Order in the matter of M/s. Karishma Floriculture Limited

DIRECTIONS UNDER SECTION 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND REGULATION 11 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 2003 AGAINST KARISHMA FLORICULTURE LIMITED, MR. S. N. BANSAL, SRP INVESTMENT, DOMINO FINANCE, SUMAN NURSERY, KAKARIA INVESTMENT, ANZ INVESTMENT, KARISHMA INDUSTRIES LIMITED, KFL FINANCIAL & SECURITIES LIMITED, MANISH CONSTRUCTION, NIPPIN INVESTMENT AND ITS PARTNER MR. SANJEEV JAIN, MR. AMRIK SINGH, MR. MAGAN PREET SINGH, MR. CHARANJEET SINGH, MR. PUSHDEEP SINGH, MR. MANDEEP SINGH, MRS. SATNAM KAUR AND JBS BUILDERS AND TRADERS PRIVATE LIMITED IN THE MATTER OF KARISHMA FLORICULTURE LIMITED 1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) had conducted an investigation into the unusual price rise in the shares of Karishma Floriculture Limited (hereinafter referred to as the Company) during the period between August 1995 and January 1996, pursuant to the receipt of certain complaints in that regard. The share price of the Company had increased from `11/- on August 1, 1995 to `27.25/- on August 29, 1995 and there was another spurt in the share price from November 24, 1995 and the price went up to `31.87/- on January 8, 1996 and fell thereafter.

The investigation observed that Mr. S.N. Bansal (the chairman/managing director and promoter of the Company) along with certain entities namely SRP Investment, Domino Finance, Suman Nursery, Kakaria Investment, ANZ Investment, Karishma Industries Limited, KFL Financial & Securities Limited, Nippin Investment and Manish Construction and the Amrik Singh Group (comprising Mr. Amrik Singh, Mr. Magan Preet Singh, Mr. Charanjeet Singh, Mr. Pushdeep Singh, Mr. Mandeep Singh, Mrs. Satnam Kaur, JBS Builders and Traders Private Limited and Sharan Fincap Limited) had indulged in trading in the shares of the Company in a manipulative manner, prima facie in contravention of the provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as the PFUTP Regulations). The Company was also alleged to have contravened Section 77(2) of the Companies Act, 1956 by financing the purchases of its shares and also of not redressing investors’ grievances. Nippin Investment was alleged to have acted as an unregistered sub-broker, in contravention of Section 12(1) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act) read with Rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Rules, 1992 (since rescinded).

On the basis of the findings of the investigation, SEBI had subsequently issued the following show cause notices under Section 11B of the SEBI Act and Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003 (hereinafter referred to as the PFUTP Regulations 2003):

a. A show cause notice dated February 21, 2005 to Karishma Floriculture Limited (hereinafter referred to as the Company), Mr. S.N. Bansal (the promoter/Chairman and Managing Director of the Company) and the entities namely, SRP Investment, Domino Finance, Suman Nursery, Kakaria Investment, ANZ Investment, Karishma Industries Limited, KFL Financial & Securities Limited and Manish Construction; b. A show cause notice dated February 21, 2005 to Mr. Amrik Singh, Mr. Magan Preet Singh, Mr. Charanjeet Singh, Mr. Pushdeep Singh, Mr. Mandeep Singh, Mrs. Satnam Kaur and JBS Builders and Traders Private Limited; and c. A show cause notice dated May 27, 2005 issued to Nippin Investment and its partner Mr. Sanjeev Jain. (The said notice was issued to Nippin Investment and its partners Mr. Rohit Jain and Mr. Sanjeev Jain and the proceeding in respect of Mr. Rohit Jain was disposed of by SEBI vide a Consent Order dated February 15, 2010.) The aforesaid notices required the concerned persons/entities to show cause as to why directions under Section 11B of the SEBI Act read with Regulation 11 of the PFUTP Regulations 2003, should not be issued.

2. The notice issued to the Company, its managing director and the eight entities had returned undelivered. Thereafter, as SEBI came to know of two other addresses of the Company and its promoter Mr. S.N. Bansal, notices were sent to their addresses at Sohna (Haryana) and Gandhidham (Kutch, Gujarat). The notices sent to the Haryana address returned with a remark ‘addressee not available’ and was refused to be accepted. Though, the notices sent to the Gandhidham address were delivered, they were subsequently returned to SEBI by an entity Shree Ambica Commercial Co. Subsequently, an opportunity of personal hearing was granted to the Company and the others on June 1, 2007. Though, the notice dated May 28, 2007 informing the entities of the hearing returned undelivered, a letter dated May 29, 2007 was received from Mr. S.N. Bansal seeking adjournment of the hearing. Thereafter, another opportunity of hearing was granted on February 18, 2009. The said letter also returned undelivered. Prosecution proceeding under Section 24 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act) was also initiated against the Company and Mr. S.N. Bansal before the Court of the Hon’ble Chief Metropolitan Magistrate at New Delhi. As per the information available, Mr. S.N. Bansal has been declared as a proclaimed offender and the same has also been posted in the website of SEBI. In response to the notice issued to Nippin Investment and its partners, the said entity, vide letter dated June 23, 2005 had denied the charges. Though, the parties were afforded an opportunity of inspection of documents in the matter on July 22, 2005, they failed to appear. Thereafter, SEBI had furnished copies of the documents to them, vide letter dated October 4, 2005. However, no reply was received from Nippin Investment and Mr. Sanjeev Jain pursuant to the supply of such documents. They did not even appear in the hearing scheduled on February 18, 2009. Meanwhile, an application for passing of a Consent Order was received from Mr. Rohit Jain and the proceeding against him was disposed of as stated earlier.

3. In respect of the notices issued to Mr. Amrik Singh, Mr. Magan Preet Singh, Mr. Charanjeet Singh, Mr. Pushdeep Singh, Mr. Mandeep Singh, Mrs. Satnam Kaur and JBS Builders and Traders Private Limited, it is noted that one Gagandeep Singh (son of Mr. Amrik Singh), vide letter dated February 28, 2005 informed SEBI that Mr. Amrik Singh and Mr. Magan Preet Singh were out of station and that they would revert as soon as they return. The notices sent to the others had returned. Thereafter, when the notices were sought to be delivered on the others, Mr. Amrik Singh refused to receive the notices on their behalf. Though, none of the persons/entities appeared for a hearing scheduled on June 1, 2007, Mr. Gagandeep Singh appeared in a hearing scheduled on February 18, 2009 on behalf of Mr. Amrik Singh, Mr. Magan Preet Singh and JBS Builders and Traders Private Limited. Thereafter, a letter dated April 8, 2009 was received from Mr. Amrik Singh, wherein he had made submissions for himself and also on behalf of Mr. Magan Preet Singh and JBS Builders and Traders Private Limited.

4. I have considered the aforesaid show cause notices and other material available on record. From the said notices, I note that the Company had come out with its initial public issue of 37,50,000 equity shares of `10/- each. The said issue had opened on January 19, 1995 and closed on January 23, 1995. Pursuant to the listing of the Company at the Delhi Stock Exchange Limited (DSE), the share price opened at `13.50/- on April 10, 1995. Subsequently, unusual upward movement in the share price was noticed at DSE. From a low of `11/- on August 1, 1995, the price went up to `27.25/- on August 29, 1995. Further, there was another spurt in the share price of the Company from November 24, 1995 and the price touched an all time high of `31.87/- on January 8, 1996. The share price fell thereafter. SEBI had initiated an investigation into the aforesaid unusual price rise based on certain complaints received in that regard. The said investigation had found that the shares of the Company were actively traded from the date of its listing at DSE by entities alleged to be the “fronts” of the Company’s promoter/chairman and managing director, Mr. S.N. Bansal. The entities were SRP Investment, Domino Finance, Suman Nursery, Kakaria Investment, ANZ Investment, Karishma Industries Limited, KFL Financial & Securities Limited, Nippin Investment and Manish Construction (hereinafter collectively referred to as the entities). The allegation in the notice is that Mr. S.N. Bansal had through the entities and the Amrik Singh Group had dealt in the shares of the Company in a malafide manner to manipulate the share price during the relevant price. As per the notice, the Amrik Singh Group comprised of persons/entities, namely, Mr. Amrik Singh, JBS Builders and Traders Private Limited, Sharan Fincap Limited (of which Mr. Amrik Singh is a director), Mr. Magan Preet Singh (son of Mr. Amrik Singh), Mr. Charanjeet Singh (brother-in-law of Mr. Amrik Singh), Mr. Pushpdeep Singh, Mrs. Satnam Kaur and Mr. Mandeep Singh. Annexure A to the show cause notices has sought to bring out the relationship between Mr. S.N. Bansal and the entities. The relationship between Mr. S.N. Bansal inter alia with the other entities is brought out from the following facts. The nexus between Mr. S.N. Bansal (promoter/chairman and managing director of the Company) and SRP Investment is based on the following facts:

a. Mr. S.N. Bansal (in his statement to Delhi Police on June 18, 1996) stated that he is the owner of SRP Investment along with Domino Finance and that all the affairs relating to these entities were managed by him. b. Mr. J P Totla (proprietor of M/s. J P Totla & Co., which had traded for Domino Finance and SRP Investment in the shares of the Company) had stated that Domino Finance and SRP Investment belonged to Mr. S.N. Bansal. c. Agbros Capital Private Limited had also stated that SRP Investment and Kakaria Investment are associate entities of Mr. S.N. Bansal. d. Mr. R P Mahipal, the proprietor of M/s. Aggarwal Securities, which had executed huge trades for SRP Investment (with Kakaria Investments, Domino Finance) has informed that those firms were introduced by Mr. S.N. Bansal and that all the dealings for the said firms were done by Mr. S.N. Bansal. e. SMC Share Broking Limited (which had purchased shares on behalf of SRP Investment) had informed SEBI that the said entity (SRP Investment) was managed by Mr. S.N. Bansal and that he used to be its contact person. f. Mr. Nirannjan Periwal (proprietor of M/s. Vasu & Co., sub broker of Choraria Investment Private Limited, member, DSE) had stated that SRP Investment was a benami concern of Mr. S.N. Bansal.

g. The entity, SRP Investment had given a cheque for Rs.7.50 lacs to Amrik Singh Group for the purchase of the shares of the Company. h. SRP Investment had a bank account number 2047 with Punjab & Sind Bank, Nehru Place Branch. The said account was opened in series with other associates (Suman Nursery with account no. 2046 and Domino Finance with account no. 2048) of Mr. S.N. Bansal on December 3, 1994. All the aforesaid bank accounts were introduced by one A.P. Singh, who in his on November 7, 1996, stated that he did not know any of these entities and that the accounts were introduced at the request of Mr. S.N. Bansal. It was further stated that Mr. S.N. Bansal had accompanied the account holders to the bank and requested him to introduce their account stating that these were his own accounts. The nexus between Domino Finance and Mr. S.N. Bansal is brought out from the following facts: i. Mr. J P Totla, whose firm was trading for Domino Finance and SRP Investment in the shares of the Company, had stated that those firms belong to Mr. S.N. Bansal. ii. Domino Finance had advanced a payment of Rs.10 lakhs to the Amrik Singh Group for purchase of shares of the Company. iii.

As per the statement (made before the Police) of Mr. S.N. Bansal, Mr. Ravinder Sharma was the clerk in Domino Finance and that Mr. Ravinder Sharma has admitted of working with Mr. S.N. Bansal in various firms promoted by him during 1985 to 1997. iv. The bank account of Domino Finance was introduced by Mr. A.P. Singh at the request of Mr. S.N. Bansal, who had stated that this firm was his own. v. Mr. Ashish Gupta who operated the bank account of Domino Finance had in his letter dated June 24, 1996 to Mr. S.N. Bansal, stated that he was a junior engineer in the Company and that the accounts were opened and signed the documents at the directions of Mr. S.N. Bansal. The said letter was issued after Mr. Ashish Gupta had received notices from JBS Builders and Traders Private Limited (entity part of the Amrik Singh Group) for dishonor of cheques issued by Domino Finance. Mr. S.N. Bansal has signed on the said letter stating that “all the liabilities of Domino Finance will be borne by me.” The fact that Mr. Ashish Gupta was an engineer with the Company was also confirmed by another ex-employee Mr. Ravinder Sharma in his statement before SEBI. vi.

Further, as stated above, Mr. S.N. Bansal, in his statement before Delhi Police recorded on June 18, 1996 had stated that he is the owner of SRP Investment along with Domino Finance and that all the affairs relating to them were managed by him. The nexus between Suman Nursery and Mr. S.N. Bansal is brought out from the following facts: a. The bank account of this firm was introduced by Mr. A.P. Singh at the request of Mr. S.N. Bansal.

b. As per the bank account opening form, the proprietor was shown as Mr. Bhuvaneshwar Prasad Sharma. The said person has been named as a key employee of Mr. S.N. Bansal by another ex-employee Mr. Ravinder Sharma in his statement before SEBI. c. Suman Nursery had advanced a payment of Rs.15 lacs and Rs. 5 lacs to Amrik Singh Group for purchase of shares of the Company during the relevant period. Kakaria Investment is related to Mr. S.N. Bansal on the basis of the following facts: i. Mr. Maganpreet Singh has stated that Kakaria Investment was a front entity of Mr. S.N. Bansal. The MoUs dated November 20, 1995 and December 15, 1995 entered into between Kakaria Investment and Mr. Maganpreet Singh/Mr. Charanjeet Singh and between Mr. S.N. Bansal and Mr. Maganpreet Singh/Mr. Charanjeet Singh indicates that Karkaria Investment was an entity used as a ‘front’ by Mr. S.N. Bansal. ii. Mr. Amrik Singh had purchased 3 lakhs shares of the Company from the members of LSE at the behest and in the name of Mr. S.N. Bansal’s firms namely, Kakaria Investment and ANZ Investment and the said purchases were made pursuant to an agreement with Mr. S.N.

Bansal. iii. Agbros Capital Private Limited had stated that SRP Investment and Kakaria Investment were the associate entities of Mr. S.N. Bansal and that it had sold shares for these entities. Further, Mr. R.P. Mahipal, whose company Agbros Capital Private Limited was trading for Kakaria Investment had stated that the said entity was introduced by Mr.S.N. Bansal and he was the dealing person for this firm. As stated earlier, Nippin Investment is a firm managed by Mr. Rohit Jain and Mr. Sanjiv Jain and that as per the information provided by the said entity; it had mainly traded on behalf of SRP Investment and Domino Finance. Further, the names of Mr. Rohit Jain and Nippin Investment were given by Mr. S.N. Bansal to the defaulting stock brokers and that the proprietor of M/s. AG Vidyasagar & Co. (member, DSE) had informed SEBI that Mr. Rohit Jain is a relative of Mr. S.N. Bansal. As regards Manish Construction, the same is also related to Mr. S.N. Bansal as it had made a payment of `8 lacs (at the behest of Mr.S.N. Bansal) to Amrik Singh Group towards the purchase of shares of the Company.

Mr. Amrik Singh had purchased 3 lakh shares of the Company from LSE members at the behest and in the name of Mr.S.N. Bansal’s firms i.e. Kakaria Investment and ANZ Investment, pursuant to an agreement with Mr.

S.N.Bansal. Therefore, it is noted that ANZ Investment is connected to Mr. S.N. Bansal. KFL Financial & Securities Limited is a company in which Mr. S.N. Bansal is admittedly its Managing Director. The said entity had made a payment of `3 lakhs to the Amrik Singh Group for purchase of the Company’s shares. Karishma Industries Limited is also another company in which Mr. S.N. Bansal is a director. The said company had made a payment of `25.50 lacs and ` 3 lacs for purchase of shares to the Amrik Singh Group. The aforesaid facts and the relationship between Mr. S.N. Bansal with the aforesaid entities, as alleged in the notices, have not been refuted. Therefore, in the light of the aforesaid facts and in the absence of any submissions to the contrary from any of the parties, I conclude that the said entities are connected to Mr. S.N. Bansal, the promoter and managing director of the Company.

5. The investigation had observed that Mr. S.N. Bansal was actively trading in the shares of the Company from the date of listing at DSE and alleged that Mr. S.N. Bansal had created market and cornered floating stock during April- July 1995, when the share price was hovering around `12/-. It was further alleged that most of the trading by Mr. S.N. Bansal (through his front entities SRP Investment and Domino Investment) during the period was through M/s. J P Totla & Co. (member, DSE). It was noticed that the said stock broker had purchased 3,58,800 shares and sold 80,100 shares resulting in a gross of 4,38,900 shares which was around 13.01% of the total trading at DSE. It was also noticed that the purchases by the stock broker constituted 21.28% of the total buy of 16,85,800 shares at DSE. As per the daily ledger of the stock broker, Domino Finance had purchased a net of 1,54,000 shares and the SRP Investment purchased 1,22,500 shares during April-August 1995. The aggregate of the aforesaid purchases constituted 9.21% of the floating stock of 30,00,000 shares of the Company. It was alleged in the show cause notice that the said purchases through the stock broker had facilitated the spurt in the share price of the Company to `27.25/- on August 29, 1995. From the show cause notice, I note that Mr. J P Totla (the proprietor of the said stock broker) had stated that both SRP Investment and Domino Finance are front concerns of Mr. S.N.

Bansal (the promoter/CMD of the Company) and that the orders for purchase/sale of shares of the Company were from Mr. S.N. Bansal and that Mr. S.N.Bansal himself had instructed to pay all cheques, bills, contract notes etc. in favour of the said two entities. Further, all shares were delivered at Nehru Place Office of Mr. S.N.Bansal and were acknowledged by his staff and similarly, all shares were received from his office. It was also stated that the addresses and the contact persons of the said entities were obtained from Mr. S.N. Bansal. Mr. J P Totla further submitted that Mr. S.N. Bansal was introduced to him by his ex-employee and another reference came from Mr. S L Maloo in whose premises (at 521, Sainik Farms, New Delhi) Mr. S.N. Bansal was residing. From the facts stated above and in the absence of any refutation in that regard from any of the entities including Mr. S.N.Bansal, I conclude that Mr. S.N. Bansal was the mind behind the trades of SRP Investment and Domino Finance in the shares of the Company during the relevant period.

6. The notice has also alleged that Mr. S.N. Bansal had responsible for the spurt in the price during August 1995 by making heavy purchases through another stock broker M/s. OP Gupta & Co. (member, DSE). From the information provided by the said stock broker, the trading was mainly done for Nippin Investment. During the period April 1, 1995–May 31, 1996, Nippin Investment had bought 7,14,900 shares and sold 1,80,800 with a net buy of 5,34,100 shares. The investigation found that Nippin Investment is a firm managed by Mr. Rohit Jain and Mr. Sanjiv Jain and that as per the information provided by the said entity; it had mainly traded on behalf of SRP Investment and Domino Finance, the “fronts” of Mr. S.N. Bansal. Further, the names of Mr. Rohit Jain and Nippin Investment were given by Mr. S.N. Bansal to the defaulting stock brokers and that one G. C. Vidyasagar (proprietor of M/s. AG Vidyasagar & Co., member, DSE) had informed SEBI that Mr. Rohit Jain is a relative of Mr. S.N. Bansal. In such circumstances and also taking into consideration the substantial trading by Nippin Investment, it is to be concluded that the said entity was also responsible for the price spurt during the relevant period.

7. The notice had also presented the details of the trades of the front entities of Mr. S.N. Bansal and others in the shares of the Company during the relevant period. The same is reproduced herein below:

Name of Client Broker’s Name Buy Sell Net Nippin Investment OP Gupta 7,14,900 1,80,800 5,34,100 Nippin Investment AG Vidyasagar 1,60,900 1,55,400 5,500 8,75,800 3,36,200 5,39,600 Domino Finance (BBY A/c) JP Totla 25,900 0 25,900 Domino Finance JP Totla 1,98,800 21,000 1,77,800 Domino Finance Agarwal Securities 63,500 1,200 62,300 Domino Finance ND Bajaj 0 7,000 ‐ 7,000 2,88,200 29,200 2,59,000 SRP Investment (BBY A/c) JP Totla 42,700 0 42,700 SRP Investment JP Totla 2,95,900 4,06,700 -1,10,800 SRP Investment Agarwal Securities 54,800 400 54,400 SRP Investment Sino Securities 63,500 1,24,600 -61,100 SRP Investment Agbros Capital 7,70,000 14,17,200 -6,47,200 SRP Investment SMC Share 10,000 0 10,000 SRP Investment Vasu & Co. 3,04,200 3,12,800 -8,600 SRP Investment AG Vidyasagar 25,600 25,600 0 15,66,700 22,87,300 -7,20,600 Suman Nursery AG Vidyasagar 35,200 35,200 0 Shri Shiv Ram Vasu & Co. 41,400 70,600 -29,200 Shyambaba Asso. Agbros Capital 56,700 56,700 0 Rakesh Jain AG Vidyasagar 32,400 0 32,400 Naresh Juneja AG Vidyasagar 33,000 0 33,000 Kakaria Investment Agbros Capital 3,28,400 4,03,100 -74,700 Vela Harson ND Bajaj 2,200 2,200 0 Total 32,60,000 32,20,500 39,500 The said entities have traded in substantial quantities in the shares of the Company. Further, as stated above, the large scale trading by the entities (at the behest of Mr. S.N. Bansal) had an impact on the share price during the relevant period. The contribution to the trading by SRP Investment and Domino Finance has already been stated earlier. By indulging in such acts, Mr. S.N. Bansal and his related entities have transacted in the securities of the Company which resulted in the unusual increase in the share price of the Company. The said conduct is in violation of Regulation 4(a) of the PFUTP Regulations.

8. The investigation had also alleged that the price spurt during December 1995 was due to the heavy buying by “Amrik Singh Group” which was done in accordance with the Memorandums of Understanding (MoU) dated November 20, 1995 and December 15, 1995. As stated earlier, the said group comprised of Mr. Amrik Singh, JBS Builders and Traders Private Limited, Sharan Fincap Limited (of which Mr. Amrik Singh is a director), Mr. Magan Preet Singh (son of Mr. Amrik Singh), Mr. Charanjeet Singh (brother-in-law of Mr. Amrik Singh), Mr. Pushpdeep Singh, Mrs. Satnam Kaur and Mr. Mandeep Singh. Investigation has revealed that the said group was mainly managed by Mr. Amrik Singh. It was also noticed that Mr. S.N. Bansal (through another front entity Kakaria Investment) had entered into a MoU dated November 20, 1995 with Mr. Magan Preet Singh and Mr. Charanjeet Singh, for purchase of shares of the Company. Further, another MoU dated December 15, 1995 was executed by Mr. S.N. Bansal himself with Mr. Magan Preet Singh and Mr. Charanjeet Singh. The investigation revealed that the Amrik Singh Group had purchased 22.73 lakhs shares (which constituted 75.76% of the floating stock of the Company) from various stock brokers during the period between November 20, 1995 and January 9, 1996. During the said period, the share price had peaked to `31.87/-on January 8, 1996. I note that the notice had averred that according to the MoUs, shares which were to be acquired by the Amrik Singh Group would be disinvested in April 1996 and that the said group knew that the purchase of 10 lakhs shares from the low floating stock of the Company would increase the share price of the Company. Further, as per the MoU, profits were to be shared equally by Mr. Amrik Singh and Mr. S.N. Bansal and that Mr. S.N. Bansal had guaranteed a minimum return of 6% per month to Mr. Amrik Singh. I note from the notice that though, Mr. S.N. Bansal had denied the signature in the MoU, the reverse of the stamp paper indicated that the same was sold to Mr. S.N. Bansal on December 12, 1995. Further, the following facts lead to a conclusion that there was indeed an understanding between Mr. S.N. Bansal and the Amrik Singh Group:

a. The Amrik Singh Group had made large purchases of the shares of the Company and that shares were purchased in the names of the front entities of Mr. S.N. Bansal; b. Mr. S.N. Bansal had made huge payments to Mr. Amrik Singh Group for the purchase of shares. The Amrik Singh Group had received around `94 lakhs by way of various cheques. The notice had also mentioned that Mr. S.N. Bansal had admitted before the Delhi Police that he had paid `80 lakhs to the Amrik Singh Group by way of various cheques, which included the cheques mentioned by Mr. Amrik Singh. c. Though, Mr. S.N. Bansal had stated that he had issued cheques to Mr. Amrik Singh for purchase 1,24,800 shares and that the said shares were purchased on January 15 & 16, 1996, the same were not possible as this would mean that the share price was `64.10/-, considering the fact that Mr. S.N.Bansal had admittedly paid `80 lakhs for the purchase of 1,24,800 shares. However, the share price of the Company never touched that level. Further, when the shares were to be purchased on January 15 & 16, 1996, there was no explanation as to why the payments made as early as December 18, 1995 for the said purchases. In view of the same, it was alleged in the notice that the Amrik Singh Group had contravened Regulation 4(a) & (d) of the PFUTP Regulations. The notice also alleged that Amrik Singh Group was taking over exposure in making purchases and that when the share price started to fall, they defaulted in making payments to the stock brokers, which therefore resulted in the default of the stock brokers to DSE. It was also alleged that Mr. Maganpreet Singh was acting on the instructions of Mr. Amrik Singh had contravened Regulation 6(a) of the PFUTP Regulations.

9. As regards the charges, Mr. Amrik Singh vide his reply had submitted that i. his concern JBS Builders and Traders Private Limited was in the construction business and in order to have a permanent source of income, he along with Mr. Maganpreet Singh and Mr. Charanjeet Singh purchased 5,00,000 equity shares at Rs.10/- each of the Company. ii. shares were retained by them till May 5, 1996 and that Mr. S.N. Bansal, the managing director of the Company had promised that he or any of his “front company” would purchase the shares and give them a profit at the rate of 6% per month. iii. Mr. S.N. Bansal had given a security of 2.5 lakhs shares of the Company and had also entered into an agreement dated November 20, 1995 and that pursuant to the said agreement, they had purchased shares from the market and had informed Mr. S.N. Bansal and Kakaria Investment (an entity related to Mr. S.N. Bansal) about the said purchase. iv. Mr. S.N. Bansal had given them various cheques which were honoured initially and that shares were purchased by them between November 20, 1995 and December 15, 1995. v. The honouring of cheques created confidence and that induced them to enter into another agreement where they undertook to buy other shares of the Company.

As per the second agreement, they were supposed to be purchasing shares from the market and keep Mr. S.N. Bansal and that payment would be made directly to the stock brokers. vi. A total of 17.73 lakh shares were purchased during the period December 15, 1995 and January 9, 1996 from the market by various stock brokers at their instance and also under the instructions of Mr. S.N. Bansal. vii. The payment for the shares so purchased became due after physical delivery within a week of purchase. However, Mr. S.N. Bansal declined to make payments. viii. Cheques tendered by Mr. S.N. Bansal when presented had returned as the account had insufficient funds. ix. Mr. S.N. Bansal did not have the funds or assets to meet the liability for the shares of Company which were purchased and in his procession or in the procession of his associates. x. In view of the same, they were constrained to complain to SEBI about the irregularities committed by Mr. S.N. Bansal and his associates and the manner of purchasing the shares. xi. The stock brokers had effected sale at a fixed rate of rs.20.65/- and had received post dated cheques from Mr. S.N.

Bansal towards the payment and that payments due from them were not received. xii. Mr. Amrik Singh or the other investors never dealt in selling any of the shares and their purpose was only to invest in those shares under the agreement. They never instructed any of the stock brokers to sell the shares and that the same was done under the instructions of Mr. S.N. Bansal. xiii. Some of the shares kept in their office premises were stolen and sold. xiv. He along with Mr. Magandeep Singh and Mr. Charanjeet Singh were only involved in the purchase of shares and were not aware of Mr. Pushdeep Singh and Mrs. Satnam Kaur. Mr. Mandeep Singh has settled abroad. xv. They were genuine investors and in order to get some monetary benefit on investments had purchased shares on an assurance of earning fixed percentage of return at 6%. xvi. The promoter had purchased shares from the market as well as from the stock brokers and off-loaded the same. xvii. They had not defaulted towards purchase of shares and only Mr. S.N. Bansal, his front companies were responsible for the malpractice and default. xviii.

The stock broker JP Totla & Co. was responsible for making payment for stolen shares in the account of Domino Finance and thereby sending the money indirectly to Mr. S.N.Bansal.

xix. JBS Builders and Traders Private Limited has instituted three cases against S.N.Bansal, Ashish Gupta (Domino Finance) and Suman Nursery before the courts and that Suman Nursery has been declared a proclaimed offender. 10. The crux of the submissions of Mr. Amrik Singh is that they had invested in the shares of the Company on promise made by Mr. S.N. Bansal that a return at 6% would be given on their investment and accordingly had entered into two memorandums of understanding with Mr. S.N. Bansal and his associate entities. Even according to Mr. Amrik Singh, large purchases of the shares of the Company were made by them at the behest of Mr. S.N. Bansal and that shares were purchased in the names of the front entities of Mr. S.N. Bansal. The notice mentions that, as per the information provided by the Amrik Singh Group, an investment of `5.65 crores was made to acquire the shares of the Company. The details of the said payments were detailed in the annexure to the notice issued to the said group. It is also mentioned that Amrik Singh Group had purchased 5 lakh shares from the market during the period November 20, 1995 and December 14, 1995 and another 17.73 lakh shares during the period December 15, 1995 to January 9, 1996. Thus, the said group had purchased a total of 22.73 lakh shares from various stock brokers. The share price had peaked to `31.87/- on January 8, 1996. The aforesaid quantity (of 22.73 lakh shares) was around 75.76% of the floating stock (of 30,00,000 shares) of the Company during the relevant period. In terms of Regulation 4(a) of the PFUTP Regulations, no person shall 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. As stated above, the Amrik Singh group, more particularly Mr. Amrik Singh, Mr. Magan Preet Singh and Charanjeet Singh, have by their trading, been instrumental for the spurt in the share price during the relevant period.

11. I also note that the notice had also mentioned the following:

i. Shares which were acquired were to be disinvested in April 1996. The said fact is against the contention of Mr. Amrik Singh that they had purchased the shares of the Company as an investment. ii. Amrik Singh Group was aware that the purchase of 10 lakh shares from the low floating stock would increase the share price of the Company. iii. The purpose of the acquisition of shares by the Amrik Singh was to earn profits and that Mr. S.N. Bansal had promised a return of 6% on such investments. As returns could be generated only when the price increases, Mr. S.N. Bansal and Amrik Singh Group had traded in such a manner which resulted in the share price rise. iv. Further, the fact that profits were to be shared equally between Mr. S.N. Bansal and the Amrik Singh Group, indicates that the Amrik Singh Group was not a mere financier. 12. The notice has also alleged that the Amrik Singh Group had made large purchases of the shares and had taken over exposure and that when the share prices started to fall, it defaulted in making payments to the stock brokers. The same had resulted in the default of the stock brokers towards their pay-in obligations to DSE. It was therefore alleged that the Amrik Singh Group had indulged in malpractices detrimental to the investor’s interest and interfered with the smooth functioning of the securities market. It was also alleged that Mr. Maganpreet Singh, a constituent of the Amrik Singh Group had made false complaints to DSE regarding theft of shares of the Company. The notice alleges that the conduct of Mr. Magan Preet Singh who was acting in accordance with the instructions of Mr. Amrik Singh had contravened Regulation 6(a) of the PFUTP Regulations. Mr. Amrik Singh has stated that shares were stolen from his office and sold in the market and the proceeds went to M/s Domino Finance and indirectly to Mr. S. N. Bansal. The said submissions had been found incorrect for the reasons stated in the notice.

13. I also note that Mr. Amrik Singh had submitted that he along with Mr. Magandeep Singh and Mr. Charanjeet Singh were only involved in the purchase of shares and were not aware of Mr. Pushdeep Singh and Mrs. Satnam Kaur. It was also submitted that Mr. Mandeep Singh has settled abroad. They had not defaulted towards purchase of shares and only Mr. S.N. Bansal, his front companies were responsible for the malpractice and default.

However, in the light of the MoU entered between Mr. S. N. Bansal and Mr. Amrik Singh and their role which has been explained in the notice, it cannot be accepted that only Mr. S. N. Bansal and his front entities were responsible for the irregularities.

14. Another charge levelled against Nippin Investment in the notice issued to it was that it had purchased shares of the Company on behalf of SRP Investment and Domino Finance, acting as a sub-broker, without obtaining registration from SEBI to act in that capacity. The said conduct was alleged to be in contravention of Section 12(1) of the SEBI Act read with Rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Rules, 1992 (since rescinded). According to the notice, Nippin Investment had bought 7,14,900 shares and sold 1,80,800 shares, with a net buy of 5,34,100. The investigation has found that Nippin Investment had largely traded on behalf of SRP Investment and Domino Finance. Trading in securities as a stock broker or a sub-broker is permissible under the existing regulatory framework only after obtaining registration from SEBI in terms of Section 12 of the SEBI Act and the aforesaid rules (as it was in force during the period of the impugned transactions). As it is brought out that Nippin Investment had traded in securities on behalf of other entities; the said conduct is in contravention with Section 12(1) of the SEBI Act read with Rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Rules, 1992 (since rescinded).

15. The next charge levelled in the notice against Mr. S.N. Bansal and his associates, is that they have contravened Regulation 4(e) of the PFUTP Regulations. The SEBI Investigation had revealed that Mr. S.N. Bansal had financed the purchase/sale of the shares of the Company made by the Amrik Singh Group. The said allegation is sought to be supported through the payments made by Mr. S.N. Bansal through his associates/related entities to the Amrik Singh Group. The following is a list of such alleged payments:

Amount received by Amrik Singh Group Amount (`In Sr. No. Paid by Amrik Singh Group to from SN Bansal entities lakhs) Arjun Kapoor & Co. A/c Mandeep 1. Amt. received from Domino Finance 10 Associates 2. Amt. received from Suman Nursery 15 Rakesh Kapoor & Co. 3. Amt. received from Mr. S.N. Bansal 14 ND Bajaj & N.N. Jain & Co. 4. Amt. received from Suman Nursery 5 ND Bajaj & Co. Various brokers for purchase of shares of 5. Amt. received from Karishma Industries 25.50 Karishma Various brokers for purchase of shares of 6. Amt. received from SRP Investment 7.50 Karishma Utilised to meet commitments with 7. Amt. received from KFL Financial 3 brokers 8. Amt. received from Karishma Industries 3 N.D. Bajaj & Co. 9. Amt. received from Manish Constructions 8 J.P. Singh & Co. and other brokers 10. Amt. received from Mr. S.N. Bansal 3 J.P. Singh & Co. and other brokers Total 94 lakhs

As stated earlier, though, Mr. S.N. Bansal (in his statement to Delhi Police) had stated to have issued some of the abovementioned cheques aggregating to `80 lakhs only, the fact remains that payment were made by Mr. S.N. Bansal through his various entities to the Amrik Singh Group for purposes of purchase of shares of the Company. The investigation has also found that Mr. S.N. Bansal had issued the following cheques to JBS Builders & Traders Private Limited (an entity of the Amrik Singh Group) for a total amount of `1.30 crores towards part payment of shares purchased on his behalf:

Cheque issued by In favour of Amount (`) Date Cheque No. JBS Builders & 9653504 of Punjab & Sind Bank, Karishma Industries 10,00,000 10.1.1990 Traders P. Ltd. Connaught Place JBS Builders & 388556 of Punjab & Sind Bank, Domino Finance 20,00,000 21.1.1996 Traders P. Ltd. Nehru Place JBS Builders & 388564 of Punjab & Sind Bank, Domino Finance 50,00,000 5.2.1996 Traders P. Ltd. Nehru Place JBS Builders & 460122 of Punjab & Sind Bank, Suman Nursery 50,00,000 15.2.1996 Traders P. Ltd. Nehru Place Total 1,30,00,000

However, stop payment orders were given and therefore the cheques were not honoured. It was also noticed that large payments were also made by Mr. S.N. Bansal and his associates for purchase of the shares of the Company to other stock brokers including the payments made to their associate Nippin Investment for purchase of shares. As stated above, the Amrik Singh Group had purchased a total of 22.73 lakhs shares which constituted 75.76% of the floating stock of the Company. The share price had also risen unusually during August, 1995 and November 1995-January 1996. Mr. S.N. Bansal has transferred funds to the extent of `94 lakhs to the Amrik Singh Group, which were utilized for the impugned purchases. As stated earlier, 6% interest on the investments was promised to be paid to the Amrik Singh Group in terms of the agreement. Further, no entity including Mr. S.N. Bansal had refuted such allegations. In such circumstances, it has to be concluded Mr. S.N. Bansal and his front entities namely, Domino Finance, Suman Nursery, Karishma Industries Limited, KFL Financial & Securities Limited, SRP Investment and Manish Construction have transferred funds to the Amrik Singh Group pursuant to an understanding and thereby induced the said group entities (Amrik Singh group) to purchase or sell the securities of the Company which had resulted in the spurt in the share price. The said conduct is in contravention of Regulation 4(e) of the PFUTP Regulations.

16. The notice also mentions that SRP Investment, a front entity of Mr. S.N. Bansal had sold 2,50,000 shares at the rate of `20.75/-per share through M/s. JP Totla & Co. on December 11, 1995. The said shares were found to be sold on the same date to M/s. M. Agarwal & Co., member DSE, who was acting on behalf of its associate company Globe Merchants Limited. On the same day, the entity Globe Merchants Limited, sold those shares to M/s. Santosh Goel & Co., member of LSE, who in turn sold them to Mr. Amrik Singh on December 12, 1995. As Mr. Amrik Singh had purchased these shares pursuant to an agreement (with Mr. S.N. Bansal) dated November 20, 1995, a bill for the said transaction was raised by Mr. Amrik Singh in the name of ANZ Investment and Kakaria Investment (both entities being the fronts of Mr. S.N. Bansal). Considering the fact that trading during the period was through open outcry system, wherein the identity of counterparty is known and these shares continued to be sold in block deals, it is alleged that Mr. S.N. Bansal through SRP Investment had executed these circular trades with the intention to induce investor interest in the scrip. The relation of the entities SRP Investment, ANZ Investment and Kakaria Investment with Mr. S.N. Bansal has already been stated above. All the said entities have been concluded to be the front entities of Mr. S.N. Bansal. In the aforesaid transaction, SRP Investment first sold shares and through various layers the shares were purchased back by Mr. Amrik Singh pursuant to an agreement and the bill had been raised in the names of two other front entities namely ANZ Investment and Kakaria Investment. In such circumstances and in the absence of any replies from the parties, it is concluded that the concerned entities have indulged in acts which was calculated to create false and misleading appearance of trading of the securities of the Company and indulged in non-genuine trades, in contravention of Regulation 4(b) and (c) of the PFUTP Regulations.

17. The next charge leveled in the notice is that the Company had contravened Section 77(2) of the Companies Act, 1956. In this regard, the notice had stated that Mr. S.N. Bansal had pursuant to the negotiations with certain stock brokers purchasing shares for the Amrik Singh Group, had issued various cheques along with a covering letter on the letterhead of the Company. The notice further stated that, as per the understanding, various entities named by Mr. S.N. Bansal would be purchasing shares lying with those stock brokers. The notice, had in Annexure B thereof, mentioned the details of the bill issued to the entities for purchase of the shares and cheques issued for the same by the Company. Mr. S.N. Bansal (in his statement dated July 15, 1996) had confirmed that the buying entities were his friends and associates and that as the stock brokers were in crisis and they did not know buying entities, he had agreed to stand as a “guarantor”. He acknowledged having issued the post dated cheques to those stock brokers. The investigation had found that all the cheques issued for purchase of shares were in fact issued by the Company from its bank account. In this regard, Section 77(2) of the Companies Act, 1956, states that no public company, and no private company which is subsidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise any financial assistance for the purpose of or in connection with a purchase of subscription made or to be made by any person of or any shares in the company or in its holding company. Since the Company had issued cheuqes from its bank account towards financial assistance for purchase of its own shares, it has contravened the aforesaid provision. Even for a moment, if it is accepted that Mr. S.N. Bansal had issued cheques as a guarantee, the same would still be a violation of Section 77(2) of the Companies Act, 1956 by the Company.

18. The Company has been alleged to have delayed in transferring shares and of not redressing investors complaints. From the notice, I note that complaints were received from shareholders of the Company, Mr. Jitender Mehta and Mr. Sandeep alleging non-transfer of shares lodged for transfer by them with the Company. According to them, they had vide letters dated September 16, 1995 sought the Company to transfer 7,500 shares and 9,000 shares, respectively. Though, their request was followed up with periodic reminders, the Company failed to redress their grievance. The matter has also been taken up by DSE with the Company. Delay in transfer/dispatch of shares lodged for transfer by the Company is in violation of Section 113 of the Companies Act, 1956. The said provision stipulates a period of two months for the said purpose. SEBI, in an effort to determine the period of delay in transfer of shares by the Company, had sought the share transfer records. However, the records were never furnished to SEBI. The notice also mentioned that SEBI had gathered from the daily newspaper Amar Ujala edition dated August 28, 1997, the matter of delay in transfer of shares was being taken up by Delhi Police and Mr. S.N. Bansal was prosecuted for the same and that the Hon’ble Sessions Judge, Delhi had cancelled the bail of Mr. S.N. Bansal. The notice alleges that the reason for delay/non transfer of shares was to reduce the floating stock of the Company and to create an easy ground for price rigging by the entities concerned. The conduct of the Company in delaying/failure to transfer securities in the name of the transferee or to dispatch the securities is in contravention of Regulation 6(c) of the PFUTP Regulations.

19. From the above findings and the facts and circumstances of the case explained above, I find that SRP Investment, Domino Finance, Suman Nursery, Kakaria Investment, ANZ Investment, Karishma Industries Limited, KFL Financial & Securities Limited, Nippin Investment and Manish Construction are the entities related to Mr. S.N. Bansal. In the absence of any submissions to the contrary and in the light of the findings of the investigation as brought out from the documents, it is concluded that the aforesaid entities had dealt in the shares of the Company at the behest of Mr. S.N.Bansal and that while trading in the shares of the Company, the entities have contravened Regulation 4(a), (b), (c) and (e) of the PFUTP Regulations. Further, the Company has contravened Section 77(2) of the Companies Act, 1956 by advancing funds for purchase of its own shares. The Company, by not redressing investor grievances and by delaying the transfer requests of shareholders, has contravened Regulation 6(c) of the PFUTP Regulations. Nippin Investment had contravened Section 12(1) of the SEBI Act and Rule 3 of the then existing Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Rules, 1992, as it had acted as an unregistered sub broker. It is also noted that SEBI vide an Order dated July 18, 2005 imposed a penalty of `1,00,000/- under Section 15A(a) of the SEBI Act on Mr. S.N. Bansal. The alleged violations have taken place in the year 1995. Considering the case in its totality, in the interest of justice, I dispose of the present proceedings as ordered hereinbelow.

20. In view of the foregoing, I, in exercise of powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 and Section 11B thereof and Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities market) Regulations, 2003, hereby warn Karishma Floriculture Limited, Mr. S.N. Bansal (the chairman/managing director and promoter of Karishma Floriculture Limited), SRP Investment, Domino Finance, Suman Nursery, Kakaria Investment, ANZ Investment, Karishma Industries Limited, KFL Financial & Securities Limited, Manish Construction, Nippin Investment and its partner Mr. Sanjeev Jain, Mr. Amrik Singh, Mr. Magan Preet Singh, Mr. Charanjeet Singh, Mr. Pushpdeep Singh, Mr. Mandeep Singh, Mrs. Satnam Kaur and JBS Builders and Traders Private Limited for their conduct as observed above and are advised to be careful while dealing in the securities market.

21. Accordingly, the show cause notices dated February 21, 2005 and May 27, 2005 issued to the aforesaid parties in the matter of Karishma Floriculture Limited are disposed of.

DR. K.M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

PLACE: MUMBAI DATE: JULY 19, 2011