Order in respect of Shri Kartik Parekh and others in the matter of Aftek Infosys Ltd

WTM/PS/03/IVD/ID-2/APRIL/2011 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER IN THE MATTER OF AFTEK INFOSYS LIMITED In respect of Mr. Kartik Parekh, Classic Credit Limited, N. H. Securities Limited, Panther Fincap and Management Services Limited, Saimangal Invest Trade Limited, Triumph Securities Limited, Triumph International Finance India Limited Date of hearing: March 09, 2010 Appearances For Noticees: Mr. R. Krishnan, Advocate for Mr. Kartik Parekh, N.H. Securities Limited, Classic Credit Limited, Panther Fincap and Management Services Limited, Saimangal Invest Trade Limited and Triumph Securities Limited None for Triumph International Finance India Limited For SEBI: Mr. Priyam Ray, Presenting Officer Ms. Anita Kenkare, General Manager Mr. Ansuman Dev Pradhan, Asst. General Manager Mr. Pradeep Kumar, Legal Officer Order Under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulation 44 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 1997 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted investigations into the dealings in the shares of Aftek Infosys Limited (hereinafter referred to as ‘Aftek/ target company’). During the course of investigation, it was inter alia revealed that seven entities/ persons related/ connected to Mr. Ketan Parekh viz. Mr. Kartik Parekh, Classic Credit Limited, N.H. Securities Limited, Panther Fincap and Management Services Limited, Saimangal Investrade Limited, Triumph International Finance India Limited, Triumph Securities Limited (hereinafter all collectively referred to as ‘noticees/ acquirers’) along with Vidyut Investments Limited while acting in concert had acquired the shares of Aftek in excess of 15% of the paid up capital of the company.

2. On completion of the investigation, SEBI inter alia issued a common show cause notice dated March 13, 2003 (hereinafter referred to as ‘SCN’), under Section 11, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) and Regulation 44 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘SAST Regulations) to all the noticees and Vidyut Investments Limited. The SCN alleged that the noticees and Vidyut Investments Limited, acting in concert had acquired 15% of the paid up capital of the target company making it mandatory for them to make a public announcement to acquire further shares as per the provisions of Regulation 10 of the SAST Regulations. Further, it was alleged that the acquirers while acting in concert have not informed the target company when their acquisition had exceeded 5% of the paid capital of Aftek. The SCN, therefore alleged that the acts of the noticees were in violation of Regulation 7(1), 7(2) and 10 of the SAST Regulations. Accordingly, it called upon the noticees to show cause as to why suitable directions under Sections 11 and 11B of the SEBI Act should not be issued against them. The proceedings as against Vidyut Investments Limited have already been concluded vide SEBI order dated January 24, 2007. Hence, I am proceeding with the rest of entities.

3. No reply was received from the noticees. Before proceeding further, an opportunity of hearing was granted to all the acquirers on March 09, 2010. On the date fixed, Mr. R. Krishnan, Advocate appeared on behalf of Mr. Kartik Parekh, Classic Credit Limited, N.H. Securities Limited, Panther Fincap and Management Services Limited, Saimangal Investrade Limited, Triumph Securities Limited and made oral submissions. Mr. Krishnan also placed an order of the Hon’ble Company Law Board dated December 23, 2008 on record in the matters of Panther Fincap and Management Services Limited, Saimangal Investrade Limited and Triumph Securities Limited. I have perused the order of Hon’ble Company Law Board and note that the same restrains the directors to function as directors of the company. Mr. Krishnan also placed on record the order of Hon’ble Calcutta High Court dated July 07, 2005, in the matter of Classic Credit Limited. I note that considerable time has elapsed from the date of alleged violation by these entities and the matter has already been delayed for long. In view of this, I find no merit in keeping these proceedings in abeyance. Considering this, I am proceeding in the matter of Panther Fincap and Management Services Limited, Saimangal Investrade Limited, Triumph Securities Ltd. and Classic Credit Limited on the basis of material available on record.

4. One amongst the acquirers namely Triumph International Finance India Limited failed to appear for the personal hearing despite due intimation issued to it. Pursuant to this, Triumph International Finance India Limited filed an application for the settlement of proceedings through a consent order. The application filed by the noticee was dealt in accordance with the SEBI Circular dated April 20, 2007. Subsequently, the proceedings initiated under the SCN were revived as the application for consent was rejected by SEBI. Having seen that sufficient opportunity has been given to the noticee to explain its case, I am compelled to proceed with the matter on the basis of material available on record, having complied with the principles of natural justice.

5. I have carefully considered the SCN issued to the acquirers. I have noted that the acquisition of the noticees of the shares of Aftek leading to the violation of SAST Regulations is as given below: Name Client ID Shareholding as % to Aftek’s on March 02, 2001 equity Kartik Parekh 10000893 5,300 0.09 Classic Credit Ltd. 10000650 37,261 0.62 N.H. Securities Ltd. 10194451 30,000 0.50 Panther Fincap 10000391 62,784 1.05 Saimangal Investrade Ltd. 10032270 2,03,000 3.38 Triumph International 10052490 97,000 5.18 Finance India Ltd. 10001090 10,000 10003176 2,04,000 Triumph Securities Ltd. 10055870 1,69,000 2.82 Total 8,18,345 13.64

6. I note that the noticees namely Kartik Parekh, Panther Fincap and Management Services Limited, Saimangal Investrade Limited, N.H. Securities

Limited, Triumph Securities Ltd. and Classic Credit Limited were directly related to Mr. Ketan Parekh and were being commonly referred to as Ketan Parekh entities as noted in the orders issued by SEBI on December 12, 2003 and March 08, 2004. Further, these noticees were having close association among themselves as these were either having the common directors or the common addresses.

Further, I note that Triumph International Finance India Limited vide SEBI order dated May 16, 2002 and March 08, 2004, was found to have indulged in manipulative trades in various scrips along with the other entities controlled by Ketan Parekh. Hon’ble Securities Appellate Tribunal (hereinafter referred to as ‘SAT’) vide its order dated May 04, 2007, after considering the material on record dismissed the appeal of the noticee on merits while making an observation that Triumph International Finance India Limited was a close associate of Ketan Parekh and his investment/ broking companies.

7. I note that the SEBI had initiated multiple proceedings as against the acquirers i.e. the present proceedings as well as the adjudication proceedings for violation of Regulation 7 and 10 of the SAST Regulations. The Adjudicating Officer vide his order dated April 22, 2003 had found that the acquirers are guilty of violating the provisions of Regulation 7 and 10 of the SAST Regulations. The said adjudication order was challenged before Hon’ble SAT. Hon’ble SAT vide its order dated December 08, 2006 had partly allowed the appeal of the acquirers. While upholding the violation of Regulation 7 of the SAST Regulations as against the acquirers, the violation of Regulation 10 of the SAST Regulations was set aside.

8. I observe that SEBI had found the acquirers guilty of violating the provisions of Regulation 7 of SAST Regulations, which was also upheld by the Hon’ble SAT. The two separate proceedings i.e. adjudication and proceedings under Section 11(4) and 11B are pursued in respect of the same set of facts. Therefore, I hold the acquirers guilty of contravening the provisions of Regulation 7 of SAST Regulations. In respect of the alleged violation of Regulation 10 of SAST Regulations by the acquirers, I note that Hon’ble SAT vide its order dated December 08, 2006 has set aside the findings of the Adjudicating Officer in his order dated April 22, 2003, finding the acquirers guilty of contravening the said provisions of SAST Regulations. From the records, I find that the said order of Hon’ble SAT in setting aside the SEBI order in respect of the violation of Regulation 10 of the SAST Regulations has not been challenged. Therefore, I do not find it proper to deal with the said allegation in this order.

9. I note that the noticees namely Kartik Parekh, Classic Credit Limited, Panther Fincap and Management Services Limited and Saimangal Investrade Limited have been prohibited from buying, selling or dealings in securities for a period of fourteen years vide SEBI Order dated December 12, 2003. As regards entities namely N.H. Securities Limited, Triumph Securities Limited and Triumph International Finance India Limited, the order of SEBI dated November 12, 2007 prohibited them from buying, selling or dealing in securities for a period of five years. Further, the certificate of registration as a stock-broker granted to Triumph International Finance India Limited was cancelled by the order of SEBI dated May 16, 2002, whereas those of N.H. Securities Limited and Triumph Securities Limited have been cancelled vide a common order of SEBI dated March 8, 2004. Therefore, no further directions are issued against the noticees.

10. Considering the facts and circumstances of the case, I, in exercise of the powers conferred upon me under Sections 11 and 11B of the SEBI Act read with Regulation 10 and 44 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, dispose of the show cause notice dated March 13, 2003 issued to the noticees accordingly.

DATE : 19/04/2011 PRASHANT SARAN PLACE : MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA