Order in respect of Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta in the matter of M/s. IQMS Software Ltd.

Under Section 11 and Section 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 the Securities Market) Regulations, 1995 and Regulation 13(2) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 in respect of Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta.

In the matter of M/s. IQMS Software Ltd. Appearances: For the Noticees: 1. Mr. Deepak Mehta 2. Mr. Nikunj Mehta For SEBI: 1. Mr. Santosh Kumar Shukla, Joint Legal Adviser 2. Mr. Santosh Kumar Sharma, General Manager 3. Mr. Nirdosh Rajan Minz, Assistant General Manager 4. Ms. P. L. Leena Shree, Assistant Legal Adviser 1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") conducted investigation into the dealings in the scrip of M/s. IQMS Software Ltd. (hereinafter referred to as "IQMS/Company") for the period November 14, 2000 to December 15, 2000 (the investigation period) to ascertain whether any provision of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") and Rules and Regulations made there under have been violated.

2. During the investigation, it was noted that IQMS was incorporated in Hyderabad on March 3, 2000 as a public limited company to carry out the business of designing and developing software systems, products and solutions. IQMS had made an initial public offer (hereinafter referred to as "IPO") of 45,00,000 equity shares of ₹10/- each at par aggregating ₹450 lacs. The IPO opened for subscription on September 28, 2000 and closed on October 3, 2000. The shares of IQMS were listed on Bombay Stock Exchange (hereinafter referred to as "BSE") and Hyderabad Stock Exchange (hereinafter referred to as "HSE").

3. During the investigation period, the price of the scrip increased from ₹19 per share to ₹41.80 per share. The volume per day during this period was approximately 38,000 shares. The total volume during the investigation period was 8,77,758 shares. The scrip was trading at 45 paisa per share at the time of conclusion of the investigation during December 2003. The unusual rise in the price of the scrip was not found to be backed by the economic fundamentals of the Company.

4. It was observed that during the investigation period, the price rise in the scrip was due to trades executed by entities that were the original allottees in the IPO of the Company. During the investigation period these entities had traded amongst each other on a number of occasions and a majority of these transactions were reversed on the same day. Further these entities also appeared to be related/connected to each other.

5. In this regard, transactions of certain brokers and their clients (who appeared to be related/connected to each other) were analyzed. It was observed that amongst these entities, three entities namely, Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta were members of the same family and were allegedly interconnected. Mr. Deepak Mehta in his statement given to SEBI on December 11, 2003 stated that he was connected to Mr. Hemang Jangla, another client who had actively traded in the scrip of IQMS during the investigation period.

6. Based on the investigation, it was alleged that premeditated reversals of trade were done by the clients (including Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta) through their respective brokers at progressively higher prices in the illiquid scrip of IQMS, which resulted in the increase of price of the scrip from ₹19 to ₹41.80 during the investigation period. It was further alleged that Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta acted in concert with each other to create a false market or misleading appearance of trading and that their transactions were not genuine but were done with the intention not to effect transfer of beneficial ownership and to operate as a device to inflate or cause fluctuation in the market price of the scrip. Such act of Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta was alleged to be in violation of regulation 4(b), 4(c) and 4(d) of PFUTP Regulations, 1995 read with regulation 13(2) of the PFUTP Regulations, 2003.

7. In view of the above, SEBI issued a combined Show Cause Notice dated June 29, 2009 (hereinafter referred to as ‘SCN’) to 12 entities including Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta calling upon them to show cause as to why appropriate directions under sections 11(4) and 11B of the SEBI Act including restraining them from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities, for an appropriate period of time, should not be issued.

8. While the proceedings commenced by the SCN are pending at various stages against the said 12 entities, Mr. Deepak Mehta and Mr. Nikunj Mehta filed their replies to the SCN and also availed the opportunity of personal hearing on July 26, 2013. They have also requested for an early disposal of the proceedings against them in view of their cooperation with SEBI enquiry. Mr. Deepak Mehta, son of Mr. Satish Mehta, also informed that Mr. Satish Mehta had expired on July 3, 2007. He had also enclosed a copy of the death certificate of Mr. Satish Mehta.

9. Submissions of Mr. Deepak Mehta and Mr. Nikunj Mehta are, inter alia, as follows:

I. Submissions of Mr. Deepak Mehta: a) He was not a regular trader and he had merely acted on the advice of his father, (Late) Mr. Satish Mehta who was active in trading in the securities market during the relevant time. b) He had cooperated with the investigation and disclosed all the facts desired by the investigation team. c) He has denied that he was a party in any manipulation, fraudulent and unfair trade practices or acted in any manner to create a false market or misleading appearance of trading in market as alleged. d) Further, he stated that he had not acted in concert or collusion with any person as falsely alleged and never acted in violation or in contravention of any rule or regulation framed by SEBI. He further stated that he has done bona fide transactions on the alleged dates and moreover, he had also not received any wrongful pecuniary gain in the alleged transactions. Furthermore, he never acted at the behest of other Noticees intending to operate as a device to inflate or to cause fluctuation in the market price of the securities as falsely alleged and had acted absolutely independently and purchased and sold the alleged scrip referred in the said notice without influence of any person or persons.

II. Submissions of Mr. Nikunj Mehta:

a) He stated that he did have a family relationship with Mr. Deepak Mehta and (Late) Mr. Satish Mehta but he was not at all aware of the speculative trading as alleged. b) He had done the transaction for 200 shares only and it was not a regular trading by him in the said scrip. It was an unintentional transaction and the difference between his sale and purchase price was 5 paisa only and there was no intention for doing any sort of speculation and to have undue benefit.

10. In the facts and circumstances of this case, I deem it necessary to conclude the proceedings as against (Late) Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta. I note that Mr. Satish Mehta had expired on May 3, 2007 and therefore, the proceedings against him have abated and the SCN dated June 29, 2009 as against him is disposed of accordingly.

11. I have carefully considered the SCN, written and oral replies/submissions of Mr. Deepak Mehta and Mr. Nikunj Mehta and other material on record. Admittedly, (Late) Mr. Satish Mehta and Mr. Deepak Mehta were connected to each other on account of their father -son relationship. Further, Mr. Nikunj Mehta is also a family member of (Late) Mr. Satish Mehta and Mr. Deepak Mehta. I further, note that Mr. Deepak Mehta, in his statement given during investigation on December 11, 2003, had admitted his connection with Mr. Hemang Jangla through a family relation. However, in the present case, the material available on record does not show any connection of Mr. Deepak Mehta and Mr. Nikunj Mehta with other entities that have been alleged to have acted in concert with each other to create a false market or misleading appearance of trading in the market.

12. I note that the investigation in the matter had observed that during the investigation period, Mr. Deepak Mehta had traded on two days and purchased and sold 4900 shares. The difference between his purchase and sale price was less than one rupee. Mr. Nikunj Mehta had traded only on one day and purchased and sold 200 shares. The difference between his purchase and sale price was 5 paisa only. Further, they had squared off their positions at the end of the respective trading day.

13. In this case, there is nothing on record to suggest that the impugned transactions of Mr. Deepak Mehta and Mr. Nikunj Mehta were done to create false market or misleading appearance of trading in the scrip of IQMS and the material on record also does not suggest any correlation between their trades and the price rise in the scrip of IQMS. The contribution of the trades of Mr. Deepak Mehta and Mr. Nikunj Mehta in the total traded volume (i.e. 8,77,758 shares) in the scrip of IQMS during the investigation period is also miniscule. In these facts and circumstances of the case, I give the benefit of doubt to Mr. Deepak Mehta and Mr. Nikunj Mehta in respect of the charges alleged against them in the SCN dated June 29, 2009 and do not deem it necessary to issue any direction as against them pursuant thereto.

14. The SCN dated June 29, 2009 is accordingly disposed of as against (Late) Mr. Satish Mehta, Mr. Deepak Mehta and Mr. Nikunj Mehta.

15. The order shall come into force with immediate effect.

DATE: October 3rd, 2013 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA