WTM/KMA/ISD/320/12/ 2010 SECURITIES AND EXCHANGE BOARD OF ... · 1. The Securities and Exchange...

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WTM/KMA/ISD/320/12/ 2010

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

DIRECTIONS UNDER SECTIONS 11B, 11D AND 11 4(b) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AGAINST MR. SANJAY DANGI, HIS ASSOCIATES AND OTHER ENTITIES IN VARIOUS SCRIPS

1. The Securities and Exchange Board of India (hereinafter referred to as

SEBI) had received a reference dated November 27, 2009 from the Office of the

Assistant Commissioner of Income Tax, Central Circle, Nagpur (hereinafter

referred to as the IT Department), containing certain findings in the matter of

Murli Industries Limited (hereinafter referred to as the company). It was stated in

the said reference that the following ten entities were holding substantial shares

of the company:

i. Ambaji Papers Private Limited ii. Inco Infrastructures Private Limited iii. Kanhaiya Mining & Minerals Private Limited iv. Krishnum Investments Private Limited v. Lakhi Packaging Private Limited vi. Ramji Agri Business Private Limited vii. Ramkrishna Fabrication & Machineries Private Limited viii. Runicha Alloys & Steel Private Limited ix. Simple Mining & Power Private Limited x. Taitan Management Services Private Limited

2. In their reference, the IT Department had also stated that the affairs of the

aforesaid ten companies (hereinafter referred to as ten entities) were being

looked after by one Amit Raja CA, who happened to be their auditor. The IT

Department had found certain documents in the office of the company suggesting

manipulation in the share price of the company and stated as under:

“4.1 Page 7 & 8:- Theses pages are duly signed by one of the director Mr. Lalchand Maloo. These papers pertain to period 12.12.2006 and 31.1.2007 just before the issue of FCCB. These papers indicate strategy to manipulate in the price of the shares before the FCCB. Further it also indicates the sharing of funds with one Mr. Sanjay Dangi”.

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3. The IT Department, had also forwarded the certified true copies of the

above mentioned pages (7 and 8), which appears to have been signed by one

Sanjay Dangi and Mr. Lalchand Maloo (one of the directors of the company) on

behalf of the company. It was stated in page 7 of the document that after the

expenditure on Foreign Currency Convertible Bonds (hereinafter referred to as

FCCBs) and base price, the difference amount was to be shared between Mr.

Sanjay Dangi and the company in the ratio of 40% and 60%, respectively. The IT

Department had concluded the following:

“5.1 All the aforesaid 10 companies are dummy companies floated by M/s Murli Industries Ltd. All the directors of these companies are of no means to carry out huge transactions running into Millions of Rupees. 5.2 All the above referred 10 companies have purchased shares of M/s Murli Industries Ltd. either from market or through issue of private placements. 5.3 It appears that all these 10 companies are being used by M/s Murli Industries Ltd. to manipulate the price of its shares.”

4. The IT Department further referred the alleged manipulation in the shares

of the company, to SEBI, for further necessary action. A plain reading of the

certified true copy of documents, which IT Department had found during their

survey at the offices of the company, prima facie indicated a well laid down

strategy planned by promoters of the company along with Mr. Sanjay Dangi to

manipulate the share price of the company before the issuance of the FCCBs.

5. In light of the aforesaid reference and documents received from the IT

Department regarding the manipulation in the shares of the company and the

profit sharing arrangement between the company and Mr. Sanjay Dangi, SEBI

initiated a preliminary inquiry in the matter to find as to whether there was any

concentration of shareholding of the company among the ten entities and

whether there was any attempt to manipulate the shares of the company before

the FCCB issue. The preliminary findings of SEBI are given below:

6. The company, which was earlier known as Murli Agro Products Limited,

has its registered office at Jai Bhawani Society, 101, Central Avenue,

Wardhaman Nagar, Nagpur. The shares of the company are listed at the Bombay

Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited

(NSE). The shares of the company started trading at NSE only from February 19,

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2007. Since, according to IT Department, the ten entities (mentioned in

paragraph 1 above) are dummy companies floated by the company and were

holding substantial shares in the company and had manipulated its share price,

SEBI obtained the ‘Know Your Client’ documents from stock exchanges/

depositories in respect of such entities. SEBI had also obtained information about

the said companies from the website of Ministry of Corporate Affairs. Such details

are given in Annexure A to this order. Analysis of the information so obtained

revealed that all the ten entities are apparently related to each other as well as to

the company and its promoters.

• The ten entities had given a common phone number (0712–2778910) belonging to one “Raja

Mit Jayantilal” with the address as Sewa Sadan Square Kamdar Complex C.A. Road Gandhi Bagh Nagpur-440002.

• As per filings made by the said ten entities with the Registrar of Companies (RoC), the electronic mail (e-mail) address has been given as “[email protected]”. The IT Department had also stated that the affairs of those ten entities were being looked after by one Amit Raja, a Chartered Accountant at Nagpur. The aforesaid e-mail address appears to be that of Mr. Amit Raja.

• In case of following directors, in companies Ramji Agri Business Private Limited, Runiicha Alloys & Steel Private Limited, Inco Infrastructures Private Limited, Simple Mining & Power Private Limited and Krishnum Investments Private Limited, there appears to be a direct connection of ten entities with the company and its promoters:

o The address of one director, Mr. Kamalkishore MultanMalji Bhattad, in his account

maintained with Central Depository Services (India) Limited (CDSL) is 101, Jai Bhavani Society, Wardhman Nagar, Nagpur, which matches that of the company. The email id provided is [email protected], which is one of the email ids of Mr. Maloo, the promoter of the company.

o The phone number provided by Mr. Kamalkishore MultanMalji Bhattad is that of Mr. Bajranglal Bankatlal Maloo, C/o Nandlal Enterprises and the fax no. provided is that of Mr. Nand Lal Maloo, both promoters of the company.

o The address in driving licence of another director, Mr. Lalit Lohia, is provided as ‘C/o M/s. Murli Agro Products Limited’.

o The phone number provided by another director, Mr. Shivshakti Babulal Dhoot, in his CDSL account is that of the company

The ten entities, thus, appear to be related to the company and its promoters, for

the reasons stated above in this order.

7. As per the disclosures made to the stock exchanges in compliance with

the provisions of the Listing Agreement, the capital structure and shareholding of

the company for the quarters, September 2006 and June 2010 are as follows: Table 1 : Shareholding pattern

September 2006 Quarter (Face Value `10)

June 2010 Quarter (Face Value `2) Category

Number of shareholders

Number of shares

% holding


Number of shares

% holding

Promoter & promoter group 18 5,301,963 74.90 30 29,322,600 54.59 Ten entities 3 274,823 3.88 8 3,280,036 28.79

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September 2006 Quarter (Face Value `10)

June 2010 Quarter (Face Value `2) Category


Number of shares

% holding


Number of shares

% holding

Other Non-Institutional 100 352,413 4.98 290 14,104,632 3.59 Others shareholders 2,566 1,149,401 16.24 5,429 7,003,732 13.04 Total 2,687 7,078,600 100.00% 5,757 53,711,000 100.00% Source: NSE & BSE websites ( based on more than 1% shareholding disclosures)

8. From the disclosures on the shareholding pattern of the company, the

following are also noted: a. The issued equity capital of the company for the quarter ended September 2006 was 70,78,600 equity shares of face value of `10. b. The issued equity capital of the company for the quarter ended December 2006 was 95,78,600 equity shares of the face value of `10. The said increase (25,00,000 shares) in the issued capital was due to the conversion of warrants in December 2006. The said warrants were allotted during June 2005 to a few of the ten companies, namely Ramji Agri Business Private Limited, Inco Infrastructure Private Limited, Kanhaiya Mining & Minerals Private Limited, Runicha Alloys & Steels Private Limited and Ambaji Paper Private Limited, which were themselves incorporated only during April and May 2005, just prior to the allotment of the warrants. c. There was a further increase of 6,63,600 shares in the issued equity capital of the company for the quarter ending September 2007. This was mainly due to the allotment of equity shares to FCCB holders against the application for conversion of the FCCB during the quarter ending September 2007. d. The issued equity capital of the company for the quarter ending March 2010 was 53,711,000 equity shares of face value of `2. The said increase in the equity shares was mainly due to sub-division of one equity shares of `10 each into 5 equity shares of `2 each and due to the allotment of 25,00,000 equity shares of the face value of `2 each to the share warrant holders of the promoter group entities namely Vishnu Gilts Private Limited, Mohan Venture Capital Private Limited, Nihal Gilts Private Limited and Raghav Finvest Private Limited.

9. The combined shareholding of promoters of the company along with that

of the said ten entities for various quarters from September 2006 till December

2009 are tabulated below with inferences:

Table 2 : Percentage shareholding of the promoters and the ten entities % Share Holding Category

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Promoters 74.90 55.35 55.35 55.35 51.77 51.77 51.77 51.77 52.38 52.38 52.38 52.38 52.38 52.38 ten entities 3.88 27.26 27.27 32.34 31.79 31.74 31.80 31.78 31.78 31.78 32.07 32.07 32.07 32.02 Total 78.78 82.61 82.62 87.69 83.56 83.51 83.57 83.55 84.16 84.16 84.45 84.45 84.45 84.4 Source : BSE website

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a) The free float shareholding of the company had moved in the range of 21.22% to 15.6% over the period and was at a low of 12.31% during the critical period, as discussed later in this order.

b) The shareholding of the promoters had reduced sharply to 55.35% in the quarter ending December 2006 as compared to 74.90% as on quarter ending September 2006. This was due to the issue of shares to the said ten companies, as stated above in this Order. On the other hand, the shareholding of the ten companies, which was 3.88% during the quarter ending September 2006 had increased to 27.26% in the quarter ending December 2006 mainly due to conversion of warrants issued to them. Their shareholding further increased to 32.34% during the quarter ending June 2007 and remained in the range of 31.5%-32.07% during subsequent quarters.

c) The combined shareholding of the promoter and the ten entities was 78.78% during the quarter ending September 2006 and the same increased to 82.61% in the quarter ending December 2006 largely due to the conversion of equity warrants issued to the ten companies as stated above in this Order. The said shareholding further increased to 87.69% during the quarter ending June 2007. The said warrants were allotted during June 2005 to five of the ten entities, namely Ramji Agri Business Private Limited, Inco Infrastructure Private Limited, Kanhaiya Mining & Minerals Private Limited, Runicha Alloys & Steels Private Limited and Ambaji Paper Private Limited

10. In view of the above, the observations of the IT Department that the ten

entities are holding substantial shares in the company appear to be correct. Prima

facie, the acquisition of shares by the ten entities as a group when taken together

with the promoter group are in violation of the Securities and Exchange Board of

India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997

(hereinafter referred to as the Takeover Regulations), as they had not made an

open offer in respect of their acquisitions.

11. In respect of the other observation of the IT Department that there was a

strategy with Mr. Sanjay Dangi to manipulate the share price of the company

before its FCCB issue, I note that the certified copy of the documents (pages 7

and 8) enclosed with the reference from the IT Department, as mentioned above

in this Order, were dated December 12, 2006 and January 31, 2007. Therefore,

SEBI ascertained whether the company had issued FCCBs around the above

period and if there was any attempt to manipulate the share price for the

purposes of influencing the FCCB issue. The pertinent points to check would be

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• Whether a spurt in price of and volume of trading in the shares of the company was noticed in the build up to the FCCB

• What was the level of trading in and price of the share price prior to the dates of ‘agreement’ as indicated in the reference of IT Department

• Did Dangi and/or promoter entities assist in manipulation of the share price around the time of the FCCB – before and after?

12. From the corporate announcements made by the company during the

years 2006-2007, it is observed that

• on December 15, 2006, the Extra-Ordinary General Meeting (EGM), had

approved further issue of securities for raising funds by way of issue of Global

Depository Receipt (GDRs)/American Depository Receipts (ADRs)/FCCBs or

other instruments for raising upto `200 crores.

• on February 6, 2007, the company successfully completed the offer and

allotment of US$23 Million Zero Coupon Unsecured FCCBs. According to the

said announcement, the bonds would have a maturity period of five years and

one day and shall be convertible.

• in July and August 2007, the shares were allotted upon conversion of FCCBs

of two holders, as given below. Date Announcement

July 12, 2007 Board to consider the allotment of shares on the conversion of FCCB for a sum of US$ 1 Million

and allotted 2,34,211 equity shares to the FCCB holder against the application for the

conversion of the same.

August, 1 2007 company received a request vide letter dated July 31, 2007 from Deutsche Bank AG, London

for the conversion of US$ 4 Million of FCCBs in to equity shares. Hence the company will issue

3,12,283 shares to the requester against the conversion US$ 4 Million FCCBs.

Therefore, from the above information, it is evident that the company had issued

FCCBs on February 6, 2007.

13. The relevant FCCB conversion price (subscription price) was fixed by the

company at `565 per share (above the minimum as per the guidelines for issue

of FCCB) and the issue was made in February 2007. The conversion price is

closely linked to the market price, since the FCCB holders have a right to exit at

any point which would logically be above the conversion price paid by them. The

factors which would be considered by the potential subscribers would include a

market price favourable to them and sufficient liquidity or volume of trading in the

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scrip. Therefore, SEBI examined the trading activity in the shares of the company

bearing in mind, a need for the promoters to achieve the target price and

maintain the same for some period of time as well as ensure liquidity in the scrip.

Given the prima facie finding of the accumulation of shares by the promoter group

of the company through the ten entities, the price-volume movement of the

shares of the company at BSE for period April 1, 2006 till December 31, 2007

covering pre-examination, examination and post-examination period was

analyzed by SEBI.

14. It was observed that there was undoubtedly a spurt in price and trading

volumes of the company during the period leading up to the FCCB and thereafter,

which had its beneficial impact on the pricing and issuance of FCCBs. It was

critical that SEBI examine the ‘how’ and ‘who all’ of the alleged manipulation

undertaken and more importantly ascertain the frequency of such pre-determined

strategies executed by such operators and promoters for their mutual benefit at

the expense of unsuspecting investors, for whom price and volume trends in a

scrip are primary inputs to their investment strategies. In the preliminary

examination it was found that the following entities appear to be associated with

Mr. Sanjay Dangi (hereinafter collectively referred to as the Dangi Group). The

said connection is mentioned in Annexure B to the Order. • Aardee Multitrade Private Limited • Alpana Sanjay Dangi @ • Amit Business Limited $@ • Ashoka Finstock Limited @ • Avani Impex Private Limited • Barkha Multitrade Private Limited • Buddhdev Trading Private Limited • Goldflag Trading Company Private Limited $ • Gorgeous Financial Advisor Private Limited$ • Ivory Consultants Private Limited @ • Kasare Financial Services Private Limited$ • Nariman Mercantile Private Limited. • Pacific Corporate Services Limited (Now known as Mentor Capital Limited) @* • Padmavati asha Properties & Projects Private Limited # • Pranam Securities Limited # • RCD Multitrade Private Limited • Sanjay Soumitra Singh Dangi @ • Sunil Somitra Singh Dangi@ • Supersun Trading Company Private Limited #@ • Swatik Finance And Investment Services Private Limited$ • Thadeshwar Financial Services Private Limited$ • Top City Mercantile Company Private Limited #@ # These entities amalgamated with Pacific Corporate Services Limited, vide court order dated 14-12-2007 $ These entities amalgamated with Pacific Corporate Services Limited, vide court order dated 26-02-2010 @ These entities were found to be trading actively. * The name of Pacific Corporate services Limited is changed to Mentor Capital Limited and fresh certificate of incorporation have been issued by the RoC on September 28, 2010

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Few of the aforesaid entities had also traded in the shares of the company during

the relevant period. A graphical representation of the price volume movement in

the shares of the company for the period from January 1, 2006 till December 31,

2007 is given below:

15. It can be seen that the share price of the company had increased six fold

from levels of `200/- in October 2006 and had peaked during July 2007 at

`1200/-. From January to October 2006 the price level had been fluctuating

around `200/- without any sharp movements but suddenly witnessed dramatic

one-sided spurts. This was coupled with an increase in the average daily volume

of the shares. The said price/volume details for different time segments over the

period April 2006 to December 2007 is given below: Table 3

Price % change Period Open high low close on

last day of period

close on first day of period

open to close on last day

High to low

close to close

Daily average volume

Pre Examination period (April 1, 2006 till August 31, 2006

230 279.9 147.55 221.4 240.75 -3.74 89.70 -8.04 3396

Examination period (September 1, 2006 till July 31, 2007)

216 1230 210.15 1192.4 215.9 452.04 485.30 452.29 9719

Post Examination period (August 1, 2007 till December 31, 2007)

1176 1176 703 799.35 1132.8 -32.03 -67.28 * -29.44 4026

* The prices started falling during the period hence the high low variation taken as negative.

16. The examination period of September 1, 2006 till July 31, 2007 is further

divided into various sub-periods viz. period from September 1, 2006 till February

6, 2007 as period building up to FCCB issuance, and the period from February 7

to July 31, 2007 as post-FCCB period. During two sub-periods [(September 1,

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2006 to February 6, 2007) and (February 7, 2007 to July 31, 2007)], the price

range, average daily volume, total volume, volume of the Dangi Group and the

ten entities are as under:

Table 4 Period High –

Low Price Range(`)

High low price percentage change

average Daily Volume

Number of Shares

Volume of Dangi group (buy)

Volume of Dangi group (Sell)

Volume of ten entities (buy)

Volume of ten entities (Sell)

September 1, 2006 till February 6, 2007 i.e. period building up to FCCB issuance

210.15 – 597

184 % 14,072

1,493,777 599,749 365,954 24,888 14,593

post-FCCB period i.e. February 7 to July 31, 2007 at BSE

484.35 – 1230

174 % 5,838 699,129 111,228 156,058 125,853 12,975

post-FCCB period i.e. February 7 to July 31, 2007 at NSE

460-1244 170 % 5,151 540,830 34,489 309,227 265,092 0

17. The aforesaid details confirms the substantial build up in average daily

trading volumes of 14,072 shares during the period building up to FCCB issuance

i.e. September 2006-February 06, 2007 as compared to 3,396 shares in the pre-

examination period of April 2006–August 2006. Similarly, the price increase (i.e.

the high low variation) for the period building up to FCCB issuance i.e.

September 2006-February 6, 2007 was over 184% as compared to the 90% in

the pre-examination period of April 2006–August 2006. For various sub-periods

of the examination, the high low variation was maintained in range of 170% which

drastically fell to -67% during the post examination period as the prices started

falling from a high of `1176/- to a low of `703/-.

18. The trading data of the company and the demat transaction statements of

few of the Dangi group entities were also examined by SEBI. It was found that

the Dangi Group entities namely, Ashoka Finstock Limited, Pacific Corporate

Services Limited, Top City Mercantile Co. Private Limited and Supersun Trading

Company Private Limited were actively trading in the shares of the company

between April 2006 and July 2007. Furthermore, it was also observed that their

trading activity was mainly concentrated in the scrip between September 2006

and June 2007 which corresponded with the examination period. It is pertinent to

note that the said period includes the period which would be reckoned for the

purposes of pricing the FCCBs. At BSE, Ashoka Finstock Limited & Pacific

Corporate Services Limited were the top two clients on a gross basis with

volumes appreciably larger than any other entity. More importantly, on a net basis

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nearly 87% of total buy volumes of the top twenty five trading clients (the lowest

net buy is 2500 shares) were concentrated in the hands of Pacific Corporate

Services Limited and the ten entities. The observations regarding the trading at

BSE and NSE for the period between September 1, 2006 and July 31, 2007 are

discussed below.

Table 5 : Top clients at BSE on Net Buy basis Volume Client Code Client Name Gross Buy Gross Sell Net Total

B_125_L0100037 Pacific Corporate Services Ltd @ 274,208 110,765 163,443 384,973 B_3027_L121 Lakhi Packaging Pvt. Ltd. ^ 34,500 0 34,500 34,500 B_30_NPT164 Taitan Management Services Pvt Ltd ^ 43,103 13,865 29,238 56,968 B_391_NPT037 Titan Management Service Pvt Ltd. ^ 26,938 2,173 24,765 29,111 B_30_NPK166 Krishnum Investment Pvt. Ltd ^ 24,439 5,570 18,869 30,009 B_125_L0100052 Supersun Trading Co Pvt Ltd @ 20,600 1,773 18,827 22,373 B_30_NPL165 Lakhi Pacaging Pvt Ltd ^ 16,800 3,200 13,600 20,000 B_3027_S2085 Simple Mining & Power P. Ltd. ^ 12,996 0 12,996 12,996 B_125_L0100053 Top City Mercantile Co Pvt Ltd @ 12,656 0 12,656 12,656 B_30_NPS163 Simple Mining &Power Pvt Ltd ^ 12,950 2,760 10,190 15,710 B_185_NB006 Bajaj Steel Industries Ltd 10,000 0 10,000 10,000 B_3027_T189 Taitan Management Services Pvt. Ltd. ^ 9,515 0 9,515 9,515 B_3070_3S05 Amrit Investment & Logistics. 6,323 250 6,073 6,573 B_179_SAMMAN77 Dalvi Samman 8,183 2,733 5,450 10,916 B_952_2S522 Kumar Bimal Sneh Comprint Pvt Ltd 7,979 2,827 5,152 10,806 B_790_NGA002 Kedia Asha 5,755 755 5,000 6,510 B_179_XMINVEST Sheth Madhukar Chimanlal 5,000 0 5,000 5,000 B_3027_K491 Krishnum Investments Pvt. Ltd. ^ 4,000 0 4,000 4,000 B_204_A131 Ashoka Finstock Ltd @ 393,513 390,110 3,403 783,623 B_204_H050 Sachetee Hemant Tej 3,000 0 3,000 3,000 B_204_P163 Sachetee Priyanka 3,000 0 3,000 3,000 B_179_AJITMAN1 Mankadiya Ajitbhai Jayntibhai 3,890 1,039 2,851 4,929 B_673_ATR80 Mandhana Ashish 3,000 500 2,500 3,500 B_767_13S056 Ashok Kumar Sharma 10,000 7,500 2,500 17,500 B_125_30501831 Navmee Securities Private Limited 10,000 7,500 2,500 17,500 Total of above top clients 962,348 553,320 409,028 1,515,668 Total net purchase for ten entities : 157,673 shares Total net purchase for Dangi Group : 198,329 shares @ belongs to Dangi Group ^ belongs to ten entities

The entities marked with the symbol @ in the above table are part of the Dangi

group being controlled directly/indirectly by Mr. Sanjay Dangi, as mentioned in

Annexure B to this Order. The high volumes of trading and concentration of net

purchase among them apparently had an upward bias on the price of the scrip,

which went up from levels of `200/- to over `600/- when the FCCB was

concluded on February 6, 2007. The gross purchases by the entities belonging to

Dangi Group were 7,10,977 shares, which constituted approximately 32% of total

gross purchases during the examination period. Their net purchases amounted to

nearly 2,00,000 shares which constituted about 50% of the net purchases of the

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top twenty-five clients as listed above. Besides, the ten entities which are

apparently connected to the company and its promoters had also purchased

1,85,241 shares on gross basis constituting 8.4% of the total gross purchases,

which further placed pressure on the buy side of the market. It was also found

that out of the 1,85,241 shares purchased by the ten entities, the counter parties

to the trades in respect of 1,14,518 shares (approximately 61% of the trades of

the ten entities at BSE) were the entities of the Dangi Group as shown in table

below. Table 6 : Trading of Dangi group entities with the said ten entities at BSE

Seller clients and client code (Dangi Group entities) Pacific Corporate Services Ltd Ashoka Finstock Limited

Buyer Clients and client code (ten entities)

B_125_L0100037 B_325_1691975 B_204_A131

Total Volume

B_30_NPK166 9,784 0 2,110 11,894 Krishnum Investment Pvt. Ltd B_3027_K491 0 1,000 3,000 4,000

B_30_NPL165 7,400 0 2,900 10,300 Lakhi Pacaging Pvt Ltd B_3027_L121 24,500 0 0 24,500

B_3027_S2085 0 12,996 0 12,996 Simple Mining & Power P. Ltd. B_30_NPS163 7,400 0 1,605 9,005

B_30_NPT164 29,500 0 420 29,920 B_3027_T189 2,999 0 1,680 4,679

Taitan Management Services Pvt Ltd

B_391_NPT037 0 0 7,224 7,224 Total Volume 81,583 13,996 18,939 114,518

At BSE, it emerges that in the early part of the examination period and prior to the

FCCB, there was an increase in trading activity in the shares of the company with

the Dangi group entities and the ten entities accounting for a substantial share of

the gross and net purchases, thus leading to an upward bias on the price. The

daily average volume was also doubled during the said period which was

accompanied by a price rise from `210/- to `1230/-. BSE had also observed that

the Dangi Group had influenced, supported and pushed up the price of the scrip,

probably to assist the FCCB issue. The majority of selling by the Dangi group

was mainly executed during May 2007 till June 2007 i.e. during the exit phase of

the alleged scheme of manipulation. Of the total 1,14,518 shares sold by the

Dangi Group to the ten entities, a quantity of 1,00,294 shares (approximately

87% of their selling) was in the May-June period. This substantiates the inference

that towards the latter part of the examination period, the Dangi group entities

exited at higher prices and the major counterparties to their sales were the ten

entities. This was apparently part of a quid pro quo arrangement with the

promoter controlled ten entities, since the FCCB had brought in funds at prices

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which may not have been possible without the volume and price manipulation

allegedly done by the Dangi group.

19. The trading in the shares of the company at NSE had started only from

February 19, 2007 after the issuance of FCCB and after creating enough liquidity

at BSE so that the listing requirements at NSE were met. For the period till July

2007, the SEBI examination revealed that the Dangi Group entities and the ten

entities again dominated the trading as tabulated below separately for net buy

and net sell basis: Table 7 : Top clients at NSE on Net buy basis

Volume Client Client Name Gross Buy Gross Sell Net buy Total

N_11460_K491 Krishnum Investments Pvt. Ltd. ^ 89,600 0 89,600 89,600 N_11460_T189 Taitan Management Services Pvt. Ltd. ^ 64,583 0 64,583 64,583 N_11460_L121 Lakhi Packaging Pvt. Ltd. ^ 54,972 0 54,972 54,972 N_09344_SM001 Simple Mining & Power Private Ltd ^ 53,437 0 53,437 53,437 N_11445_R023 Rajeev Agarwal Huf 6,041 41 6,000 6,082 N_10975_XMINVEST Madhukar Chimanlal Sheth 5,000 0 5,000 5,000 N_10975_NUSRAT77 Nusrat Aiyub Puthawala 8,033 3,300 4,733 11,333 N_10975_MUSTAQ11 Mustaq Abdulsattar Puthawala 7,577 4,600 2,977 12,177 N_08082_08082 Naman Securities & Finance Pvt Ltd 7,566 4,854 2,712 12,420 N_11445_S051 Sanjeev Kumar Agarwal 2,550 0 2,550 2,550 N_11460_S2085 Simple Mining & Power P. Ltd. ^ 2,500 0 2,500 2,500 N_06553_3K01 Superline Consultants Pvt. Ltd. 3,300 1,100 2,200 4,400 N_06378_40S54 Setu Securities Pvt. Ltd. 6,028 4,230 1,798 10,258 N_10975_GIRI23 Girish N Malkan 2,058 500 1,558 2,558 N_10975_KETZ7899 Ketan G Malkan 2,000 462 1,538 2,462 N_10585_AN02 Shreeji Securities 1,675 175 1,500 1,850 N_11159_S1138 Shrawan Kumar Bajaj Huf 1,352 0 1,352 1,352 N_06002_M11169 Maulik Mohanlal Mendpara 1,300 0 1,300 1,300 N_06553_6436 Sundune Office Systems Private Limited 3,045 1,862 1,183 4,907 N_11420_5289 #N/A 2,315 1,133 1,182 3,448 Total of above top clients 324,932 22,257 302,675 347,189 Total net purchase for ten entities : 265,092 shares

Table 8 : Top clients at NSE on net sell basis

Volume Client code Client Name Gross buy Gross sell Net sell Total

N_10208_L0100037 Pacific Corporate Services Ltd @ 500 244,865 244,365 245,365 N_10208_L0100052 Supersun Trading Co Pvt Ltd @ 1,300 20,127 18,827 21,427 N_10208_L0100053 Top City Mercantile Co Pvt Ltd @ 901 13,557 12,656 14,458 N_07711_D909 Krishna Kumar Soni 0 6,045 6,045 6,045 N_12763_9762 Chandak Krishnagopal M. 0 3,750 3,750 3,750 N_11445_N012 Nidhi Agarwal 0 3,453 3,453 3,453 N_11445_S053 Shaily Agarwal Boski Todi 0 3,062 3,062 3,062 N_10208_30501831 Navmee Securities Private Limited 0 2,500 2,500 2,500 N_07711_PL3000 Anitha Matta 1,003 2,668 1,665 3,671 N_08067_GHK045 Kausalya Devi R Fofalia 0 1,450 1,450 1,450 N_08067_GHR078 Ramvallabh Fofalia D 502 1,929 1,427 2,431 N_06538_HYV316 Vinod Kumar Bangad (Huf) 0 1,250 1,250 1,250

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Volume Client code Client Name Gross buy Gross sell Net sell Total

N_07711_PL661 Chetan Praksh Hariram Bung 453 1,699 1,246 2,152 N_06537_RF23 Rahul Ramesh Fofalia 951 2,020 1,069 2,971 N_06538_HYS374 Shiv Prakash Mantri (Huf) 0 1,000 1,000 1,000 N_07730_8501155626 Seema Shirish Pandit 0 1,000 1,000 1,000 N_08067_GHJ002 Jayshree R. Fofalia 0 938 938 938 N_07711_AR002 Shanta Rathi 2,130 3,051 921 5,181 N_11030_247KDB Mrs Kiran Baldwa 0 800 800 800 N_07711_AR021 Manoj Kumar Rathi 1,451 2,251 800 3,702 Total of above top clients 9,191 317,415 308,224 326,606 Total net sell for Dangi Group : 275,848 shares

It can be seen that the ten entities were the top buyers on net basis contributing

87.58% of the total net purchase at NSE. Further, the ten entities had contributed

50% of the total gross purchase of 5,40,830 shares in the market during the

period, by purchasing 2,65,092 shares. It is noted that the quantum of shares

purchased by the ten entities is significantly higher than that of any other

unconnected purchaser as seen from the quantities under net purchase column

of the table.

20. At NSE too, the Dangi Group entities were observed to be the top sellers

on net basis. They had sold 2,75,848 shares on net basis. The majority of the

shares sold by the Dangi Group were purchased by the ten entities. It is

pertinent to note that, out of 2,65,092 shares purchased by the ten entities,

2,57,538 shares were purchased from the Dangi Group. The same constituted

97% of the total purchases made by the ten entities. Further, Dangi group entities

had sold shares of the company substantially after May 25, 2007. From May 25,

2007 till July 31, 2007, Dangi group entities had sold 3,57,832 shares or 3.7%

shareholding of the company to the promoter related ten entities on both NSE

and BSE. As on May 22, 2007, the Dangi group entities were holding

approximately 3,71,048 shares or 3.87% shareholding in the company. Thus, the

sale of shares to the ten entities during May 25, 2007 till July 31, 2007 was

approximately 96% of the holding of Dangi group entities. The implication is that

the Dangi group entities were prima facie provided an exit from their holding in the

scrip at higher prices by the ten entities. Apart from the major purchases by the

ten entities (from the Dangi Group entities), the rest of the purchases were

scattered. The trading between the two groups (Dangi group and ten entities)

associated with the alleged manipulative scheme is mentioned in the table below:

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Table 9 : Trading of Dangi group entities with the ten entities at NSE Seller clients and client codes (Dangi Group entities)

Pacific Corporate Services Ltd

Supersun Trading Co Pvt Ltd

Top City Mercantile Co Pvt Ltd

Ashoka Finstock Ltd

Buyer Clients and client codes (ten entities)

N_10208_L0100037 N_10208_L0100052 N_10208_L0100053 N_11679_A131

Total Volume

Krishnum Investments P Ltd.

N_11460_K491 53,743 10,000 0 25,000 88,743

Lakhi Packaging Pvt. Ltd.

N_11460_L121 54,668 0 0 0 54,668

N_11460_S2085 0 0 0 617 617 Simple Mining & Power Private Ltd N_09344_SM001 43,411 8,155 0 0 51,566 Taitan Mgmt. Services Pvt. Ltd.

N_11460_T189 54,583 0 7,361 0 61,944

Total Volume 206,405 18,155 7,361 25,617 257,538

From the above tables, it is noticed that the Dangi Group entities viz. Pacific

Corporate Services Limited and Ashoka Finstock Limited were the major sellers

to the ten entities at both BSE as well as NSE. The net purchasers in the initial

phase of the examination period were largely the entities of the Dangi Group and

the ten entities. Subsequently, once the FCCB issuance was completed, the

Dangi Group was provided with the exit option by the ten entities.

21. Trading within the Dangi group: During the examination period, it was

observed that the gross purchases made by the Dangi group entities at BSE

were 7,10,977 shares, out of which 1,93,952 shares or 27% of its trading was

between the group entities themselves. Ashoka Finstock Limited was the top

seller while Pacific Corporate Services Limited was the top buyer within the

group. Since, the trades were between the group entities, the trades are prima

facie artificial, as there is no genuine transfer of beneficial ownership of the

shares so traded and were executed for increasing the volumes in scrip without

any cost to the operator in order to attract new investors.

22. New price establishment and variation in the Last Traded Price (LTP): As per the guidelines for issuing FCCB, the relevant period for fixing the FCCB

price was November 1, 2006 and November 14, 2006. During the said period, the

price at BSE was in range of `333.55/- to `397.25/-. Analysis of the trades

revealed that a new price for the shares of the company was established on five

days i.e. on November 1, 2, 3, 6 and 7 of 2006. It is pertinent to note that the

trading of Dangi group entities was substantial and the same were prima facie

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responsible for establishing a new price on the aforesaid dates. For this, an

analysis on the new price establishment and variation in LTP was also

undertaken by SEBI, which revealed that the trades of the Dangi group entities

have been mostly either at the LTP or above LTP and therefore were responsible

for attaining a new share price. Table 10 : New price establishment and LTP analysis for November 1, 2006 till

November 14, 2006 at BSE Instances of Remarks Trades New price LTP +LTP At LTP or above LTP

gross buy volume (quantity)

Total trades 1507 88 697 454 1151 252608 % to total 5.84 46.25 30.13 76.38 Trades of Dangi group Entities as buyers

537 57 297 167 464 104454

% to total 35.6 64.77 42.6 36.78 40.3 41 % to Dangi group entities trades 10.61 55.3 31.09 86.4

As stated above, during the said period i.e. November 1, 2006 and November 14,

2006, there were 88 trades wherein new prices were established. Of the said

trades which were responsible for fixing a new price, the Dangi group entities

were involved in 57 instances. In other words, the Dangi Group was present in

64% of the trades influencing the share price. It is also seen that in those trades,

the Dangi Group entity was a buyer. Thus, from the aforesaid facts, it is noted

that the majority (86% of their trades) of the trades of the Dangi group entities

have traded either at the LTP or above LTP, thereby leading SEBI to infer that

their motive was to artificially increase the share price or maintain the same at the

desired levels. Moreover, as per BSE examination report, during

November 1, 2006 and November 14, 2006, out of an increase of `63.70/- in

share price, the increase by `29.50/- were contributed by Dangi group alone.

23. Further, during the entire examination period from September 1, 2006 till

July 31, 2007 for trades at BSE, the analysis revealed that new prices were

established in 476 instances/trades and out of the same, in 164 trades or 34% of

such instances, the buy client was a Dangi group entity. It is very important to

note that in almost all the 164 instances (except 7 instances), the buy orders

placed by the Dangi Group entities had established the higher prices. It is

surprising to note that when a buyer would always want a stock to be purchased

at the least possible price in the market, the Dangi group was placing orders at

higher prices, to establish higher prices thereby also attracting investors’ interest

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by projecting that the scrip was worth such prices. Prima facie, in this manner, the

Dangi Group was able to artificially increase the share price.

24. Further, SEBI had analyzed variations in the last traded price of the scrip

for the entire examination period. The same revealed that out of a total 22,878

trades in the shares of the company, 6,401 trades had a positive impact on the

LTP causing the successive trade price to be higher than that of the preceding

trade. It is further noticed that i. Of the 6401 trades, there were 1,207 trades or 18.8% of the trades, wherein the

entities of Dangi group purchased at a price higher that the LTP, thereby establishing

a new higher price.

ii. Out of the total 3,735 trades of the Dangi Group entities during the examination

period, 1,207 trades had a positive impact on the price as they were higher than the

LTP. The said trades constituted 32% of their trades. Further, in 1903 trades or 51%

of its trades, the Dangi Group had purchased at the LTP.

Thus, from the aforesaid facts, it is noted that the majority (83% of their trades) of

the trades of the Dangi group entities have traded either at the LTP or above

LTP, thereby leading SEBI to infer that their motive was to artificially increase the

share price or maintain the same at the desired levels. In the present case, it is

noted that though the Dangi Group, were the buyers they had placed orders at

higher price, in majority of the trades. Generally, a buyer would rationally seek a

lower price to buy shares. The influence of the Dangi Group on the share price

during the examination period is presented in a table below: Table 11 : New price establishment and LTP analysis for Sep 2006 till July 31, 2007

Instances of Remarks

Trades New high LTP +LTP At LTP or above LTP


BSE Total trades 22,878 476 10,482 6,401 16,883 2,192,906

% to total trades 2.08 45.82 27.98 73.80

Trades of Sanjay Dangi Entities as buyers

3,735 164 1,903 1,207 3,110 710,977

% of total trades 16.33 34.45 18.15 18.86 18.42 32.42 % to Sanjay Dangi trades 4.39 50.95 32.32 83.27

25. A clear picture of the influence on the share price emerge from a

comparison of the Weighted Average Price (WAP= total turnover during the

period/total number of shares traded during the period) during crucial periods,

which is as follows: For the period July 2006 till October 30, 2006 (period prior to

the reference pricing for FCCB), the WAP was ` 277.57/-. For the period between

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November 1, 2006 till February 6, 2007 (period building up to FCCB issuance),

the WAP was `419.33/- and finally for the post-FCCB period (February 7 to July

31, 2007), when the Dangi Group entities started selling from May onwards, the

WAP was ` 726.10/-.

26. From the foregoing, it appears that the Dangi group entities have

influenced the price upwards in the scrip during the ‘pricing period’ of FCCB and

thereafter, appeared to have exited the scrip at a profit, as per the agreement

made with the promoters of the company. The gross purchase value of the

transactions carried out by the Dangi group entities during the period of

examination was approximately `28.36 crores and `2.01 crores at BSE and NSE,

respectively, totaling `30.37 crores. The gross sale value of their transactions

carried out at BSE and NSE was approximately `23.29 crores and `19.27 crores,

respectively, totaling `42.57 crores. From their transactions in the shares of the

company, as stated above, the Dangi Group entities appeared to have made a

positive difference to the tune of `12 crores. The inference of this positive

difference may be either share of the profits in the transactions as per the ‘profit

sharing arrangement’ or could be over and above the share of the profits as

agreed upon between the promoters and Sanjay Dangi. The exchange route of

the sharing of funds appears to have been adopted so that this money could be

easily accounted for in the books of accounts of promoters, the company and Mr.

Sanjay Dangi. This supports the inference that for a larger part of the examination

period, the Dangi group was responsible for the price increase through buyer

initiated orders at higher prices, with a specific motive in mind. The price

increased around 485% during this period. Their conduct and nature of trading

which had prima facie artificially inflated the share price of the company appears

to be as per the plan drawn up together with the promoters, as a comfort in terms

of the market price which was necessarily to be provided, especially to the

subscribers of the FCCBs, who were bringing in huge funds. The share price was

artificially raised and maintained at the levels desired by the promoters of the

company, prima facie through the Dangi Group entities. In return, the ten entities

controlled by the promoters of the company had ensured an exit to the Dangi

group entities at artificially inflated share prices.

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27. Facts about the FCCB issue: The observation of the IT Department

regarding the manipulation of share prices prior to FCCB issue and the sharing of

funds seem to be supported from the above preliminary observations. The

planning of the FCCB issue as found in documents forwarded by the IT

Department and the actual issuance of FCCB, as statutorily disclosed to the

stock exchanges, is described as under:

a. The documents suggest that US$25 million would be raised, while in

actual, US$23 million was raised.

b. Actual conversion price for FCCB was fixed at `565/- as compared to

minimum/base price of `450+/`325 as agreed upon.

c. The transaction was supposed to be complete before February 15, 2007

and it was completed on February 5, 2007.

d. The promoters had formulated a dividend distribution policy upto 10% and

in actual for the financial years 2007, 2008 and 2009, the company

distributed dividend at 20%.

e. A clear calculation was made to arrive at the commissions payable to Mr.

Sanjay Dangi-expenses on FCCB and base price to be deducted from

collection through FCCB and the difference was to be shared between Mr.

Sanjay Dangi and the company in an agreed ratio of 40% and 60%,

respectively. From the material available with SEBI at this stage, it is

observed that the profits to the Dangi Group was partly passed to it, when

they sold off shares at artificially inflated prices to the ten promoter related

entities. In this manner, by distorting the trading pattern of the shares of

the company, the Dangi Group profited with the help of the ten entities

who are connected to the promoters of the company..

28. Therefore from documents received from the IT department and other

sources, analysis of the trading data and the actual unfolding of the FCCB issue,

it prima facie appears that the FCCB issuance was done in the manner as

premeditated by the promoters of the company and the Dangi group. Thus, in

view of the above, the observations of the IT Department that there was a

strategy to manipulate the share price of the company before its FCCB issue,

prima facie appears to be founded.

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29. I note that prior to the FCCB issue, the promoter related ten entities were

incorporated during April-May 2005 and warrants were issued to them and upon

conversion of the same, a formal dilution in the shareholding of the promoters

from 74.9% to 55.35% was effected. The same gave an impression of a wider

floating stock held by the public, whereas through the said ‘ten dummy entities’,

the total holding of the promoter group of the company actually rose to 82.61%,

and thus there was misrepresentation of the shareholding in the statutory

disclosures.

30. I further note that through their dealing in the shares of the company, the

Dangi group was instrumental in raising and maintaining the prices as well as

providing liquidity in the trading of the shares of the company. Volumes of trade

doubled and price rose 485% during the examination period. This suggests a

perfect execution of the promoter’s game plan by the Dangi Group in terms of the

agreement signed between them. The issue of FCCBs was made at higher prices

and artificial creation and maintenance of share price allowed an exit to the

operator (the Dangi Group) without sudden fall in price, whilst continuing to

attract new unsuspecting investors. There was a perceptible fall in the price of the

shares of the company after the exit of the Dangi group and average daily traded

volumes also halved in the post-examination period. The planned selling to the

ten entities probably was a manner in which the profit share of Dangi Group, as

agreed upon in the signed agreement, was partly transferred to them. This on the

face of it, seems to be the evidence of part payment for services rendered by the

Dangi Group to raise the share price of the company in order to issue FCCB at

prices that may not reflect their intrinsic value.

31. Prima facie, the promoter group together with the ten entities had increased

their shareholding/voting rights in the company, in violation of the Takeover

Regulations. Further, there is prima facie a violation of the Securities and

Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices

Relating to Securities Market) Regulations, 2003 (hereinafter referred to as the

PFUTP Regulations) in creation of a artifice or device by the promoters and the

Dangi group for the latter to trade substantially in the shares of the company such

that the increase in price of the share could positively influence the pricing of the

FCCB issue made by the company. The said activities of the entities induced

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several hundred investors to deal in the scrip without any knowledge of a pre-

determined scheme of artificial creation of volume and increase in price

orchestrated by the promoters and the Dangi group. Finally the Dangi group was

given an exit from their holding of the shares of the company at a higher price by

selling a majority of its holdings to the ten entities. The price of the shares fell

sharply thereafter, thereby leaving unsuspecting investors with possible losses.

Finally, there may be prima facie a violation of the Securities and Exchange

Board of India (Prohibition of Insider Trading) Regulations, 1992 (hereinafter

referred to as the PIT Regulations) as the said ten entities and the Dangi Group

(who could be termed as persons deemed to be connected with the

company/directors) were transacting on the basis of the information of the

impending FCCB issue by the company that was available only to them as part of

the game plan conceived by the promoters (few of the promoters were also

directors of the company).

32. The aforesaid finding that a group operating as a mercenary offering its

services to a promoter, led SEBI to search for and examine similar patterns in the

trading and price-volume of scrips of other companies that had issued FCCBs or

in which Dangi Group had been found to have traded regularly, or both. SEBI

also analyzed the demat transaction statements of few of the entities belonging to

the Dangi Group for the period between April 1, 2006 and December 2009. The

said examination revealed that the Dangi Group was actively trading in the

shares of many companies where there was capital raising through FCCB issue,

ADR/GDR issue, QIB/QIP placement, preferential allotment or loans or

pledge/revocation of pledge of promoter shares. Among the several scrips in

which Dangi group was trading, their role was taken up for examination in their

dealings in the shares of Ackruti City Limited (Ackruti), Welspun-Gujarat Stahl

Rohren Limited (Welspun), Brushman (India) Limited (Brushman) and RPG

Transmission Limited (RPG). It was observed that such mercenary operations

were possibly continuing in the market to the detriment of the investing public.

33. Except RPG, in Ackruti, Welspun and Brushman, capital was raised during

the period of intensive trading undertaken by Dangi group. The details of the

corporate announcements relating to the fresh issue of capital are given below: Table 12 : Major Announcements by the selected companies

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Date Corporate Announcement Ackruti January, 18 2008 Board of directors approved issue of 1,35,00,000 equity shares on preferential basis February 16, 2008 EGM of company have accorded the Board to create, offer, issue and allot upto

1,07,02,777 equity shares of the face value `10 at a premium of ` 1190 on preferential basis

April, 2 2008 The Board of Directors has decided not to proceed further with the proposed issue July 02, 2008 Meeting of Board of directors to raise funds through issue of securities including by way of

issue of equity shares to QIB/ADR/GDR/FCCB or in any other combination thereof September 03, 2009 QIP issue opened at ` 500.60 per equity share with the 'Relevant Date' for this purpose

was August 31, 2009. September 07, 2009 QIP issue closed Welspun June 25, 2009 EGM for issue of securities upto US$ 250 Million or its Indian Rupee equivalent thereof.

Authorized the Board to permit Foreign Institutional Investors to acquire and hold shares upto an aggregate limit of 49% of paid up share capital.

September 25, 2009 Launched successfully FCCB offering for an amount of US $ 130 Million, with an upsize option of US $ 20 Million.

Brushman December 5, 2007 EGM accorded Board to issue, offer and allot, in domestic/international offering, any

securities including ADR/GDR/QIP/FCCB convertible into equity /preference shares June 12, 2008 Company has successfully closed its FCCB issue of US$ 12 Million

34. Linkages between the Dangi Group entities with the promoters of the aforesaid companies: It emerged in the preliminary examination that Ackruti,

Brushman and Welspun had raised funds through QIP/FCCBs during the period

2007-2009 and the Dangi group had been observed to be trading substantially in

the shares of these companies around the same period. In addition, the entities

related to promoter/promoter group of the identified companies viz. Welspun and

Ackruti, were also trading in the shares of their respective companies. The

preliminary analysis observed certain links between Dangi group and the

promoter entities of the respective companies thereby confirming their prima facie

relationships, as stated below: • Ackruti City Knowledge Private Limited and City Gold Farming Private Limited are wholly

owned subsidiaries of Ackruti and have a stake in Ivory Consultant Limited, a Dangi

Group entity. Ivory Consultants Limited had received shares of Ackruti in off market

transfer from Mr. Mahipatray V. Shah, one of the promoters of Ackruti. Ackruti is also

related to Zeus Infra and Chaitra Realty.

• Mr. Pankaj Rathod and Mr. Pradeep Rathod, belonging to Ackruti group, are

shareholders in Pacific Corporate Services Limited and are directors in Cello Group of

Companies, to whom the promoters of Ackruti have pledged their shares.

• Welspun Trading Limited (one of the promoters of Welspun) had stake in Dangi group

entities viz. Amit Business Limited, Pacific Corporate Services Limited, Ivory Consultants

Private Limited. Another promoter entity, GRG Cosmetics Limited had stake in Amit

Business Limited (now merged with Pacific Corporate Services Limited), a Dangi group

entity.

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• Mr. Kapil Kumar, the Managing Director of Brushman, having address as D-6/2, Vasant

Vihar, New Delhi -110005 was allotted 4,00,000 equity shares in Splendor Vanijya Private

Limited and Delight tie-up Private Limited on December 31, 2008. It may be noted that

Splendor Vanijya Private Limited, Delight tie-up Private Limited and Dangi Group entities

are connected to each other by way of crossholdings as well as off-market transfers.

Delight tie-up Private Limited had stake in Amit Business Limited while Splendor Vanijya

Private Limited had made off-market transfer to Amit Business Limited. Amit Business

Limited had stake in Splendor Vanijya Private Limited, while Splendor Vanijya Private

Limited had stake in Delight tie-up Private Limited.

35. Besides the relationship with the promoters of the above companies, for

the period of examination of activity of Dangi Group, it appears that the Dangi

group had relationship with the promoters of various other companies. This is

inferred so because, in other scrips viz. Arrow Textiles Limited, Brabourne

Enterprises Limited, Delta Corp Limited, Micro Technologies (India) Limited,

Resurgere Mines & Minerals India Limited, the Dangi Group entities had received

shares in a preferential allotment or pre-IPO allotment which carried a lock-in

period.

36. Linkages of the Dangi Group entities with other groups: During the

preliminary examination, it was also noticed that a group of clients trading

through the stock broker namely Ashika Stock Broking Limited (hereinafter

Ashika Stock Broking Limited and its group/associate entities are referred to as

‘Ashika Group’) were trading in the scrips in which the Dangi group entities were

also actively trading. The entities in various groups, their relationship and the off-

market transfers among them etc., are described in Annexure B to this Order.

Certain relevant facts are given below: • A few of the Ashika Group entities share the same/similar addresses as that of the

entities having shareholding in the Dangi Group entities, while some had made off-market

transfers to the Dangi Group entities. In some cases, the entities in which Dangi group

had shareholding, had stake in the entities of the Ashika group.

• Ashika Group entities viz. Delight Tie-up Private Limited, Forever Merchants Private

Limited, Pushkar Banijya Limited and Calcom Consultancy Private Limited had stake in

Amit Business Limited (now merged with Pacific Corporate Services Limited), a Dangi

group Entity.

• Micro Management Limited had made off-market transfers to Dangi Group entities while

Pushkar Banijya Private Limited had a stake in Dangi Group entities. One of the

addresses of Pushkar Banijya Private Limited is 32, Ezra Street, 8th Floor, Kolkata is

similar to one of the addresses of Micro Management Limited.

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• As per the Annual Return filed by Ashika Global Finance Private Limited, on March 24,

2006, Ashika Global Securities Limited had transferred 98,320 shares of Ashika Agro

Projects Private Limited (now known as Ashika Global Finance Private Limited) to Ivory

Consultants Private Limited as well as Amit Business Limited (who are the Dangi group

entities).

• Ashika Global Finance Private Limited has the same address as that of Ashika Stock

Broking Limited.

• Further, the entities that are part of the promoters/directors of Ashika Stock Broking

Limited viz. Mr. Daulat Jain, Mr. Puran Mal Jain and Ms. Kanchan Devi Jain made off-

market transfers to Amit Business Limited, a Dangi group entity.

37. The Dangi group entities traded through a large number of stock brokers;

the primary among them being Ashika Stock Broking Limited, Sanchay Fincom

Limited/ Sanchay Finvest Limited and Systematix Shares & Stocks India

Limited/Systematix Shares & Stock Brokers Limited, Anand Rathi Financial

Services Limited/ Anand Rathi Shares & Stock Brokers Limited. The prima facie

relationship of the Dangi Group and few of the stock brokers is mentioned below: • It may be noted that Mr. Sanjay Dangi and Mrs. Alpna Dangi belong to the promoter

group of Sanchay Fincom Limited and in Sanchay Finvest Limited Mr. Sanjay Dangi, Mr.

Sunil Dangi and Mrs. Alpna Dangi belong to the promoter group.

• It is noted that one of the offices of the stock broker, Sanchay Finvest Limited is located at

the office of Pacific Corporate Services Limited, a Dangi group entity.

• Dangi group entities were having shareholding in the group company of the stock broker,

Ashika Stock Broking Limited.

• There were instances wherein the entities that are part of the promoters/directors of

Ashika Stock Broking Limited viz. Mr. Daulat Jain, Mr. Puran Mal Jain and Ms. Kanchan

Devi Jain made off-market transfers to Dangi group entity.

Thus, from the above, it appears that the relationship of Dangi group and the

stock brokers viz. Ashika Stock broking Limited and Sanchay Fincom Limited/

Sanchay Finvest Limited goes beyond the normal client–stock broker

relationship.

38. The preliminary observations in respect of the trading in the scrips of

Ackruti, Welspun, Brushman and RPG are discussed in a structured manner in

the following paragraphs. Pertinently, there are striking similarities in the pattern

of trading and manipulative tactics of the Dangi group entities with those

described in the case of Murli Industries Limited.

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Ackruti:

39. Analysis of the trading activity of Dangi group revealed that they were

active in the scrip of Ackruti during the period - June 2007 till February 2008 (first

patch) and then again during January 1, 2009 to March 19, 2009 (second patch).

The promoter holding during this period was in the range of 89.96%. During June

2007- February 2008, the price-volume of the scrip at BSE is as under:

During the said period, Ackruti had got the approval of its shareholders to create,

offer, issue and allot equity shares of face value of `10 at a premium of `1190 on

preferential basis to various private equities (PE). The share price kept rising

during the period on low volumes except for a brief period during June 28, 2007

to October 23, 2007 when there was a spurt on certain days. The shares of

Ackruti were trading in the range of `1100-`1250 during November 2007-

February 2008. However, during April 2008, the Board of Ackruti decided not to

proceed further with the proposed issue. However, in July 2008, Ackruti again

made a corporate announcement that its board decided to raise capital through a

QIP or GDR issue. Ackruti subsequently raised capital through a QIP issue in

September 2009. In this backdrop, analysis on new price establishment and

trading at LTP and positive LTP revealed the following:

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Table 13 : New price establishment and LTP analysis for period June 2007- February 2008

Instances of Remarks Trades New price LTP +LTP At LTP or above LTP

gross buy Volume (quantity)

BSE Total 949,205 4127 559,093 200,651 759,744 56,604,869 % to total 100.00 0.43 58.90 21.14 80.04

Dangi group as buyers 39,939 77 27,269 5,499 32,768 7,858,388 % to Dangi group trades 100 0.19 68.28 13.77 82.05

NSE

Total 1,459,471 3612 946,409 262,066 1,208,475 55,681,658 % to total 100.00 0.25 64.85 17.96 82.80

Dangi group as buyers 46,866 90 34,064 5296 39,360 5,228,119 % to Dangi group trades 100 0.19 72.68 11.30 83.98

• During the period, the total traded volume was 56,604,869 and 55,681,658 shares on BSE

and NSE, respectively, of which the Dangi group entities had purchased a total of 7,858,388

& 5,228,119 shares on gross basis constituting 14% & 9%, respectively.

• 82% and 83% of all trades carried out by Dangi group were either at LTP or above LTP at

BSE and NSE, respectively.

• Of 7,858,388 shares purchased by the Dangi group at BSE, in trades for 2,153,220 shares (or

27%) the counterparty clients were the Dangi group itself. Similarly, at NSE, 1,229,552 shares

or 23.5% shares traded were between the Dangi group itself.

• It appears that the Dangi group’s role was to maintain the share price and give an

appearance of high volume of trading, which was achieved by generation of artificial volumes.

40. The inference drawn from the events and the trading of shares is the

nexus that is created between the promoter and the market operator to suddenly

commence artificially generated increase in the price-volume of the scrip. In the

next period under examination viz. January 1, 2009 till March 19, 2009 (second

patch), the share price of Ackruti witnessed a sudden and steep increase of

238% in the background of capital raising and specific announcements related to

the revocation of equity shares pledged by the promoters. The price-volume

movement for the period is as under:

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During the said period, infrastructure companies had seen a drop of 32% in their

prices (BSE Reality Index) and Nifty witnessed a 7.5% fall. Ackruti, in its quarter

ending December 2008 had shown a profit of `190.80 Million as compared to

`924.10 Million for quarter ending December 2007, a decrease of 79%. The

movement in broad based index, sectoral index and the results of third quarter of

Ackruti do not appear to support a steep rise in the price of Ackruti. It was

observed that on January 19, February 5, and March 4, 2009, the derivative

contracts in the underlying, crossed 95% of the market-wide position limit

(MWPL). For 37 trading days out of total 49 trading days during this period, the

scrip remained in the ‘ban’ period wherein the investors were allowed only to

decrease their positions through offsetting positions and any increase in open

positions attracted appropriate penal and disciplinary actions. The following are

the major observations during the said period: • The entities belonging to Ackruti Group viz. Khandesh Builders Limited , Sureshkumar

Bikamchand Jain, Naresh Jayantilal Shah, Sangeeta P Rathod, Pankaj G Rathod, Pradeep G

Rathod and Cello Finance Corporation, are prima-facie connected with the

promoters/company (as described in Annexure B) by way of off-market transfers and have

traded in the scrip of Ackruti City Ltd.

• Dealings by Pacific Corporate Services Limited: For the period January 01, 2009 to

February 10, 2009 when the prices moved from `631.05 to `963.10, it had the second biggest

position in both buy and sell side on a gross basis. The gross traded value of the client in the

scrip was `45.20 cr which accounted for 98.76% of its total gross traded value in all scrips

during the mentioned period. The entity has actively taken a long position in futures of Akruti

City and it had the 2nd highest concentration on gross basis for the January period and its

traded value in Akruti futures accounted for 99% of its total traded value in F&O segment.

• Dealings by Ashoka Finstock Limited: For the period January 01, 2009 to February 10,

2009, when the prices moved from `631.05 to `963.10, the said entity had the highest

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concentration on the basis of gross traded value in the month of January, 2009 reaching 15%

at BSE and 13% at NSE . The gross traded value of the client in the scrip was ` 137.24 cr

which accounted for 97.98% of its total gross traded value traded in all scrips during the

aforesaid period. It had the highest concentration on gross basis for the January 2009 period

in Ackruti futures contracts.

• Dealings by the Ashika Group: The Ashika group entities were observed to be heavily

trading in Ackruti and most of the entities traded in the futures contracts underlying the shares

of Ackruti for the first time. All the entities started trading from January 13, 2009, when other

promoter related entities have started trading and most of then traded only in Ackruti from

January 2009. The entities together maintained an average open interest (OI) (long) of 9.5%

of total open interest in January 2009, 17.65% in February 2009 and 22.5% in March 2009.

• Dealings by Ackruti group and Dangi group: These related entities have traded in both

cash as well as futures of Ackruti during the period under examination:

o Most of these entities received shares through off market from the promoter and only

then started trading in the scrip in the period during which the prices saw an upward

movement

o The promoter related entities took a huge long position averaging 47.46% of open

Interest in January, 27.70% of open interest in February and 7.99% of open interest

till March 23, 2009.

o These entities had on the basis of gross traded value maintained close to 30%

concentration at BSE and 25% concentration at NSE for the month of January 2009.

o Most of the promoter related entities traded only in the shares of Ackruti.

41. The dealing in shares by the above groups, who had received shares from

the promoters through off-market transfers, suggests that by cornering the shares

in the cash segment and in futures segment they artificially raised the price of the

scrip in the cash segment and thereby made unfair gains in the futures segment.

The alleged manipulation in Ackruti is already a subject matter of SEBI

investigation. The successful operation of Dangi group on behalf of yet another

promoter to manipulate the share price of its company, initially in June 2007 to

February 2008 and then from January 2009 to March 2009, has thus prima facie

found to be substantiated with evidence of connections between them. The link

between the Dangi group entities and Ashika group on one hand and Ackruti

Group including its promoters on the other is established through evidence of

holdings of the latter in entities of Dangi Group. The trading in the shares of

Ackruti takes on a different dimension after Dangi group entities start trading in

them. There are higher volumes and multifold increase in price. The share price

increased from `400/- to `1200/- levels in the first period and in the second

period that was examined above from `500/- to `1500/- and moved back to

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`500/- levels only on account of regulatory intervention of stock exchanges by

shifting the scrip to trade for trade segment and excluding it from the equity

derivatives segment. The ease with which connected entities build up large

positions both in the cash and F&O segment, on the back of relatively low public

floating stock is cause for serious concern to the integrity of the market. Prima

facie, the role of Dangi group appears to be to raise volumes through artificial

trades and generate interest in the scrip and cause price to rise by consistently

buying at LTP or above it, thereby facilitating a higher pricing for the capital

issuance or for maintaining the price to support pledged shares. In this case, by

causing price rise and maintaining the same at desired levels during the

examination period, promoters were able to get their pledged shares revoked. In

the second period there were many announcements regarding revocation of

shares pledged by the promoters. Ackruti subsequently issued capital through a

QIP in July 2009.

Brushman:

42. The trading pattern in the scrip Brushman was analyzed for the period

February 2008 till November 2008. It is observed that the said company came out

with an FCCB issue in June 2008. The price volume movement of the said scrip

during the period is as under:

• For period February 2008 till November 2008, analysis on new price establishment and

trading at LTP & +LTP revealed the following:

Table 14 : New price establishment & LTP analysis for February - November 2008

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Trades New price LTP +LTP At LTP or above LTP

gross buy

volume (quantity)

BSE

Total 24,480 218 11,909 6,727 18,636 15,189,195

% to total 100.00 0.89 48.65 27.48 76.13

Dangi group Entities as buyers 4,753 84 2,335 1,801 4,136 3,039,682

% to total 19.42 38.53 19.61 26.77 22.19 20.01

% to Dangi group trades 100.00 1.77 49.13 37.89 87.02

The analysis of the trades in the scrip of Brushman revealed the following: • During the said period, the total traded volume was 15,189,195 shares. The Dangi group

entities had purchased a total of 3,039,682 shares on gross basis at BSE, which was

approximately 20% of the total trading. Out of the said purchase of 30,39,682 shares,

trades involving 712,092 shares were executed within the Dangi group entities creating

artificial volumes. The said quantity was approximately 23% of their total trading volume

at BSE.

• Of the instances when new prices were discovered, 38% of total instances were attributed

to the Dangi group entities. Similarly, of the instances for the trades that were either at

last trade price or above last traded price, 22% of total instances were attributed to the

trading carried out by the Dangi Group. Moreover 87% of trades of Dangi Group was

either at last trade price or above last traded price.

• From the filings made available at the website of Ministry of Corporate Affairs, it was

observed that Mr. Kapil Kumar, the managing Director of Brushman, was allotted 400,000

equity shares each in Splendor Vanijya Private Limited and Delight tie-up Private Limited

on December 31, 2008 . Both the said entities and Dangi Group entities are appeared to

be connected to each other by way of crossholdings as well as off-market transfers.

Delight tie-up Private Limited had stake in Amit Business Limited, a Dangi group entity,

while Splendor had made off-market transfer to Amit Business Limited. Further, Amit

Business Limited had a stake in Splendor Vanijya Private Limited, which itself had stake

in Delight tie-up Private Limited.

• At BSE, for the period February 2008 till November 2008 it is seen that, the Dangi group

entities viz. Ashoka Finstock Limited and Ivory Consultants Private Limited contributed

significantly to the trading volumes on a gross basis and were the top clients with

volumes appreciably larger than any other entity as tabulated below:

Table 15: Top clients at BSE on Gross Buy basis Volume Client Code Client Name Gross Buy Gross Sell Net Total

B_204_A131 Ashoka Finstock Ltd 2,062,914 1,998,184 64,730 4,061,098 B_912_P1721 Prachi Agencies Pvt Ltd 1,400,000 700,000 700,000 2,100,000

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Volume Client Code Client Name Gross Buy Gross Sell Net Total

B_179_160 Arisaig India Fund Ltd 905,892 0 905,892 905,892 B_912_I004 Ivory Consultants Pvt Ltd 622,050 466,050 156,000 1,088,100 B_491_D256 Devkant Synthetics India Pvt. 521,474 517,909 3,565 1,039,383

43. Thus, it is observed that the Dangi group and Ashika group entities are

found dealing in the shares of Brushman, during the relevant period prima facie in

order to artificially increase the share price and favour the pricing of the securities

which were to be issued. The continued activity of the operator in the scrip is

linked to the need to maintain price for the apparent comfort of the FCCB

subscribers as also to generate interest among investors. In this case, the nexus

between promoter and Dangi Group is prima facie borne out from the investment

made by the promoter in Ashika group entities which in turn had investments in

Dangi group entities. The promoter’s objective is met by the higher levels of price

and volume in the scrip, whereas for Dangi group, the gains are funds invested

by promoter in entities controlled by it towards the consideration for their activities

which finally led to the artificial price and volume in the shares of Brushman and

which resulted in the manipulation.

Welspun:

44. The analysis revealed that the Dangi Group entities had actively trading in

the scrip during the period May 2009 till November 2009. During this period, the

share price of Welspun kept rising from levels of `100/- to above `250/- in

September 2009. The price-volume movement of the scrip during the period is as

under:

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An analysis of the trades in the shares of Welspun during the above period

revealed the following: • For the period January 1, 2009 to March 25, 2010 entities belonging to Dangi Group

entities and Ashika group along with Welspun Group itself, were actively trading in the

scrip. A brief description of the above groups and their relations along with few other

entities is placed at Annexure B. Their trading activity in cash segment and derivatives

segment is as under:

o Majority of the activity of the aforesaid clients in the derivatives segment was

confined to this scrip. Further, entities of the above mentioned three groups were

holding significant portion of the long positions and their average share of open

interest in the scrip was around 70% of the total limit. The position varied in the

range of 15.91% to 94.68% of the total open interest in the scrip.

• Their trading activity in cash segment at NSE for period from January 01, 2009 to March

25, 2010 is tabulated below:

Table 16: Trading activity in Welspun at NSE - Cash Segment Name No of scrips

traded Gross Value in Welspun Gujarat ( in lacs )

% activity in Welspun Gujarat

Dangi Group entities

Ashoka Finstock Ltd 64 34685 17%

Pacific Corporate Services Ltd 60 37744 19%

Amit Business Ltd. 11 1489 27%

Sunil Somitra Singh Dangi 61 1596 64%

Welspun Group Krishiraj Trading Limited 3 2808 30%

Welspun Trading Limited 4 10337 33%

Welspun Wintex Ltd. 1 173 100%

Welspun Mercantile Limited 1 105 100%

Welspun Polybuttons Pvt. Ltd. 3 479 85%

GRG Cosmetics Private Limited 3 663 61%

Ashika Group

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Name No of scrips traded

Gross Value in Welspun Gujarat ( in lacs )

% activity in Welspun Gujarat

Withal Commercial Pvt Ltd 84 35361 75%

Winall Vinimay Private Limited 5 2623 82%

Fountain Vanijya Pvt Ltd 72 1162 21%

PR Vyapaar Private Limited 13 5639 28%

o During period March 9, 2009 to November 19, 2009 there was a substantial

increase in price from `75/- to `275/- approximately, accompanied by spurts in

volume in the scrip. Pacific Corporate Services Limited was the top net buyer

during this period and accounted for about 15% to market net.

o Dangi group placed and executed a total of 2647 buy limit orders out of which,

more than half or 1461 orders were placed with a positive LTP variation. Out of

the total of 192.29 lakh shares bought by Dangi group, for 30.70 lakh shares

12.75 lakh shares & 5.20 lakh shares, the entities of Welspun group and Ashika

Group were the counterparties, respectively. Therefore, 25% of its trades were

artificially generated or without transfer of beneficial ownership.

o Welspun group placed and executed a total of 132 buy limit orders out of which

72 orders were placed with positive LTP variation. Out of the total of 25.56 lakh

shares bought by Welspun Group, for 0.41 lakh shares, 3.28 lakh shares & 0.98

lakh shares they themselves, Dangi group & Ashika Group were the respective

counter parties.

o Ashika group placed and executed a total of 169 buy limit orders out of which 108

orders were placed with positive LTP variation. Similarly, out of the total of 60.01

lakh shares bought by Ashika Group, for 22.85 lakh shares they themselves and

for 2.29 lakh shares Dangi group were the counterparties.

• Further for period May 2009 till November 2009 an analysis on new price establishment

and trading at LTP & +LTP on BSE was carried out and it revealed the following:

Table 17 : New price establishment and LTP analysis for May - November 2009 Instances of Remarks Trades New price LTP +LTP At LTP or above LTP


BSE Total 1,689,887 2042 1,001,332 348,001 1,349,333 226,782,626 % to total 0.12 59.25 20.59 79.85

Dangi Entities as buyers 19,935 39 14,292 1,685 15,977 10,427,664 % to Dangi group trades 0.20 71.69 8.45 80.15

o Of 10,427,664 shares purchased at BSE by Dangi group, 1,796,297 shares were

traded within the Dangi group entities which was approximately 17% of the total

trading volume of the said entities at BSE, were artificial trades.

o 80% of the trades of the Dangi group entities were at or above LTP. It appears

that the Dangi group’s primary role was to artificially maintain the price of the

shares.

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45. The aforesaid activity is similar to that observed in the scrips of Murli

Industries Limited and Ackruti wherein the promoter/promoter related entities had

actively traded at the same time when Dangi group entities and others were also

dealing substantially in the company shares. The linkages between promoter

entities i.e. Welspun Group and Dangi group are prima facie borne out through

holdings of the former in entities of Dangi Group (as explained in Annexure B).

The trading in the scrip led to high volumes and rise in prices of the shares. This

culminated in Welspun issuing FCCB in September 2009 when price had been

taken up to levels of `250/-. The pre-determination or possible agreement of

promoters with the market operator is prima facie established through

investments by the promoter in Dangi group entities and the role of Dangi group

entities in creating artificial volumes and price rise/maintenance. For example in

Welspun, Mr. Sanjay Dangi after carrying out his activities had accumulated

approximately 10,237,782 shares ( 5% share capital in Welspun) as on March 31,

2010 and later on sold approximately 81 lakh shares to Life Insurance

Corporation of India for `268/- April 08, 2010. The ulterior objective of the

promoters and the operator was not known to investors who therefore got

induced into dealing in the scrip.

RPG:

46. From the transaction statement received from the depositories, the Dangi

group entities viz. Topcity Mercantile Co Private Limited and Supersun Trading

Co Private Limited had received shares under the promoter’s quota of RPG. The

lock in for these shares expired on August 4, 2006. During the period September

2006 to September 2007, there was an announcement of merger of RPG with KEC

International Limited. Therefore, the trading pattern in the scrip was analyzed.

The price volume movement in the shares of RPG during this period is as under:

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An analysis of the trades in the shares of RPG for the period September

2006-September 2007 revealed the following: Table 18 : New price establishment and LTP analysis during Sep 2006 till Sep 2007


Trades New price LTP +LTP At LTP or above LTP

gross buy Volume (Quantity)

BSE

Total 201,044 887 105,603 47484 153,087 2,077,7642

% to total 100 0.44 52.53 23.62 76.15

Dangi Entities as buyers 20,697 142 13,731 4310 18,041 5,073,289

% to total 10.29 16.01 13.00 9.08 11.78 24.42

% to Dangi group trades 100 0.69 66.34 20.82 87.17

o Of the total traded volume of 20,777,642 shares, Dangi group entities had a buy

of 5,073,289 shares on gross basis, which was approximately 24% of the total

trading.

o Of the instances of new price that were discovered during the period, 16%

instances of total new price discovery were attributed to Dangi group entities.

Similarly, for the trades that were either at last trade price or at above last traded

price, 9% instances were attributed to the trading carried out by the Dangi Group

entities.

o Of total 5,073,289 shares that were purchased by the Dangi group entities at

BSE, for 1,708,466 shares the counter party clients were the Dangi group entities

itself. Thus, 33% of the trading of Dangi Group Entities was between them and

constituted artificial volumes.

o Ashika group entities viz. Calcom Consultancy Services Private Limited,

Rosewood Vanijya Private Limited and Pushkar Banijya Private Limited had

altogether purchased 123,000 shares of the scrip at BSE. The counterparty for

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approximately 117,363 shares was Ashoka Finstock Limited, a Dangi Group

entity.

• At BSE for the period September 11, 2006 till September 30, 2007, the Dangi group

entities viz. Ashoka Finstock Limited and Pacific Corporate Services Limited contributed

significantly to the trading volumes and were the top clients with volumes appreciably

larger than any other entity as tabulated below:

Table 19 : Top clients at BSE on Gross Buy basis Volume Client Code Client Name Gross Buy Gross Sell Net Total

B_204_A131 Ashoka Finstock Ltd 3,295,532 3,295,485 47 6,591,017 B_125_L0100037 Pacific Corporate Services Ltd 1,526,477 1,420,943 105534 2,947,420 B_121_45204 Bsma Limited 696478 0 696478 696478 B_125_BMF Birla Mutual Fund - India Advantage

Offshore Fund 420,000 0 420000 420,000

B_182_D207 Parikh Manish Arvind 236,188 226737 9451 462,925

47. In this case also, the trades of Dangi Group entities were prima facie

responsible in maintaining the share price and generating volumes. The

promoters may have been benefitted in realizing better valuations for their

company which was being merged during the same period. Prima facie, the case

demonstrates the ease with which operators controlling several entities execute a

scheme of artificial and misleading trading at the behest of the promoters which is

impossible to discover by investors who then suffer the consequences of being

induced to purchase these shares.

48. A clear pattern thus emerges from the above analysis of the trading

activity of the Dangi Group entities across different companies and over time. The

prima facie observations of the same are given below:

• It appears that the said entities along with the promoters/promoter

related entities have prima facie manipulated the price of shares of the

respective companies with an objective of raising capital at a price

more beneficial to promoters of such companies than what may be

justified by their fundamentals.

• Dangi group entities along with the promoter/promoter related entities

have accounted for a disproportionately large share of trading in shares

of the companies concerned, thereby giving misleading signals of huge

trading interest in order to attract genuine investors. The price and

volume manipulation is known only to Dangi group, its associates and

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the promoters of the respective companies and is executed in a

manner patently malafide with respect to investors.

• The concerned promoters and the Dangi Group have partnered for the

purposes of raising the share price to achieve limited objective of the

promoter. This was then followed by profit taking by Dangi group either

by exit through sale of shares assisted by promoter related entities or

investments made by promoters/company to the capital of a Dangi

group entity or sale by the Dangi Group entity to the unsuspecting

investors, including Institutional Investors. These patterns have been

observed in the above cases. It was found that in case of one

company, Dangi group entities providing exit opportunity to the

Institutional Investors. In Sangam India Limited, the Dangi group along

with Ashika Group on November 23, 2010 had provided exit route to

investors such as Swiss Finance Corporation (Mauritius) Limited and

India Advantage Fund-I who were approximately holding 23.01% share

capital in the said company.

• The activities of Dangi group observed by SEBI lead to a discernible

pattern that causes market integrity to be compromised since investors

are ignorant of the reasons for the unexplained surges in the share

price. Besides the above mentioned companies, presently the Dangi

group entities alongwith its known and unknown associates appear to

be substantially active in various scrips such as Parekh Aluminex

Limited, Panasonic Home Appliances India Limited, J Kumar Infra

Projects Limited, Prakash Steelage Limited and Core Projects &

Technologies Limited etc.

• Presently, as observed, the Dangi group is not restricting itself to the

old associates but is expanding its groups of associates. It appears that

mandate of Dangi group through large scale trading in shares is to

increase and maintain the prices, providing signals of huge trading

interests, picking up substantial chunk of free float as well as

preventing fall in the share prices directed in a manner that their

activities are beneficial to the promoters of the companies. Thus, the

modus operandi by the Dangi group is continuous in nature.

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49. As is prima facie evident from the facts outlined above, the Dangi group

along with the promoters of various companies had indulged in fraudulent and

unfair trade practices relating to securities market. It also shows the connivance

of promoters with the Dangi group which helped them in achieving their goals by

manipulating the trading in securities of their companies. Moreover, it is observed

that the Dangi group and Ashika group entities have time and again come

together in a coordinated manner serving much like mercenaries on hire for

execution of fraudulent schemes in the securities market. At the relevant point of

time, prior to the pricing of a forthcoming issue of securities, they were found

dealing in shares of companies concerned in order to artificially increase volumes

and price or even to maintain the prices and favour the promoters in the desired

manner. The relationship between the promoters of the concerned companies

and the Dangi group arises from evidences such as the information provided by

the IT Department, cross holdings, off-market transfer of shares etc. The ulterior

objective of the promoters and the operator was not known to the investors who

therefore got induced to deal in the shares of companies without full information

and suffer erosion of value of their holdings when Dangi and Ashika group

entities suddenly exit the scrip. The nexus between different promoters and the

Dangi group therefore emerges clearly and repetitively as the Dangi group

successfully offers its services for a commercial consideration; a contract that

jeopardizes investor interest and violates the tenets of the securities market.

50. The above instances had prima facie shown that on each occasion the

promoter of the concerned company had employed a scheme or a game plan for

the subscription of their securities. To this end, the services of the hired group of

entities controlled by Mr. Sanjay Dangi were employed to execute the same.

Thus, from the foregoing, it appears that the aforesaid entities and the persons

connected with them have prima facie violated Section 12A of the Securities and

Exchange Board of India Act, 1992, Regulations 3 and 4 of the Securities and

Exchange Board of India (Prohibition of the Fraudulent and Unfair Trade

Practices Relating to Securities Market) Regulations 2003, Regulation 3 of the

Securities and Exchange Board of India (Prohibition of Insider Trading)

Regulations, 1992 and Regulations 10 and 11 of the Securities and Exchange

Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,

1997.

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51. I also note that as outlined in Annexure C to this Order, this is not the first

instance that Sanchay Fincom Limited and Sanchay Finvest Limited, the stock

broking entities in which Mr. Sanjay Dangi is one of the promoters, have been

involved in investigations leading to regulatory actions by SEBI. Moreover, as a

listed company, the stock broking firm Sanchay Finvest Limited has failed to

comply with the clauses of listing agreement prompting BSE to initiate

appropriate penal actions. It is noted that Sanchay Finvest Limited without

complying with the listing agreement, as a listed stock broking firm. Moreover I

also find that the relationship of Dangi group and the stock brokers, Ashika Stock

broking Limited and Sanchay Fincom Limited/Sanchay Finvest Limited is beyond

the normal client–stock broker relationship. The actions of these stock brokers,

which are apparently related to the Dangi Group entities, assumes significant role

in the scheme of aiding and abetting the planned execution of the game plan of

Mr. Sanjay Dangi.

52. Given the vital function of protecting investors and safeguarding the

integrity of the securities market, vested in SEBI and the commensurate powers

given to it under the securities laws, it is necessary for SEBI to exercise these

powers firmly, effectively and immediately to insulate the market and its investors

from the actions of persons who potentially perpetrate fraud in the securities

market. In the light of what has been prima facie unearthed in this examination so

far, allowing the Dangi group entities and others involved therein to continue to

deal in the securities market, would severely compromise the integrity of the

market and continue to expose unsuspecting investors to a significant and

material possibility of being misled. One basic premise that underlies trading on

the stock exchanges is that investors conform to standards of transparency and

ethical behavior prescribed in the various regulations and statutes, relevant in this

regard. In the light of the preliminary findings against the entities mentioned

above, it would be difficult to conclude that these entities conformed to the

prescriptions even remotely. No indulgence on the part of SEBI would be

justified, given the sacrosanct mandate of investor protection entrusted to it. I

would have little hesitation in noting that in this instant case, the risk to investors

of any fraud on the part of the promoter-operator nexus is consequently amplified

and would little justify any hesitation on the part of SEBI. Therefore, this is a fit

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case where SEBI as the regulator needs to intervene sternly and immediately in

preventing these entities from operating in the securities market to prevent further

misuse and harm, until further directions.

53. In view of the foregoing, I, 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(4), 11B and 11D thereof, pending investigation, by way of this

ad interim ex-parte Order, hereby issue the following directions:

A. The persons/entities mentioned in the table below are restrained from

accessing the securities market and further prohibited from buying, selling or

dealing in securities in any manner whatsoever, till further directions:

Sr. Entity Permanent Account Number

Dangi Group Entities 1. Alpana Sanjay Dangi AFNPD2805C 2. Amit Business Limited AACCA6091Q 3. Ashoka Finstock Limited AADCA7725J 4. Goldflag Trading Company P Limited AACCG2601E 5. Ivory Consultants Private Limited AAACI5518C 6. Mentor Capital Limited (erstwhile Pacific Corporate

Services Limited) AACCP7995G

7. Sanjay Soumitra Singh Dangi AHSPD6986H 8. Sunil Somitra Singh Dangi AAZPD2714P 9. Supersun Trading Company Private Limited AAICS7352N 10. Top City Mercantile Company Private Limited AACCT1775G

Ashika Group Entities 11. Calcom Consultancy Services Private Limited AABCC0899F 12. Cynosure Tie-Up Private Limited AACCC8722E 13. Delight Tie-Up Private Limited AACCD4249H 14. Forever Merchants Private Limited AAACF9807H 15. Fountain Vanijya Private Limited AABCF1407E 16. Hanurang Vinimay Private Limited AAACH6707Q 17. Micro Management Private Limited AABCM8245K 18. PR Vyapaar Private Limited AAECP3304K 19. Pushkar Banijya Limited AABCP9780E 20. Rosewood Vanijya Private Limited AADCR3600D 21. Sarswati Vincom Limited AAECS4656B 22. Splendor Vanijya Private Limited AAKCS0981P 23. Winall Vinimay Private Limited AAACW8004B 24. Withal Commercial Private Limited AAACW2222R

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B. The promoter/promoter related entities of Murli Industries Limited, Ackruti

City Limited, Welspun Gujarat Stahl Rohren Limited (now Welspun Corp. Limited)

and Brushman India Limited mentioned below in the table are hereby directed not

to buy, sell or deal in the securities of their own companies and their listed group

companies, in any manner whatsoever, till further directions:

Sr. Entity Permanent Account Number Entities Connected to Murli Industries limited

1. Ambaji Papers Private Limited AAFCA2276C 2. Bajranglal Bankatlal Maloo ACHPM5764C 3. Bajranglal Maloo (HUF) AAAHB8633E 4. Inco Infrastructures Private Limited AABCI3615H 5. Kanhaiya Mining And Minerals Private Limited AACCK5740L 6. Krishnum Investments Private Limited AACCK5953H 7. Lakhi Packaging Private Limited AABCL0873C 8. Lalchand B Maloo (HUF) AAAHL2224F 9. Lalchand Bankatlal Maloo ACGPM0657D 10. Mahesh Maloo AFXPM4524R 11. Murli S Maloo ACGPM0665D 12. Nandlal B Maloo (HUF) AAAHN6253N 13. Ramji Agri Business Private Limited AACCR9946F 14. Ramkrishana Fabrication & Machineries Private Limited AADCR0189F 15. Runicha Alloys And Steel Private Limited AACCR9947E 16. Simple Mining And Power Private Limited AAJCS0291D 17. Sunilkumar S Maloo ACGPM0659P 18. Taitan Management Services Private Limited AACCT2473R

Entities Related to Ackruti City Limited 19. Cello Finance Corporation AAFFC0147D 20. Cello Pens And Stationery Private Limited AABCC1808J 21. Falguni Vyomesh Shah AAFPS0667J 22. Hemant Mahipatray Shah (HUF) AAAHH1062F 23. Khandesh Builders Limited AAACK8222H 24. Kunjal Hemant Shah AAGPS9693B 25. Lata Mahipatray Shah AAGPS9692A 26. Mahipatray V Shah (HUF) AAFHM0519R 27. Naresh Jayantilal Shah AADPS0903R 28. Pankaj G Rathod AAAPR5522N 29. Pradeep G Rathod AAAPR5520Q 30. Sangeeta P Rathod AAAPR5521R 31. Vyomesh Mahipatray Shah (HUF) AAAHV1442H

Welspun Group Entities 32. GRG Cosmetics Private Limited AABCG6334M 33. Krishiraj Trading Limited AAACK2257N 34. Welspun Mercantile Limited AAACW2876K 35. Welspun Polybuttons Private Limited AAACW0036H 36. Welspun Trading Limited AAACW2877J

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Sr. Entity Permanent Account Number 37. Welspun Wintex Limited AAACW0488M

Brushman India Limited 38. Kapil Kumar AALPK9933F

C. The stock exchanges are advised to enable squaring off, at the earliest,

existing open positions in the Futures and Options Segment, if any, for the

persons/entities mentioned above. Further, the concerned stock exchanges

should also ensure that said persons/entities do not take fresh positions or

increase their open positions.

D. Murli Industries Limited, Ackruti City Limited, Welspun Gujarat Stahl

Rohren Limited (now Welspun Corp. Limited) and Brushman India Limited, and

their respective promoters are directed to cease and desist from carrying out the

activities mentioned above in this Order which is prima facie in contravention of

the securities laws.

E. Murli Industries limited, Ackruti City Limited, Welspun Gujarat Stahl

Rohren Limited (now Welspun Corp. limited) and Brushman India Limited and

their respective promoters are further directed to ensure that, the shareholding of

the promoters/promoter group in the said companies is not altered in any manner

till further directions.

F. The stock brokers namely, Sanchay Fincom Limited, Sanchay Finvest

Limited and Ashika Stock Broking Limited are hereby directed not to buy, sell or

deal in the securities in their own/proprietary account in any manner till further

directions in this regard. They are further directed not to take/deal with fresh/new

clients with immediate effect until further orders.

54. The Stock exchanges and the depositories are directed to ensure that all

the above directions are strictly enforced.

55. The persons/entities against whom this Order is passed may file their

objections, if any, within twenty one days from the date of this order and, if they

so desire, avail themselves of an opportunity of personal hearing before the

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Securities and Exchange Board of India, on a date and time to be fixed on a

specific request, received from the said persons.

56. The aforesaid directions is without prejudice to the ongoing investigations

being carried out by Securities and Exchange Board of India in respect of the

trading in shares of Ackruti City Limited for the period between January 2009 and

March 2009.

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

DR. K M ABRAHAM

WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

PLACE: MUMBAI DATE: DECEMBER 2, 2010

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Annexure A: Details of ten entities

As per MCA Data from MCA website

Sr. Name of entity Address Email Date of Incorporation

Directors

1. Ambaji Papers

Pvt Ltd

Itwari High School nikalad

Mandir Road, Rathi Bhawan,

Nagpur

[email protected] 10/05/2005 • Chenaram Chhaganram Rad

• Poonamchand Multanmal

Bhattad

2. Inco

Infrastructures

Pvt Ltd

142, East Wardhman Nagar,

Behind Akash Apartment,

Nagpur

[email protected] 29/04/2005 • Sanjay Rambhau Lute

• Shivshakti Babulal Dhoot

3. Kanhaiya Mining

& Minerals Pvt

Ltd

142 East Wardhman Nagar

behind Akash Apartment,

Nagpur

[email protected] 05/05/2005 • Sukharam Prajapat Tejaram

4. Krishnum

Investments Pvt

Ltd

C/O. Vidya Amar Fulzale

Ambedkar Square, Bypass

Road, Umred, Nagpur

[email protected] 24/05/2005 • Lalit Ramnivas Loya

• Kamalkishore Multanmalji

Bhattad

5. Lakhi Packaging

Pvt Ltd

Annapourna Traders Kirana

Oliitwari, Nagpur

[email protected] 24/05/2005 • Shrikant Ruthiya

• Bhawarlal Arjunram Khaliya

6. Ramji Agri

Business Pvt Ltd

Vidya Amar Fulzale ambedkar

Square, Bypass Road

Umrer, Nagpur

[email protected] 28/04/2005 • Umardan M Khariya

• Lalit Ramnivas Loya

7. Ramkrishna

Fabrication &

machineries P

Ltd.

C/O Suresh Rao Warotkar

Neartelipura Peotha, Near,

Shakar Mirchi Temple Itwari,

Nagpur

[email protected] 20/05/2005 • Nilesh Kumar Jain

8. Runicha Alloys &

Steel Pvt Ltd

Vidya Amar Fulzale Ambedkar

Square, Bypass Road Umrer,

Nagpur

[email protected] 09/05/2005 • Bhawarlal Arjunram Khaliya

• Nilesh Kumar Jain

9. Simple Mining &

Power Pvt Ltd

Beh Saibaba Mandirnear

Govind Apartment, Civil

Lines, Chandrapur

[email protected] 30/05/2005 • Shivshakti Babulal Dhoot

10. Taitan

Management

Services Pvt Ltd

142 C/O Sureshrao Warotkar

telipura Peotha, Near Shankar

Mirchi Temple, Itwari, Nagpur

[email protected] 20/05/2005 • Poonamchand Multanmal

Bhattad

• Nilesh Kumar Jain

• As per the KYC form obtained from the depositories and the exchanges the common

addresses for the above entities except Ramkrishna Fabrication & machineries P Ltd. is 142

East Wardhman Nagar behind Akash Apartment, Nagpur.

• Address of Poonamchand Multanmal Bhattad is Itwari High School nikalad Mandir Road ,

Rathi Bhawan, Nagpur

• In Ambaji Papers private Limited there was a deposit of ` 4,85,00,000 on 05-12-2006 which

were transferred to Murli Industries on 06-12-2006. This transfer may be for the conversion of

share warrants to shares.

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• In Inco Infrastructures Pvt Ltd there was a deposit of ` 4,86,00,000 on 05-12-2006 which were

transferred to Murli Industries on 06-12-2006. This transfer may be for the conversion of

share warrants to shares.

• Lakhi Packaging Pvt Ltd had provided fund to Taitan Management Services Pvt Ltd

• Nilesh Kumar Jain, director in Ramkrishna Fabrication & machineries P Ltd is directors in

various companies which have address as 142 East Wardhman Nagar behind Akash

Apartment, Nagpur.

• The address of Kamalkishore MultanMalji Bhattad one of the directors in Krishnum

Investments Private Limited is 101, Jai Bhavani Society, Wardhman Nagar, Nagpur. This is

the address of the company. The email id provided is [email protected] which is one

of the email ids of Maloos, the promoters of the company. The phone number provided by Mr.

Bhattad is that of Mr. Bajranglal Bankatlal Maloo C/o Nandlal Enterprises and Fax no.

provided is that of Sri Nand Lal Maloo. Mr. Bajranglal Bankatlal Maloo and of Mr. Nand Lal

Maloo are the promoters of the company.

• The address in driving license of Mr. Lalit Lohia, a director in few of the ten entities, is C/o

M/s. Murli Agro Products Limited.

• The phone number provided by another director Shri Shivshakti Babulal Dhoot in the CDSL

account is that of Murli Agro products Limited

From the above it appears that all the said 10 companies are apparently related

to each other and are apparently connected to the promoters. The table below

summarizes the shareholding details of the said ten entities in the company for

various quarters.

% Share Holding Entities

Sep-

06

Dec-

06

Mar-

07

Jun-

07

Sep-

07

Dec-

07

Mar-

08

Jun-

08

Sep-

08

Dec-

08

Mar-

09

Jun-

09

Sep

09

Ambaji Papers Pvt Ltd 0 5.22 5.22 5.22 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88

Inco Infrastructures Pvt

Ltd

0 5.22 5.22 5.22 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88

Kanhaiya Mining &

Minerals Pvt Ltd

0 5.22 5.22 5.22 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88

Krishnum Investments

Pvt Ltd

1.11 0 0 1.02 1.87 1.87 1.95 1.95 1.95 1.95 1.95 1.95 1.95

Lakhi Packaging Pvt

Ltd

1.2 0 0 1.79 1.84 1.83 1.78 1.78 1.78 1.78 1.9 1.9 1.9

Ramji Agri Business

Pvt Ltd

0 5.22 5.22 5.22 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88

Runicha Alloys & Steel

Pvt Ltd

0 5.22 5.22 5.22 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88 4.88

Simple Mining &

Power Pvt Ltd

1.57 1.16 1.17 1.95 1.86 1.82 1.85 1.83 1.83 1.83 1.94 1.94 1.94

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% Share Holding Entities

Sep-

06

Dec-

06

Mar-

07

Jun-

07

Sep-

07

Dec-

07

Mar-

08

Jun-

08

Sep-

08

Dec-

08

Mar-

09

Jun-

09

Sep

09

Taitan Management

Services Pvt Ltd

0 0 0 1.48 1.82 1.82 1.82 1.82 1.82 1.82 1.88 1.88 1.88

Total 3.88 27.26 27.27 32.34 31.79 31.74 31.8 31.78 31.78 31.78 32.07 32.07 32.07

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Annexure B: Details regarding entities belonging to various groups, crossholdings, off-market Transfers and pledges

1. The entities that appear to be part of the Dangi group are described in the

table below with linkages based on address, phone numbers, and directors

etc., as obtained from KYC’s received from exchanges, demat account details

of entities, MCA website etc.

Dangi Group of Entities Address PAN No. Directors (at any point of time Sep

2006 – Feb 2010)

Aardee Multitrade Private

Limited

713 Raheja Centre Nariman Point Mumbai -

400021

• Sanjay Soumitra Singh Dangi

• Alpana Sanjaykumar Dangi

Alpana Sanjay Dangi @

• 502 Resort View Thakur Complex

Kandivali(E), Mumbai -400101

• 61, Venus Apartments, Colaba, Cuffe

Parade, Mumbai-400005

AFNPD2805C • Wife of Sanjay Dangi

Amit Business Ltd.$@

• 713 Raheja Centre, Free Press Journal

Marg, Nariman Point, Mumbai,

Maharashtra, India, 400021

• 58 D N S Road 3rd Floor Room No 305

Kolkata-700001

AACCA6091Q • Sanjay Dangi(father name

Saumitra Dangi)

• Paras Mull Jain

• Manoj Vimalsingh Pamecha

• Alpana S Dangi

Ashoka Finstock Ltd@

• 101, Green Garden Apt Near Maheshwari

Bhavan City Light Road Parle Point Surat

395007

• E/205, Vidhata Township, Near Gita Nagar,

Parvatgram Road, Surat- 395010 Tel No

56332270

AADCA7725J • Gajanand Sharma

• Mahendra Kumar Jangir

• Moolchand Jangir

• Sunil Dangi (father name

Saumitra Dangi)

Avani Impex Private Limited

713 Raheja Centre Nariman Point Mumbai –

400021



Barkha Multitrade Private

Limited


400021



Buddhdev Trading Private

Limited


400021



Goldflag Trading Company

P Limited$

713 Raheja Centre Nariman Point, Mumbai AACCG2601E • Sanjay Soumitra Singh Dangi


Gorgeous Financial Advisor

Private Limited$


400021



Ivory Consultants Private

limited@

27 Brabourne Road 3rd Floor Room No 305,

Kolkata

AAACI5518C • Sanjay Dangi

• Manoj Vimalsingh Pamecha

• Alpana S Dangi

Kasare Financial Services

Private Limited$


400021



Nariman Mercantile Private 713 Raheja Centre Nariman Point, Mumbai • Sanjay Soumitra Singh Dangi

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Dangi Group of Entities Address PAN No. Directors (at any point of time Sep

2006 – Feb 2010)

Limited. • Alpana Sanjaykumar Dangi

Pacific Corporate Services

Ltd (Now known as Mentor

Capital Limited) @*


400021

Tel No 56332270

AACCP7995G • Sanjay Dangi (father name

Saumitra Dangi)

• Ashok Upadhyay

• Sanjay kumar K Patel

Padmavati asha Properties

& Projects Private Limited #

101 NR House, High Court Lane, Ashram Road,

Ahmedabad- 380009



Pranam Securities Limited

#

104 NR House, Near popular House, Ashram

Road, Ahmedabad- 380009



RCD Multitrade Private

Limited


400021



Sanjay Soumitra Singh

Dangi @

61, Venus Apartments, Colaba, Cuffe Parade,

Mumbai-400005

AHSPD6986H Self

Sunil Somitra Singh

Dangi@

D-612 International Trade Centre Majura Gate

Char Rastha, Surat

AAZPD2714P NA

Supersun Trading Co Pvt

Ltd#@

713 Raheja Centre Nariman Point, Mumbai AAICS7352N



Swatik Finance And

Investment Services Private

Limited$


400021



Thadeshwar Financial

Services Private Limited$

713 Raheja Centre Nariman Point Mumbai -–

400021



Top City Mercantile Co Pvt

Ltd #@

713 Raheja Centre Nariman Point, Mumbai AACCT1775G



# These entities amalgamated with Pacific Corporate Services Limited vide court order dated 14-12-2007

$ These entities amalgamated with Pacific Corporate Services Limited vide court order dated 26-02-2010

@ These entities were found to be trading actively.

* The name of Pacific Corporate Services Limited is changed to Mentor Capital Limited and a fresh certificate of incorporation

have been issued by the RoC on September 28, 2010

2. Entities belonging to Welspun Group are Krishiraj Trading Limited, Welspun

Trading Limited, Welspun Wintex Ltd, Welspun Mercantile Limited, Welspun

Polybuttons Pvt Ltd and GRG Cosmetics Private Limited.

3. Entities belonging to Ashika Group are Calcom Consultancy Services Pvt

Ltd, Cynosure Tie-Up Private Limited, Delight Tie-Up Private Limited, Forever

Merchants Private Limited, Fountain Vanijya Private Limited, Hanurang

Vinimay Private Limited, Micro Management Private Limited, PR Vyapaar

Private Limited, Pushkar Banijya Limited, Rosewood Vanijya Pvt Ltd, Sarswati

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Vincom Ltd, Splendor Vanijya Private Limited, Winall Vinimay Private Limited

and Withal Commercial Private Limited.

4. Entities belonging to Ackruti group are Khandesh Builders Ltd, Naresh

Jayantilal Shah, Sureshkumar Bikamchand Jain, Sangeeta P Rathod, Pankaj

G Rathod, Pradeep G Rathod, Cello Finance Corporation and Cello Pens &

Stationary Pvt Ltd besides the promoters of Ackruti City Limited.

5. Linkages between the Dangi Group, Ashika Group, and Promoters/promoter

related entities (Welspun Group, Ackruti Group etc.,) of various companies:

a. The shareholders in few of the Dangi group entities is as under: Dangi Group of Entities Few Shareholders during any point of time

during 2006 - 2009 (as per MCA website) Remarks

Amit Business Ltd.(now

merged with Pacific Corporate

services Limited)

• Welspun Trading Limited %

• Delight Tie-up Private Limited *

• Pushkar Banijya Limited *

• Calcom Consultancy Private Limited *

• Welspun Trading Limited is one

of the promoters of Welspun

Gujarat & Welspun group of

Companies

Avani Impex Private Limited • Basant Marketing Private Limited

Barkha Multitrade Private

Limited • Basant Marketing Private Limited

Buddhdev Trading Private

Limited • Basant Marketing Private Limited

Ivory Consultants Private

limited • Welspun Trading Limited %

• Ackruti City Knowledge Private Limited!

• City Gold Farming Private limited!

• Zeus Infrastructure Private Limited!

• Chaitra Realty Limited!

• Ackruti City Knowledge Private

Limited and City Gold Farming

Private limited are wholly owned

subsidiaries of Ackruti City

Limited. Ackruti is related to

Zeus Infra and Chaitra Realty.




Companies

Nariman Mercantile Private

Limited. • Database Software Technology Private

Limited

Pacific Corporate Services Ltd • Sanjay Soumitra Singh Dangi


• Basant Marketing Private Limited

• Avani Impex Private Limited

• Nariman Mercantile Private Limited

• RCD Multitrade Private Limited

• Amit Business Limited

• Ivory Consultants Private Limited

• Welspun Trading Limited %




Companies

• Ivory Consultants had Ackruti

City Knowledge Private Limited

and City Gold Farming Private

Limited, both wholly owned

subsidiaries of Ackruti City

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Dangi Group of Entities Few Shareholders during any point of time

during 2006 - 2009 (as per MCA website)

Remarks

• Aardee Multitrade Private Limited

• Liberal Vincom Private Limited

• Gokul Financial Advisors Private Limited

• Pankaj Rathod !

• Pradeep Rathod !

Limited as its shareholders

Source Filings made by the above entities and available at MCA website

! Ackruti group * Ashika group % Welspun Group

b. A few of the Ashika Group entities shares the same/similar addresses as

that of entities having shareholding in Dangi Group entities or Dangi Group

Entities while some had made off-market transfers to Dangi Group entities.

While the Welspun Group entities had shareholding in the Dangi Group

entitles. In some cases the entities in which Dangi group entities had

shareholding, have stake in the entities of Ashika group. o Withal Commercial an Ashika Group entity had made off-market transfers of

shares viz. Ashika Global Finance and Ashika Global Securities to Amit Business

Limited.

o Delight Tie-up Private Limited, Pushkar Banijya Limited and Calcom Consultancy

Private Limited part of Ashika group had stake in Amit Business Limited a Dangi

group Entity.

o Amit Business Limited a Dangi group entity had shareholding in various Ashika

group entities such as Rosewood Vanijya Private Limited, Forever Merchants

Private Limited and Splendor Vanijya Private Limited etc...

o One of the addresses of Sarswati Vincom Limited is same as that of Ivory

Consultants Private Limited viz. 27, Brabourne Road, 3rd floor, R.N.305, Kolkata

-700001. Ivory Consultants Private Limited had stake in the Pacific Corporate

Services Limited

o Forever Merchants Private Limited & Rosewood Vanijya Private Limited, in which

Dangi Group entities having stake, had shareholding in Withal Commercial

Private Limited

o Rosewood Vanijya Private Limited and Splendor Vanijya Private Limited in which

Dangi Group entities having stake, had shareholding in Delight Tie-up Pvt Ltd.

o As per the Annual return filed by Ashika Global Finance P Ltd, on 24-03-2006

Ashika Global Securities Limited had transferred 98320 shares of Ashika Agro

Projects P Ltd (now known as Ashika Global Finance P Ltd) to Ivory Consultants

P Ltd as well as Amit Business Limited the Dangi group entities..

o Ashika Global Finance P Ltd has same address as that of Ashika Stock broking

Limited.

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o Further the promoters of Ashika stock broking limited viz. Daulat Jain, Puran Mal

Jain and Kanchan Devi Jain made off-market transfers to Amit Business Limited

a Dangi group entity.

o One of the addresses of Basant Marketing Private Limited who is having stakes

in various Dangi Group and Ashika group entities is 8/1 Lal Bazar Street 3rd

Floor, Kolkata.

o One of the Addresses of PR Vyapaar Private Limited is 29A, Weston Street, 3rd

Floor, Kolkata, which is similar to the address of Fountain Vanijya Private limited.

Further Fountain Vanijya Pvt Ltd trading through Ashika Stock Broking Limited

was observed to be placing orders through dealer Heena M Maldar whose office

address is 1008, Raheja Centre, 10th Floor 214, Nariman Point Mumbai.

400021. This office is located in the same building where Dangi Group is based.

o One of the addresses of Pushkar Banijya Private Limited is 32 Ezra Street 8th

Floor, Kolkata which is similar to one of the addresses that of Micro Management

Limited. Micro Management had made off-market transfers to Dangi Group

Entities while Pushkar Banijya Private Limited had stake in Dangi Group entities.

o Dangi group entity Ivory Consultants Private Limited had shareholding in Lotus

Capital Financial Services Limited while entities such as Forever Merchants,

Micro Management, Pushkar banijya and Rosewood Vanijya had stake in Lotus

Capital. While Lotus had made off-market transfer to Dangi Group Entity.

c. Details regarding entities related to promoters of Ackruti, Welspun,

Brushman and Dangi/Ashika Group

Entity Relation to Promoter

Ivory Consultants Ltd An off market transfer has taken place on 14/01/2009 for 3,00,00 shares from Mahipatray

V Shah (promoter) and the shares have been returned back on 13/03/2009. Mr. Sanjay

Dangi was one of the directors in the company. Ivory Consultants has shareholding in

Pacific Corporate Services Limited, a company of Mr. Sanjay Dangi.

Khandesh Builders Ltd An off market transfer has taken place on 15/01/2009 for 2,00,000 shares from

Mahipatray V Shah (promoter), the shares have been returned back on 17/03/2009.

Sureshkumar Bikamchand

Jain

An off market transfer has taken place on 15/01/2009 for 2,00,000 shares from

Mahipatray V Shah (promoter), the shares have been returned back on 19/03/2009.

Naresh Jayantilal Shah An off market transfer has taken place on 14/01/2009 for 65,000 shares from Mahipatray

V Shah (promoter).

Rathod Group Promoters have pledged their shares with a related company, Cello Pens and Stationary

Pvt Ltd. The group includes Sangeeta P Rathod, Pankaj G Rathod, Pradeep G Rathod

and Cello Finance Corporation; also the entity has received shares from Pacific Corporate

Services through Off market

Dhananjay Money Market An off market transfer has taken place between Dhanajay Money Market and Systematix

Fincorp on 12/3/2009 for 111000 shares, on the same date 115000 shares have then

been transferred to Pacific Corporate Services from Systematix Fincorp through off

market.

of 56

Entity Relation to Promoter

Industrial Investment Trust

Limited

Mr. Sanjay Dangi, the Director of Pacific Corporate Services was the director of this

company for the year 2006-07.

d. Ackruti City Knowledge Private Limited and City Gold Farming Private limited the

subsidiary companies of Ackruti City Limited had stakes in Dangi group entity Ivory

Consultants Private Limited. Ivory Consultants had received shares of Ackruti City Limited

in off market transfer from Mahipatray V Shah, one of the promoters of Ackruti City

Limited.

e. In Ivory Consultants P Limited, an entity viz. Zeus Infrastructure Private Limited has a

stake. However in Zeus Infrastructure Private Limited. Akruti City and DLF Commercial

Developers Limited hold 100,000 shares each.

f. In Ivory Consultants P Limited an entity viz. Chaitra Realty Limited has a stake. As per the

DRHP, a subsidiary company of Ackruti City Limited viz. Vishal Nirman (India) Private

Limited had has entered into a memorandum of understanding (“MoU”) dated May 8,

2006 with Chaitra Realty Limited (“Chaitra”) and the shareholders of Chaitra, holding

approximately 77% of the equity shares of Chaitra (the “Sellers”). In terms of this MoU,

Vishal Nirman will acquire approximately 77% of the equity shares of Chaitra from the

Sellers and make an offer to acquire the remaining equity shares of Chaitra from the other

shareholders of Chaitra, in order to acquire control over Chaitra, and consequently over a

plot of land owned by Chaitra.

g. It may be noted that Pankaj Rathod and Pradeep Rathod are shareholders in Pacific

Corporate Services Limited and are directors in Cello Pens & Cello Pens and Stationary

Pvt Ltd. to whom the Promoters of Ackruti City Limited have pledged their shares.

h. Welspun trading the promoter of Welspun Gujarat had stake in Dangi group entities viz.

Amit Business Limited, Pacific Corporate Services Limited, Ivory Consultants Private

Limited.

i. Mr. Kapil Kumar MD of Brushman India Limited having address as D-6/2, Vasant Vihar,

New Delhi -110005 was allotted 400,000 equity shares in Splendor Vanijya Pvt. Ltd on

31.12.2008. It may be noted that Splendor Vanijya and Dangi Group entities are being

connected to each other by way of crossholdings as well as off-market transfers. Delight

tie-up Private Limited had stake in Amit Business Limited while Splendor had made off-

market transfer to Amit Business Limited. Amit Business Limited had stake in Splendor

Vanijya Pvt. Ltd. While Splendor Vanijya Pvt. Ltd had stake in Delight tie-up Private

Limited.

j. The Dangi group entities viz. Topcity Mercantile Co Pvt Ltd and Supersun Trading Co Pvt

Ltd had received the shares under the promoter’s quota of RPG Transmission Limited.

k. In other scrips viz. Arrow Textiles Limited, Brabourne Enterprises Limited, Delta Corp

Limited, Micro Technologies (India) Limited, Resurgere Mines & Minerals India Ltd., the

Dangi Group entities had received shares in a preferential allotment or pre-IPO allotment

which carried a lock-in period.

of 56

Thus, Based on above there appears to be relationship between promoter

entities of various companies enlisted above with Dangi group and Ashika group

entities. Moreover the relationship between the Dangi Group and Ashika Group is

much more than the client broker relationship as evident from the cross-holdings.

Details of Off-market Transfers for some Dangi Group Entities & their counter parties based on their CDSL Accounts

Entity Scrip Date Cr/Dr Qty Counter Party BO Counter Party Client

Ashika Global Finance 9/24/2009 Dr 56120 1203450000000112 Kanchan Devi Jain

Ashika Global Finance 9/24/2009 Dr 42200 1203450000000034 Puran Mal Jain

Ashika Global Finance 3/29/2008 Dr 98320 1203450000075998 Rachna Vinimay Pvt. Ltd.

Ashika Global Finance 9/24/2009 Cr 56120 1203450000123249 Withal Commercial Private Ltd *

Ashika Global Finance 9/24/2009 Cr 42200 1203450000123249 Withal Commercial Private Ltd *

Ashika Global Securities 5/28/2009 Dr 200000 1203450000000021 Daulat Jain

Ashika Global Securities 3/26/2008 Dr 200000 1203450000075998 Rachna Vinimay Pvt. Ltd.

Ashika Global Securities 8/28/2008 Cr 200000 1203450000123249 Withal Commercial Private Ltd *

Brahmanand Himghar 12/4/2006 Dr 30000 IN301372 10172217 Srijan Vyapar Pvt. Ltd.

Brahmanand Himghar 1/22/2007 Dr 7750 IN301740 10041726 Titanic Network Marketing Private

Grand Foundry Ltd 5/25/2007 Cr 40 1203450000002352 Ashika Global Finance Private Ltd

Gujarat Lease Fincng 5/25/2007 Cr 62 1203450000002352 Ashika Global Finance Private Ltd

Himachal Fut Comm 12/19/2006 Dr 654354 1203450000001521 Micro Management Ltd. *

Hind Door Oli `2 3/25/2008 Cr 30000 1203450000052482 Swastik Securities & Finance Ltd

Khaitan Electricals 12/19/2006 Dr 550 1203450000001521 Micro Management Ltd. *

Nath Pulp & Paper Eq 5/25/2007 Cr 50 1203450000002352 Ashika Global Finance Private Ltd

Pyramid Saimira 12/30/2006 Dr 100000 1203450000086482 Cynosure Tie-Up Private Ltd. *

Pyramid Saimira 12/28/2006 Dr 100000 1203450000000021 Daulat Jain

Pyramid Saimira 12/28/2006 Cr 100000 1203450000000021 Daulat Jain

Pyramid Saimira 12/29/2006 Dr 100000 1203450000086497 Splendor Vanijya Private Ltd *

Pyramid Saimira 12/30/2006 Cr 100000 1203450000086497 Splendor Vanijya Private Ltd *

Rama News `10 6/30/2007 Cr 125 1203450000000361 Ashika Credit Capital Ltd. *

Subhkam Capital 9/17/2008 Cr 36000 1203450000457752 Ansu Cmmercial Pvt. Ltd.

Subhkam Capital 1/1/2009 Dr 36000 1203450000001591 Lotus Capital Financial Services L

Amit Business

Ltd

Tata Teleservices 12/22/2006 Dr 1140000 1203450000001521 Micro Management Ltd. *

Bombay Stock Exch 8/2/2007 Cr 439 IN300095 10030014 Iit Investrust Ltd

Bombay Stock Exch 10/11/2007 Dr 439 IN302871 20111444 Pacific Corporate Services Ltd @

G-Tech Info Eq Re 1/ 12/10/2007 Cr 133000 1202200000013297 Aparna Shriniwas Bhatt

Joonktollee Tea Co 8/3/2007 Cr 5501 1203460000002157 Industrial Investment Trust Ltd.

Joonktollee Tea Co 10/17/2007 Dr 5501 IN302871 20111444 Pacific Corporate Services Ltd @

Joonktollee Tea Co 3/29/2008 Cr 5501 IN302871 20111444 Pacific Corporate Services Ltd @

Ashoka Fin

Stock Ltd

Navinon Ltd [Idi] 8/3/2007 Cr 29355 1203460000002157 Industrial Investment Trust Ltd.

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Navinon Ltd [Idi] 10/17/2007 Dr 29355 IN302871 20111444 Pacific Corporate Services Ltd @

Navinon Ltd [Idi] 3/29/2008 Cr 29355 IN302871 20111444 Pacific Corporate Services Ltd @

Pilani Investment 8/3/2007 Cr 100 1203460000002157 Industrial Investment Trust Ltd.

Pilani Investment 10/17/2007 Dr 100 IN302871 20111444 Pacific Corporate Services Ltd @

Sat Ind ` 2 1/4/2007 Dr 150000 IN300644 10099643 Space Age Polymers Pvt Ltd



Sat Ind ` 2 6/19/2006 Cr 223799 IN300062 10017271 Watermark Systems (India) Pvt Lt

Southern Wind 7/16/2007 Cr 694440 1203460000002157 Industrial Investment Trust Ltd.

Southern Wind 10/11/2007 Dr 694440 IN302871 20111444 Pacific Corporate Services Ltd @

Ackruti City 3/13/2009 Dr 100000 IN302269 11627690 Madhukar Sheth

Ackruti City 4/1/2009 Dr 90000 IN302269 11627690 Madhukar Sheth

Ackruti City 3/24/2009 Dr 110000 IN300159 10190227 Pradeep G Rathod !

Ackruti City 3/24/2009 Dr 150000 1202890000357011 Riddisiddhi Bullions Ltd.

Ackruti City 3/5/2009 Dr 90000 1203460000032663 Systematix Fincorp India Ltd


Ackruti City 3/12/2009 Cr 115000 1203460000032663 Systematix Fincorp India Ltd



Ackruti City 3/31/2009 Cr 87017 1203460000032663 Systematix Fincorp India Ltd

Ackruti City 1/19/2009 Cr 3600 1203230000012061 Vijay Hirilal Shah (Huf)

Ackruti City 1/21/2009 Dr 3600 1203230000012061 Vijay Hirilal Shah (Huf)

Century Aluminium 1/10/2008 Dr 200000 IN302855 10000423 Deepjyoti Agencies Private Ltd

Century Aluminium 1/17/2008 Dr 35000 IN300095 10671346 Kutir Udyog Kendra (I) Ltd

Century Aluminium 1/17/2008 Dr 115357 IN300095 11208058 Madhab Prasad Jhunjhunwala

Century Aluminium 1/17/2008 Dr 25600 IN300095 11208067 Madhab Prasad Jhunjhunwala

Century Aluminium 1/17/2008 Dr 80100 IN300095 11208033 Moulshree Jhunjhunwala

Century Aluminium 1/10/2008 Dr 30000 IN300095 11208076 Satyam Mohatta

Century Aluminium 1/17/2008 Dr 371700 IN300095 11208040 Sita Devi Jhunjhunwala

Century Aluminium 1/10/2008 Dr 200000 IN300095 11208025 Vijay Kumar Mohatta

Century Aluminium 1/17/2008 Dr 195000 IN300095 11208025 Vijay Kumar Mohatta

Century Aluminium 1/17/2008 Dr 25600 IN300095 11208123 Vikram Jhunjhunwala

Century Aluminium 1/17/2008 Dr 7250 IN300095 11210755 Vikram Jhunjhunwala

Century Aluminium 1/17/2008 Dr 186000 IN300837 10018203 Vintage Capital Markets Ltd.

Gokul Refoils 10/3/2008 Dr 81000 IN301803 10026582 Rathi Global Finance Ltd

Gokul Refoils 11/17/2008 Cr 81000 IN301803 10026582 Rathi Global Finance Ltd

Gokul Refoils 6/28/2008 Dr 650000 IN301803 10022500 Rathi Global Finance Pvt Ltd

Gokul Refoils 8/16/2008 Cr 650000 IN301803 10022500 Rathi Global Finance Pvt Ltd

Resurgere Mines 9/10/2008 Cr 36000 1203450000001441 Ashika Stock Broking Ltd. *

Resurgere Mines 9/8/2008 Cr 36000 1203450000097251 Jrk Consultants Private Ltd

Pacific

Corporate

Services Ltd

Resurgere Mines 9/11/2008 Dr 36000 1203450000097251 Jrk Consultants Private Ltd

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Vaibhav Gems 7/14/2006 Cr 28200 1202200000013020 Basant Marketing Pvt. Ltd.

Vaibhav Gems 10/16/2006 Dr 28200 1202200000013020 Basant Marketing Pvt. Ltd.

Vaibhav Gems 5/23/2006 Dr 100000 1203460000002157 Industrial Investment Trust Ltd.

Vaibhav Gems 8/14/2006 Cr 100000 IN300484 10343460 Industrial Investment Trust Ltd.

Vaibhav Gems 9/26/2006 Cr 75000 1601010000064929 Narendrapal Gupta

Welspun Gujarat ` 5 11/13/2009 Dr 300000 1302860000091319 Gold Flag Trading Co. Pvt Ltd. @

@ Dangi Group * Ashika Group ! Ackruti Group

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Annexure C

The broking firm Sanchay Finvest Limited wherein Mr. Sanjay Dangi is one of the

promoters is a listed company at BSE. The details of the action taken by

SEBI/Exchanges against Sanchay Fincom Limited and Sanchay Finvest Limited

(erstwhile D.S. Sancheti Securities & Financial Services Ltd) during period 2008-

2010 are as under:

Entity Regulatory Charges Regulatory Action(S)

Action taken by SEBI

• Acted In Concert With Another Client To Create Artificial Market/Price Rise

Through Matching/Synchronised Deals In The Scrip Of Havells India Ltd.

• Did Not Exercise Due Care And Diligence

Imposed Penalty (Date Of Order: 26-Nov-

2008)

• Did Not Exercise Due Skill, Care And Diligence While Dealing In Scrip Of

Adani Exports Ltd.

• Indulged In Creation Of Artificial Market And Price Manipulation Through

Synchronized/Reversal/ Fictitious Transactions In Scrip Of Adani Exports

Ltd.

Imposed Penalty (Date Of Order: 02-Jun-

2009)


Circular/Reversal Of Trade In Scrip Of Gravity India Ltd.

• Failed In Maintaining Integrity, Indulged In Manipulative Activities And Not

Complied With Statutory Requirements Violating Regulation 7 Read With

Clauses A(1) To A(5) Of Code Of Conduct Under Schedule Ii Of SEBI

(Stock Brokers And Sub Brokers) Regulations,1992 In Matter Of Gravity

India Ltd.

Imposed Penalty (Date Of Order: 24-Aug-

2009)


Circular/Reversal Of Trades In Scrip Of Todays Writing Products Ltd.

• Failed In Maintaining Integrity, Not Exercised Due Skill And Care, Indulged

In Manipulative Activities And Not Complied With Statutory Requirements

Violating Regulation 7 Read With Clauses A(1) To A(5) Of Code Of

Conduct Under Schedule Ii Of SEBI (Stock Brokers And Sub Brokers)

Regulations,1992 In Matter Of Todays Writing Products Ltd.


2009)


Synchronized/Circular Transactions In Scrip Of K Sera Sera Production

Ltd.

• Failed In Maintaining Integrity And Indulged In Manipulative Activities

Violating Regulation 7 Read With Clauses A(1) And A(3) Of Code Of


Regulations,1992 In Matter Of K Sera Sera Productions Ltd.

Imposed Penalty (Date Of Order: 09-Sep-

2009)

Sanchay

Fincom

Ltd.


Synchronized Transactions In Scrip Of Eltrol Ltd.

• Failed In Maintaining Integrity, Did Not Exercise Due Skill And

Care,Indulged In Manipulative Activities And Not Complied With Statutory

Requirements Violating Regulation 7 Read With Clauses A(1) To A(5) Of

Code Of Conduct Under Schedule Ii Of SEBI (Stock Brokers And Sub

Brokers) Regulations,1992 In Matter Of Eltrol Ltd.

Imposed Penalty (Date Of Order: 18-Nov-

2009)

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Entity Regulatory Charges Regulatory Action(S)

• Indulged In Creation Of Artificial Volume And Price Manipulation Through

Synchronized, Circular And Reversal Of Trades In Scrip Of Krbl Ltd.

• Failed In Maintaining Integrity, Did Not Exercise Due Skill And Care,

Indulged In Manipulative Activities And Not Complied With Statutory

Requirements Violating Regulation 7 Read With Clauses A(1) To A(5) Of

Code Of Conduct Under Schedule Ii Of SEBI (Stock Brokers And Sub

Brokers) Regulations,1992 In Matter Of Krbl Ltd.

Imposed Penalty (Date Of Order: 26-Feb-

2010)

• Did Not Exercise Due Skill, Care And Diligence While Dealing In Scrip Of

Adani Exports Ltd.


Synchronized/Reversal/ Fictitious Transactions In Scrip Of Adani Exports

Ltd.

Imposed Penalty (Date Of Order: 02-Jun-

2009)


Synchronized/Reversal Of Trades In Scrip Of Maharashtra Seamless Ltd.





Regulations,1992 In Matter Of Maharashtra Seamless Ltd.


2009)


Circular/Reversal Of Trades In Scrip Of Todays Writing Products Ltd.





Regulations,1992 In Matter Of Todays Writing Products Ltd.


2009)

Sanchay

Finvest

Ltd.

• Indulged In Creation Of Artificial Volume Through Structured,

Synchronized, Circular And Reversal Of Trades Transactions In Scrips Of

Aarti Drugs Ltd. And Havells India Ltd.

Imposed Penalty (Date Of Order: 15-Feb-

2010)

Action Initiated by Exchanges

Sanchay

Finvest

Ltd.

• Not Complied With The Listing Agreement

• Failed To Submit Corporate Governance Report For The Quarter Ended

31-March-2010

• Companies Not Traceable At The Last Known Address

• Failed To Submit Shareholding Pattern Under Provisions Of Clause 35

For The Quarter Ended 31-March-2010

• Companies Suspended For Trading

• Put Up On BSE Website For Public

Notice

• Put Up On BSE Website Under

"Unknown Category"

WTM/KMA/ISD/320/12/ 2010 SECURITIES AND EXCHANGE BOARD OF ... · 1. The Securities and Exchange...

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