TMI Blog2014 (12) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... lottees are fraudulent as defined under regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ( PFUTP Regulations ) and are in contravention of the provisions of regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (e) and (g) thereof and section 12A(a), (b) and (c) of the SEBI Act, 1992. As directors of Radford during the relevant time (i.e. Prakash Bhawarlal Biyani, Manish Nareshchandra Shah, Rajesh Kumar Maheshwari and Nitin Shivratan Murarjka), being in control of the day to day affairs of Radford, had the knowledge of its acts and omissions. They were also under an obligation to ensure that acts and transactions of Radford were not in violation of any of the applicable provisions of SEBI Regulations or other applicable laws. Therefore, prima facie find that these directors were responsible for Radford 's acts and omissions in this case. A detailed investigation of the entire scheme employed in this case is necessary to find out the role of any other entity therein including LTP contributors, Suspected entities, connection amongst the concerned entities and the ultimate owners of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs in the shares of Radford Global Limited {hereinafter referred to as Radford }, Securities and Exchange Board of India ( SEBI ) undertook a preliminary inquiry in the dealings in the shares of Radford for the period January 28, 2013 to March 24, 2014 {hereinafter referred to as the examination period }. 2. On January 28, 2013, pursuant to a stock split, the face value of each share of ₹10/- was reduced to ₹2/- per share. Post stock-split, during the period January 29, 2013 to July 23, 2013 ( Patch I ), the price of the scrip of Radford opened at ₹49.20, rose to a high of ₹86.00 and closed at ₹74.95. During the period July 24, 2013 to March 24, 2014 ( Patch II ), the price of the scrip continuously fell from ₹74.10 to ₹4.89. An illustration of price/volume movement in the scrip of Radford during the examination period is given below: 3. The preliminary examination revealed that there was a pattern in which the shares of Radford were being traded. The modus operandi adopted by the traders in the scrip is as under : i. Firstly, shares were allotted on preferential basis in Pre-Patch I to entities connected/related directly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter taking into account the stock-split dated January 28, 2013, increased by 5 times to 70,311,500. From the Annual Reports of Radford for FY 2011-12 and FY 2012-2013, it was observed that it is in the business of Staffing Services, Textile and Real Estate and it had earned a profit of ₹6,17,264/- during 2011-12 and ₹45,87,092/- during FY 2012-13. From the Annual Report of Radford for the FY 2012-2013 it is observed that for the FY ended 2012 the EPS was ₹0.01/- and for the FY ended March 31, 2013 EPS was ₹0.07/-. It was further noted that during the Pre-Patch I there was no material corporate announcement made by Radford which could support such price rise in its scrip. It is observed from the above facts that the price rise of 7442% during PrePatch I was not justified and aberrant. Also the movement was extremely aberrant vis-a-vis the movement of the stock market as the Sensex only moved from 17,645 to 20,103. 7. The sharp price rise in the scrip as discussed above was not supported by fundamentals of Radford or any other external factor. The price in the scrip increased prior to the expiry of the lock-in period on the shares held by the aforesaid all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Name Clnt Pan Trading Member Name No. of Instances % to Total Instances Pos LTP Contri of the Client as a buyer Tot Pos Contri In Sec Pos Contri (in %) 1 Taran Kumar Rungta ASVPR5947G Shilpa Stock Broker Pvt. Ltd. 14 11.57 45.21 246.7 18.33 2 Prem Lata Nahar AFAPN8764M 25 20.66 43.3 246.7 17.55 3 Manjulaben Sukhdev Pandya ALVPP7764J Sanghavi Brothers Brokerage Ltd. 15 12.4 32 246.7 12.97 4 Rajat Share Broking Pvt Ltd AAACR2695B Shilpa Stock Broker Pvt.Ltd. 6 4.96 25.5 246.7 10.34 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significant increase in the trading volume was observed and it appears that most of the entities were acting as counterparty to the preferential allottees. Also on further examination direct/ indirect relationship were established among these entities through Know Your Client (KYC) details , their bank statements, off-market transactions amongst themselves, and information available on the Ministry of Corporate Affairs (MCA) website. List of such entities are annexed as Annexure - B and hereinafter referred to as the Radford Group Suspected Entities . 14. It is observed that during Patch I, the preferential allottees were net sellers and entities forming part of the Radford Group Suspected Entities were net buyers, a snapshot of which is given below:- Table III - Exit provided by Radford Group Suspected Entities to allottees Shares sold % of Total allotted shares Shares purchased from preferential allottees % of preferential shares Sold Total shares bought in the Patch I by % of Net Buy Preferential Allottees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.24 1705206 68.88 6 Winall Vinimay Private Limited Ltd AAACW8004B 2144989 3.68 1764206 82.25 7 Pine Animation Limited AAECM0267A 1858368 3.18 1081586 58.20 8 Limestone Properties Private Limited AACCL0133G 1764054 3.02 1357040 76.93 9 Runicha Merchants Private Limited AAECR0580M 1584913 2.72 1325164 83.61 10 Dhanleela Investments Trading Company Limited AAACR1770P 1464988 2.51 680586 46.46 11 Apex Commotrade Private Limited Ltd AAJCA4459K 1223735 2.10 1033114 84.42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 Natural Housing Private Limited AADCN6251G 200000 0.34 183926 91.96 26 Radison Properties Private Limited AAFCR2818B 160125 0.27 114517 71.52 27 Ridhi Vincom Pvt Ltd AAECR9858C 115000 0.20 115000 100.00 28 Dhanraksha Vincom Pvt Ltd AADCD6028P 113390 0.19 112390 99.12 29 Kingfisher Properties Private Limited AAECK3394G 95000 0.16 92400 97.26 30 Vibgyor Financial Servicepvt Ltd AAACV8378B 82000 0.14 37840 46.15 31 Blue Circle Services Limited AAACB2131L 64073 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 224803 20.01 5 East West Finvest India Limited AADCE1236G 221250 0.38 72200 32.63 Total (II) 6904536 11.83 2291537 33.19 Grand Total (I+II) 40851126 70.01 27684200 67.77 16. It is observed that 46 allottees made a collective profit of ₹313.01 Crore on their total investment of ₹12.99 crore, a substantial return of approximately 2309 % on their investment in a period of 18 months (including the lock in period). It is evident from the above analysis of trading in Patch I that the entities of Radford Group Suspected Entities provided a hugely profitable exit to the allottees, who also were related directly/indirectly to Radford. The profit/gain earned by the allottees during Patch I is given below:- Table V: Details of the trades carried out by allottees and profit ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 19831633 0 5 Ashok Jiwrajka AACPJ36 10K 250000 1250000 3 0 0 1250000 1250000 79.18 95222911 0 6 Babita Mittal AAIPG4 573G 150000 750000 3 0 0 750000 750000 79.34 57254421 0 7 Bimal Desai AAKPD3 160A 200000 1000000 3 9001 0 1009001 1009001 83.22 80945955 0 8 Brij Bhushan Singal AEFPS62 98M 580000 2900000 3 0 0 2900000 2900000 82.12 229451547 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 949J 100000 500000 3 0 0 500000 500000 81.16 39080552 0 18 Jyoti Anil Trevadia ABWPT8 000C 100000 500000 3 0 0 500000 500000 81.39 39195997 0 19 Jyotsna Jitendra Desai AHPPD4 223L 200000 1000000 3 0 9001 990999 990999 70.65 67041531 0 20 Kalpita Suresh Luniya AAAPL9 611J 100000 500000 3 0 0 500000 500000 58.83 27916282 0 21 Kamal Indur Punwani AFFPP52 07G 100000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00000 1000000 82.47 79471984 0 30 Pratik Agarwal Beneficiar y Trust AABTP7 516K 200000 1000000 3 0 0 1064874 1064874 79.01 76033232 0 31 Praveen Kumar Agarwal ACSPA4 725A 200000 1000000 3 0 0 1000000 500000 78.47 37735000 5000 00 32 Praveen Kumar Agarwal Huf AAIHP6 229C 200000 1000000 3 0 0 1000000 1000000 82.6 79600930 0 33 Rajendra Mangilal Jain ACPPJ98 53R 100000 500000 3 0 0 500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 Tanvi Bhavik Trevadia AFAPT5 888A 100000 500000 3 0 0 500000 500000 80.07 38535769 0 43 Tarun Aggarwal AOQPA9 034E 150000 750000 3 0 0 750000 750000 79 57001648 0 44 Ujwala Namdev Mane AAEPM5 924H 100000 500000 3 0 0 500000 500000 46.16 21577500 0 45 Uma Songal ANRPS7 987A 225000 1125000 3 0 0 1125000 1125000 78.6 85053164 0 46 Yogesh Popatlal Thakkar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnected entities to provide exit was a scheme devised to rake in ill-gotten gains. 19. In Patch II, the price of the shares of Radford has decreased from ₹74.10 to ₹4.89, i.e. a fall of approximately 93.4%. Also the volumes have again decreased by 67% of the volume of Patch I. On analysis of the top 20 sellers during the period, it was noted that 9 entities of the Radford Group Suspected Entities have sold approximately 37% of the net traded volume. Also on analysis of the negative LTP contribution, it was noted that the top 20 entities had contributed 72% of the price fall of which only 13% was contributed by Radford Group Suspected Entities . It indicates that a sizeable quantum of gullible investors had started trading in the shares of Radford and were disposing at any possible price. 20. From the analysis of the trading across Patches, it can be comfortably stated that the modus operandi of allotting shares on preferential basis at a premium, pumping the share price artificially and then dumping the price so that the same cycle could be repeated, demonstrates the mala fide of the Radford Group Suspected Entities . Also the mechanism is being presumably u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. In the facts and circumstances of this case, I am of the view that preferential allotment was used as a tool for implementation of the dubious plan, device and artifice of Radford Group Suspected Entities and preferential allottees. One could argue that in order to make LTCG, the preferential allottees in question could have bought in secondary market and waited for a year before selling the shares. In the instant case, probably the preferential allotment route was preferred over secondary market route because the share capital of Radford prior to preferential allotment was very small, i.e., 1,40,62,300 shares (Face Value: ₹ 10) to accommodate the required fictitious LTCG of ₹313 crore approximately. As such the capital expansion through preferential allotment and stock split provided much bigger source to the persons involved in terms of volume and price manipulation to facilitate the whole operation. 26. Since prior to the trading in its scrip during the Examination Period, Radford did not have any significant financial standing in the securities market, in my view, the only way it could have increased its share value is by way of market manipulation. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (e) and (g) thereof and section 12A(a), (b) and (c) of the SEBI Act, 1992. The said regulations are reproduced hereunder:- SEBI ACT Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. 12A. No person shall directly or indirectly (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (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 regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the knowledge of its acts and omissions. They were also under an obligation to ensure that acts and transactions of Radford were not in violation of any of the applicable provisions of SEBI Regulations or other applicable laws. I, therefore, prima facie find that these directors were responsible for Radford 's acts and omissions in this case. 29. I am of the opinion that a detailed investigation of the entire scheme employed in this case is necessary to find out the role of any other entity therein including LTP contributors, Suspected entities, connection amongst the concerned entities and the ultimate owners of funds used for manipulating the price of the scrip. Therefore, while SEBI would investigate into the probable violations of the securities laws, the matter may also be referred to other law enforcement agencies such as Income Tax Department, Enforcement Directorate and Financial Intelligence Unit for necessary action at their end as may be deemed appropriate by them. 30. SEBI strives to safeguard the interests of a genuine investor in the Indian securities market. The acts of artificially increasing the price of scrip mislead investors and the fundamental tenet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of Radford Investment Services Pvt. Ltd. 7 Roshan Dwarkani ATXPD7040B 8 Suresh Kumar Saini BCXPS0818J Preferential Allottees 9 AachalchandBalar ABAPB8617M 10 PiyushKumarBalar AEMPB6394Q 11 AbhishekKumarBalar AATPB8811B 12 AfsarZaidi AADPZ8571G 13 AmreshA.Mody AACPM4024E 14 HasumatiA.Mody AJSPM7935P 15 AnilRajatAgarwal Sons.Huf. AAFHA0709M 16 AshokBJiwrajka AACPJ3610K 17 BabitaMittal AAIPG4573G 18 BimalJDesasi AAKPD3160A 19 BrijBhushanSingal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 SantoshAggarwal ABAPA4548E 49 ShaileshMangilalJain AAAPJ6765F 50 ShilpaAggarwal AEXPA1230M 51 SmtUjwalaNamdevMane AAEPM5924H 52 SurendraBJiwrajka AACPJ4316L 53 SushantInvestments ACAFS8650G 54 TanviBhavikTrevadia AFAPT5888A 55 TarunAggarwal AOQPA9034E 56 UmaSingal ANRPS7987A 57 YogeshPopatlalThakkar AAPPT1825P Radford Group 58 Amrit Sales Promotion Pvt Limited AACCA3220D 59 Amrusha Mercantile Private Ltd AALCA0340D 60 Anjali Suppliers Private Limited AAJCA1784D 61 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vincom P Ltd AAMCS1711P 86 Scope Vyapar Private Limited AAICS6023N 87 Shelter Sales Agency Pvt Ltd # AASCS1797F 88 Shivkhori Construction Private Limited AAPCS7850L 89 Signet Vinimay Private Limited AAMCS1712Q 90 SKM Travels Private Limited AAICS0688K 91 Spice Merchants Private Limited AAPCS7492G 92 Symphony Merchant Pvt Ltd AADCS5411K 93 Topwell Properties Private Limited AADCT8403C 94 Udbal Mercantile Private Limited AABCU2648C 95 Vibgyor Financial Service Pvt Ltd AAACV8378B 96 Winall Vinimay Private Limited AAACW8004B Suspected Entities 97 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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