Order in the matter of M/s S. G. Capital Services Ltd and Others

WTM/RKA/IVD/NRO/118 - 131/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN THE MATTER OF S. G. CAPITAL SERVICES LIMITED.

In respect of Sr. No. Name of Entity Order number 1. S.G. Capital Services Ltd. (SGCSL) 118/2015 2. Mr. Sanjiv Gupta, director of SGCSL 119/2015 3. Mr. O. P. Gupta, director of SGCSL 120/2015 4. S. G. Global Exports Ltd.(SGGEL)- (Formerly known as Tinna 121/2015 Exports Ltd.) 5. Mr. D. P. Singh, director of SGGEL 122/2015 6. Mr. Ashwani Khera, director of SGGEL 123/2015 7. Mr. Hemant Gopal, director of SGGEL 124/2015 8. Mr. Ramesh Jindal, director of SGGEL 125/2015 9. Ms. Rachna Gupta, director of SGGEL 126/2015 10. Majestic Builders Ltd. (Majestic) (Now known as Lancer 127/2015 Enterprises Limited) 11. Mr. Balraj Sharma, director of Majestic 128/2015 12. Ms. Manju Sharma, director of Majestic 129/2015 13. Mr. Virchand Jindal, director of Majestic 130/2015 14. Mr. Harison Bhatti, director of Majestic 131/2015 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI’) investigated into the unusual price movement in the scrip of SG Capital Services Ltd. (hereinafter referred to as “SGCSL”) during 1996. The investigation, inter alia, revealed that – (a) There was an unusual upward price movement in the share price of SGCSL from `10/-on February 29, 1996 to `42/- on April 19, 1996. The share price declined to `22.50/-on April 30, 1996 and again increased to `43.50/- on May 29, 1996. Thereafter, the share price hovered around `40/- till June 24, 1996.

(b) On June 24, 1996 there was an auction at unusually high price of `50.75/-. Thereafter, share price declined to `30/- on the next trading day, i.e., June 27, 1996. The scrip was put under spot by Ludhiana Stock Exchange Limited(LSE ) with effect from August 12, 1996. The price of the scrip further declined thereafter to `7/- on October 1, 1996.

(c) It was observed that Century Fiscal Services Ltd. (hereinafter referred to as "Century") was among the top trading members in the scrip at LSE during the period March 21,

Order in the matter of S. G. Capital Services Limited

1996 to April 19, 1996. Century had mainly traded for its client Majestic Builders Ltd. (now known as Lancer Enterprises limited and hereinafter referred to as “Majestic”). Majestic had built large position in the scrip, which was carried forward over many settlements by it through Century though carry forward was not allowed on LSE. The trading of Majestic vis-à-vis total trading in the scrip at LSE which ranged from 19.56% to 89.23% is described in the following Table: Table 1- Trading of Majestic vis-à-vis total trading in the scrip at LSE Date Trading Total % of (2) Share price movement by Trading to (3) Majestic at LSE (1) (2) (3) (4) (5) 21.3.96 1,00,000 3,30,100 30.29% Opened at ` 22 and rose to ` 26 22.3.96 90,000 4,37,400 20.57% Opened at ` 28.25 and rose to ` 29.50 25.3.96 90,000 3,03,600 29.64% Opened at `28 and rose to ` 30 29.3.96 90,000 3,12,100 28.83% Opened at `28.50 and rose to `29.25 1.4.96 90,000 2,08,900 43.08% Not Available 4.4.96 75,000 3,82,200 19.62% Opened at `29 and rose to ` 32 8.4.96 75,000 3,83,400 19.56% opened at `31.50 and rose to `36 9.4.96 33,800 87,800 38.49% Opened at a high of `39 10.4.96 52,200 58,500 89.23% Opened at ` 36.75 and rose to `37 11.4.96 64,300 1,47,100 43.71% Opened at `36.75 and rose to `36.75 12.4.96 48,200 2,21,000 21.80% Opened at `37 and rose to `40.50 15.4.96 42,700 60,300 70.81% Opened at a high of `39 19.4.96 26,900 55,900 48.12% Opened at `38 and rose to `42 (d) Majestic had taken delivery of 82,400 shares in respect of transactions conduced till 19.04.1996, out of the floating stock of 10,78,000 shares of SGCSL, i.e., 7.64%. All these factors caused the upward price movement in the scrip.

(e) It was observed that the purchases made by Majestic had reduced the floating stock in the shares of SGCSL available in the market. As a result there were many short sellers who were forced to go for auction that happened at unusually high price and for which shares were provided by Majestic.

(f) On June 21, 1996 and June 24, 1996, auctions of 39,400 shares of SGCSL were conducted at LSE. The auction price was unusually high at around `50/- when the previous market price was `39/-. Out of total 39,400 shares in auction, 39,000 shares were provided to the bidding members by Century who in turn got these shares from Majestic.

(g) On June 26, 1996 and June 27, 1996 payments were received from the bidding members against the shares of SGCSL provided to them for auction. Century in turn made a payment of `5 lacs to Majestic and `8 lacs to Tinna Exports Ltd. (now known as “S. G. Global Exports Ltd.”) on June 27, 1996 after sale of shares in aforesaid auction. (h) Majestic was the associate concern of SGSCL and was acting in concert with SGCSL and its promoter Shri Sanjiv Gupta in manipulation of the price of the scrip. S. G. Global Exports Ltd ( SGGEL-formerly known as Tinna Exports Ltd.) is an associate company of SGCSL/its directors. Majestic had linkages with SGCSL /its associate companies / its promoters and it was an associate/front company of SGCSL/its promoters. Further, Majestic was a shell company. These finding were based on the following facts and circumstances- (i) From the information received from Century it was noted that the correspondence address of Majestic is 131, Model Gram, Ludhiana which as per M/s. SR Uppal & Co., member, LSE is also the address of Tinna Exports Ltd. (ii) As per prospectus of Tinna Exports Ltd., its registered office was at 18, Sampuran Lodge, South Model Gram, Ludhiana.

From the information obtained from Registrar of Companies, Jalandher, registered office of Majestic was at 18, Sampuran Lodge, South Model Gram, Ludhiana. This address of Tinna Exports Ltd. and Majestic, is the residential address of the promoter of SGCSL, namely Shri Sanjiv Gupta and his father Shri O. P. Gupta. (iii) From the bank statement of Century it was noted that it had received ` 7, 00,000 from Majestic on April 23, 1996 and had given back ` 5,00,000 to it on June 26, 1996. These transactions were made by Majestic through its current account no. 756 with State Bank of India, LSE Branch, Ludhiana. As per the account opening form for this account the registered office address of Majestic was 18, Sampuran Lodge, Model Gram, Ludhiana. Further, this bank account of Majestic was introduced by a director of SGCSL, namely Shri Sanjiv Gupta. (iv) It was further noted that the aforesaid amount of ` 7,00,000 transferred by Majestic to Century on April 23, 1996 were earlier received by it on the same date from M/s Exalt Fincap P. Ltd. (`5,50,000/-) and M/s Diwakshi Investment P. Ltd.( `1,50,000/-).

(v) On receipt of `5,00,000/- from Century on June 26, 1996, Majestic transferred the same to M/s Exalt Fincap P. Ltd. on same date. (vi) From the aforesaid bank account of Majestic it was noted that except for the above two transactions three were no major transactions therein and the said account was closed on April 23, 1997. It was inferred that the said account was opened by Majestic for undertaking the aforementioned transactions in the scrip of SGCSL.

(vii) The bank account of Diwakshi Investments P Ltd. with the State Bank of India was opened by its director Ms. Rachna Gupta having residence at 18, Sampuran Colony, Model Gram, Ludhiana. Ms. Rachna Gupta, wife of Shri Sanjiv Gupta, promoter/Managing Director of SGCSL, was the director of M/s Tinna Exports Ltd. Further, the bank account of M/s Diwakshi Investments P. Ltd. was introduced by SG & Co, member of LSE. As per prospectus of SGCSL, Mr. Sanjiv Gupta was also supervising the activity of SG & Co. (viii) Bank account no. “746” of Exalt Fincap P. Ltd. was introduced by a person signing as “Gupta” having account no. “30077”. This person had also introduced the bank accounts of Majestic (as director of SGCSL) and of Diwakshi Investments P Ltd. (as representative of M/s SG & Co.). A perusal of distribution schedule of SGCSL showed that this signature of "Gupta" was that of Shri Sanjiv Gupta. These facts clearly indicate that Shri Sanjiv Gupta had introduced the said bank account of Exalt Fincap P. Ltd. (ix) SGGEL (Tinna Exports Ltd.) had advanced `8,00,000 to Century on May 06, 1996 which was returned to it on June 27, 1996 after auction of shares of SGCSL at unusually high price.

(i) No plausible reasons have been given for the funds given by the associate companies of SGCSL, namely, Exalt Fincap P. Ltd. and Diwakshi Investments P Ltd. to Majestic. The funds given by them were utilised by Majestic to acquire the shares of SGCSL through Century. As mentioned above, only `5,00,000/- were given back by Majestic to Exalt Fincap P. Ltd. on June 26, 1996 after receipt of the said amount from Century on the same date and a large portion is still receivable from Majestic by those associate companies of SGCSL. Such financial dealings would not be prudent unless the same is between associates/group companies or the companies acting in concert. This fact further substantiates the finding that Majestic was an associate of SGCSL/its promoter/directors. (j) No reason at all has been given as to why Tinna Exports Ltd. (an associate of SGCSL / its directors) gave `8,00,000 to Century on May 06, 1996. As observed during investigations after receipt of the fund from the aforesaid associate companies, Majestic made large scale acquisitions of the shares of SGCSL through Century.

In fact the share price of SGCSL moved from ` 26 on May 09, 1996 to ` 40 on June 20, 1996. Century returned the said `8,00,000 to Tinna Exports Ltd. on June 27, 1996 i.e. only after auction of the shares of SGCSL at LSE at unusually high auction price of ` 50.75 on June 24, 1996. (k) Majestic was making large scale acquisition of shares of SGCSL and its transactions were instrument in unusually upward price movement in the scrip. There were many short sellers who were forced to go for auction which happened at unusually high price and to whom shares were provided by Century acting at behest of Majestic. The funds so provided were utilised to make large purchases and reduce the floating stock of the shares of SGCSL. In view of the low available floating stock of SGCSL, the buyers enforced auctions of the shares at unusually high price. Almost all the shares of SGCSL for which auctions at unusually high price were conducted were delivered by Majestic acting at the behest of SGCSL/its directors. (l) It has been alleged that SGCSL / its directors /SGGEL had financed the transactions of Majestic for the purpose of manipulation of the price of shares of SGCSL.

Further, Majestic had indulged in market manipulation by entering into the transactions in shares of SGCSL with the intention of artificially raising its share prices and thereby inducing the sale and purchase of securities by other persons. 2. In view of the above, SEBI issued 3 separate show cause notices (SCNs) all dated June 14, 2004 under section 11B of the Securities and Exchange Board of India Act, 1992 (the SEBI Act) read with regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995(the PFUTP Regulations, 1995). The details of the SCNs are given in the following Table: Table 2-Particulars of the SCNs Sr. no. SCN No. The noticees Specific charge 1. IES/NRO/02/244/ SGCSL Majestic a shell company was used AS/2002/20167 Mr. Sanjiv Gupta, for price manipulation in the share director SGCSL price of SGCSL by SGCSL and its Mr. O. P. Gupta, director directors. Thus, they had violated SGCSL provisions of regulation 4(a) of the PFUTP Regulations, 1995. 2. IES/NRO/02/244/ SGGEL SGGEL (formerly Tinna Exports AS/2002/20168 Mr. D. P. Singh, director Ltd.) had financed the share price of SGGEL manipulation by Century during May Mr. Ashwani Khera, 9, 1996 to May 31, 1996. By director of SGGEL indulging in such financing Mr. Ramesh Jindal, transactions, SGGEL had violated director of SGGEL the provisions of regulation 4(e) of Ms. Rachna Gupta, the PFUTP Regulations, 1995. director of SGGEL Mr. Hemant Gopal, director of SGGEL 3. IES/NRO/02/244/ Majestic Majestic is an associate/front AS/2002/20169 Mr. Balraj Sharma, company of SGCSL/its promoters director of Majestic and had indulged in market Ms. Manju Sharma, manipulation by entering into the director of Majestic transactions in securities of Mr. Virchand Jindal SGCSL with the intention of director of Majestic artificially raising its share prices Mr. Harison Bhatti, and thereby inducing the sale and director of Majestic purchase of securities by other persons and thus, Majestic had violated the provisions of regulation 4(a) of the PFUTP Regulations, 1995.

The aforesaid entities are hereinafter referred to as "the noticees" or by their respective name. 3. By the respective SCNs, the noticees were called upon to show cause as to why proceedings under section 11B of the SEBI Act, 1992 read with regulation 12 of the PFUTP Regulations, 1995 should not be initiated against them, inter alia, debarring them from associating with the capital market related activities, dealing in securities, accessing the capital market and in any capacity whatsoever associating with any of the intermediaries in the capital market for appropriate period. 4. The noticees did not respond to the respective SCN despite service thereof. Later, on October 14, 2008, SGCSL applied for settlement of instant proceedings through a consent order and the said proposal was rejected by SEBI on May 26, 2010. Personal hearing was granted on July 31, 2010, wherein, these noticees expressed their desire to revise the consent terms. The noticees again applied for consent on August 4, 2010. The revised consent proposal was were disposed of as withdrawn on January 20, 2011. The opportunities of personal hearing were given to the noticees on February 15, 2011 when they had requested for adjournment.

5. Thereafter, the matter was brought before me and opportunities of personal hearings were granted to the noticees on several occasions. However, they failed to appear before me on the given dates and sought adjournments. A final opportunity of personal hearing was granted to all the noticees on April 23, 2015. On the said date, Mr. Sanjiv Gupta appeared before me for himself and all other noticees and submitted that the noticees have no further submissions to make apart from those made during investigations. Since he had not filed authorisation for appearance on behalf of other noticees he undertook to submit the same alongwith PAN of all the noticees. However, he has failed to submit the same till date. Considering these facts and circumstances, I am of the view that sufficient opportunities have been given to the noticees and accordingly, I proceed to deal with this case on the basis of SCN, replies /submissions of the noticees and material available on record. 6. I have carefully considered the SCNs issued to the respective noticees and relevant material available on record. I note that the SCNs have been issued to all the noticees on the basis of same set of facts and circumstances.

I, therefore, deem it appropriate to deal with the respective SCNs issued to all the noticees herein by way of this common order. 7. I note that sufficient opportunities have been provided to the noticees. They have not filed any written reply to the SCNs and have reiterated their submissions made during investigation. I note that the replies of the noticees submitted during the investigation have been considered and analysed in the respective SCNs itself. I note from the replies of the noticees as analysed in the respective SCNs that they have merely made technical objections with regard to the alleged connections / linkages and have not disputed the transactions that are basis of the SCNs. They have also not filed any reply on merits of the case except for Shri O. P. Gupta who had though admitted that the Majestic had taken one room on rent from him at 18, Sampuran Lodge, Model Gram, Ludhiana but has contended that he and SGCSL had no connection with regard to the transactions between Majestic and Century and they had nothing to do with the same. 8. From the SCN no. IES/NRO/02/244/AS/2002/20167, I note that during investigations Shri Sanjiv Gupta had contested the basis of connection between SGCSL, its directors, Tinna Exports Ltd. (SGGEL) and Majestic and had submitted that the fund transfers from Exalt Fincap P. Ltd. (`5,50,000/) and Diwakshi Investment P. Ltd.( `1,50,000/-) to Majestic were "normal business relations".

From the SCN no. IES/NRO/02/244/AS/2002/20168 it is noted that SGGEL and its directors had not submitted any reply during investigation. From the SCN no. IES/NRO/02/244/AS/2002/20169 it is noted that Majestic and its director Shri Harison Bhatti had not given any reply during investigations. Its directors Ms. Manju Sharma and Shri Virchand Jindal had claimed that they had resigned from the board of Majestic in August 2002 and Shri Balraj Sharma had claimed that he had resigned from the board of Majestic in December 2002. I note that all these contentions have been very clearly examined in the respective SCNs. I agree with those analysis in the SCNs and do not deem it necessary to burden this order by reiterating the same. 9. Coming to the merits of the case, I note that the charge against the noticees are with regard to the large transactions of Majestic in the scrip of SGCSL through Century during the period March 21, 1996 to April 19, 1996 whereby the price of the scrip was manipulated. Such transactions had induced the sale and purchase of securities by other persons. The purchases of Majestic had also reduced the floating stock in the scrip.

Consequently, there were many short sellers who were forced to go for auction, which happened at unusually high price of `50/- when the previous market price was `39/- and for which shares were provided by Majestic. 10. The charge in the SCN no. IES/NRO/02/244/AS/2002/20167 have been leveled against

SGCSL, and its directors viz., Shri Sanjiv Gupta and Shri O P Gupta on the basis of conclusions that - (a) Majestic was associate concern of SGCSL and was acting in concert with it and its promoter Shri Sanjiv Gupta;

(b) Associate companies of SGCSL (i.e. Exalt Fincap P. Ltd. (`5,50,000/) and Diwakshi Investment P. Ltd.( `1,50,000/-) had financed the transactions of Majestic through Century;

(c) SGGEL (Tinna Exports Ltd.) had provided unexplained finance of ` 8,00,000 to Century on May 06, 1996 which it had returned on June 27, 1996 i.e. after auction of the shares of SGCSL at LSE as aforesaid; (d) Majestic was a shell company and was used by SGCSL/its directors for price manipulation in shares of SGCSL. 11. On careful consideration of all facts and circumstances described in the SCN, I find no material on record to suggest complicity of SGCSL and Shri O. P. Gupta in the transactions of Majestic though their connection with the alleged associate companies which provided finance to Majestic and Century namely, Exalt Fincap P. Ltd. and Diwakshi Investment P. Ltd. and SGGEL, respectively is established. There is no material on record to indicate that SGCSL itself or Shri O. P. Gupta were involved in the financing of transactions of Majestic through Century. I, therefore, give benefit of doubt to them. I further note that wife of Shri O. P. Gupta has submitted that he has already expired and has filed a copy of his death certificate. In view of the same the proceedings against him are abated. 12. As regards the role of Shri Sanjiv Gupta, I note that he was promoter and managing director of SGCSL at the relevant time. Correspondence address of Majestic is also one of the addresses of SGGEL. The registered offices of Majestic and SGGEL are situated at the residence of Shri Sanjiv Gupta. Shri Sanjiv Gupta was the introducer of Majestic for its bank account no. 756 with State Bank of India, LSE Branch, Ludhiana which was opened for conducting transactions in the scrip of SGCSL and in which Majestic transacted financial dealings of receipt and payment as described in the SCN. Ms. Rachana Gupta, wife of Shri Sanjiv Gupta was the director of SGGEL and also a director in Diwakshi Investment P. Ltd. at the relevant time. The account from which Diwakshi Investment P. Ltd. transferred `1,50,000 to Majestic on April 23, 1996 was opened by Ms. Rachana Gupta and introducer to the said account was M/s. SG & Co., (a member of LSE) supervised by Shri Sanjiv Gupta. He had introduced Diwakshi Investment P. Ltd. for the said bank account (as a representative of M/s. SG & Co.) Shri Sanjiv Gupta was also introducer for the bank account of Exalt Fincap P. Ltd. from which had transferred ` 5,50,000 to Majestic on April

23, 1996. These facts strongly indicate complicity of Shri Sanjiv Gupta in the manipulative transactions of Majestic as described in the SCN. It is undisputed fact that total `7,00, 000 received by Majestic from Exalt Fincap P. Ltd. and Diwakshi Investment P. Ltd. on April 23, 1996 were transferred by Majestic to Century on the same date. This is the period when Majestic was buying shares of SGCSL. Out of the said ` 7,00,000, only `5,00,000 were returned by Majestic to Exalt Fincap P. Ltd. on June 26, 1996 i.e. after auction of the shares of SGCSL on June 24, 1996. It is also admitted position that `8,00,000 transferred by SGGEL to Century on May 06, 1996 (i.e. the period when the scrip price moved from `26 on May 09, 1996 to ` 40 on June 20, 1996) was returned by Century to SGGEL on June 27, 1996 i.e. after the said auction of shares. These facts and circumstances clearly establish the role of Shri Sanjiv Gupta in manipulation of the price of the scrip of SGCSL during the relevant period as described in the SCN no. IES/NRO/02/244/AS/2002/20167. I, therefore, find the he had violated the provisions of regulation 4(a) of the PFUTP Regulations, 1995. 13. I note that SGGEL(formerly Tinna Exports Ltd.) and its directors (who are the noticees in this proceedings) have not filed any reply in the matter.

The aforesaid financing with regard to the transactions of Majestic by SGGEL is undisputed and established. I, therefore, find no reason to differ with the allegations leveled against them in the SCN no. IES/NRO/02/244/AS/2002/20168. I, therefore, find that SGGEL and its directors namely, Shri Davinder Pal Singh, Shri Ashwani Khera, Shri Hemant Gopal, Shri Ramesh Jindal and Smt. Rachna Gupta had violated the provisions of regulation 4(e) the PFUTP Regulations, 1995. 14. Majestic and its directors (who are the noticees in this proceedings) have not filed any reply to the charges leveled against them in SCN no. IES/NRO/02/244/AS/2002/20169. In view of the aforesaid findings, I agree with the analysis, allegations and charges against these noticees as described in the said SCN. I, therefore, find that Majestic and its directors, viz., Shri Balraj Sharma, Ms. Manju Sharma, Shri Virchand Jindal and Shri Harison Bhatti had violated the provisions of regulation 4(a) of the PFUTP Regulations, 1995. I further note from the material on record that Shri Harison Bhatti (one of the directors of Majestic) had expired on September 7, 2008. Accordingly, the proceedings as against him are abated and disposed of without any direction as against him.

15. Coming to the issue as to what direction should be issued in the facts and circumstances of this case as found hereinabove, it is pertinent to note that the transaction in question were executed way back in 1996 and the SCNs were issued in the year 2004. Thereafter considerable time has been consumed in disposal thereof and the noticees have also contributed in that regard by seeking several adjournments of dates of hearings. There is no material on record to indicate that investors suffered any loss on account of acts and omissions as found in the case and SCNs do not allege so.

16. Considering the above facts and circumstances, I, in exercise of the powers conferred upon me under section 19 read with sections 11, 11(4) and 11B of SEBI Act, 1992, hereby restrain the following entities from accessing the securities market and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for the period of three years :- Table: 3 Sr. Name of Entity PAN No. 1. Mr. Sanjiv Gupta, director of SGCSL AAXPG7108G 2. S. G. Global Exports Ltd.(SGGEL)- (Formerly known AACCS4594E as Tinna Exports Ltd.) 3. Mr. D. P. Singh, director of SGGEL Not known 4. Mr. Ashwani Khera, director of SGGEL Not known 5. Mr. Hemant Gopal, director of SGGEL Not known 6. Mr. Ramesh Jindal, director of SGGEL Not known 7. Ms. Rachna Gupta, director of SGGEL Not known 8. Majestic Builders Ltd. (Majestic) AACCM5711D (Now known as Lancer Enterprises Limited) 9. Mr. Balraj Sharma, director of Majestic Not known 10. Ms. Manju Sharma, director of Majestic Not known 11. Mr. Virchand Jindal, director of Majestic Not known 17. This order shall come into force with immediate effect. 18. A copy of this order shall also be served upon the depositories and stock exchanges for necessary action on their part.

Sd/- DATE: September 10th, 2015 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA