BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER

Transcription

1 WTM/RKA/ISD/51/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 WITH REGARD TO AVENTIS BIOFEEDS PRIVATE LTD. AND OTHERS - IN THE MATTER OF DEALING IN THE SCRIP OF RUCHI SOYA INDUSTRIES LIMITED. Appearances: For Noticees: 1. Mr. Vinay Chauhan, Advocate for Sr. No. Name PAN 1. Shreyans Credit and Capital Private Limited (Shreyans) AAMCS7878M 2. Betul Minerals and Constructions Private Limited (Betul AADCB7050M Minerals) 3. Aventis Biofeeds Private Limited (Aventis) AAECA0863E 4. Betul Oils & Feeds Private Limited (Betul Oils) AACCB8638E 5. Sunmate Trade Private Limited (Sunmate) AAOCS9796A 6. Moebius Credit and Capital Private Limited (Moebius) AAHCM4176D 2. Mr. Rajesh Khandelwal, Advocate for Sr. No. Name PAN i. Navinya Multitrade Private Limited (Navinya) AACCN9662J ii. Uni24 Techno Solutions Private Limited (Uni24) AABCU2171N iii. Vision Millennium Exports Private Limited (Vision) AAACV6970B For SEBI: Mr. Sujit Prasad, Chief General Manager, Mr. Santosh Kumar Shukla, Joint Legal Adviser, Mr. Rajesh Kumar Dangeti, Deputy General Manager, Mr. Durgesh Kumar Thakur, Assistant Legal Adviser, Mr. Salmanu K K, Assistant General Manager, Mr. Harshal Vishnu Pund, Assistant Manager 1. Vide an ad interim ex-parte order dated February 15, 2013 (hereinafter referred to as the 'interim order') SEBI inter alia restrained the above mentioned nine entities (hereinafter referred to as the 'noticees' or by their respective names) from accessing the securities market and Page 1 of 9

2 further prohibited them from buying, selling or dealing in securities, in any manner whatsoever, till further directions. 2. The interim order was passed on the basis of prima facie findings that the said noticees were connected with each other and they had manipulated the closing price of the scrip of Ruchi Soya Industries Limited (hereinafter referred to as 'the scrip') on September 27, 2012 (hereinafter referred to as the 'trading day' or the 'expiry day') in the cash segment, which was the settlement price for derivative segment, to gain from their long positions in futures of the scrip. 3. Pursuant to the interim order, the noticees sought inspection of documents, namely, transaction log, Entity Master Report generated by SEBI system, Bank Statements. On March 21 and 22, 2013, SEBI granted them inspection of the documents relied upon in the interim order. Copies of the desired documents were also provided to them. Thereafter, all those entities filed their written representations and also availed opportunity of personal hearing. Their submissions are inter alia as follows: (a). That no materials in support of the allegations have been made available to them. (b). They are not connected to any of the other entities as stated in Para 5 of the interim order. The allegation of connection on the basis of common office address/common directors/directors' common address is denied by all the entities. (c). As regards the common addresses as the basis for determining the connection, Betul Oils, Vision, Aventis and Navinya have submitted as under: (i) As per Betul Oils, its registered office address is at '117, Mittal Chambers, Nariman Point, Mumbai' and not 'Daga House, Kothi Bazar, Betul, , Madhya Pradesh' or '810, Maker Chamber V, Nariman Point, Mumbai' as alleged in the interim order. (ii) As per Vision, though it was occupying the premises at '810, Maker Chamber V, Nariman Point, Mumbai' long time back; its present registered office address is at 'J.N. 1, 65-B-5, Sector - 9, Vashi, Navi Mumbai' and not '117, Mittal Chambers, Nariman Point, Mumbai' or '810, Maker Chamber V, Nariman Point, Mumbai' as alleged in the interim order. (iii) As per Aventis, though it was occupying the premises at '810, Maker Chamber V, Nariman Point, Mumbai' three years back; its present registered office address is '101, 1st Floor, Ashok Tower, Tower -C, Dr. S.S. Rao Road, Parel, Mumbai' and not '810, Maker Chamber V, Nariman Point, Mumbai' as alleged in the interim order. Page 2 of 9

3 (iv) As per Navinya, its registered office address is ' , 2nd Floor, Ashok Tower, Tower -C, Dr. S.S. Rao Road, Parel' and not '117, Mittal Chambers, Nariman Point, Mumbai' as alleged in the interim order. In support of their above claim, these entities have also submitted copies of the Form 18 submitted by them to the Registrar of Companies (RoC) with regard to change in their respective addresses. (d). As regards the common address of few directors of Sunmate, Navinya, Moebius and Uni24, for determining the connection amongst them as alleged in the interim order, Sunmate, Navinya, Moebius and Uni24 have denied the same and have submitted that on the trading day, Ms. Kanchan Daga was not on the board of Sunmate and Ms. Deepali Daga was not on the board of Navinya. (e). Shreyans has submitted that with effect from March 14, 2011, Mr. Nilaykumar Daga has ceased to be its director and on the trading day he was not its director. (f). Vision, Aventis, Sunmate, Shreyans, Navinya and Betul Oils have denied that the phone number ' ' belongs to them. According to them, said phone number may be of the introducer. Betul Minerals has admitted that the said phone number belongs to it. (g). The said noticees have denied any role in the trades by each other. As per these noticees, the fund transfers amongst them, as alleged in Para 6 of the interim order, were in the ordinary course of business and no adverse inference of relationship can be drawn on this basis. (h). Betul Oils and Vision have further contended that Betul Oils had received funds from Vision to the extent of 200 lac only as against 913 lac as incorrectly stated in the interim order. Betul Oils and Aventis have contended that the allegation of transfer of 5500 lac from Betul Oils to Aventis is factually incorrect. (i). All the said noticees have contended that the volume in the scrip on the trading day appreciated in the backdrop of the fact that the same was the expiry day of the futures contract and post that day the scrip was going to be moved out of F&O Segment at NSE. Hence, the trading volume on that day is not comparable with that of a normal trading day. (j). Aventis, Sunmate and Shreyans have submitted that they were keen on holding their position in the scrip and rollover in futures was not possible as the scrip was getting Page 3 of 9

4 removed from the derivatives segment. Therefore, they had no option but to buy the shares and to quote a higher price so as to attract the sellers. They never intend to indulge in manipulative trading and they only wanted to avoid loss that could occur to them as the trading day was the last day for futures contracts in this scrip. They have further submitted that it is undisputed fact that they had taken delivery of the shares bought by them on the trading day and are still holding them. This is against the purported theory of indulging in price rigging and making unlawful gains as no one will manipulate the price of shares to hold shares whose price is manipulated. (k). Moebius has submitted that it was not holding any position in the futures of Ruchi Soya as on the trading day. Vision has also stated that it was also not holding any long position in the futures of this scrip rather it was holding short position of 3.92 lac shares in the futures of this scrip as on the trading day. Therefore, there is no question of inflating the settlement price of this scrip in order to gain on long positions in futures as alleged in the interim order. (l). While Betul Oils and Betul Minerals have admitted that they were holding long positions in futures, they have contended that in the absence of any trading by them in the cash market, the issue of manipulating the settlement price on the trading day does not arise. (m). Aventis, Moebius, Shreyans and Sunmate submitted that a small portion of trades (only for lac shares) have matched amongst the said noticees and the remaining shares were from/to the market. Further, there is no allegation of synchronization as the timing of buy orders and sell orders are far from each other. Had their intention been to rig the price, they would have bought the shares in one shot in a single lot. Aventis has further submitted that no purpose was served by their buying at 88, since even if they would have bought the shares in the cash segment in the last half an hour at 71 or 73 or 80 or even at 85, the net gain or loss of the noticees would have been around the same, if the noticees had bought the shares at 73, then the closing price would have been around 73. (n). The noticees have denied that they have made profit as alleged since the average purchase price for lac shares, as per their calculation, was 79 (Approx) per share, while closing price for futures was Aventis, Moebius, Shreyans and Sunmate have submitted that they have in fact incurred losses in the overall trade in the scrip on the trading day as their average buy price in cash segment was higher than the closing price of the scrip. Page 4 of 9

5 (o). Shreyans has submitted that it did not place any sell order rather it placed only buy orders. It has further submitted that as its earlier buy orders for 63 per share for 6 lac shares did not get executed, it decided to revise the bid to 88 per share. (p). Shreyans and Sunmate have submitted that they had modified the buy orders in the last 30 seconds when the last traded price (LTP) was around 84 and not at 72 as alleged and by the time they had modified the orders, the scrip had already touched a high of 88. (q). Shreyans and Sunmate have further submitted that in the past, the price of the scrip had touched an all time high of Therefore, the rising of price to 88 on the trading day was perfectly in consonance with the price movement in the scrip in the past. (r). The noticees have denied the allegation that their trades had a direct impact on the closing price of the scrip on the trading day. They have pointed out that even if all the said entities are clubbed together, because of their matched trades, the impact on the closing price would be only 0.93 and not to the extent of 8.15 as alleged in the interim order. Shreyans, Moebius, Sunmate, Aventis, Uni24, Vision and Navinya have contended that the respective impact on the closing price on the trading day because of their matched trades with other alleged connected noticees was only 0.04, 0.18, 0.09, 0.56, 0.26, 0.30 and (s). Vision, Navinya and Uni24 have submitted that the allegation that by placing huge limit sell orders at 88, they had enabled the matching of the limit buy orders of Aventis and Moebius at 88 is preposterous. They had placed only sell orders much prior to the placement of buy orders by the other entities. Vision has also stated that there is no anomaly in it placing sell order at 88 when the LTP was around 71 since as a seller it would always want a higher price. Uni24 and Navinya have submitted that their idea was merely to make profit from trading in the ordinary course of business. They were sellers in the last half an hour of trading though they had long position in futures of Ruchi Soya. (t). There was no mala fide in placing both the buy orders and sell orders which were lying parked in the system and were not visible to any trader in the market. There was no way that they could have known the pending orders and the price at which sellers were willing to sell except for the best 5 sell orders. Page 5 of 9

6 (u). They have not acted in orchestrated manner as alleged in the interim order. Their trading was not abnormal or was part of a scheme or device that was employed to manipulate the price of the scrip. In so far as their trading is concerned, the same was bona fide and in the ordinary course of business and they have genuinely traded in the scrip. (v). The noticees have denied the allegation that they have indulged in marking the close or have executed any artificial and manipulative trades. (w). They have not violated the provisions of section 12A of the Securities and Exchange Board of India Act, 1992 (the SEBI Act) and regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 (the PFUTP Regulations). 4. I have carefully considered the allegations/ charges against the noticees, their replies and relevant material available on record. In the instant case, it is observed that the directions issued vide ad interim ex-parte order against the noticees were interim in nature and were issued on the basis of prima facie findings. I note that the investigation in the matter is still in progress. Therefore, the limited issue to be considered at this stage is pending completion of investigation whether the ad-interim ex-parte directions issued against the noticees vide the interim order need to be confirmed, vacated or modified in any manner. 5. All the noticees have contended that no material in support of the allegations have been provided to them and thus the principles of natural justice have been violated in these proceedings. I note that the relevant material/documents relied upon in these proceedings have been inspected by the said noticees on March 21 and 22, 2013, and on their request copies of Transaction log, Entity Master Report generated by SEBI system, Bank Statements were also provided to them. I, therefore, do not agree with their contention in this regard. 6. I note that the noticees have denied the connection amongst them and have disputed some of the factors like common addresses, common addresses of the directors, common directors, common telephone numbers and inter se fund transfers for determining such connection as discussed in Para 5 and 6 of the interim order. In view of the submissions of the noticees and material relied upon by them, I find that the connection amongst all the noticees needs to be investigated further before conclusive inference can be drawn in this regard. 7. Another factor for determining connection amongst the noticees is the fund transfer amongst them though there is no allegation in the interim order that those funds were transferred for the purpose of impugned transactions. In this regard, all the noticees have Page 6 of 9

7 admitted that there has been transfer of funds from Vision to them and have claimed that the funds transfer was in the ordinary course of business. Similarly, Betul Minerals, Moebius, Uni24, Shreyans and Aventis have admitted the funds transfer by them to Vision and have claimed that the same was in the ordinary course of business. Betul Oils and Vision have contended that Betul Oils had received only 200 lac from Vision and not 913 lac as observed in the interim order. Aventis and Betul Oils have denied fund transfer between them. In this regard, it is observed that the fund transfer to the extent of 5500 lac was between Aventis and Betul Oil Ltd. (and not Betul Oils and Feeds Pvt. Ltd. which is referred to as Betul Oils in this case). 8. The facts and circumstances that are basis of the interim order and also admitted or not disputed by the noticees are summarized as under:- (a). September 27, 2012 was the expiry day of the futures contracts in the scrip of Ruchi Soya and the scrip was going to be moved out of F&O Segment at NSE thereafter. On this day, all the noticees except Moebius and Vision had total long position in futures of lac shares of Ruchi Soya. While Moebius did not have any position in futures of Ruchi Soya, Visions had short position for 3.92 lac shares in the said futures. (b). On the expiry day, Aventis, Betul Oils, Moebius, Navinya, Shreyans, Sunmate and Uni24 in total acquired position of lac shares in cash segment. While Betul Minerals had not traded in the shares of Ruchi Soya on the expiry day, Vision had bought 3.98 lac shares and sold 4.2 lac shares (net sale of shares). (c). During the last 2 minutes of trade on the trading day, Aventis, Moebius, Sunmate and Shreyans in all bought 62 lac shares. Betul Minerals did not trade in the shares of Ruchi Soya on the expiry day though Betul Oils had bought 1600 shares of Ruchi Soya earlier during the day and that trade is not in question in the interim order. (d). On the expiry day the trading in the 62 lac shares of Ruchi Soya as stated above happened in the following manner: (i) Between 14:27:30 to 14:59:30, Aventis, Moebius, Sunmate and Shreyans had placed buy orders for 63 lac shares of Ruchi Soya at limit price of 63 to 65 per share, when the market price was around 71 per share. Subsequently, in the last 2 minutes of the expiry day these four noticees modified their buy orders with regard to quantity and price both and placed limit buy orders to buy 62 lac shares of Ruchi Soya at a price of 88 and so as the buy upto this price. (ii) Before these four entities started placing such buy orders, two of them, i.e., Aventis and Moebius had placed sell orders between 14:24:15 and 14:34:32 for 30 Page 7 of 9

8 lac shares each with limit price of per share and was significantly higher than the prevailing market price of around 71 per share and these sell orders remained pending in the system till the end of the trading day. (iii) Vision, Navinya and Uni24 had placed sell orders between 14:41:50 and 14:48:10 for 15 lac shares each (which was modified to 7 lac shares each in the last three minutes of the trading day) with limit price of 88. (e). Aventis, Moebius, Sunmate and Shreyans were able to buy all 62 lac shares of Ruchi Soya, for which they had placed buy orders, in the last two minutes of the trading day at an average price of and out of these 62 lac shares, their buy orders for lac shares got matched with the sell orders of Vision, Navinya and Uni24 at the price of 88 per share. 9. It is important to note that September 27, 2012 was the expiry day of the futures contracts in the scrip of Ruchi Soya and the scrip was going to be moved out of F&O Segment at NSE thereafter. It is further noted that the noticees, except Moebius and Vision had total long position in the futures of lac shares of Ruchi Soya as on the trading day. It has been submitted by them that they were keen on holding their position in the scrip but roll-over in futures was not possible as the scrip was getting removed from the derivatives segment on the trading day. Therefore, they had no option but to buy the shares from the cash market quoting a higher limit price so that the required quantity could be bought. It has been claimed that they never intended to indulge in manipulative trading and they only wanted to avoid loss that could occur to them as the trading day was the last day for futures contracts. I note that the above arguments of the noticees cannot be rejected outright in view of the fact that the trading day was the last day of trading in the futures of Ruchi Soya and noticees were holding substantial position i.e., of lac shares in the futures I further note that there is no allegation that there were any premeditated synchronised trades. The matter needs detail investigation before any final finding is arrived at on the issue of alleged 'marking the close'. 10. Further, the noticees have denied that their trades had a direct impact on the closing price of the scrip and have contended that the impact on the closing price on account of their trades, even if all the entities are clubbed together, was much less than the alleged. Betul Oils and Betul Minerals have claimed that they did not make any profits on their long positions in the futures of the scrip. Some of the noticees have also claimed that they did not make any profit rather they booked losses in the impugned trades. These facts also require detailed investigation and no conclusive finding can be expressed at this stage. Page 8 of 9

9 11. I, further, note that in the instant case, the noticees have already undergone restraint of more than nine months since the interim order. In my view, the balance of convenience at this stage is in favour of the noticees and the facts and circumstances of the case do not suggest any emergent or urgent reasons to continue with the directions issued against the noticees vide the interim order. I am, therefore, of the considered view that the directions issued against the noticees vide the interim order need not continue during the pendency of the investigation in the matter. 12. I, therefore, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11(1), 11(4) and 11B thereof, hereby revoke the directions issued vide the ad-interim ex-parte order dated February 15, 2013 in the matter of dealing in the scrip of Ruchi Soya Industries Limited against the said noticees mentioned in order. It is, however, made clear that this order is without prejudice to any enforcement action that SEBI may deem necessary against the aforesaid noticees in the matter, on completion of the investigation. Date: December 6 th, 2013 Place: Mumbai RAJEEV KUMAR AGARWAL WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Page 9 of 9