any transactions in the shares of the Company after September 2001. I also do take cognizance of his submission that his involvement was confined only to the extent of use of his demat account and that too for off-market transfer of shares of the Company, and find it appropriate to warn Mr. Rajesh C. Talsania for doing so as knowingly or unknowingly, he had become a conduit for the passage of the fraudulently allotted shares of the Company to reach other hands. 4. 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, 1992read with Sections 11(4) and 11B thereof and Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, while disposing of the show cause notice dated April 25, 2005 issued to Mr. Rajesh C. Talsania, without any directions, caution him from repeating such objectionable acts noticed hereinabove.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: JULY 19, 2011