Order in respect of Vikram Studio and Labs Private Limited, Mr. B.S. Ranga and Mr. B. Ranga Vasanth in the matter of Datasoft Application Software (India) Limited

WTM/PS/76/IVD/ID-01/MARCH/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER IN THE MATTER OF DATASOFT APPLICATION SOFTWARE (INDIA) LIMITED In respect of Vikram Studio and Labs Private Limited, Mr. B.S. Ranga and Mr. B. Ranga Vasanth Date of hearing: August 25, 2011 Appearances: For Noticees: Mr. B. Ranga Vasanth Mr. Bharat Joshi, Advocate Mr. Mehul Shah, Advocate For SEBI: Ms. Anju Mahendra, Presenting Officer Ms. Medha Sonparote, Deputy General Manager Ms. Anitha Anoop, Deputy Legal Adviser Mr. Pradeep Kumar, Assistant Legal Adviser Mr. Naveen Kumar, Manager

ORDER Under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted investigation in respect of trading in the shares of Datasoft Application Software (India) Limited (hereinafter referred to as ‘Datasoft’) for the period from November 06, 2000 to January 25, 2001. The scrip of Datasoft, during the period of investigation was listed at the Bombay Stock Exchange (hereinafter referred to as ‘BSE’) and Ahmedabad Stock Exchange (hereinafter referred to as ‘ASE’).

2. The investigation inter alia revealed that Datasoft came out with preferential issue of 1,20,00,000 shares for cash @ `10 per share with a premium of `17 per share on April 27, 2000 pursuant to the resolution of the Board of Directors dated January 28, 2000 under Section 81(1A) of the Companies

Act, 1956. The preferential issue was to be made to the persons other than the promoters. The amount for the shares in the preferential issue was to be paid in two tranches; firstly `1 per share towards the nominal value and a premium of `1.70 per share on the application and `9 towards nominal value and `15.30 per share towards premium on first and final call before August 31, 2000. Later on, the time for payment of final call was extended by Datasoft till April 27, 2001 to give the allottees adequate time to pay the final call money. A total of 41 entities had applied for the preferential allotment of Datasoft. Out of these, 16 applicants had applied for 1,18,50,000 shares and they paid `3,19,95,000 towards application money. Later on, these 16 applicants had defaulted in making the payment of the call money. The application money of these entities who had not paid the balance amount even after the extended time, was forfeited.

3. SEBI also investigated the flow of funds for the preferential issue of shares. Out of these 16 applicants, the share application money in respect of 10 share applications for 74,31,000 shares amounting to `2,00,63,700 was found to have been paid through the account of one Shalibhadra Securities Limited (hereinafter referred to as ‘Shalibhadra’). It was revealed that one of these applications was made by Vikram Studio and Labs Private Limited (hereinafter referred to as ‘Vikram’).

4. On completion of the investigation, SEBI issued a Show Cause Notice (hereinafter referred to as ‘SCN’) dated December 31, 2009 to Vikram and its directors namely Mr. B.S. Ranga and Mr. B. Ranga Vasanth (hereinafter collectively referred to as the ‘noticees’ and individually by their respective names) under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’). The SCN alleged that Vikram had applied for 7,25,000 shares in the preferential issue of Datasoft, Mr. B. Ranga Vasanth had lent the name of Vikram to one G.S. Sridhar and his group for making investments in the preferential issue of Datasoft. The SCN, also alleged that the acts of the noticees were in violation of Regulation 6(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (hereinafter referred to as ‘PFUTP Regulations’). Accordingly, the SCN called upon the noticees to show cause as to why suitable directions under Section 11 read with Section 11B of the SEBI Act including the direction of restraining them from accessing the securities market should not be initiated against them.

5. B. Ranga Vasanth vide his letter dated January 28, 2010 replied to the SCN. Further, he also sought certain documents vide his letter dated February 17, 2010. Thereafter, the noticees were afforded an opportunity of inspection of the documents on August 22, 2011 and take copies of documents. Before proceeding further, an opportunity of personal hearing was granted to the noticees on August 25, 2011. On the date fixed for personal hearing, Mr. B. Ranga Vasanth, director appeared along with Mr. Bharat Joshi, Advocate and Mr. Mehul Shah, Advocate. During the personal hearing, the director of the company also filed the written submissions which were taken on record.

6. The submissions of the noticees are almost similar and are stated below:

- Vikram has not applied for 7,25,000 shares of Datasoft. They had neither signed nor forwarded the application for the preferential allotment of shares. The share application form does not bear the correct registered address of Vikram. - Vikram had stopped functioning since the year 1970-71 and it was deregistered from the records of Registrar of Companies since 2002. Vikram did not have any bank account/ demat account in Mumbai. - Managing Director of Vikram, Mr. B.S. Ranga had expired in December, 2010. - Relationship of Shalibhadra with Vision Technologies (India) Limited (hereinafter referred to as ‘Vision’) has been rejected by Hon’ble SAT vide order dated February 20, 2006. Hon’ble SAT vide its order has set the issue at rest by holding that Vision has received absolute consideration for the funds paid to Shalibhadra for investments under the PMS scheme. A sum of `2.9 crore were advanced to Shalibhadra for investment based on assured returns for which 8 lakh shares of Electrolux Kelvinator were transferred to Vision’s demat account in SCHIL. - No contra-entry of `1,02,00,000 can be seen in the Bank of Punjab statement of Vision allegedly transferred to Shalibhadra. - They have no knowledge that the shares were taken by Tukaram, an employee of G.S. Sridhar group of companies. - No material on record to infer that they were part of the alleged transactions and the entire transaction had taken place without their knowledge. No material on record to show that they were associate of G.S. Sridhar. - The SCN has been addressed to VSLPL and its directors, however, the allegations are addressed against Vision.

7. I have carefully considered the show cause notice issued by SEBI, the respective replies received and the material available on record. Based on these, the issue arises for my consideration is: Whether the noticees had made an application in the preferential issue of Datasoft and acted in a fraudulent manner?

8. Whether the noticees had made an application in the preferential issue of Datasoft and acted in a fraudulent manner?

a. I note that out of the total of forty one (41) entities who had applied for the preferential allotment in the scrip of Datasoft, 25 applicants had applied for mere 1,50,000 shares and they paid `4,05,000 as application money and the remaining 16 applicants had applied for as many as 1,18,50,000 shares and paid `3,19,95,000 towards application money. However, these 16 applicants defaulted in making the payment of the call money and therefore their application money was forfeited. Thus, Datasoft forfeited over 1.18 crore out of 1.20 crore shares allotted under preferential issue through private placement.

b. I note that out of these 16 applicants, the share application money in respect of 10 applicants for 74,31,000 shares amounting to `2,00,63,700 was paid through cheques issued from the account of one Shalibhadra Securities Limited (hereinafter referred to as ‘Shalibhadra’) maintained with the Central Bank of India, Share Bazar branch, Mumbai. The source of funds in the account of Shalibhadra revealed deposit of two cheques amounting to `2,02,77,500 (i.e. `1,00,77,500 from the account of Narven Finance & Investments Limited and `1,02,00,000 from the account of Vision). The cheque issued from the account of Vision was against the deposit of `2,00,00,000 received by them from one Burlington Finance Limited, Kolkata.

c. I note that the noticee namely Vikram was one of the applicants who had applied for 7,25,000 shares out of the total 10 applications and for such shares the funds were provided by Shalibhadra as discussed in sub-paragraph above. I note that B. Ranga Vasanth, the director of Vikram was also the Managing Director of the company namely Vision at the relevant point of time from whom Shalibhadra had received the funds. I observe that the director of Shalibhadra was approached by one G.S. Sridhar for seeking help to procure the subscription for the preferential issue of Datasoft. It has been alleged in the SCN that Vision had acted as a conduit for making an application by Vikram in the preferential issue of Datasoft. However, I note that the noticees have denied their role in the preferential issue of Datasoft.

d. I note the submission of B. Ranga Vasanth, that he knew G.S. Sridhar who was an investor in Vision since January, 2000 and as a C.A. from Hyderabad. B. Ranga Vasanth in his submission has also said that Vikram had stopped its operations since the year 1970-1971. It has been further submitted by him that they had neither made nor signed any application in the preferential issue of Datasoft. Further, the address given of Vikram in the application form is also not correct. B. Ranga Vasanth has also submitted that Vikram did not have any bank account/ demat account in Mumbai.

e. Considering the above, I note that the share application form of Vikram does not have the correct address of the company. Further, the application form does not find mention of the PAN/ demat account details. The only evidence on record to suggest the involvement of the noticees in making the application, is the signature on the share application form which the noticees have already denied. I note that pursuant to the allotment of the partly paid shares of Datasoft, the shares were received by one Tukaram (an employee of G.S. Sridhar). Taking note of all these facts and in the absence of any other corroborative evidence regarding the involvement of the noticees, I am inclined to give the benefit of doubt to the noticees.

f. As regards the allegation regarding the fund movement, I have seen the bank statement of Vision and find a debit entry of `1,00,00,000 to Shalibhadra on April 22, 2000. I observe that the amount of this entry do not match with the allegation in the SCN. I have also seen the bank statement of Shalibhadra and find a credit entry of `1.02 Crores in its bank account. However, the record does not make it clear that the money came from the account of VTIL.

g. From the above discussion, I do not find sufficient evidence on record to show that the noticees had violated Regulation 6(a) of the PFUTP Regulations. Taking in view of this, I do not consider this a fit case to impose any penalty.

9. I note the submission of B. Ranga Vasanth that the operations in Vikram are no longer in existence since 1970-1971. It has been checked independently by SEBI that the name of Vikram has been struck off since 2002. In view of the same the proceedings as against Vikram has become infructuous.

Further, I note that the noticee namely Mr. B.S. Ranga had expired on December 12, 2010. I have seen the documents in support of the same. Having seen the same, I am of the view that since the proceedings were initiated against the alleged personal acts of omission and commission of a person who is no more alive to face the penalty, the present proceedings against late Mr. B.S. Ranga are liable to be abated. Hence, the present proceedings against Late Mr. B.S. Ranga stands abated.

10. In the facts and circumstances of the matter, I, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992, hereby dispose of the show cause notice issued to Vikram Studio and Labs Private Limited, Late Mr. B.S. Ranga and Mr. B. Ranga Vasanth without imposing any penalty or direction.

DATE : MARACH 5, 2012 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA