Order 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 Rakesh Chandak and Manoj Chandak 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 (now 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. The OFS opened on October 27, 1999 and closed on October 30, 1999. Pursuant to the OFS, the shares of HTL 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.

2. The Company had an equity capital of Rs. 23,96,10,000/- comprising of 2,39,61,000 shares of Rs. 10/-. The equity capital was held by its promoters in the following manner :

Name of the promoter shareholders No. of shares held Percentage holding (%) Euro Offshore Investments Limited 98,11,000 40.95% ("Euro Offshore") Dalhousie Securities Limited ("Dalhousie 61,49,980 25.67% Securities") Order in the matter of Home Trade Limited.

Ways Inc. 40,00,000 16.69% Euro Discover Limited ("Euro Discover") 20,00,000 8.35% Euro Allied Limited ("Euro Allied") 20,00,000 8.35% Sanjay Agarwal 10 0% Rakesh Chandhak 10 0% Total 2,39,61,000 100%

3. The shareholding pattern, post the OFS, was as follows: Name of the Percentage Sr.No. Shareholders/Category No. of Shares held shareholding (%) 1 Euro Offshore 38,20,750 15.94% 2 Dalhousie Securities 61,49,980 25.67% 3 Ways Inc. 40,00,000 16.69% 4 Euro Discover 20,00,000 8.35% 5 Euro Allied 20,00,000 8.35% 6 Sanjay Agarwal 10 0% 7 Rakesh Chandak 10 0% 8 Public shareholders 59,90,250 25% Total 2,39,61,000 100% Sr. nos. 1-7 are promoters

4. Securities and Exchange Board of India ("SEBI") conducted an investigation into OFS by Euro Offshore and the subsequent listing and trading of shares of HTL at PSE and BgSE. On the basis of the investigation, SEBI had issued a common Show Cause Notice ("SCN") dated April 1, 2004 to (i) Sanjay Aggarwal, (ii) Subodh Bhandari, (iii) N.S.Trivedi, (iv) Ketan Sheth, (v) 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) Dhananjay Aggarwal, (xiii) Vijendra Kumar Surana, (xiv) Dilip Jain, (xv) Manoj Chandak, (xvi) Manoj (Mike) A. Shah, (xvii) Allen James Macmillan, (xviii) Russell H. Doekenkroger Jr., (xix) Shashank Ranade, (xx) Salil D. Gandhi, (xxi) Vijay Kumar Modi, (xxii) Ms. Tanya Sek Sum, (xxiii) Michael V K Lo Tiap Kwong and (xxiv) Ways India Limited.

5. The SCN contains the following allegations against the Noticees (i) to (xxiv):- i. Manipulations in the OFS: a) Promoter group of HTL (Ketan Sheth and his associate/family members and associate/connected firms) and certain directors/key management personnel of the HTL 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 at the stock exchanges using the proceeds of the OFS; d) 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) The shares were listed on 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 (Rajneesh Karanpuria and Rajendra Veerkar) brought in more clients in whose names the trading were done at PSE and BgSE. d) Orders on behalf of most of the clients were placed by Ketan Sheth, and employees of HTL viz., Rajneesh Karanpuria and 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) 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.

6. 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 SCRR. The aforesaid Noticees are 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.

7. It is noted that the proceedings initiated vide SCN dated April 01, 2004 against all the Noticees except two Noticees Rakesh Chandak and Manoj Chandak were concluded vide SEBI Order No. WTM/GA/54/ISD/02/06 dated February 16, 2006, SEBI Order No. WTM/ PS/ 125/ EFD/ DEC/2015 dated December 31, 2015, SEBI Order No. SEBI/WTM/SR/EFD-DRA1/22/03/2017 dated March 27, 2017 and SEBI Order No. SEBI/WTM/SR/EFD-DRA1/68/09/2017 dated September 5, 2017. The brief details of the aforesaid four orders are as follows:- (a) The proceedings initiated vide SCN dated April 01, 2004 against Russell H. Doekenkroger Jr., Dilip Jain, Vijendra Kumar Surana, Salil D. Gandhi, Vijay Kumar Modi, Shashank Ranade and 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 ".

(b) The proceedings initiated vide SCN dated April 01, 2004 against Sanjay Aggarwal, Subodh Bhandari, N.S.Trivedi, Ketan Sheth, M/s Dalhousie Securities, Home Trade Limited, Euro Offshore, M/s Ways Inc., Euro Allied Limited, Euro Discover Limited, Dhananjay Aggarwal and 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.

(c) The proceedings initiated vide SCN dated April 01, 2004 against Ms.Tanya Sek Sum and Mr. Michael VK Lo Tiap Kwong were disposed of vide SEBI Order dated March 27, 2017, without any directions, wherein it was observed that “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.”

(d) The proceedings initiated vide SCN dated April 01, 2004 against Allen James Macmillan was disposed of vide SEBI Order dated September 5, 2017, wherein it was observed that “I also note that the Noticee Mr. Allen James Macmillan failed to file any reply to the SCN till date. Considering the conduct of the Noticee as regards the present proceedings, I am of the view that the case of the Noticee is also similar to that of the entities mentioned in the SEBI Order bearing number WTM/PS/125/EFD/DEC/2015 dated December 31, 2015. Vide the said order, HTL and its promoters/key managerial personnel 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. Considering the facts and circumstances of the present case and taking into account the fact that the Noticee Mr. Allen James Macmillan failed to submit any reply in the instant proceedings and further he has not availed the opportunity of personal hearing granted to him, I find that the charges levelled against Mr. Allen James Macmillan are proved on the basis of the evidence available on record.”

8. Even though the proceedings against 22 entities were completed, the proceedings against Rakesh Chandak and Manoj Chandak were kept pending as service of SCN and hearing notice was not effected. Rakesh Chandak was the promoter-director of HTL and Manoj Chandak was the director of HTL during the period. The SCNs issued to the two Noticees, i.e. Rakesh Chandak and Manoj Chandak 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.

9. In response to the SCN, vide letter dated May 16, 2011, Rakesh Chandak sought additional time to reply. However, no further communication or reply has been received from Rakesh Chandak till date.

10. Manoj Chandak replied to the SCN vide letter dated March 16, 2011 and he submitted the following: i. “I do not have any financial or other interest in the said company. In fact, I have resigned from directorship w.e.f. 17.02.2000 and accordingly the company had accepted my resignation and filed with ROC also. The same has also been reflected in the Annual Return of the Company. Further, I was just one of the dormant Director just for 13 months from 14.01.1999 to 17.02.2000 only. ii. Further, we would like to inform you that, we are not associated with the company since last more than 11 years now. In fact I was not in touch with any of the Directors or promoters since then. iii. At the time of Directorship, neither I attended any Board of Directors meeting nor was I shareholder of the company at any point.”

11. Thereafter, an opportunity of personal hearing was scheduled for the two noticees viz., Rakesh Chandak and Manoj Chandak on July 27, 2016. However, the hearing notices issued to these entities returned undelivered. The said notices were also published on the SEBI website. Subsequently, another opportunity of personal hearing was granted to the entities on September 27, 2016.

12. It is noted that the hearing notices were affixed at the last known addresses of Rakesh Chandak and Manoj Chandak. Despite the same, no one appeared on behalf of Rakesh Chandak and Manoj Chandak. Another opportunity of hearing was granted on April 24, 2018, to the two noticees vide hearing notice dated April 11, 2018 at the alternate address available on record. On April 24, 2018, Rakesh Chandak and Manoj Chandak appeared and inter alia made the following submissions :-

 Rakesh Chandak submitted that during the relevant time he was working with Lloyd securities Limited which was a subsidiary of Lloyd finance limited.  As an employee of Lloyd securities limited, he was asked by Mukesh Gupta to hold 10 subscription shares of HTL and be a part of HTL board.  Manoj Chandak, a relative of Rakesh Chandak, was introduced to the HTL by Rakesh Chandak.  Later on when they realized that Mukesh Gupta was not a part of HTL they resigned from the company together on September 1999.  Rakesh Chandak submitted that he received salary from HTL till July 1999 and both of them attended one board meeting during this period but the issue of OFS was never discussed before them.  They requested time of 7 days to submit a detailed reply to the SCN and the same was granted. The two noticees failed to submit any reply on merits to the SCN till date.

13. I have considered the material available on record such as Investigation Report, SCN issued to Rakesh Chandak and Manoj Chandak and the four orders passed against the twenty two other common noticees. In the light of the same, I shall now proceed to deal with the charges levelled against the noticees in the SCN. The SCN alleges that the Noticees viz., Rakesh Chandak and Manoj Chandak (hereinafter referred to as “the Noticees”) contravened the provisions of regulations 3, 4 (a), (b), (c) & (d) and 6 (a) of the PFUTP Regulations. The relevant 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;

14. 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. Similar view was taken in the case of Tanya Sek Sum and Michael VK Lo Tiap Kwong in SEBI Order dated March 27, 2017. As the present noticees were also neither involved in the decision making process nor day-to-day functioning of HTL, I find that the roles of Rakesh Chandak and Manoj Chandak are also similar to that of the entities mentioned in the aforesaid SEBI Orders dated February 16, 2006 & March 27, 2017.

15. Since no specific facts or evidence are brought against the Noticees viz., Rakesh Chandak and Manoj Chandak substantiating their role in respect of the alleged violations, I do not find any compelling reason to deviate from such view on the basis of records placed before me.

16. 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., Rakesh Chandak and Manoj Chandak.

17. 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., Rakesh Chandak and Manoj Chandak without any directions.

18. This order shall come into force with immediate effect.

Date: October 3, 2018 G. MAHALINGAM Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA