Order in the matter of Netvision Web Technologies Limited

WTM/RKA/IVD/15/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGARWAL, WHOLE TIME MEMBER ORDER Under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992

In the matter of Netvision Web Technologies Limited and its directors Mr. Bharatbhai Jivanlal Patel, Mr. Sanjiv C. Patel, Mr. Hemant J. Patel, Mr. Himanshu J. Patel, Mr. Dhirendra B. Patel, Mr. Kantibhai N. Patel, Mr. Parmesh G. Shah, Mr. Jay P. Shah and Mr. Shibu George K. Dates of hearing: January 25, 2012 and February 22, 2012 Appearance of parties: For Netvision Technologies Limited and its aforesaid directors: 1. Shri Keyoor Bakshi, Practising Company Secretary 2. Shri Jay P. Shah For the Securities and Exchange Board of India: 1. Smt. Neelam Bhardwaj, General Manager 2. Shri Santosh Shukla, Joint Legal Adviser 3. Shri T. Vinay Rajneesh, Assistant Legal Adviser 4. Shri Avinash Dhumal, Manager

1. Netvision Web Technologies Limited (hereinafter referred to as ‘the Company’) is a company having its shares listed on the Bombay Stock Exchange Limited (BSE). SEBI had conducted an investigation in the scrip of the Company for the period between March 1, 2005 and May 12, 2005 (‘the investigation period’). The investigation revealed that the price of the shares of the Company was falling during the investigation period despite 8 favourable corporate announcements given by the Company on BSE during the investigation period; and improvements of the financial results in the quarter ended March 2005 as well as for entire the Financial Year 2004-05. Out of the 8 favourable corporate announcements, except for one relating to payment of dividend, none of them actually fructified.

2. Pursuant to the findings of the investigations, a show cause notice dated May 05, 2011 (‘the SCN’) was issued to the Company and its directors (hereinafter collectively referred to as ‘the noticees’). It was alleged in the SCN that the notices, by giving such favourable corporate announcements which never materialized, had tried to influence the decision of the investors. They have, by issuing false and misleading announcements, violated section 12A(b) and (c) of the SEBI Act read with Regulations 3(c) and (d), 4(1) and 4(2)(e), (f), (k) and (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘the PFUTP Regulations’).

3. The noticees were called upon to show cause as to why action in terms of sections 11, 11(4) and 11B of SEBI Act read with regulation 11(1) of the PFUTP Regulations should not be initiated against them for the alleged violations, which could include debarring them from accessing the securities market, directly or indirectly and prohibiting/restraining them from buying, selling or otherwise dealing in securities, directly or indirectly in whatsoever manner for an appropriate period of time.

4. Vide letter dated May 24, 2011, the Company filed its reply to the SCN. Mr. Himanshu J. Patel and Mr. Shibu George K filed their replies; vide letters dated May 24, 2011 and dated May 27, 2011, respectively. After seeking adjournment of the date of personal hearing, the noticees appeared for personal hearing before me on February 22, 2012 through their authorised representative Mr. Keyoor Bakshi, Practising Company Secretary along with Mr. Jay P. Shah, director of the Company. During the hearing, the authorised representative made submissions on the lines of the replies of the noticees. The Company also filed its written submissions vide letter dated February 24, 2012. The noticees have inter alia made following submissions - a. The Company had acted honestly in giving the corporate announcements. The announcements given by the company during the investigation period investigation period cannot be said to be fraudulent as during the said period the volume of the trading in shares of the Company was less than 1% of the securities listed. Therefore, it is not correct to allege that it had induced investors to deal in its securities through the corporate announcements; b. Except for a few transactions made by one or two directors of the Company, the promoters or persons acting in concert (PACs) with them were not involved in the sale or purchase of securities of the Company during the investigation period;

c. The performance of the Company started to deteriorate year after year and it was not able to achieve the expected target. The companies that were engaged in software/information technology activities had sustained heavy losses after 2005; d. Mr. Sanjiv C Patel, Mr. Kantibhai N Patel and Mr. Hemant J Patel have left India permanently. e. The Company’s reply to be treated as the reply of Mr. Jay P. Shah, Mr. Dhirendra B. Patel and Mr. Parmesh G Shah, who do not hold any shares of the company and are its professional directors. f. Mr. Himanshu J Patel, Mr. Shibu George K and Mr. Bharat J Patel have ceased to be the directors of the Company and are not associated with it now. While denying the allegations Mr. Himanshu J Patel and Mr. Shibu George K have further submitted that they were not looking after the day-to-day affairs of the Company at the relevant period. Therefore, they are not liable for any act of the Company as alleged. They have requested that they should be exonerated from the charges levelled in the SCN. g. As per the definition of fraudulent practice given under the regulations, one should deal in security in order to induce another person or his agent to deal in securities. h. The ventures mentioned in the announcements made by the Company did not fructify for genuine reasons and therefore the Company was not able to implement such projects. He also submitted that the Company and its directors did not have any intention to defraud the shareholders/investors. i. The price of the scrip was falling during the relevant period and therefore, the announcements made by the Company had no impact on the share price. During the investigation period only Mr. Bharat J Patel, director of the Company had sold 4, 40,000 shares at an average price of Rs. 17.83 per share. He did not sell any shares until first six announcements listed in the SCN when the price range was Rs. 45 to Rs. 18 per share. Had the motive been bad for giving the announcements, he would have sold the shares at much higher price. This sole factor proves the bona-fide of the Company and its director.

j. In order to be covered under the prohibition of section 12A (b) and (c) of the SEBI Act read with regulations 3(c) and (d), 4(1) and 4(2)(e), (f), (k) and (r) of the PFUTP Regulations, there should be device, scheme or artifice or act, practice or course of business which operates or would operate as fraud or deceit in connection with issue or dealing with securities. In this case, there were no such device, scheme, artifice, etc. with intend to defraud any person. There was nothing in any of the announcements which was not true or which the Company did not believe to be true. Therefore, the allegations in the show cause notice do not meet the requirements of the provisions of law mentioned therein. 5. I have considered the SCN, the replies of the noticees, oral and written submissions and other material available on record. I note that the announcement at serial no. 5 in the SCN with respect to Declaration of dividend for the year ended March 2005 is not the basis of the charge as stated in the SCN itself. I further note that the SCN in para. 4 makes a reference that some directors have sold their shares in the market when the announcements were made. This is a statement of fact without making any imputations against the noticees that the announcements made by the Company had impacted/manipulated the price of the scrip during the investigation period. Further, there is no allegation that by selling the shares during the investigation period the director of the company manipulated the price of the shares of the Company. The charge of violation of regulation 4(2)(e) of the PFUTP Regulations by the noticees as alleged in the SCN, is not sustainable.

6. Before dealing with other contentions of the noticees, I proceed to examine the following 7 corporate announcements which form basis of the charges in the SCN and the submissions made on behalf of the Company with respect to each announcement.

A. Announcement No. 1: Joint Venture Agreement with WavNet Communications, USA-signed by Mr. Paresh Patel CEO. i. On March 8, 2005, the Company disclosed/announced to BSE that : “NetVision Web Technologies Ltd has informed BSE that the Company has signed a joint Venture Agreement with WavNet Communications, Inc, a Florida Corporation (“WavNet”). By this Agreement it is the intent of the parties to create a Joint Venture relationship to engage in telecommunications related business and opportunities in India for profits. The Joint Venture shall be conducted through India WavNet Communications, organized for this venture in India by and between WavNet Communications Inc. Florida, (USA) and the Company.

TECHNOLOGY With its innovative hardware and proprietary software applications, industry and technical expertise, and with current access to the Indian market, Management believes that WavNet-US and the Company has a highly profitable opportunity to become a leading provider for a full spectrum of voice communications and high speed data products and services in the Indian region by integrating best-of-class standards-based technologies for cost containment, and certain critical proprietary advances to sustain ongoing leadership in market position, WavNet-US has developed a turnkey “last mile” wireless infrastructure solutions that can profitably deliver a full complement of voice communications and high-speed data products and services at prices attractive to end users in its Point of Entry, Target, and Regional Focus Markets, WavNet-US’s broadband wireless access (“BWA”) technologies provide carrier-calss, packet-based wireless infrastructure that support voice communications and high-speed data transfer. These technologies are especially well suited for countries where Telecom infrastructure may be spotted nonexistent as is the case throughout India. Overview of Product and Services • Wireless voice over Internet protocol with carrier class domestic and international call origination and termination. • Internet access up to 60mbps with aggregation or dedicated QOS (quality of service), • Digital broadband audio and video streaming and downloads, Geo-location capabilities utilizing non-GPS system for one meter location and tracking of mobile items or persons. • Video-on-demand services. Product advantages include: • Innovative technologies to ensure market leadership • Quick cost-efficient deployment • Carrier class transmission quality • Scalability to expand a networks as customer base grows • A one-stop wireless solution for virtually all communications services The Expected Revenues generated from this joint-venture shall be decided on Survey conducted in the nearest future by the experts. It is expected that the company’s turnover shall increase to Rs. 750 million in the First Year and shall further increase to Rs. 2000 million, in the second year, which shall also increase company’s profitability, considerably. ”

ii. The Company had furnished a copy of the agreement, said to have been executed between itself and WavNet Communications, Inc., a Florida Corporation on February 18, 2005 to SEBI. The Company has admitted that this agreement was never acted upon. iii. In this corporate announcement, the Company projected that its sales would increase to ` 75 crores in the year 2005-2006 and shall further increase to ` 200 crores in the year 2006-2007. I note that the actual reported sales of the Company of ` 6.03 crores and a loss of ` 2.04 crores were in complete contrast with the corporate announcement. Similarly in the year 2006-2007, the Company reported sales of ` 1.22 crores and the profit of ` 0.1 crore, as against projected sales of ` 200 crores. I find that the above referred corporate announcement had projected positive performance in sales and profit generation by the Company during the year 2005-06 and the year 2006-07 and this could, in my view, influence the decisions of the investors in the scrip. iv. The Company submitted in its written submissions that the joint venture did not materialize due to lack of sufficient financial reserves. If the Company did not have financial reserves it could have terminated the said agreement in terms of clause 12 thereof. There is no material on record to establish that it was a bona fide announcement. The Company never disseminated that it could not implement this agreement. It did not give any such information along with supporting documents to SEBI during investigation or thereafter except for making this statement in the written submission after the hearing before me. If it was acting with clean hands in making this announcement, it should have disclosed non-implementation of the agreement too in the same fashion as the announcement.

B. Announcement No. 2: Company in association with TECTONA completed project of Reliance Industries Ltd. i. On March 14, 2005, the Company made announcement to BSE that – “the Company in an joint association with Tectona has successfully completed the project for M/s Reliance Industries Ltd. The commercial application is done by the Company while TECTONA is involved in embedding the application on chip & link it with Microprocessor card to the server with online monitoring of looms performance at Reliance’s Naroda Unit.” ii. While in its written submissions, the Company has claimed that the pilot project was completed as announced but TECTONA could not get further orders and the Company being its associate could not do any additional business, it has failed to produce any supporting documents about this claim and this announcement at any stage in this proceeding. I, therefore, find that this announcement was made without any basis and it can be reasonably inferred that this announcement did not contain the true information and the same was misleading.

C. Announcement No. 3: Company to launch BPO centers across the country investment of ` 50 crores.

i. On March 28, 2005, the Company made following announcement at BSE - “it is in planning to launch BPO Centers across the country with an objective to expand company’s presence in Global IT services Market. The said plan involves an investment of around Rs. 500 million and will be financed mainly through Private Banks and to be supplemented by internal accruals. By an intensive survey conducted by the experts, the Company identified IT related service Industry within the BPO space as worth growing sector. The prime motive of launching of BPO centers is to widen the operations over the globe and to provide inaugurate its first customer support call centre at Infocity, Hyderabad. BPO allows the clients to save about 50-70% on their operational expenses by outsourcing non-core work offshore. To ensure seamless communications, the company will set-up BPO centres that are equipped with high skilled personnel, latest software, hardware and Tele-communications equipment.” ii. The Company had not given any proof regarding correctness and bona fide of this announcement during investigation/ inquiry by SEBI or in its reply to SCN or during the hearing.

However, in its written submissions, it has claimed that its Board of Directors on March 28, 2005 decided to launch BPO centers across the country. In support of its claim the Company has submitted a copy of the resolution purported to have been passed by its Board of Directors in its meeting held on March 28, 2005, wherein, the Board decided to launch BPO centers across the country. The Company has also submitted certain documents said to be the primary working papers for the BPO plan. These documents are unauthenticated papers and cannot be relied upon. Relying upon the Form 32 filed with Registrar of Companies regarding appointment of an additional director and the minutes of the said Board meeting it has claimed that the announcement was genuine and bona fide. The Company has claimed that the project could not commence due to lack of financial resources. iii. I note from the above stated minutes of the meeting of the Board of Directors of the Company held on March 28, 2005 that an intensive survey was conducted by the experts. In the said meeting the Chairman of the Company had informed that the project would require an investment of ` 50 crore.

I also note that while in the above stated resolution the Board had decided to launch BPO centers, the Board had not passed any resolution on investment of ` 50 crore. In the announcement, it was stated that “plan involves an investment of around Rs. 500 million and will be financed mainly through Private Banks and to be supplemented by internal accruals.” iv. The Company has now stated that the project could not commence for lack of financial resources. The Company has not submitted any explanation as to what steps it had taken to arrange for the financial assistances. In my view, the entire investments as claimed were not to be invested at one go. I note from the financial statement of the Company for the year ended March 31, 2005 the Company had made a profit of ` 1160.45 lakhs. If the Company was serious to launch the BPO centers as decided by its Board of Directors it should have taken steps to launch atleast one BPO with resources available with it. Further, if the project could not be implemented, the Company should have disclosed the same to BSE. In my view the Company made this announcement without intention to act upon the plans disclosed in it.

D. Announcement No. 4: Entered into ccontract with China based education organization “Wenshange No 4 Middle School”. i. On April 04, 2005, the Company announced to BSE that – “It has signed an Educational Contract worth Rs.166.05 million with China based “Wenshang No.4 Middle School, Shangdong” for supply of 200 faculties for Computer Software Education and Software Development and the said was approved by “Sini-Indo Education Co-operation, China”. Under this contract, the Company will deliver educational programmes to Chinese education departments or colleges. The said educational organization was scouting for a right partner to offer skilled and high end IT professionals of software education, software development, web development and technology to their students, and the Company is, one of the leaders in this area, will help to achieve their goals. This contract is in line with the Company’s commitment to offer students the choice of authorized training programmes that will give them IT, Web Technology education. With this contract, the Company will be one of the select Computer Software training companies in India to offer Computer Education. The Company has successfully executed order of Government of Gujarat and another order to the tune of 110 Million is under negotiation, which at the verge of finalisation. The current order book position stands at Rs.540 Million.” ii. The Company had admitted that the contract with ‘Wenshange No 4 Middle School’ was signed on May 19, 2004 but the announcement about this contract was made on April 04, 2005. Later, in its written submissions, the Company has submitted that it deputed a team of trainers and some training programmes were conducted. Since expected number of Chinese students could not be found, the project was terminated halfway. However, the dates of deputing trainers and termination of contract have not been submitted by the Company. No evidence has been submitted to substantiate this claim.

iii. I find that the fact that the contract was executed more than one year back was suppressed in the announcement. Further, if the contract was terminated “halfway” before April 04, 2005, the announcement of its existence to public would definitely with some mala fide motive and intention. If the venture was terminated subsequent to the announcement on April 04, 2005, it was not informed to the BSE for dissemination to public. In my view, the Company has not given any cogent reasons to explain as to why the fact of an agreement executed on May 19, 2004 which had potential of influencing the decision of the investors in the scrip of the Company was announced as late as 4th April 2005. iv. I note that the announcement contained substantial positive statements about the performance of the Company. The contents of this announcement suggest that Company had got the contract recently and it will, pursuant to this contract, deliver educational programmes to Chinese education departments or colleges. v. In view of the above circumstances, I find that by this announcement, the Company attempted to make its shareholders/investors believe that it had at the time of announcement executed high value deals/contracts with China based ‘Wenshang No 4 Middle School’ whereas the contract was an old one. Therefore, it can be safely said that this announcement was misleading and disclosed information in a distorted manner so as to influence the decision of the investors.

E. Announcement No. 6: Export order of ` 10 crores from WaveNet Communications Inc. USA. Also got some export orders from Africa, UK and USA. i. On April 12, 2005, the Company announced on BSE that : “the Company has been awarded remarkable Export Order worth Rs. 108 Million for Strategic IT Outsourcing services from USA based WaveNet Communication Inc. Under the terms of the purchase order, the Company will deliver strategic IT Outsourcing services to WaveNet Communication Inc with delivery schedule of completion within June 30, 2005 and covers all related IT services. Moreover, the Company has got number of remarkable export orders from Eastern Africa, UK and USA. Inspired by the development in International market, the Company has expanded and opened an overseas office in USA to catch the opportunities. The company is expecting another export order to the tune of Rs. 350 Million from other USA based clients. Company’s network spans 18 countries, over 900 dedicated and highly skilled IT professionals, work in development centers in India, USA, Canada, UK, Singapore, China, Australia and serve over 36 global companies.

The Company is one of the India’s fastest growing IT group with strong focus on Software Development, Multimedia Developments, IT-Consultancy, Feasibility Study, System Analysis & Design, Project Management & Training with 30000 Sq. Ft of Development Center. Company’s major domestic clientele includes L&T Ltd., ICICI Bank, Johnson & Johnson, Gujarat Ambuja Ltd., 55th Indian Dental Conference, All India Ophthalmological Society etc.” ii. In support of its claim about disclosures in this announcement, the Company had furnished to SEBI a photo-copy of purchase order (agreement) dated July 26, 2004 entered into by the Company with Borne Trading Limited, U.K. In its written submissions, the Company, while confirming that the export order was from Borne Trading Ltd., UK, has forwarded a copy of the abstract of an unauthenticated resolution (on a plain paper) dated November 25, 2004 purported to have been passed in the meeting of its Board of Directors held on October 31, 2004. The Company has further submitted that it was to receive advance payment against a bank guarantee and a proposal for the same was submitted to the Punjab National Bank.

Since it could not arrange the required bank guarantee the order could not be executed for want of required funds. iii. I have perused the documents submitted by the Company. From the abstract of the Resolution dated November 25, 2004 stated to be passed by the Board of Directors of the Company on October 31, 2004, I find that Mr. Jay P. Shah and Mr. Dhirendra B. Patel, the directors of the Company were authorized to sign, execute any deed, document with respect to an order for US$35,10,000 for the development and export of the software to the UK based party. The export order (agreement) was signed and executed between Company and Borne Trading Limited, U.K on July 26, 2004 i.e. before this Board Resolution. iv. I also find that in this announcement the Company has highlighted the receipt of an export order for Rs.108 million from WaveNet Communications, Inc. USA under which the Company will deliver strategic IT Outsourcing services to WaveNet Communication Inc. USA. Though a general statement “Moreover, the Company has got number of remarkable export orders from Eastern Africa, UK and USA” has also been made in the announcement, the Company has not given the highlights of the purchase order from Borne Trading Ltd, UK, for US$3,510,000 for the purchase of ‘software development’. v. I note that whenever the Company was provided the opportunity to prove the existence of the export order for Rs.108 million claimed to have been received from WaveNet Communications Inc., USA, other export orders from Africa, UK and USA and other disclosures in the announcement, the Company confirmed existence of the above stated export order from a UK based company Borne Trading Limited, U.K only.

In view of the same, the only inference one can draw is that no export order from Africa, UK or USA did exist when the Company made the announcement on April 12, 2005. vi. In my view, the information disclosed therein had the potential to influence the decision of the investors in the scrip of the Company. I find that the Company had given a false announcement on April 12, 2005 that it had bagged a huge contract for a value of ` 108 million from WaveNet Communications Inc. USA. Further, the information/disclosure, about other ‘remarkable export orders from Eastern Africa and USA’ was also false. I also find that by highlighting false information regarding non-existent export order while having a different export order from a UK based company, the Company indulged in disseminating information in a distorted manner.

F. Announcement No. 7: Secures orders from Gujarat Government PSUs. i. On April 25, 2005, the Company informed BSE that - “Company has bagged orders from GUJARAT GOVERNMENT giant PSUs for supply of E-Governance software products. The Company has achieved significant break through in the government projects for E-Governance software, as a result different departments of GUJARAT GOVERNMENT like Gujarat Heavy Chemicals Ltd., Sardar Sarovar Nogam Ltd., Gujarat Water Resoureces Development Corporation Ltd., Gujarat Vigillance Commission, Labour and Employment Department, Ahmedabad City Police Department, Ahmedabad Passport Office, has assigned the Company to work on the project. During the last quarter, the Company has successfully implemented orders of GOVERNMENT OF GUJARAT and it will place another order of huge value within a short period of time. The Company is listed in G. R. of Government of Gujarat and already began to collect the order from the offices of Government and is receiving the tremendous response for its software products, which will definitely yield good revenue in the coming years. To its success, the Company is ranked in top 500 ET companies of India where giants like ONGC, Infosys & Wipro and leading the table of rankings.”

ii. As per the SCN, this announcement was with respect to the work orders obtained/letter of acceptance/proposal acceptance received by the Company on various dates - February 11, 2002, July 15, 2004, September 16, 2004, November 20, 2004 and February 10, 2005. All these orders/acceptances are old. iii. The Company in its written submissions has stated “we have supplied the bilingual software as per the order dated 10.02.2005. We were required to sign a contract with Gujarat Water Resources Development Corporation Limited with-in 21 days from their letter dated 10.02.2005. We had made the announcement after signing contract with said authority.” iv. I note that the Company has failed to furnish the documents pertaining to work orders/ letter of acceptance /proposal acceptances received on February 11, 2002, July 15, 2004, September 16, 2004 and November 20, 2004, as announced by it. As regards the order dated February 02, 2005 from Gujarat Water Resources Development Corporation Limited (GWRDCL) for supply of Gujarati Software packages, I note that the Company has not submitted documents to prove the execution/implementation of this work order. v. The Company has not given any explanation as to why the announcement with respect to orders/proposals obtained in 2002 and 2004 was made on April 25, 2005. vi. In view of the above, I draw an inference that the Company had made false announcements and disclosed certain false facts while having different facts in possession. I, therefore, find that the announcement is false and misleading and also makes distorted representation of facts, making the reader of the announcement to believe that the contracts, if existed in 2002 – February 2005, were fresh at the time of announcement. vii. I also find that the announcement had the potential to mislead the investors regarding their investment decisions in the Company.

G. Announcement No. 8: Launches Wireless Internet Technology (WIT) all over India. i. On May 02, 2005, the Company made announcement at BSE that: “NetVision Web Technologies Ltd has announced that the launch of Wireless Internet Technology (WIT) will provide services to more than 25 lacs customers all over India. The Launching up of the Wireless License Internet Technology reflects Company’s confidence in the business opportunities that exist in this country. This is an area where Company gained considerable experience and can bring significant value to Company’s customers. The Company expects revenue generation of Rs. 500 million from the new business operations, which shall also increase Company’s profitability, considerably.

Formalities to start its WIT are in pipeline with Government of India to get license to operate. The Company has diversified and began to develop in the number of multi media products in almost all segments like travel, religious, educational etc. Looking to the present scenario and encouraged by response from the customers, the Company has developed umber of new albums based on current topics, which focusing the day-to-day problems of common people. This year, Company is definitely thinking towards development of new areas in the overseas market, which will require large investment from the establishment of the same. Company will make progress and achieve significant break through in the said untouched area.” ii. The Company had not given any explanation and supporting documents about implementation of the project that was announced till hearing in the proceedings. In its written submissions, the Company has submitted that it was required to pay a deposit of ` 50 crore to the Government of India and since the required sum could not be raised it could not launch the project. I find this reply of the Company vague and not supported by any evidence about the steps taken by the Company to implement the project. It is not clear as to what deposit the Company was to pay to the Government. Moreover, if the project was not implemented, the disclosure about the same should also have been made at BSE by the Company. In view of these observations, I draw the inference that the Company made this announcement without being serious about it. iii. From the copy of the minutes of the meeting of the Board of Directors of the Company held on May 02, 2005, I note that the Board of Directors resolved that- “the Company do enter into the business of Wireless Internet Technology and that an investment of Rs.500 Million be made in the said project to facilitate the Customers all over India.”. From this resolution, I note that the Company had decided to make an investment of `50 crores in the project but in the announcement it declared expected revenue generation of `50 crores. This is also a distortion of facts which may mislead the investors.

7. The above mentioned 7 announcements were made by the Company during a short span of less than two and a half months (March-May 2005). The observations made above may be summarised as under – (i) On few occasions the Board of Directors had been passing resolutions repeatedly stating that the Company would be making huge investments in projects, whereas the projects have been shelved because of lack of financial resources. If the Company did not have adequate financial resources to complete its announced projects/plans as claimed by it, it is curious why its Board of Directors had been passing resolutions to invest in projects/ plans repeatedly. Thus, it has to be inferred that the Company had been making such positive announcements without intending to implement such projects announced. (ii) On certain occasions, the Company has made certain announcements of non-existent agreements, like in the case of announcements made on March 14, 2005 (completion of project for Reliance Industries Ltd.), on April 12, 2005 (export order of Rs.10 crore from WaveNet Communication Inc. USA/export orders from Africa, UK and USA) and on April 25, 2005 (secures orders from Gujarat Government PSUs). (iii) The Company has also made announcements regarding old agreements, like in the case of announcement made on April 04, 2005 (entered into contract with China based education organisation). The Company has thereby misrepresented to the market/investors that such announcement was for a fresh/new contract, which is not the case.

8. Such false, misleading and distorted information in those 7 announcements had the potential to induce the shareholders of the Company to remain invested in the scrip on the belief that their earnings per share would increase when the Company’s worth also gets enhanced by earnings from the announced projects/plans. Further, they also had the potential to induce the general investors to purchase and hold shares of the Company on the belief that they may stand to make profits from their investments in the scrip of the Company. Thus, the said 7 announcements made by the Company had the potential to influence the investment decision of the investors and induce sale or purchase of the shares of the Company.

9. The provisions of the SEBI Act and PFUTP Regulations which are alleged to have been violated by the noticees are reproduced below:

SEBI Act. “Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. 12A.No person shall directly or indirectly— ……………… (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder;” PFUTP REGULATIONS. Definition of ‘ fraud” – Regulation 2(1)(c). (c)“fraud” includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include— (1) a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment; (2) a suggestion as to a fact which is not true by one who does not believe it to be true; (3) an active concealment of a fact by a person having knowledge or belief of the fact; (4) a promise made without any intention of performing it; (5) a representation made in a reckless and careless manner whether it be true or false; (6) any such act or omission as any other law specifically declares to be fraudulent; (7) deceptive behaviour by a person depriving another of informed consent or full participation; (8) a false statement made without reasonable ground for believing it to be true; (9) the act of an issuer of securities giving out misinformation that affects the market price of the security, resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price.

And “fraudulent” shall be construed accordingly; …………………………………………………………………………………..” “3. Prohibition of certain dealings in securities No person shall directly or indirectly- (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.” 4. Prohibition of manipulative, fraudulent and unfair trade practices “(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (e) any act or omission amounting to manipulation of the price of a security; (f) publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities;

(k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors; (r) planting false or misleading news which may induce sale or purchase of securities.” 10. The noticees have contended that in order to fall in this definition one should deal in securities in order to induce another person or his agent to deal in securities. I find that the definition of “fraud” in regulation 2(1) (c) is an inclusive one. It is inclusive with respect to act, expression, omission or concealment committed by any person whether in deceitful manner or not, while dealing in securities in order to induce another person. The definition is also inclusive with respect to knowing misrepresentation, concealment of material fact, suggestion to an untrue fact, active concealment of fact with knowledge, promise without intention to perform, reckless and careless representations, deceptive behaviour, false statement, etc. as listed in points (1) to (8) of regulation 2(1) (c). The activities listed in regulation 2(1)(c) (1) to (8) are not connected or related with dealing in securities by a person to induce another person to deal in securities as contended by the noticees. In my view, the act of making false, misleading and distorted announcements by the noticees as found above is squarely covered in the second part of the definition.

11. Section 12A (b) and (c) of the SEBI Act and regulation 3(c) and (d) of the PFUTP Regulations prohibit employment of any ‘device’, ‘scheme’ or ‘artifice’ to defraud in connection with dealing in securities”; and engaging in any act, practice, course of business which operates or would operate as fraud or deceit upon any person “in connection with dealing in securities”. The words ‘device’, ‘scheme’ or ‘artifice’ have not been defined in the SEBI Act or in the PFUTP Regulations. According to the Black’s Law Dictionary,- i. “device” means (a) an invention or contrivance; any result of design; (b) a scheme to trick or deceive; a stratagem or artifice, as in the law relating to fraud. ii. “scheme” means (a) a systemic plan; a connected or orderly arrangement, especially of related concepts; (b) an artful plot or plan, usually to deceive others <a scheme to defraud creditors iii. “artifice” means a clever plan or idea, especially one intended to deceive.

12. In my view, the act, conduct and practice adopted by the noticees in issuing series of false, misleading and distorted corporate announcements as observed above, are covered within the scope of the expressions “device” or “artifice” or “scheme”. The expression ““in connection with dealing in securities” in section 12A (b) and (c) of the SEBI Act and regulation 3(c) and (d) of the PFUTP Regulations do not signify that the person employing in the device, etc. and engaging in act, practice, etc. should actually buy or sell securities. In my view, any fraudulent or deceptive device, scheme, act, practice which has the potential to induce sale or purchase of securities of the Company and to influence the investment decisions of the investors would be covered in the prohibitions of section 12A (b) and (c) of the SEBI Act and regulation 3(c) and (d) of the PFUTP Regulations.

13. Regulation 4 (1) of the PFUTP Regulations, prohibits indulgence in fraudulent and unfair trade practices in securities. By making false representations and distorting the facts in its announcements, as observed above, the noticees have indulged in fraudulent activities that are prohibited under regulation 4(1) read with regulation 2(1) (c) of the PFUTP Regulations. Publishing or causing to publish untrue information, issuing advertisements containing information in a distorted manner and planting of false and misleading news are declared fraudulent and unfair trade practices under regulation 4(2) (f), (k) and (r), respectively. In Regulation 4(1) or in Regulation 4(2)( f) (k) and (r) also do not envisage actual buy or sell of securities. Issuance of misleading/false announcements or advertisements that contain distorted information would be covered by the prohibitions of regulation 4(2), if they “may” influence the decision of investors or induce sale or purchase of securities.

14. In this regard, the Hon’ble Hon’ble Securities Appellate Tribunal (Hon’ble SAT) in its Order dated June 29, 2011 (Appeal No.104 of 2011-V. Natarajan vs. SEBI) has held that fraudulent or unfair trade practice in securities includes publishing any information which is not true or any advertisement that is misleading or contains information in a distorted manner which may influence the decision of the investors. The following observations of the Hon’ble Securities Appellate Tribunal in this case are worth mentioning:

“ … we are satisfied that the provisions of Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 were violated. These regulations, among others, prohibit any person from employing any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on an exchange. They also prohibit persons from engaging in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities that are listed on stock exchanges. These regulations also prohibit persons from indulging in a fraudulent or unfair trade practice in securities which includes publishing any information which is not true or which he does not believe to be true. Any advertisement that is misleading or contains information in a distorted manner which may influence the decision of the investors is also an unfair trade practice in securities which is prohibited. The regulations also make it clear that planting false or misleading news which may induce the public for selling or purchasing securities would also come within the ambit of unfair trade practice in securities. …….” 15. In view of the above, I do not agree with the contentions of the noticees in this regard.

16. From the Annual Report of the Company for 2004-2005, I note that as on September 09, 2005 all the directors to whom the SCN was issued were on the board of directors of the Company and Mr. Bharat J Patel was its Chairman. From the Annual Report for 2005-2006, I note that except for Mr. Bharat J Patel, all the others continued on the board of directors of the Company and Mr. Shibu George K was its Chairman. Thus, during relevant time when the above said 7 corporate announcements were made all the directors who are noticees were directors of the Company and they are liable for the acts and omissions of the Company. Whether some of directors left India or some are not now associated with the Company is not relevant for the present proceedings. If they were directors at the time of violations they can not escape the responsibility. Mere statement that Mr. Himanshu J. Patel and Mr. Shibu George K were looking after day-to-day affairs of the Company will not be of any help to them. They have also not given any evidence in support of this submission and have not proved that the violations were committed without their knowledge or that they had exercised all due diligence to prevent the commission of the violations. I also note that Mr. Shibu George K was disclosed as Chairman cum Managing Director of the Company in the Annual Report for 2005-2006. In view of such observations, I find the directors also responsible for the acts of the Company in issuing such false, misleading and distorted corporate announcements.

17. In view of the above, I find that the noticees have contravened the provisions of section 12 A(b) and (c) of the SEBI Act read with regulations 3 (c) and (d), 4 (1), 4 (2) (f), (k) and (r) of the PFUTP Regulations.

18. I, therefore, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11(1), 11(4) and 11B thereof and regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, hereby restrain and prohibit Netvision Web Technologies Limited and Mr. Bharatbhai Jivanlal Patel, Mr. Sanjiv C. Patel, Mr. Hemant J. Patel, Mr. Himanshu J. Patel, Mr. Dhirendra B. Patel, Mr. Kantibhai N. Patel, Mr. Parmesh G. Shah, Mr. Jay P. Shah and Mr. Shibu George K. from accessing the securities market and from buying, selling or dealing in securities, directly or indirectly, in whatsoever manner, for a period of two years.

19. This Order shall come into force with immediate effect.

Date: April 20, 2012 RAJEEV KUMAR AGARWAL Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA