Order in respect of Ms. Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong in the matter of Home Trade Limited

ORDER Under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992, Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 read with Regulation 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 in respect of Ms. Tanya Sek Sum and Mr. Michael VK Lo Kiap Kwong in the matter of Home Trade Limited.

1) Home Trade Limited ("HTL/the company”) is a company incorporated under the Companies Act, 1956. During the year 1999, one of the promoters of HTL viz., Euro Offshore Investments Limited (presently known as Euro Discovery Technology Venture Limited) (hereinafter referred to as “Euro Offshore”) came out with an Offer for Sale ("OFS") of 59,90,250 equity shares of HTL (from its total shareholding) of Rs.10/- each for cash at a price of Rs.50/- per share, aggregating to Rs.29.95 crores to the public in terms of Rule 19(2) (b) of Securities Contracts (Regulation) Rules, 1957. The OFS opened on October 27, 1999 and closed on October 30, 1999. Pursuant to the OFS, the shares of the Company were listed on the erstwhile Pune Stock Exchange Limited ("PSE") and Bangalore Stock Exchange Limited ("BgSE"). The trading in the shares of the Company commenced from November 15, 1999. Ms. Tanya Sek Sum and Mr. Michael VK Lo Kiap Kwong were the directors of Euro Offshore during the said period.

2) Securities and Exchange Board of India ("SEBI") conducted an investigation into the OFS by Euro Offshore and subsequent listing and trading of shares at PSE and BgSE.

3) On the basis of the findings/observations of the investigation, SEBI issued a common Show Cause Notice ("SCN") dated April 1, 2004 to (i) Mr. Sanjay Aggarwal, (ii) Mr. Subodh Bhandari, (iii) Mr N.S.Trivedi, (iv)Mr. Ketan Sheth, (v) Mr. Rakesh Chandak, (vi) M/s Dalhousie Securities, (vii) Home Trade Limited, (viii) Euro Offshore, (ix) M/s Ways Inc., (x) Euro Allied Limited, (xi) Euro Discover Limited, (xii) Mr. Dhananjay Aggarwal, (xiii) Mr. Vijendra Kumar Surana, (xiv) Mr. Dilip Jain, (xv) Mr. Manoj Chandak, (xvi) Mr. Manoj (Mike)

A. Shah, (xvii) Mr. Allen James Macmillan, (xviii) Mr. Russell H. Doekenkroger Jr., (xix) Mr. Shashank Ranade, (xx) Mr. Salil D. Gandhi, (xxi)Mr. Vijay Kumar Modi, (xxii) Ms. Tanya Sek Sum, (xxiii) Mr. Michael V K Lo Tiap Kwong and (xxiv) Ways India Limited.

3.1 The SCN contains the following allegations against the Noticees (i) to (xxiv): i. Manipulations in the OFS: a) Promoter group of HTL (Mr. Ketan Sheth and his associate/family members and associate/connected firms) and also certain directors/key management personnel of the Company applied for large quantities of shares offered in the OFS; b) The application money was funded by the company routed through its connected entities in a circuitous manner; c) Shares allotted to the applicants were purchased back from them at a predetermined price immediately after listing and trading at the stock exchanges using the proceeds of the OFS; d) The shares allotted to Ketan Shah group were hand delivered to the Company/its Director Mr. N.S. Trivedi and not to the allottees. e) Hence, it is alleged that the Promoters and Directors of HTL, the Directors of Euro Offshore together cornered over 95% of the total shares during the OFS and OFS did not receive genuine public subscription.

ii. Price manipulation at PSE and BgSE post OFS and listing of the shares of HTL: a) When the shares were listed on the PSE and BgSE and the trading started at price range of Rs.250/- to Rs.270/- on November 15, 1999. The price of the scrip was artificially increased to the price range of Rs.700/- to Rs.850/- by September 2000. b) The Company, its promoter, directors and related entities had brought in clients in whose name the trading was done in the shares of HTL. c) The employees of HTL (Mr. Rajneesh Karanpuria and Mr. Rajendra Veerkar) brought in more clients in whose name the trading were done at PSE and BgSE. d) Orders on behalf of most of the clients were placed by Mr. Ketan Sheth, and employees of HTL viz., Mr. Rajneesh Karanpuria and Mr. Rajendra Veerkar. e) The transactions done in the names of most of the clients were funded by HTL mostly through its front/connected entity M/s. Maniram Consultancy. f) The price of the scrip was taken up to unrealistically high levels by placing orders by HTl in the names of those clients.

g) It was alleged that the transactions of the Promoters/Directors/key management personnel and related entities in the shares of HTL were instrumental in establishing artificial price and artificial volumes in the scrip with the intention to pledge those shares in the names of the promoters/directors and associate/connected companies of HTL with the banks in order to receive funds from those banks. 3.2 In view of the above, it is alleged that the Noticees nos. (i) to (xxiv) have contravened the provisions of Regulations 3, 4 (a), (b), (c) & (d) and 6 (a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 ("the PFUTP Regulations"). It was also alleged that the public shareholding in HTL was less than 25% as required under rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 (“SCRR”)(In the SCN, the same is inadvertently mentioned as Section 19(2)(b) of Securities Contracts (Regulation) Act, 1956). The aforesaid Noticees were advised to show cause as to why action in terms of Regulation 11 of the PFUTP Regulations read with Section 11 and 11B of the Securities and Exchange Board of India Act, 1992 ("the SEBI Act") debarring them from accessing and dealing in the securities market for a period of 10 years should not be issued.

4) The SCNs issued with respect to some of the Noticees got returned undelivered. In view of this, SEBI placed such SCNs on its website on January 22, 2008 and January 18, 2009. SEBI also issued a public notice on March 10, 2011 in leading national and regional newspapers with respect to the SCNs.

5) In response to the SCN, a reply dated December 09, 2010 was received on behalf of Ms. Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong through their advocates with the following submissions: i. “At the outset we state that our clients have no knowledge of the alleged manipulations in the scrip of Home Trade Limited (“Home Trade”) shares which was being investigated into by SEBI. Further, there has been no specific allegations or observations recorded directly in respect if our clients in the Notice. While we confine this reply to the limited extent of explaining their role as management company professionals, our clients deny inference that may be drawn against them in the Notice; ii. We state that our clients are part of Port Louis Management Services Limited (PMSL), a professional service provider offering management and company secretarial services to companies incorporated in Mauritius. Section 132 of the Mauritius Companies Act, 1984 provides that a company to be incorporated in Mauritius should have at least two locally resident directors in order to qualify for issuance of a tax residence certificate.

As contained under the provisions of the Companies Act, our clients were the local non-executive directors of M/s Euro Discover Technology Ventures Limited (Euro Discover) which was formerly known as Euro Offshore Investments Limited. PMSL acted as the local company secretary only for the specific purposes of compliance with the local laws of Mauritius to lawfully incorporate a resident company in Mauritius. iii. PMSL offered the services of a management company to Euro Discover and was paid professional fees for the services rendered. As per the professional agreement, PMSL would provide for two local directors to Euro Discover, to enable Euro Discover to fulfil the mandatory requirements for its tax residence certificate. It was also agreed that PMSL would raise invoices towards the professional fees for management services. In addition to paying the professional fees, the promoters of Euro Discover undertook to indemnify and keep indemnified PMSL and its officers of any liability, financial or otherwise that may be fastened by reason of their acting as officers of Euro Discover. iv.

Our clients state that the business and management of the day to day affairs of Euro Discover were never looked after by our clients. They were independently managed and looked after by the promoter group of Euro Discover. Our clients being the local directors were assured that the affairs of Euro Discover would be carried on in accordance with all the legal provisions of India and Mauritius. v. Our clients submit that the purchase and sale transactions executed by Euro Discover in the scrip of Home Trade in 2000 were reported to the Board of Directors by way of a declaration on September 28, 2001 whereby it was affirmed by the Indian Directors that the said transactions were carried out in accordance with the rules and regulations in India. It was also confirmed that the transactions did not involve any violation of any of the provisions of law. vi. We reiterate that apart from acting as local directors for a company against which allegations are levelled in the notice, our clients never directly or indirectly participated in or sanctioned any scam, fraud or crime of whatsoever nature.

Our clients have never derived any benefit or any advantage from the alleged scam nor have they intended by any means to so benefit… vii. There has been no allegation or regulatory intervention against our clients or PMSL which have been providing services of management for many companies under the laws of Mauritius many of which invest in India. Our clients and PMSL are professional persons of very good repute, moral and good standing and have never been the subject of any criminal proceedings or order of the court conviction imprisonment or any civil proceedings either in the courts of Mauritius and elsewhere. viii. Without prejudice to the aforesaid submission, we state that there has been no direct allegation against our clients in the notice. The Notice is being issued to our clients because they were directors of Euro Discover. Even this non-executive arrangement was terminated with effect from May 24, 2002. It is also pertinent to note that PMSL too has terminated its service arrangement with Euro

Discover vide letter dated May 27, 2002. As already stated earlier, our clients were not managing any of the affairs or management of Euro Discover. Hence no liability can be attributed to our clients for any alleged transactions which were not even in the knowledge of our clients...”

6) Proceedings against the Noticee Nos (i) to (xxiv): 6.1 It is noted that the proceedings initiated vide SCN dated April 01, 2004 against Mr. Russell H. Doekenkroger Jr., Mr. Dilip Jain, Mr. Vijendra Kumar Surana, Mr. Salil D Gandhi, Mr. Vijay Kumar Modi, Mr. Shashank Ranade and Mr. Manoj Shah were disposed of vide SEBI Order dated February 16, 2006 without any directions, wherein it was observed "It is therefore concluded that there is no specific evidence against any of these directors that they were in control of the affairs of HTL during the first or second phase of manipulations. On the basis of the allegations in the show cause notice, it is clear that no such case has been made out and further there is no evidence to suggest that there is abdication of their duties and obligations or collusion and therefore these directors cannot be held liable for acts of the HTL or acts of the Director Ketan Sheth and other Executive Directors acting for and on behalf of the company ".

6.2 The proceedings initiated vide SCN dated April 01, 2004 against 1) Mr. Sanjay Aggarwal, 2) Mr. Subodh Bhandari, 3) Mr N.S.Trivedi, 4) Mr. Ketan Sheth, 5) M/s Dalhousie Securities, 6) Home Trade Limited, 7) Euro Offshore, 8) M/s Ways Inc., 9) Euro Allied Limited, 10) Euro Discover Limited, 11) Mr. Dhananjay Aggarwal and 12)Ways India Limited were disposed of vide SEBI Order WTM/PS/125/EFD/DEC/2015 dated December 31, 2015. Vide the said order, the aforesaid entities were restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of 10 years for the violations of the provisions of regulations 3, 4(a),(b),(c) & (d) and 6(a) of the PFUTP Regulations, 1995.

6.3 The proceedings in respect of Ms.Tanya Sek Sum, Mr. Michael Vk Lo Kiap Kwong, Mr. Rakesh Shyam Chandak, Mr. Manoj Chandak and Mr. Allen James Macmillan are considered separately as Ms.Tanya Sek Sum, Mr. Michael Vk Lo Kiap Kwong, Mr. Rakesh Shyam Chandak, Mr. Manoj Chandak had filed replies in the matter and service of Mr. Allen James Macmillan (foreign national-USA) was pending.

7) Opportunity of Personal Hearing: 7.1 Considering the replies filed by the entities, an opportunity of personal hearing was scheduled before me for the entities viz., Ms.Tanya Sek Sum, Mr. Michael Vk Lo Kiap Kwong, Mr. Rakesh Shyam Chandak, Mr. Manoj Chandak and Mr. Allen James Macmillan on July 27, 2016. However, the hearing notices issued to these entities returned undelivered. The said notices were also published on SEBI website. Subsequently, another opportunity of personal hearing was granted to the entities on September 27, 2016.

7.2 It is noted that the hearing notices were affixed at the last known addresses of Mr. Rakesh Shyam Chandak, Mr. Manoj Chandak and Mr. Allen James Macmillan. Despite the same, no one appeared on behalf of Mr. Rakesh Shyam Chandak, Mr. Manoj Chandak and Mr. Allen James Macmillan.

7.3 On behalf of Ms. Tanya Sek Sum and Mr. Michael V K Lo Tiap Kwong, their duly authorized representative Mr. Mohammad Salim Jhumka appeared before me on September 27, 2016 and made submissions at length. The Noticees were granted time upto September 29, 2016 to file written submissions, if any.

7.4 On the same day, i.e. September 27, 2016 at 7.25 pm (i.e. subsequent to the hearing at 2:30 pm earlier the same day) SEBI received an email from Ms. Tanya Sek Sum and Mr. Michael V K Lo Tiap Kwong, inter alia stating the following: “…the authorised representative who was to accompany Mr. Salim Jhuma (Mr. Murali Mohana Rao Potukunchi) was not available and therefore submissions could not be made. The documents underlying the issuance of the SCN have not yet been provided by SEBI although this request was made earlier during the meetings held with SEBI which took place a couple of years ago”. Ms. Tanya Sek Sum and Mr. Michael V K Lo Tiap Kwong further requested for rescheduling the hearing to another date after the inspection of documents is done as they will file a detailed reply in the matter.

 In this regard, I note that Ms. Tanya Sek Sum and Mr. Michael V K Lo Tiap Kwong have already submitted their reply vide letter dated December 09, 2010. Moreover, one of the authorised representatives viz., Mr. Mohammad Salim Jhumka who appeared before me on behalf of the entities (with proper authorisation letter dated September 19, 2016 from Mr. Michael V K Lo Tiap Kwong and September 20, 2016 from Ms. Tanya Sek Sum) and made oral submissions at length. Therefore, I am of the view that sufficient and reasonable opportunity was granted to the Noticees to represent their case.

 From the material available on record there appears to be no previous request for inspection of documents or non-availability of documents on behalf of Ms. Tanya Sek Sum and Mr. Michael V K Lo Tiap Kwong.

 In view of the above, I am of the view that the request for inspection does not seem justified and therefore I am not inclined to accede to the said request subsequent to the conclusion of the personal hearing granted to the Noticees on September 27, 2017.

8) I have considered the the Investigation Report, SCN issued to Ms. Tanya Sek Sum and Mr. Michael V K Lo Tiap Kwong alongwith the documents provided therein, their reply on merits to the SCN; submissions made by their authorised representative during the personal hearing before me and all other relevant material available on record. In the light of the same, I shall now proceed to deal with the charges levelled against them in the SCN.

9) The SCN alleges that the Noticees viz., Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong (hereinafter referred to as “the Noticees”) contravened the provisions of Regulations 3, 4 (a), (b), (c) & (d) and 6 (a) of the PFUTP Regulations. 10) Before I proceed to deal with the issues, the relevant legal provisions, the contravention of which have been alleged in this case may be reproduced hereunder:- Prohibition of certain dealings in securities 3. No person shall buy, sell or otherwise deal in securities in a fraudulent manner. Prohibition against market manipulation 4. No person shall – (a) 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; (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market;

(c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions; (d) enter into a purchase or sale of any securities, not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress, or cause fluctuations in the market price of securities; Prohibition on unfair trade practice relating to securities 6. No person shall - (a) in the course of his business, knowingly engage in any act, or practice which would operate as a fraud upon any person in connection with the purchase or sale of, or any other dealing in, any securities;”

11) In this context, it is relevant to note the role of the Noticees herein viz., Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong in the abovementioned manipulations. 11.1 Ms. Tanya Sek Sum and Mr. Michael VK Lo Kiap Kwong are arrayed as the Noticees in the SCN and alleged that they violated PFUTP Regulations by being the Directors of Euro Offshore. However, from the replies of the Noticees I note that they never participated in the affairs of the Company and were only local non-executive directors of Euro Offshore (the promoter of HTL). 11.2 Relevant extracts from the replies of the Noticees are reproduced hereunder:  “...the business and management of the day to day affairs of Euro Discover (earlier known as Euro Offshore) were never looked after by our clients. They were independently managed and looked after by the promoter group of Euro Discover.  There has been no specific allegations or observations recorded directly in respect if our clients in the Notice.  Apart from acting as local directors for Home Trade, they never derived any benefit or any advantage from the alleged scam nor have they intended by any means to so benefit…” 11.3 Furthermore, from the facts of the case and the material available on record, I note that SEBI vide Order bearing number WTM/GA/54/ISD/02/06 dated February 16, 2006 disposed of the proceedings against 6 entities (Mr. Russell H. Doekenkroger Jr., Mr. Dilip Jain, Mr. Vijendra Kumar Surana, Mr. Salil D Gandhi, Mr. Vijay Kumar Modi, Mr. Shashank Ranade and Mr. Manoj Shah ) arrayed as Noticees in the SCN dated April 01, 2004 without any directions against them. The said decision was based on the fact that there was no specific evidence against any of these Directors in respect of the manipulations. I find that the role of the present Noticees viz., Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong is also similar as that of the entities mentioned in the said SEBI Order dated February 16, 2006.

11.4 In view of the foregoing, it is noted that no specific facts or evidence are brought against the Noticees viz., Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong substantiating their role in respect of the alleged violations. In view of the same and also considering the fact that SEBI vide Order bearing number WTM/GA/54/ISD/02/06 dated February 16, 2006 had already taken a decision in respect of similarly placed entities, I do not find any compelling reason to deviate from such view on the basis of records placed before me.

12) Considering the facts and circumstances of the case and the abovementioned order of SEBI in the matter, I am of the view that no further action is necessary in respect of the Noticees viz., Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong.

13) I, therefore, in exercise of the powers conferred upon me by virtue of Section 19 of the SEBI Act, 1992 read with Section 11 and 11B, hereby dispose of the Show Cause Notice dated April 01, 2004 against the Directors of Euro Offshore (presently known as Euro Discovery Technology Venture Limited) viz., Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong without any directions.

14) This order shall come into force with immediate effect.

MUMBAI S. RAMAN MARCH 27, 2017 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA