Order in respect of Omega Avenues Limited in the matter of Manna Glass Tech Industries Limited

ORDER Under Sections 11 (4)(b) and 11B of the Securities and Exchange Board of India Act, 1992 in respect of Omega Avenues Limited in the matter of Manna Glass Tech Industries Limited.

1. Securities and Exchange Board of India ("SEBI") conducted an investigation into the alleged manipulation in the trading and dealing in the shares of Manna Glass Tech Industries Limited (Manna Glass) on Bombay Stock Exchange (BSE) for the period from January 1999 to July 1999 and from January 2000 to July 2000. Based on the findings of investigation, a common Show Cause Notice (SCN) dated September 29, 2003 was issued to 18 entities, namely, Manna Glass, its directors and promoters, namely, Dr. Beena A Shah, Mr. Tushar A Majumdar, Mr. Amidhar Majumdar, Ms. Reena A Majumdar, Ms. Reema T Majumdar and certain preferential allottees, namely, Sarlee Fabrics Exports Limited, Omega Avenues Ltd., Growth Agro Industries Limited, Indian Shelters Limited, Shalin Resorts Limited, Indo Care Pharmaceuticals Limited, Gujarat Fun’n Water Park Limited, Shree Corporation, G Bhavsar & Company, Sofitel & Finstock, Ashok Chokshi and Nupoor Kansara, for the alleged violation of the provisions of regulations 4 and 6 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (PFUTP Regulations).

2. Subsequently, SEBI has passed orders in the matter on February 1, 2006 (against 13 entities) and October 23, 2008 (against 4 entities) prohibiting 17 entities from accessing the securities market for a period of three years. These orders covered all entities except Omega Avenues Limited (Omega). The proceedings against Omega remained pending as in its replies and during the hearing before the then WTM on August 3, 2007, it submitted that the signature of its director was forged by persons who were connected/related to the directors and promoters of Manna Glass and they used the name of Omega for the fraudulent activity alleged in the SCN. It was also

Order in the matter of Manna Glass Tech Industries Ltd.

submitted that Mr. Satish H Patel, director of Omega, has got a criminal complaint (FIR No. 148/2004 dated March 9, 2004) registered in Naranpura Police Station, Ahmedabad alleging forging of his signature and opening of bogus bank account in the name of Omega with Social Co-operative Bank Ltd. at Ahmedabad. The police has filed charge sheet in the matter and the criminal case (No. 1173/2004) is pending before the 9th MM Court, Naranpura, Ahmedabad. After considering the submissions, it was decided that the proceedings against Omega may be kept in abeyance till the disposal of the said criminal case.

3. It has been informed by Omega that the criminal case before the MM Court in Ahmedabad is still pending as some of the accused are not traceable. It is observed that more than 13 years have elapsed since the issuance of SCN and the matter is still pending. It is settled legal position that on the same set of facts, a civil case and proceedings in a criminal case can proceed simultaneously (Capt. M Paul Anthony v. Bharat Gold Mines Ltd. (1999) 3 SCC 679); Stanzen Toyotetsu India P Ltd. Vs. Girish V and Others (MANU/SC/0050/2014). Since the criminal case has not made much headway, it was decided to resume the proceedings that were kept in abeyance.

4. The entity (Omega) was granted an opportunity of hearing on March 15, 2017. Ms. Poonam Gadkari, Advocate, appeared on behalf of it and reiterated the submissions made vide reply dated July 19, 2007. The Noticee has also filed written submissions dated March 15, 2017 and additional documents vide letter dated March 20, 2017.

5. As per the SCN, the allegation against Omega is that during the period from January 5, 1999 to July 09, 1999, three entities namely, Indian Shelters Ltd., Growth Agro Industries Ltd. and Sarlee Fabrics Exports Ltd., traded in large quantities in circular manner in the scrip of Manna Glass on BSE which created artificial demand for shares of Manna Glass and raised the price of the scrip. Later, when the price of the scrip was high, these three entities along with Omega sold shares of Manna Glass. It has been also mentioned that these entities are connected amongst themselves, as one Manish Patel was placing orders for Indian Shelters, Growth Agro and Sarlee Fabrics and Nupoor Kansara was the common person placing orders for Indian Shelters and Omega.

6. Further, on January 27, 2000, Manna Glass issued 1.8 crore shares at a price of ` 17/- per share on preferential basis to five promoter entities of Manna Glass and twelve non-promoter entities. In this preferential allotment, Omega (one of the non-promoter entities) was allotted 11,50,000 shares. Analysis of the bank account statements of Manna Glass, promoters of Manna Glass and preferential allottees for the period from January 17, 2000 to January 24, 2000 revealed that Manna Glass had issued cheques to promoter companies/entities who in turn issued cheques to the preferential allottees and the allottees issued cheques back to the company as allotment money. Thus, the money was arranged by promoter companies/entities of Manna Glass and there was no real flow of money into the company with respect to the preferential allotment. So far as flow of funds into bank account of Omega with Social Co-operative Bank Ltd. at Ahmedabad is concerned, it was observed that on 18/1/2000, the opening balance in the account of Omega was `1,75,937/. On the said date, a credit cheque of `1,95,50,000/- was received from Mannapoule Machineries Pvt. Ltd. (a company linked to promoters of Manna Glass) in this account and a debit cheque was issued from this account to Manna Glass for an amount of `1,95,50,000/-. The banking transactions of Omega and others show that the transactions were structured and designed to show that the company received money towards allotment of preference shares, however, the money was arranged by promoter companies/entities of Manna Glass. Subsequently, during the period from March 2000 to July 2000, the preferential allottees sold around 1.51 crore shares (84% of the shares allotted in the preferential issue) at BSE and in the process made an unlawful gain of around `5.2 crore by defrauding investors. 7. On the basis of the above, it was alleged in the SCN that Omega along with others have violated the provisions of regulation 4(a), 4(b), 4(c), 4(d) and regulation 6(a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995.

8. Omega Avenues Ltd. has replied vide letters dated February 23, 2004, July 19, 2007 and March 15, 2017. The entity has also filed additional documents vide letter dated March 20, 2017. The summary of the reply and oral submissions of Omega are as under: i. That the alleged fraud was committed by persons related/connected with Manna Glass Ltd. and its directors/promoters by using the name of Omega. The bonafide directors of Omega and the company were not involved in the alleged fraudulent activity. It has been also submitted that they are not connected with Manna Glass or its promoters and directors or others as alleged. ii. Omega was incorporated on March 27, 1996. Shri Satish H Patel was the Managing Director of the company and Rajni Patel and Rajesh H Parekh were its other directors. iii. The registered office of the company, since its inception, is at S R House, Near Bank of India, S M Road, Ahmedabad and they were never having any office at F-29, Harisiddh Chambers, Income Tax, Ashram Road, Ahmedabad. iv. That Omega was non-operational and defunct. In August 2000 it opted for Company Law Settlement Scheme (CLSS, 2000) and during that period it applied for certified copies of certain documents and searched the records of Registrar of Companies, Gujarat (ROC) with respect to Omega.

At that juncture they came to know about the forgery and appointment of two directors of the company Shankarlal S Rajput and Kantiben J Goriya w.e.f. April 30, 1999 and resignation of Rajni Patel and Rajesh Parikh w.e.f. April 30, 1999. v. That, vide letter dated August 29, 2000 Omega informed the ROC that no old directors have resigned nor any new director was appointed with effect from April 30, 1999 and the signature of Shri Satish Patel, director of Omega was forged in the Form No. 29 and 32 filed with ROC on May 24, 1999. vi. The company also reported the fact of forgery to Income Tax Authority vide letter dated September 9, 2000 and to CBI vide letter dated September 12, 2000. In response to a summon issued by SEBI they, vide letter dated March 13, 2003, stated that the company has not done any transaction and that somebody, by forging the signature of director of Omega, has changed the name of directors of the company and carried out the transactions in the name of the company. One Nupoor Kansara from Manna Glass had approached them to settle the matter. vii. Shankarlal S Rajput and Kantiben J Goriya, who have been shown as directors of Omega are employees of Dr. Bina A Shah (Director of Manna Glass) in the capacity of driver and clerk/employee respectively. viii.

Subsequently, after gathering information, Shri Satish Patel (Director of Omega), filed FIR against Shankarlal S Rajput, Kantiben J Goriya, promoters and directors of Manna Glass and others alleging criminal conspiracy, cheating, forgery, wrongly replacing directors of Omega, wrongly opening bank account, illegally allotting shares of Manna Glass to Omega etc. The criminal case pursuant to their complaint is pending before 9th MM Court, Naranpura, Ahmedabad. ix. The company and its bonafide directors have not done any transaction in the shares of Manna Glass. They have not opened any bank account with any bank, including Social Co-operative Bank nor any trading account with any stock broker since its inception. Though the company obtained certificate of Commencement of Business on April 2, 2001 it has not done any business or transaction since the date of its incorporation. Certificate of M/s. Rajesh Dudhara & Co., Chartered Accountants, confirming the fact that the company has not transacted any business since the date of incorporation till the date of filing application for striking off the name of the company on February 19, 2003 has been submitted. x. Provisional opinion of handwriting expert Shri J J Patel, Retd.

Acting Chief Examiner of Questioned Documents, FSL, Govt. of Gujarat dated November 3, 2004 has also been filed. xi. That they are the victims of fraud done by promoters/directors of Manna Glass, Dr. Bina A Shah, Shahkarlal Shakarabhai Rajput and Kantaben Jinabhai Goria who have committed fraud in collusion with each other by using name of Omega Avenue.

9. I have carefully considered the SCN, the replies of Omega and materials available on record. In this case, the allegation against Omega are (i) that it was involved in manipulative trades during the period January 5, 1999 to July 09, 1999 and (ii) that during the period January 2000 to July 2000, shares of Manna Glass were allotted to it in preferential issue which did not bring any additional money into the company and thereafter most of these shares were dumped in the market by promoters/directors of Manna Glass and preferential allottees (named in para 1 above), in order to defraud innocent investors.

10. Omega has not denied any of the transactions relating to manipulative trades or preferential allotment of shares of Manna Glass without consideration and its subsequent sale in the market.

However, it has been submitted that these fraudulent and manipulative transactions have been carried out by Dr. Bina A Shah, Shahkarlal Shakarabhai Rajput and Kantaben Jinabhai Goria in collusion with each other by misusing the name of Omega. It has been submitted that the bank account in question was not opened by it but by persons connected with directors and promoters of Manna Glass who fraudulently substituted two individuals as directors of Omega and opened the bank account and trading account in the name of Omega and applied for shares in the preferential allotment of Manna Glass on receipt of money from promoter entities of Manna Glass. Nupoor Kansara is a person related to promoters/directors of Manna Glass and not to Omega. It has been also submitted that Omega is not connected/related with Manna Glass and its directors and promoters or other preferential allottees and that it is one of the victims of forgery and fraud committed by the promoters/directors of Manna Glass and persons associated/connected with them.

11. In this regard, it is observed that during the first patch of investigation (January 5, 1999 to July 9, 1999), Omega has only entered into some sale transactions which were done after opening of the bank account of Omega on June 1, 1999. This bank account which has been used in the fraudulent transactions was opened with the same branch of Social Co-operative Bank Ltd. at Ahmedabad in which other entities related to Manna Glass and most of the preferential allottees were having their bank account. The address of Omega as per record of the bank and stock broker was - F-29, Harisiddh Chambers, Income Tax, Ashram Road, Ahmedabad. This is not the registered office address of Omega as per MCA records. Omega has submitted that it was never having any office at the aforesaid address and it never opened any bank account with any bank, including the Social Co-operative Bank. It is observed from the certificate of the Chartered Accountant that Omega has not carried out any business since its inception and it had even filed an application with ROC in 2003 for striking off the name of the company. Further, as mentioned in SCN, the money for subscribing to shares in preferential allotment came in the bank account of Omega from the promoter entities of Manna Glass; thus no fund was provided by Omega for the preferential allotment. It is also noted that Omega has filed criminal complaint with police against those persons who operated the bank account by fraudulently introducing themselves as directors of Omega and the police after investigation has filed charge sheet in the matter naming Shankarlal S

Rajput and Nupoor Kansara amongst others as accused. Therefore, prima facie it appears that this bank account and trading account may have been opened and were used by persons other than Omega and that Omega may have no connection with the perpetrators of fraud.

12. It is also noted that as soon as they came to know about the incident of forgery and fraud, the entity intimated about the fact of forgery and fraudulent substitution of directors to ROC vide letter dated August 29, 2000, to Income Tax Authority vide letter dated September 9, 2000 and to CBI vide letter dated September 12, 2000. They had also written a letter to SEBI on March 13, 2003 informing about the incident. Some of these intimations were sent to the authorities long before the issuance of the SCN dated September 29, 2003. Subsequently, the entity has also filed a criminal complaint in the matter and the matter is sub-judice before MM Court. In the facts and circumstances of the case, the subsequent steps taken by the entity corroborate its submissions. With regard to the reliance placed by the noticee upon the opinion of handwriting expert in its defence, it is observed that the opinion of the expert is based on a comparison of the photocopies of signatures and he has himself qualified it as provisional. Therefore, I am not inclined to take that into consideration for the purpose of the present proceedings.

13. In the facts and circumstances narrated above, it is not a fit case to invoke section 11B of the SEBI Act and pass directions thereunder. Accordingly, I hereby dispose of the Show Cause Notice dated September 29, 2003 issued to Omega Avenues Ltd. in the matter of Manna Glass Tech Industries Ltd. without any directions.

Date: June 20, 2017 G. MAHALINGAM Place: Mumbai WHOLE TIME MEMBER