TMI Blog2008 (10) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... uence of events leading to the passing of the impugned order by the Board started off with an investiga- tion conducted by the Board into the unusual price movements of the scrip of Mega Corporation Ltd., the appellant company, during the period from 25-1-2005 to 16-9-2005. Based on the findings in the investigation, the Board charged the appellant with manipulating the market in its own shares by several means. According to the show-cause notice dated 10-10-2007 issued by the Board, a group of persons connected with the appellant indulged in a large number of trades among themselves only to generate large trading volumes which resulted in raising the price of the scrip from ₹ 4.25 on 25-1-2005 to ₹ 43.85 on 16-9-2005. The show-cause notice further alleged that the appellant sought to generate investor interest in its scrip by publishing false and misleading announcements in the press about the company s prospects and business plans which projected unduly high revenues and profits for the company. It was also alleged that the company reported a huge profit in their annual results for the year 2004-05 by manipulating their books of account to induce the investors to buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant company and were present in the annual general meeting of the company held on 29-7-2005. The second link was that four of the traders namely Patric Xess, Nirmal Jain, Laxman Saijari and Mahendra Gopal Gorivale had the same address as that of Crayons Advertising Limited, an associate company of the appellant. As regards the second link, the learned representative of the appellant stated that Crayons Advertising Ltd. was not an associate company of the appellant but an associate company of another company controlled by one of the promoters of the appellant company. He also argued that the address given by the said four individuals was of a large building which had many offices located therein and there was no material at all to connect these individuals to any particular company. Last but not the least, he pointed out that the promoters of the appellant company did not sell any of their shareholding except for 3 lakh shares in one block on 24-3-2005 at a price of ₹ 14 each and so never derived any profit out of the increase in the price of its shares. What is stated by the learned representative of the appellant could not be controverted on behalf of the Board. After c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember 2005. Regarding the announcement made on tour business, we find that the business plan of the company for tour services was based on their agreement with the well known company Gem Tours and Travels Pvt. Ltd. that had offices across the world. The original agreement between the appellant company and Gem Tours and Travels Pvt. Ltd. was produced before us so also the documents to establish that a subsidiary company called Mega Holidays Ltd. had been formed in order to handle the tour services business. The bank statement supports the payment of ₹ 15 lakhs made to Gem Tours and Travels Pvt. Ltd. on 11-4-2005 as a deposit in pursuance of the agreement entered into with that company. As regards the second announcement pertaining to the launch of Mega Forex, it is clear that the application for licence to deal in foreign exchange made in September 2005 was only a revised application submitted by the appellant in response to the queries raised earlier by the Reserve Bank of India on their original application of 14-4-2005. The original application as well as the response of the Reserve Bank of India was produced for our perusal. After considering the submissions made by both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board is that though the appellant held more than 1 per cent of the share capital of Karuna Cables Ltd., Lakshmi Overseas Ltd. and IFSL Ltd., none of them showed the name of the appellant in the list of their shareholders holding more than 1 per cent shares. All these pieces of evidence, taken together, make it appear that the transactions did not actually take place. The appellant, however, took the stand that it had dealt only with its broker who alone would be in a position to clarify the points raised by the Board. It is the case of the appellant that it had placed orders for sale and purchase of shares with DPS and the latter alone would know how the trades were executed. Shri Dinesh Masalia, a Director of DPS complained to the Board that the broker had not handled the appellant s trades in the three aforesaid scrips and that the contract notes issued to the appellant were forged. The Board has relied upon this statement to hold that the trades were fictitious. We have on record at least two cheques of ₹ 20 lakhs each signed by Shri Dinesh Masalia on behalf of DPS which were issued to the appellant towards payment of the latter s dues on the sale of scrips. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estors to buy the scrip of the company. Given the lack of any definite evidence, this charge against the appellant also fails. 7. Before concluding, we would like to mention that there are statements made by several persons which are available on the records of this case and which have been stoutly denied by the appellant. These include the statements of two directors of the appellant s broker DPS to the effect that the purchase and sale of shares executed by DPS on behalf of the appellant company were completely false and fabricated and that payments were made to the appellant company on account of such dummy sales out of the funds provided by the appellant company itself. There is also a letter addressed to the respondent Board by one Sanjeev Kathuria alleging the involvement of one of the Directors of the appellant company in manipulative trading in its shares. The learned representative of the appellant company, apart from denying the allegations, demanded cross-examination of the persons and because such cross-examination was not allowed, these statements could not be relied upon by the respondent. Considering that the respondent Board undertook a process of enquiry under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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