wtm/rka/ivd/id-08/72-95/2014 before the securities and … · the price of scrip had increased up...

Order in the matter of Vital Communications Limited of 47

WTM/RKA/IVD/ID-08/72-95/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

UNDER SECTION 11 AND SECTION 11B OF THE SECURITIES AND EXCHANGE

BOARD OF INDIA ACT, 1992 READ WITH REGULATION 11 OF THE SECURITIES

AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND

UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET)

REGULATIONS, 2003 AND REGULATION 44 OF THE SECURITIES AND

EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND

TAKEOVERS) REGULATIONS, 1997.

In respect of:

Sl. No. Name of the entities (Noticees) PAN Order Number

1 Vital Communications Ltd. (VCL) AAACV2016L 72/2014

2 Mr. Vijay Jhindal (Mr. Vijay Jhindal) AADPJ9438J 73/2014 3 Ms. Shubha Jhindal (Ms. Shubha Jhindal) AAGPJ0051N 74/2014 4 Mr. Vinay Talwar (Mr. Vinay Talwar) AAAPT0316L 75/2014

5 Master Finlease P. Ltd. (MFL) AAACM6050D 76/2014 6 Mr. J. P. Madaan (Mr. Madaan) AIAPM8977E 77/2014 7 Mr. R. K. Garg (Mr. R. K. Garg) AAAPG1594P 78/2014

8 CBS System Ltd. (CBS System) Not available 79/2014

9 Anupama Communications Pvt. Ltd. (Anupama) AACCA4565H 80/2014

10 Brut Finance (India) Pvt. Ltd. (Brut Finance) AABCB9386Q 81/2014

11 Chankya Apparels Pvt. Ltd. (Chanakya Apparels) AAACC0866H 82/2014 12 Chankya Overseas Pvt. Ltd. (Chankya Overseas) AAACC0868K 83/2014

13 Cosmo Corporate Services Ltd. (Cosmo Corporate) AAACC3529P 84/2014 14 Fashion Tech India Ltd. (Fashion Tech) AAACF0332R 85/2014

15 Flair Finance (India) Ltd. (Flair Finance) AAACF2044G 86/2014

16 Heritage Corporate Services Ltd. (Heritage Corporate) AAACH2120D 87/2014

17 Perfect Car Scanners Pvt. Ltd. (Perfect Car) AAACP7864J 88/2014

18 Rajat Stock Investments Pvt. Ltd. (Rajat Stock) AAACR4085K 89/2014

19 Troop Trac Chits Pvt. Ltd. (Troop Trac Chits) AAACT0601P 90/2014

20 Troop Trac Exports Pvt. Ltd. (Troop Trac Exports) AABCT6785F 91/2014

21 Troop Trac Electrodes Pvt. Ltd. (Troop Trac Electriodes) Not available 92/2014

22 Wisdom Publishing Pvt. Ltd. (Wisdom Publishing) AAACW0942L 93/2014

23 S. V. Stock Land (Stock Land) Not available 94/2014

24 Troop Trac Marketing Pvt. Ltd. (Troop Trac Marketing) AABCT6800D 95/2014


Appearances:

For the Noticees:

Sl. No. Name of the entities Authorised Representative

1 VCL Mr. Bhuwanesh Bansal

2 Mr. Vijay Jhindal Self

3 Ms. Shubha Jhindal Mr. Vijay Jhindal

4 Mr. Vinay Talwar None

5 MFL Mr. Vijay Jhindal

6 Mr. J. P. Madaan Self

7 Mr. R. K. Garg

None

8 CBS System

9 Anupama

10 Brut Finance

11 Chankya Apparels

12 Chankya Overseas

13 Cosmo Corporate

14 Fashion Tech

15 Flair Finance

16 Heritage Corporate

17 Perfect Car

18 Rajat Stock

19 Troop Trac Chits

20 Troop Trac Exports

21 Troop Trac Electrodes

22 Wisdom Publishing

23 Stock Land

24 Troop Trac Marketing

1. Vital Communications Ltd. (hereinafter referred to as ―VCL‖ or 'the company" ) was promoted

by Mr. Vinay Talwar in the year 1995. VCL came out with an initial public offering (IPO) of

20,00,000 equity shares of `10/- each at par in December 1995 and its shares were listed at

Delhi Stock Exchange (DSE) with effect from February 26, 1996.

2. During the period September-December 1999, sudden rise in price and volume of the scrip of

VCL was noticed. The price of scrip had increased up from `9/- on September 01, 1999 to

`144/- on February 10, 2000. SEBI initiated investigation into the price increase between the

period September 01, 1999 to February 10, 2000 (Investigation Period - I).

3. Investigation observed that VCL had convened an Extra-ordinary General Meeting (EGM) on

November 18, 1999 wherein it proposed to raise capital by way of preferential allotment of

72,00,000 equity shares of `10/- each at the premium of `2.50/- to finance its venture into the

internet related business. Accordingly, the allotment of 72,00,000 equity shares on the

preferential basis was made on December 14, 1999. Pursuant to the preferential allotment, the

shares of the company were listed at Bombay Stock Exchange (BSE) in May, 2000 and at


National Stock Exchange of India Limited (NSE) on March 7, 2001. During the period April-

May 2001, the price of scrip was observed to be very volatile. The price of scrip fell from

`33.15/- on April 02, 2001 to `18.40/- on April 30, 2001 and then it increased to `39.05/- on

May 18, 2001. Accordingly, SEBI initiated investigation into the price volatility between the

period March 28, 2001 to June 19, 2001 (Investigation Period - 2).

4. During the investigations SEBI examined the trading pattern, role of preferential allottees and

promoters and analysed the movement of funds. The investigations revealed that:

(1) Mr. Vijay Jhindal, Mr. Anup Das, Mr. Ashok Kumar Sharma, Mr. B. L. Bhawan , Mr.

Gurudas Sarkar, Mr. J. P. Madan and Mr. Vinay Talwar were the promoter-directors of

VCL during this period.

(2) VCL had convened an Extra-ordinary General Meeting (EGM) on November 18, 1999

wherein it proposed to raise capital by way of preferential allotment of 72,00,000 equity

shares of `10/- each at the premium of `2.50/- towards its venture into the internet

related business.

(3) On December 14, 1999, VCL made preferential allotment of 72,00,000 shares to fifteen

entities, namely, Anupama, Brut Finance, Chankya Apparels, Chanakya Overseas, Cosmo

Corporate, Fashion Tech, Flair Finance, Heritage Corporate, Perfect Car, Rajat Stock, Troop Trac

Chits, Troop Trac Exports, Troop Trac Electrodes, Wisdom Publishing and Troop Trac Marketing

(hereinafter collectively referred to as “the preferential allottees” or by their respective names).

The allottees were advised to pay the allotment money in cash within 45 days of allotment

(i.e., by January 28, 2000).

(4) VCL was to receive `9 Crore in cash from these preferential allottees. VCL has given

directly `30.5 Lacs and indirectly `1.68 Crore to the preferential allottees. In aggregate, VCL

has financed more than 20% of the preferential allotment by itself. In addition, it was also

observed that VCL has given more than `1 Crore to CBS System as advances during the

period which in turn transferred these funds to some of the preferential allottees.

(5) Prior to allotment of preferential issue VCL has transferred `58.75 lacs to Anupama

which in turn transferred `43.75 lacs to Chankya Apparels, Chanakya Overseas, Cosmo

Corporate, Heritage Corporate, Perfect Car, Rajat Stock, Troop Trac Chits, Troop Trac Electrodes and

Wisdom Publishing. This Fund was then used by these preferential allottees including Anupma

as application money.

(6) VCL had received `1.5 Crore as application money from the preferential allottees. Thus,

more than 30% of the application money was re-circulated by VCL for the preferential

allotment.

(7) After the allotment (December 6, 1999 to January 29, 2000), VCL transferred `2.1 Crore


to Anupma. Anupma transferred `1.2 Crore to several preferential allottees. This Fund was

then transferred by the preferential allottees including Anupma to VCL as call money.

(8) VCL has also transferred `6.5 Lacs to two preferential allottees, namely, Rajat Stock and

Cosmo Corporate on January 11, 2000.

(9) VCL informed DSE it had made a preferential allotment of 72 lacs equity shares of `10/-

each at a premium of `2.50/- amounting to `9 Cr. on December 14, 1999 to the 10

entities, namely, Anupama, Chankya Apparels, Cosmo Corporate, Fashion Tech, Flair Finance, Heritage

Corporate, Perfect Car, Rajat Stock, Troop Trac Electrodes and Wisdom Publishing. Further, these entities

were shown as suppliers to VCL though their area of enterprise varied from construction

to publishing to financing and had nothing to do with the business of VCL, i.e., software

development.

(10) On the other hand, vide its letter dated November 21, 2002, VCL informed SEBI that it

had made preferential allotment of equity shares to the following 15 entities on December

14, 1999.

Table No. 1- Preferential Allotment of Shares by VCL (as informed to SEBI)

Sl. no. Preferential Allottees Shares Allotted

1 Anupama 200000

2 Brut Finace 500000

3 Chankya Apparels 500000

4 Chankya Overseas 500000

5 Cosmo Corporate 500000

6 Fashion Tech 500000

7 Flair Finance 500000

8 Heritage Corporate 500000

9 Perfect Car 500000

10 Rajat Stock 500000

11 Troop Trac Chits 500000

12 Troop Trac Exports 500000

13 Troop Trac Electrodes 500000

14 Troop Trac Marketing 500000

15 Wisdom Publishing 500000

Total 7200000

(11) However, the details of the preferential allottees as enumerated in the copy of the minutes of

the meeting of the board of directors of VCL held on December 12, 1999 is as under:


Table No. 2- Preferential Allotment of Shares by VCL (as in the minutes of board meeting)

Sl. no. Name of the Allottees Shares allotted

1 Anupama 200000

2 Mr. Ghanshyam Das Gupta. 500000

3 Chankya Apparels 500000

4 Mr. Ravindra Kumar 500000

5 Cosmo Corporate 500000

6 Fashion Tech 500000

7 Flair Finance 500000

8 Heritage Corporate 500000

9 Perfect Car 500000

10 Rajat Stock 500000

11 Mr. Naresh Kumar 500000

12 Mr. Jyoti Prakash 500000

13 Troop Trac Electrodes 500000

14 Mr. Dharmender Kumar 500000

15 Wisdom Publishing 500000

Total 7200000

(12) Thus, in the copy of minutes of board meetings of VCL, name of five allottees were

different from the list provided by VCL to SEBI vide its letter dated November 21, 2002.

Therefore, VCL provided inconsistent and misleading information regarding the details

of preferential allottees to SEBI as well as exchanges.

(13) It was noted that preferential allotment was made by VCL as described in the follwong

table:

Table No. 3 - Preferential Allotment of Shares by VCL and consideration thereof

Sl. No. Name No. of shares allotted Amount received (in `)

1 Anupama 200000 2500000

2 Brut Finance 500000 6250000

3 Chankya Apparels 500000 6250000

4 Chankya Overseas 500000 6250000

5 Cosmo Corporate 500000 6250000

6 Fashion Tech 500000 6250000

7 Flair Finance 500000 6250000

8 Heritage Corporate 500000 6250000

9 Perfect Car 500000 6250000


10 Rajat Stock 500000 6250000

11 Troop Trac Chits 500000 6250000

12 Troop Trac Exports 500000 6250000

13 Troop Trac Electrodes 500000 6250000

14 Troop Trac Marketing 500000 6250000

15 Wisdom Publishing 500000 6250000

Total 72,00,000 9,00,00,000

(14) The said preferential allottees were connected to each other as well as connected to the

erstwhile promoters of VCL, i.e. Mr. Vinay Talwar and Mr. Vijay Jhindal. The basis of

connection amongst these entities is as under:

Table No. 4- Details of connection amongst the entities

Sl. No. Entity Basis of connection with other entities

1.

VCL a) Address of MFL and VCL was same, i.e. 606, Kailash Building, K G Marg,

New Delhi-110002;

b) VCL had banking transactions with MFL;

c) Prior to allotment of preferential shares VCL had transferred huge sum to

Anupama;

d) VCL had given advances to Anupama and CBS Systems;

e) VCL had banking transactions with Rajat Stock and Cosmo Corporate;

f)VCL had banking transactions with Chanakya Apparels, Troop Trac Chits

through Federal Bank.

2 Ms. Shubha

Jhindal

a) Was promoter/director of MFL and MFL was promoter of VCL;

b) Had banking transactions with MFL, Flair Finance, Troop Trac Chits.

3 Mr. Vinay Talwar a) Was the introducer in Bank of Rajasthan for Cosmo Corporate, Fashion Tech,

Heritage Corporate, Rajat Stock and Wisdom Publishing at the time of opening of

their bank accounts;

b) Date of opening the bank accounts of Cosmo Corporate, Fashion Tech, Heritage

Corporate, Rajat Stock, Wisdom Publishing and VCL was same, March 08, 1999.

4 Mr. Vijay Jhindal a)Was the promoter/director of MFL

b) MFL was promoter of VCL;

c) Had banking transactions with Flair Finance.

5 MFL a) Promoters/directors of MFL were Mr. Vijay Jhindal, Ms. Shubha Jhindal (wife

of Mr. Vijay Jhindal) and Ms. Angoori Devi (mother of Mr. Vijay Jhindal);


b) Address of MFL and VCL was same, i.e., 606, Kailash Building, K. G.

Marg, New Delhi-110002;

c) Banking transactions with Stock Land, Chanakya Overseas and Flair Finance;

d) Common phone number of Rajat Stock, Cosmo Corporate, Chanakya Apparels,

Troop Trac Marketing, Wisdom Publishing, Troop Trac Chits, Flair Finance, Perfect Car,

MFL, Anupama, Troop Trac Exports, Fashion Tech, Troop Trac Electrodes, Brut

Finance in the demat account opening form with the depository participants

Alankit Assignment and Abhipra Capital Services Ltd.

6 Mr. J.P. Madaan He was director of VCL from January 22, 2000 to June 30, 2007.

7 Mr. R. K. Garg He was director of VCL during April 2002 to July 2002.

8 CBS System

a) Mr. Vijay Jhindal was the authorized person to operate the bank account at

the Federal Bank;

b) Mr. Vijay Jhindal was named as the director of CBS System in the bank

account opening form of the Federal Bank.;

c) Received huge sum from VCL prior as well as post preferential allotment of

equity shares.

9 Anupama a) Mr. Vijay Jhindal was the authorized person to operate the bank account at

the Federal Bank;

b) Mr. Vijay Jhindal was named as the director of Anupama in the bank account

opening form of the Federal Bank;

c) Had banking transactions with Fashion Tech, Perfect Car, Troop Trac Chits,

Chanakya Apparels, Rajat Stock, Cosmo Corporate, Chanakya Overseas, VCL, Wisdom

Publishing, Troop Trac Electrodes, Heritage Corporate and Flair Finance;

d) Had received advances from VCL.

e) Common phone number of Rajat Stock, Cosmo Corporate, Chanakya Apparels,





10 Brut Finance a) Common phone number of Rajat Stock, Cosmo Corporate, Chanakya Apparels,




Alankit Assignment and Abhipra Capital Services Ltd.;

b) Mr. Pankaj Kumar is common director of Brut Finance, Troop Trac Marketing,

Perfect Car, Anupama, Troop Trac Exports, Troop Trac Electrodes;

c) Common address of Troop Trac Exports, Heritage Corporate and Mr. Atul

Kumar, Director of Brut Finance;

d) Had banking transactions with Flair Finance.


11 Chanakya

Apparels

a) Had banking transactions with Anupama and VCL;

b) Common phone number of Rajat Stock, Cosmo Corporate, Chanakya Apparels,





c) Mr. R. K. Mishra is the common director for Cosmo Corporate, Troop Trac

Chits, Flare Finance, Chanakya Apparel.

12 Chanakya Overseas a) Had banking transactions with Anupama, VCL, MFL;






c) Mr. Ram Singh is the common director in Rajat Stock, Troop Trac Exports,

Fashion Tech, Chanakya Apparels.

13 Cosmo Corporate a) Had banking transaction with Anupama.







Chits, Flair Finance, Chanakya Apparels.

14 Fashion Tech a) Had banking transactions with Anupama.






c) Mr. Ram Singh is the common director of Rajat Stock, Troop Trac Exports,

Fashion Tech, Chanakya Overseas.

15 Flair Finance a) Had banking transactions with MFL, Anupama, Mr. Vijay Jhindal, Ms. Shubha

Jhindal, Brut Finace.






c) Mr. R. K. Mishra is the common director of Cosmo Corporate, Troop Trac Chits,


Flair Finance, Chanakya Apparels.

16 Heritage Corporate a) Had Banking transaction with Anupama;






c) Common address of Troop Trac Exports, Heritage Corporate and Mr. Atul


17 Perfect Car a) Had banking transactions with MFL and Anupama.






c) Mr. Pankaj Kumar is the common director of Brut Finace, Troop Trac

Marketing, Perfect Car, Anupama, Troop Trac Exports, Troop Trac Electrodes.

18 Rajat Stock a) Had banking transaction with Anupama.






c) Mr. Ram Singh is the common director of Rajat Stock, Troop Trac Exports,


19 Troop Trac Chits a) Had banking transactions with VCL, promoters of VCL and other related

entities including Anupama.







Chits, Flair Finance, Chanakya Apparels.

20 Troop Trac

Exports

a) Common address of Troop Trac Exports, Heritage Corporate and Mr. Atul








c) Mr. Pankaj Kumar is the common director of Brut Finance, Troop Trac

Marketing, Perfect Car, Anupama, Troop Trac Exports, Troop Trac Electrodes.

d) Mr. Ram Singh is the common director of Rajat Stock, Troop Trac Exports,


21 Troop Trac

Electrodes

a) Had banking transaction with Anupama.






c) Mr. Pankaj Kumar is common director with Brut, Troop Trac Marketing, Perfect

Car, Anupama, Troop Trac Exports, Troop Trac Electrodes.

22 Wisdom Publishing a) Had banking transaction with Anupama.






23 Stock Land Received shares, sold shares and transferred funds to MFL.

24 Troop Trac

Marketing

a) Common address of Troop Trac Exports, Troop Trac Marketing, Heritage

Corporate and Mr. Atul Kumar, Director of Brut Finance;

b) Had banking transactions with MFL.

c) Common phone number of Rajat Stock, Cosmo Corporate, Chanakya Apparels,





d) Mr. Pankaj Kumar is the common director with Brut, Troop Trac Marketing,

Perfect Car, Anupama, Troop Trac Exports, Troop Trac Electrodes.

(15) From the bank statements of VCL and the preferential allottees for the period from June 01,

1999 to September 30, 2002, it was noticed that large number of funding transaction had

been undertaken by these entities among themselves and with VCL.

(16) VCL had transferred funds from its A/c No. 1400301043178 with Bank of Rajasthan,

Barakhambha Road, Delhi to CBS System and Anupama who in turn transferred funds to

the preferential allottees. The details of some of the fund transfers by VCL are given as

below:


Table No. 5- Fund transfers by VCL

Date Transferred to Cheque No. Amount (in `)

07/12/1999 CBS Systems 49977 6,00,000

09/12/1999 Anupama 49982 13,50,000

11/12/1999 Anupama 49983 10,00,000

14/12/1999 Anupama 49984 15,00,000

17/12/1999 Anupama 49981 18,00,000

17/12/1999 CBS Systems 49985 7,50,000

23/12/1999 Anupama 49987 10,00,000

28/12/1999 Anupama 49988 2,50,000

11/01/2000 Rajat Stock 65142 500000

11/01/2000 Cosmo Corporate 65126 150000

03/02/2000 Anupama 65174 1800000

25/02/2000 Anupama 71064 1500000

(17) The above bank account of VCL (A/c No. 1400301043178 with Bank of Rajasthan,

Barakhambha Road, Delhi) was opened on March 08, 1999. Mr. Vinay Talwar was the

Managing Director of VCL and also authorized person for operating the said account.

Mr. Vijay Jhindal was one of the Directors of VCL as stated in the said bank account.

(18) Another bank account of VCL (A/c No. CA347 with Federal Bank, Karol Bagh, New

Delhi) was opened on March 11, 1999 wherein Mr. Vijay Jhindal was authorized person as

well as director of VCL. From the transactions details in this account bank, it was

observed that large amount of money was transferred by VCL to CBS System and

Anupama as described in the following tables :

Table No. 6- Fund transfers by VCL to CBS System

Date

Cheque No. Amount (in `)

24/11/1999 143845 2,50,000

19/11/1999 143847 11,50,000

23/12/1999 143848 12,00,000

26/11/1999 143849 11,00,000

27/11/1999 143850 7,50,000

03/12/1999 143851 6,00,000

23/12/1999 460251 10,00,000

23/12/1999 460252 10,75,000

04/01/2000 460254 24,25,000

Table No. 7- Fund transfers by VCL to Anupama


Date Cheque No. Amount (in `)

08/12/1999 143852 9,50,000

16/12/1999 143855 4,50,000

11/12/1999 143856 10,75,000

18/12/1999 143858 12,00,000

18/01/2000 143859 2,50,000

11/01/2000 460253 20,00,000

05/01/2000 460261 16,60,000

14/01/2000 460263 18,00,000

21/01/2000 460266 1,00,000

21/01/2000 460270 16,00,000

21/01/2000 460271 5,50,000

29/01/2000 460273 18,00,000

25/01/2000 460274 65,00,000

25/01/2000 460275 1,25,000

02/02/2000 460277 1,10,000

01/05/2000 460280 45,00,000

26/04/2000 460282 45,00,000

06/05/2000 460284 40,00,000

15/05/2000 460285 4,00,000

22/05/2000 460287 52,50,000

26/04/2000 460282 45,00,000

(19) During the period December 1999 to June 2001, the funds from the Anupama's bank

account number 9565, Vasya Bank, WTC Branch, New Delhi were transferred to the

preferential allottees as follows:

Table No. 8- Fund transfers by Anupama to preferential allottees

Date Transferred to Amount (in `)

09/12/1999 Perfect Car 7,00,000

10/12/1999 Troop Trac Chits 6,50,000

10/12/1999 Perfect Car 3,00,000

11/12/1999 Chanakya Apparels 2,00,000

11/12/1999 Rajat Stock 4,25,000

14/12/1999 Cosmo Corporate 8,00,000

14/12/1999 Chanakya Overseas 3,00,000

15/12/1999 Rajat Stock 10,00,000

16/12/1999 VCL 4,00,000

20/12/1999 VCL 1,00,000

21/12/1999 VCL 1,80,000

20/12/1999 Wisdom Publishing 95,000

21/12/1999 Wisdom Publishing 10,00,000

24/12/1999 Rajat Stock 10,00,000




07/01/2000 Troop Trac Electrodes 15,00,000

12/01/2000 Heritage Corporate 19,00,000



14/01/2000 Troop Trac Chits 2,50,000

17/01/2000 Rajat Stock 2,00,000







27/01/2000 Troop Trac Electrodes 1,75,000

18/04/2001 VCL 20,00,000

19/04/2001 VCL 10,00,000

02/05/2001 VCL 4,00,000

01/05/2001 ISF Securities Ltd. 4,00,000

(20) It was observed that VCL had used its own funds indirectly for subscription of its own

shares in the preferential allotment. The banking transactions of VCL and some of the

preferential allottees revealed that VCL had given advances to Anupama and CBS Systems

who in turn had transferred the funds to the 15 preferential allottees. The same money had

come back to VCL purportedly as the consideration towards the preferential allotment of

equity shares.

(21) Following transactions undertaken by few other related entities also establish that these

entities as well as company VCL were acting in concert with each other:

A. Flare Finance operating through its account number 9573, Vasya Bank Ltd, WTC

Branch, New Delhi during the period December 1999 to June 2001:

Table No. 9- Fund transfers from Flair Finance

Date

Transferred to

Cheque No. Amount (in `) Remark

29/03/2000 MFL 97801 5,00,000 Money was transferred from the

account of Anupama or by cash

to this account on previous day. 30/03/2000 MFL 97808 3,00,000

31/03/2000 Mr. Vijay Jhindal 97811 10,00,000

31/03/2000 Ms. Shubha Jhindal 97810 10,00,000

12/04/2001 ISF securities 104933 600000

12/04/2001 ISF securities 104934 650000

12/04/2001 Ms. Angoori Devi 104935 1,00,000

17/04/2001 Ms. Shubha Jhindal 104936 3,00,000


B. Chanakya Apparels through its account number 341, Federal Bank, Karol Bagh, New

Delhi:

Table No. 10 - Fund transfers from Chanakya Apparels

Date Transferred to Cheque No. Amount (in `) Remark

09/12/1999 VCL 142462 3,00,000 Money was deposited in the

account one/two day prior. 11/12/1999 VCL 142463 5,00,000

14/12/1999 VCL 142464 2,00,000

24/04/2000 VCL 142465 45,00,000

03/05/2000 VCL 142466 5,00,000

13/05/2000 VCL 142467 2,50,000

07/03/2001 Anupama 142470 32,00,000

94,50,000

C. Chanakya Overseas through its current account number 348, Federal Bank Ltd, Karol

Bagh, New Delhi.

Table No. 11 - Fund transfers from Chanakya Overseas

Date Transferred to Cheque No. Amount (in `) Remark

09/12/1999 VCL 143863 7,00,000

15/12/1999 VCL 143864 3,00,000

25/04/2000 VCL 143865 35,00,000 Money was deposited in the account

one/two day prior by cash or related

entities.

02/05/2000 VCL 143867 15,00,000

13/05/2000

VCL 143868 2,50,000

18/04/2001

Anupama

143870 22,00,000

This amount was deposited by MFL

on 17/04/2001

D. Troop Trac Chits through its current account number 342, Federal Bank, Karol Bagh,

New Delhi:

Table No. 12 - Fund transfers from Troop Trac Chits

Date

Transferred to

Cheque No. Amount (`)

Remark

06/12/1999 VCL 142481 3,50,000 Money was deposited in the account

one/two day prior by cash or related

entities. 14/12/1999 VCL 142483 6,50,000

05/01/2000 Shubha Jhindal 142484 2,50,000

17/01/2000 VCL 142485 2,50,000

29/04/2000 VCL 142487 45,00,000

13/05/2000 VCL 142488 7,50,000


17/03/2001 Anupama 142492 30,00,000

29/03/2001 Anupama 142493 20,00,000

E. Further, Fashion Tech received `30 lacs on March 14, 2001 and transferred the same

amount to Anupama on March 15, 2001. Similarly, Further, Fashion Tech received `20

lacs on April 10, 2001 and transferred the same amount to Anupama on April 11,

2001. Fashion Tech transferred `20 lacs on April 11, 2001 to Anupama. In this manner,

a total of `50 lacs was transferred to Anupama by Fashion Tech.

(22) The investigations revealed another set of activities by VCL during 2002. It was noted

that in the months of May/June, 2002, VCL had issued a spate of advertisements in

newspapers to the effect that a meeting of its board of directors was to be held shortly

inter alia, to consider buy-back of its shares, issue of bonus shares and preferential issue of

shares within short span of time. The unusual aspects of these advertisements were that

they were issued at proposal stage itself and there was no legal requirement for their

publication. Also, all these corporate actions were contradictory in nature as buy-back

reduces the number of outstanding shares while preferential allotment and bonus issue

increases the number of outstanding shares. List of such advertisements is as following:

Table No. 13 – Details of Advertisements by VCL

Date of issuance

of advertisement

Date appeared in

newspapers

Newspaper Matter in the Advertisement

20/05/2002

27/05/2002 and

28/05/2002

Economic

Times

Buyback up to 10,00,000 shares at

maximum price of `30/-

29/05/2002 Business

Standard

27/05/2002

28/05/2002 Business

Standard

Preferential allotment of equity shares

up to 10,00,000 at the rate of `35/-

(Going price in BSE- `7.55/-)

29/05/2002 Economic

Times

17/06/2002 24/06/2002

Economic

Times

Issue of Bonus share in the ratio of

8:10

(23) VCL later informed the stock exchanges that the board of directors of VCL had rejected

the proposals of buy-back of its shares and issue of bonus shares, while the preferential

allotment was made at just `10/- per share as opposed to `35/- advertised by VCL.


(24) The advertisement for buy back was a ploy to mislead the investors by benchmarking

price of the scrip at `30/- when the share was trading around `3/- to `12/-. The

advertisement signaled that the fair value of VCL shares are much more than the market

price which propelled the investors to buy the shares. Also investors (buyers)/

shareholders would have envisaged a clear gain of around `22/- per share (buyback price

of `30/- per share less prevailing market price levels of `8/- per share). The

announcement of buy-back of shares and its subsequent withdrawal resulted in a

pecuniary loss to the investors.

(25) The advertisement issued by VCL regarding preferential allotment showed increase in

turnover, earnings per share (EPS), profit and FII shareholding. However, from the profit

and loss account of VCL for the financial year 2001-02 it was observed that, contrary to

what was given in VCL advertisement, the income, profit after tax and EPS of VCL had

decreased in the financial year 2001-02 compared to previous year.

(26) The preferential allotment of shares was approved in the board meeting held on June 14,

2002 when VCL was still considering buyback of shares. The preferential allotment was

done at a price of `10/- against the stated price of `35/- in the advertisement, which

indicates that the advertisement was an attempt to benchmark the price of the scrip to the

levels of `30-35 when the scrip is actually trading in the range of `5-10. Thus, VCL was

intentionally issuing misleading advertisements to induce an demand in the market.

(27) When VCL issued the advertisement on bonus issue of shares on June 17, 2002 VCL

was not eligible for issuing bonus shares as its paid up capital consisted of partly paid up

shares. Therefore, the motive behind the advertisement on bonus issue, even when VCL

was not eligible as per law to issue bonus shares, was to lure the investors to buy the

shares of the company so that promoter related entities can offload the shares into the

market.

(28) Further it was revealed that during the period from May 2, 2002 to July 31, 2002 a total of

71.14 lakh shares were sold by some of the aforesaid preferential allottees, namely, Stock

Land, Fashion Tech, Perfect Car, Anupama, Rajat Stock and Troop Trac Exports into the market.

It was observed from the bank statements of these preferential allottees that part of their sale

proceeds was transferred into the account of MFL; an entity owned by Mr. Vijay Jhindal

and his relatives. The details of such fund transfer is described in the following table:-


Table No. 14 – Details of Fund transfers to MFL

Inflow in a/c of MFL (M)(A B M)

Fund transfer (A) to (B) Fund transfer (B) to (MFL)

Entity (A) Date Entity (B) Date Amount (`)

Stock Land 01/07/2002 Flare Finance

01/07/2002 20 lacs

Anupama 05/07/2002 Troop Trac

Marketing 05/07/2002 40 lacs

Perfect Car 05/07/2002

Stock Land 13/07/2002 Perfect Car 15/07/2002 10 lacs

Fashion Tech 15/07/2002 Troop Trac

Marketing 18/07/2002 35 lacs

Stock Land 17/07/2002

(29) The entire chain of events in respect of the buy back, bonus issue and preferential

allotment described by VCL, the unwarranted advertisement, large moneys spent, reasons

for the proposed corporate actions, reasons for the proposal being rejected, impact on the

price/volume of the shares suggests an orchestrated ploy on part of the promoters to

create an artificial demand for the shares of VCL and induce innocent investors for

purchasing shares so as to absorb sales by the promoter related entities.

(30) It is also observed that except Anupama all the preferential allottees were allotted marginally

less than 5% of the post allotment equity share capital of VCL. However, all these 15

connected preferential allottees acting in concert acquired total 70.25% of post preferential

allotment equity capital of VCL. However, they failed to make requisite open offer under

regulations 10 and 11 of the SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 nor did VCL make the relevant disclosures under these Regulations

pursuant to the allotment of 70.25% of post preferential capital.

5. Considering above, SEBI issued show cause notices (SCNs) dated May 24, 2005 and September

17, 2007 to certain entities, details of which are as under:

Table No. 15 – Details of SCNs

Sl. No.

Name of the entity

Allegation Violation SCNs issued.

1 VCL 1) VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce innocent investors for purchasing shares so as to absorb sales

Regulations 3, 4, 5(1) and 6(a) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations,

24/05/2005


by the promoter related entities. 2) VCL had used its funds indirectly for purchase of its own shares. 3) Knowingly published factually incorrect information in its advertisement.

1995 (the PFUTP Regulations, 1995) read with regulations 3, 4(2)(f) and 4(2)(k) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (the PFUTP Regulations, 2003). Section 77 of the Companies Act, 1956.

1) VCL gave misleading information to the public and exchange with regard to preferential allotment. 2) Information on details of preferential allottees given to SEBI and Exchange was inconsistent. 3) Indulged in mala fide intention to increase the price and thus manipulated the market. 4) Failed to make disclosure with regard to the preferential allottee holding of 70.25% (i.e., PACs)

Regulations 3, 4(a) and (b), 5(1)(a) and (b) and 6(a) and (d) of the PFUTP Regulations, 1995 as well as Section 11C (6) (a) and (b) of the SEBI Act, 1992 and regulation 7 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Takeover Regulations, 1997).

17/09/2007

2 Ms. Shubha Jhindal VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce innocent investors for purchasing shares so as to absorb sales by the promoter related entities.

Regulations 3, 4, 5(1) and 6(a) of the PFUTP Regulations, 1995 read with regulation 3, 4(2)(f) and 4(2)(k) of the PFUTP Regulations, 2003.

24/05/2005

She was appointed as director of VCL on 05/07/2002. The sale proceeds after sale of shares by allottees of shares in the preferential allotment reached the bank accounts of Ms. Shubha Jhindal alongwith others.

Regulations 3, 4(a) and (b), 5(1) (a)

and (b) and regulation 6(a) and (d)

of the PFUTP Regulations, 1995

and section 11C (6) (a) and (b) of

the SEBI Act 1992 and regulation

7 of the Takeover Regulations,

1997

17/09/2007

3. Mr. Vinay Talwar VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce innocent investors for purchasing shares so as to absorb sales by the promoter related entities.


24/05/2005

He was the Chairman cum Managing Director of VCL at the time of preferential allotment in 1999 and he was aware that the actual purpose of PA was to cheat investors thus he aided and abetted Mr. Vijay Jhindal.

Regulations 3 and 6(a) of the PFUTP Regulations, 1995

17/09/2007

4. Mr. Vijay Jhindal VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce

Regulations 3, 4, 5(1) and 6(a) of the PFUTP Regulations, 1995 read with regulations 3, 4(2)(f) and

24/05/2005


innocent investors for purchasing shares so as to absorb sales by the promoter related entities.

4(2)(k) of the PFUTP Regulations, 2003.

MFL received fund from the preferential allottees/sellers who sold the fraudulently issued shares after the misleading announcements. Thereafter, the fund was transferred to Vijay Jhindal and his related entities. Further Vijay Jhindal also gave wrong information to SEBI regarding MFL and Avisha Credit.

Regulations 3, 4(a) and 4(b), 5(1)(a) and (b), 6(a) and (d) of the PFUTP Regulations, 1995

17/09/2007

5. MFL MFL received fund from the preferential allottees/sellers who sold the fraudulently issued shares after the misleading announcements. Thereafter, the fund was transferred to Mr. Vijay Jhindal and his related entities. Further Mr. Vijay Jhindal also gave wrong information to SEBI regarding MFL and Avisha Credit.

Regulations 3, 4(a) and 4(b), 5(1)(a) and (b), 6(a) and (d) of the PFUTP Regulations, 1995 Regulations 6(a) of the PFUTP Regulations 1995 read with regulation 3(c) and 3(d), of the PFUTP Regulations, 2003.

17/09/2007

6.

Mr. J. P. Madaan VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce innocent investors for purchasing shares so as to absorb sales by the promoter related entities.


24/05/2005

Issuing misleading advertisements to the public which led to creation of artificial volume and defraud the gullible investors

Regulations 3, 4(a) and (b) 5 (1)(a)

and (b), 6(a) and (d) of the PFUTP

Regulations, 1995 and section 11C

(6) (a) and (b) of the SEBI Act,

1992 and regulation 7 of the

Takeover Regulations 1997.

17/09/2007

7 Mr. R. K. Garg VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce innocent investors for purchasing shares so as to absorb sales by the promoter related entities.


24/05/2005

Issuing misleading advertisements to the public which led to creation of artificial volume and defraud the gullible investors

Regulations 3, 4(a) and (b) 5 (1)(a)

and (b), 6(a) and (d) of the PFUTP

Regulations, 1995 and section 11C

(6) (a) and (b) of the SEBI Act,

1992 and regulation 7 of the

Takeover Regulation, 1997

17/09/2007

8 CBS System Assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner. Facilitated transfer of money to

Regulations 3 and 6(a) of the PFUTP Regulations, 1995

17/09/2007


preferential allottees.

9 Anupama Received money from VCL and transferred it to the preferential allottees thus assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner. Entity was also one of the allottee in the preferential allotment.

Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997

17/09/2007

10 Brut Finance One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.

Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997.

17/09/2007

11 Chanakya Apparels One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

12 Chanakya Overseas One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

13

Cosmo Corporate One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

14 Fashion Tech One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

15 Flair Finance One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

16 Heritage Corporate One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

17

Perfect Car One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007


18 Rajat Stock One of the allottee in the preferential allotment who were part of the group to sell shares issued in a fraudulent manner. Thus, aided and abetted Mr. Vijay Jhindal in committing the fraud on innocent investors.


17/09/2007

19 Troop Trac Chits One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

20 Troop Trac Exports One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

21 Troop Trac

Electrodes

One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

22 Wisdom Publishing One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner.


17/09/2007

23 Troop Trac

Marketing

One of the allottee in the preferential allotment which assisted VCL in raising money from the market at the cost of gullible investor in fraudulent manner. Transfer of funds to MFL after receiving from various preferential allottees. Thus, aided and abetted Mr. Vijay Jhindal and MFL, in committing the fraud on innocent investors.

Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 6(a) of the PFUTP Regulations, 1995 read with regulation 3(c) and 3(d), of the PFUTP Regulations, 2003.

17/09/2007

6. The allegations/charges contained in the common SCN dated May 24, 2005 issued to VCL, Mr.

J. P. Madaan, Mr. R. K. Garg, Ms. Shubha Jhindal, Mr. Vinay Talwar and Mr. Vijay Jhindal were

considered by SEBI and vide order dated February 20, 2008 restrained VCL and its directors,

namely, Mr. J. P. Madaan, Mr. R. K. Garg, and Mr. Vijay Jhindal, from accessing the securities

market and prohibit them from buying, selling and dealing in securities in any manner for a

period of two years. Further, SEBI also restrained Ms. Shubha Jhindal, director VCL from

accessing the securities market and prohibit her from buying, selling and dealing in securities in

any manner for a period of six months. There was no direction against Mr. Vinay Talwar.


7. Being aggrieved by the above SEBI order, Mr. J. P. Madaan, Mr. Vijay Jhindal and Ms. Shubha

Jhindal filed separate appeals before the Hon'ble Securities Appellate Tribunal (the Hon’ble

SAT). The Hon'ble SAT vide its order dated August 28, 2008, remanded the matter back to

SEBI with the following observations:

―The contents of the advertisements pertain to price sensitive issues and if they are false and misleading as

alleged by the Board, it shall be in the interest of the securities market and the investors to find out as to who

is responsible for the advertisements and those responsible need to be dealt with appropriately. We are not

happy with the impugned order particularly with the manner in which the issues have been discussed. The

appeals are accordingly allowed and the impugned order qua the appellants set aside and the cases remanded

to the Board with a direction to issue fresh show cause notice(s) to the appellants herein who will file their

replies, if necessary. The Board will then afford an opportunity of hearing to them and pass a fresh order in

accordance with law. In case the Board comes to the conclusion that the advertisements are not misleading or

fraudulent as contended by the appellants, then in that event, it shall be open to it to pass appropriate orders

against the other entities as well including the recalling of the order against them.”

8. After the order of the Hon'ble SAT, SEBI initiated another investigation in the matter with

particular focus on the conduct of various entities during the period May-July 2002. This

investigation inter alia revealed that:

(1) VCL had issued a spate of advertisements in newspapers in the months of May/June

2002 to the effect that a meeting of its board of directors was to be held shortly to inter

alia, consider buyback of its shares (10,00,000 shares at a maximum price of `30/-), issue

of bonus shares in the ratio of 8:10 and preferential issue of 20,00,000 shares @ `35/-

within short span of time. Following is the list of advertisements and their dates of

publication.

Table No. 16 – Details of advertisements by VCL

Date of issuance of advertisement

Date appeared in the newspapers

Newspaper Matter in the advertisement

20/05/2002 27/05/2002 and 28/05/2002

Economic Times

Buyback of upto 10,00,000 shares

at the maximum price of `30/-

29/05/2002 Business Standard

27/05/2002 28/05/2002

Business Standard

Preferential allotment of equity

shares upto `20 lacs at the rate of

`35/- (Market price at BSE

`7.55/-)

29/05/2002 Economic Times

17/06/2002 24/06/2002 Economic Times Issue of Bonus shares in the ratio of 8:10

(2) The board of directors of VCL had rejected the proposals of buy-back of its shares and

issue of bonus shares whereas preferential allotment of shares had been approved.


However, the preferential allotment was made at just `10/- per share as against the

advertised rate of `35/- per share.

(3) Normally, such advertisements are issued after the Board decision regarding the

price/quantity of shares to be preferentially allotted. However in the instant case, the

advertisements were issued at the proposal stage itself.

(4) Also all the proposed corporate actions were essentially contradictory in nature as buyback

reduces the number of outstanding shares while preferential allotment and bonus issue

increases the number of outstanding shares.

(5) Unusual movements in the price and volume of VCL between April 1, 2002 and August

31, 2002, was observed during the period when which the advertisements pertaining to

buyback, preferential allotment and bonus shares were issued by VCL.

(6) During April 29, 2002 to May 20, 2002, i.e., the 20 day period prior to publication of

advertisements, price and volume in the scrip suddenly shot up as compared to the price

and volume prevailing during April 1, 2002 and April 28, 2002. Subsequently, during the

period of advertisements, the average volumes doubled while the prices decreased

marginally as compared to the period April 29, 2002 to May 20, 2002.

(7) The major selling entities during this period were Stock Land, Anupama, Fashion Tech, Troop

Trac Marketing, Rajat Stock. All these entities except Stock Land were allotted the

preferential shares of VCL in 1999. All these entities were also related entities of VCL.

(8) From the bank accounts of these seller entities, it was found that part of the money

received towards the sale proceeds were transferred into the account of MFL, an entity

owned by Mr. Vijay Jhindal and his wife, Ms. Shubha Jhindal and mother, Ms. Angoori

Devi.

(9) Before considering buyback of shares, VCL had formed a committee which submitted

one page report dated May 17, 2002 explaining the basic rules and regulations regarding

buyback of shares. Despite the recommendation of the committee, absence of such a

provision in the Articles of Association, VCL published the advertisement regarding the

buyback at the proposal stage itself i.e., on May 20, 2002 when the proposal for buyback

was to be considered in the board meeting of VCL to be held on June 4, 2002.

(10) The advertisement proposed buyback at `30/- per share when the share was trading

between `3/- and `12/-. Thus, the advertisement was a ploy to mislead the investors by

benchmarking price of the scrip at `30/- which would generate interest in the scrip and

induce more buying since the investors (buyers)/ shareholders would have envisaged a

clear gain of around `20/- per share.

(11) As a consequence of the advertisements, the average volume of trading in the scrip

increased by 200% indicating that more investors had traded during the relevant period,


ostensibly considering this advertisement to be true. Thus, the announcement of buy-

back of shares and its subsequent withdrawal resulted in a pecuniary loss to the investors

who were influenced to purchase shares on the basis of the advertisement.

(12) Even though the volume increased based on the investor’s expectation of a buyback, the

price of the scrip did not positively respond. On the other hand, the price of the scrip

went down after the advertisement period and thereby resulted in loss to investors who

bought shares expecting pecuniary gains, consequent to the advertisements.

(13) Similarly, while the advertisements dated May 28 and 29, 2002 proposed preferential issue

of shares at `35/-, the board of VCL in its meeting held on June 14, 2002 approved the

preferential allotment of shares at a price of `10/-, which indicates that the advertisement

was an attempt to benchmark the price of the scrip to the levels of `30-35 when the scrip

was actually trading in the range of `3-12.

(14) When the company issued the advertisement on bonus issue of shares on June 17, 2002,

the company was not eligible for issuing bonus shares, as its share capital was not fully

paid up and sufficient reserves were not available.

(15) In its advertisement regarding the buyback, VCL had proposed using reserves of `7 crore

for buyback of shares. However, the balance sheet of VCL for the financial year ending

31st March, 2002 shows reserves of just `4.68 crores. Thus, VCL was not in a position to

comply with the financial and legal requirements of buyback of shares or issue of bonus

shares. VCL had proposed to proceed with the abovementioned corporate actions so as

to mislead the public. The advertisement was made without a genuine intention to

proceed with buy back or issue of bonus shares.

(16) The proposals for buyback and bonus issue were later rejected by the board of VCL and

this information was not disseminated to the public.

(17) The issue of buyback, preferential allotment and bonus shares were discussed in the

board meetings of VCL held on June 04, 2002, June 14, 2002 and July 05, 2002

respectively. All these meetings were chaired by Mr. J. P. Madaan and the proposal for all

these corporate actions were put forth by him and the minutes of the board meeting were

also signed by him. Thus, Mr. J. P. Madaan was instrumental in these decision of the board

of VCL for the above corporate actions and for issuing misleading advertisements to the

public.

(18) Mr. R. K. Garg, director of VCL had also attended these board meetings.

(19) During May 2002 – July 2002, the major sellers in the scrip of VCL were Stock Land,

Perfect Car, Fashion Tech, Troop Trac Exports, Rajat Stock and Anupama. Save for Stock Land,

all these entities were allotted shares in the preferential allotment made by VCL in 1999.

(20) Stock Land and Rajat Stock have Mr. Ram Singh as the common director. Further, Stock


Land received shares from Flare Finance, Wisdom, Troop Trac Electrodes, Heritage Corporate,

Anupama, Cosmo Corporate and Perfect Car, i.e., the preferential allottees who were allotted

shares in 1999, and then sold them in the market.

(21) The analysis of bank statements of these sellers (Stock Land, Perfect Car, Fashion Tech, Troop

Trac Exports, Rajat Stock and Anupama) revealed that the consideration received from the

sale of shares was directly and indirectly paid to MFL, a company belonging to Mr. Vijay

Jhindal. The details of fund transfers from/to MFL is mentioned below:

Table No. 17 – Details of fund transfers to/from MFL

Funds transfer to MFL Funds transfer from MFL

Date Transferor Amount (`) Date Transferee Amount (`)

15/04/2002 Avisha Credit 450000 15/04/2002 Banwarilal Goel 335000

16/04/2002 Issued as self cheque 115000

28/05/2002 Shubha Jhindal 200000 28/05/2002 100000

28/05/2002 Angoori Devi (Mother) 100000

25/06/2002 500000 02/07/2002 VCL 2500000

01/07/2002 Flare Finance 2000000

05/07/2002 Troop Trac Marketing 4000000 06/07/2002 Shubha Jhindal (Wife) 2000000

08/07/2002 VCL 2000000

15/07/2002 Perfect Car 1000000 16/07/2002 Saroj Ganda 1000000

20/08/2002 Mangla Ltd. 2350000 21/08/2002 115000

21/08/2002 Shubha Jhindal 115000

22/08/2002 Saroj Ganda 2000000

27/08/2002 Avisha Credit 100000

(22) Further, the sellers, entities transferring shares to Stock Land and entities transferring

funds to MFL, as stated below, are responsible for aiding and abetting Mr. Vijay Jhindal

and his entity MFL in committing the fraud on innocent investors.

Table No. 18 – Transactions amongst the preferential allottees

Sellers Transferor of shares Transferor of funds

Stock Land Flare Finance Stock Land

Perfect Car Wisdom Publishing Anupama

Fashion Tech Troop Trac Electrodes Perfect Car

Troop Trac Exports Heritage Corporate Fashion Tech

Rajat Stock Anupama Flare Finance

Anupama Cosmo Corporate Troop Trac Marketing

Perfect Car


9. Considering the above, SCNs dated July 6, 2012 and July 12, 2012 were issued to various entities

as per following details:

Table No. 19 – Details of SCNs

Sl. No.

Name of the entity

Allegation Violation SCNs

1 Mr. Vijay Jhindal MFL received fund from the preferential allottees/sellers who sold the fraudulently issued shares after the misleading announcements. Thereafter, the fund was transferred to Mr. Vijay Jhindal and his related entities. Further, Mr. Vijay Jhindal also gave wrong information to SEBI regarding MFL and Avisha Credit.

Regulations 6(a) of the PFUTP Regulations, 1995 read with regulation 3(c) and (d) and regulation 13 of the PFUTP Regulations, 2003.

06/07/2012

2. MFL MFL received fund from the preferential allottees/sellers who sold the fraudulently issued shares after the misleading announcements. Thereafter, the fund was transferred to Mr. Vijay Jhindal and his related entities. Further, Mr. Vijay Jhindal also gave wrong information to SEBI regarding MFL


12/07/2012

3.

Mr. J. P. Madaan Issuing misleading advertisements to the public which led to creation of artificial volume and defraud the gullible investors

Regulations 5 and 6(a) of the PFUTP Regulations, 1995 read with regulation 3(c) and (d), 4(1) and 4(2)(k) and 13 of the PFUTP Regulations, 2003.

06/07/2012

4. Anupama Sold the shares issued in a fraudulent manner and transferred the funds to MFL. Also transferred shares issued in a fraudulent manner to Stock Land which were offloaded in the market. Thus, aided and abetted Mr. Vijay Jhindal and his entity MFL, in committing the fraud on innocent investors.


12/07/2012

5.

Cosmo Corporate Transfer of shares issued in a fraudulent manner to Stock Land which were offloaded in the market Thus, aided and abetted Mr. Vijay Jhindal and his entity MFL, in committing the fraud on innocent investors.


12/07/2012

6. Fashion Tech Sold the shares issued in a fraudulent manner and transferred the funds to MFL. Thus, aided and abetted Mr. Vijay Jhindal and his entity MFL, in committing the fraud on innocent investors.


12/07/2012


7. Flair Finance Transfer of shares issued in a fraudulent manner to Stock Land which were offloaded in the market and transfer of funds to MFL after receiving from Stock Land. Thus, aided and abetted Mr. Vijay Jhindal and his entity MFL, in committing the fraud on innocent investors.


12/07/2012

8. Heritage Corporate Transfer of shares issued in a fraudulent manner to Stock Land which were offloaded in the market Thus, aided and abetted Mr. Vijay Jhindal and his entity MFL, in committing the fraud on innocent investors.


12/07/2012

9.

Perfect Car Sold the shares issued in a fraudulent manner and transferred the funds to MFL. Also transferred shares issued in a fraudulent manner to Stock Land which were offloaded in the market. Thus, aided and abetted Mr. Vijay Jhindal and his entity MFL, in committing the fraud on innocent investors.


12/07/2012

10. Rajat Stock One of the allottee in the preferential allotment who were part of the group to sell shares issued in a fraudulent manner. Thus, aided and abetted Mr. Vijay Jhindal in committing the fraud on innocent investors.


12/07/2012

11. Troop Trac Exports They were part of the group who sold the shares issued in a fraudulent manner. Thus, aided and abetted Mr. Vijay Jhindal in committing the fraud on innocent investors.


12/07/2012

12 Troop Trac

Electrodes

Transfer of shares issued in a fraudulent manner to Stock Land which were offloaded in the market Thus, aided and abetted Mr. Vijay Jhindal and MFL, in committing the fraud on innocent investors.


12/07/2012

13. Wisdom Publishing Transfer of shares issued in a fraudulent manner to Stock Land which were offloaded in the market Thus, aided and abetted Mr. Vijay Jhindal and MFL, in committing the fraud on innocent investors.


12/07/2012


14. Stock Land Selling shares after receiving from preferential allottees which were issued in a fraudulent manner and transfer of funds to MFL through preferential allottees. Thus, aided and abetted Mr. Vijay Jhindal and MFL, in committing the fraud on innocent investors.


06/07/2012

15. Troop Trac

Marketing

Transfer of shares issued in a fraudulent manner to Stock Land which were offloaded in the market Thus, aided and abetted Mr. Vijay Jhindal and MFL, in committing the fraud on innocent investors.


12/07/2012

10. SEBI issued notices of hearing to 24 entities as enumerated in the Table No. 15 and Table No.

19 and advising the noticees to make personal appearance or to submit their replies in respect of

the allegations/charges contained in the respective SCNs dated September 17, 2007, July 6, 2012

and July 12, 2012. The notices of hearing alongwith the relevant SCNs were served upon the

respective noticees by way of speed post AD/courier and affixture at their last known addresses.

Further, in respect of Anupama, Fashion Tech, Flair Finance, Heritage Corporate, Perfect Car, Rajat

Stock, Troop Trac Exports, Troop Trac Electrodes, Troop Trac Marketing, Wisdom Publishing and Stock

Land, the respective SCNs were published in the newspapers having nationwide circulation. An

opportunity of personal hearing was granted to the noticees on January 7, 2014 when Mr. Vijay

Jhindal appeared on behalf of himself, his wife Ms. Shubha Jhindal and MFL and sought

adjournment in the matter. The remaining noticees did not appear. On the next date of hearing

on February 18, 2014, only Mr. Bhuwanesh Bansal, Advocate, appeared as the authorized

representative of VCL and sought adjournment. The next date of hearing was fixed on June 20,

2014, wherein Mr. J. P. Madaan appeared and made submissions under oath. Further, VCL,

MFL and Mr. Vinay Talwar sought adjournment and requested that the hearing be held at New

Delhi. Another personal hearing date was scheduled for July 03, 2014 at SEBI, Head Office.

However, on the said date none of these noticees appeared. These noticees once again sought

adjournment in the matter and requested that hearing be given to them at New Delhi.

11. Mr. Vijay Jhindal filed reply vide his letters dated June 18, 2014 and July 03, 2014. Mr. J. P.

Madaan also filed replies vide letters dated June 19/ June 26, 2014, June 29, 2014, June 30, 2014,

July 07, 2014 and July 08, 2014. Mr. Vinay Talwar filed his vide letter dated June 30, 2014. Mr.

Vijay Jhindal, Mr. J. P. Madaan and Mr. Vinay Talwar have inter alia made following submissions:

A. Mr. Vijay Jhindal:

(1) He has no interest in or connection with the preferential allottees who were related to each

other and found to be connected with the promoters of VCL or use of funds of VCL


which were routed through two other related entities namely Anupama and CBS System.

(2) He had resigned from the board of VCL with effect from May 17, 2001 and as such he

was not aware of the spate of advertisements issued in the months of May-June, 2002 by

VCL.

(3) He was not the director of VCL during the period of publication of advertisements

regarding bonus, buyback of shares, and preferential issue of shares and their discussion in

the board meeting of VCL.

(4) He was not the director of VCL and as such was not responsible for the publication of

advertisement regarding the proposed buyback of shares at `30/- per share when the share

price was trading between `3/- at the proposal stage itself.

(5) He was not the director of VCL when its board had rejected the proposal of buyback of

shares and preferential allotment at just `10/- per share as against the advertised rate of

`35/- per share.

(6) He was not the director of VCL during April 29, 2002 to May 20, 2002 when there was

unusual movements in the price and volume.

(7) The sale proceeds that were transferred by Stock Land, Anupama, Fashion Tech, Troop Trac

Marketing and Rajat Stock to MFL was in the ordinary course of business as MFL is an

NBFC. However, he is not the beneficiary of the said money as alleged.

(8) MFL and Avisha Credit Capital Ltd., are not the original promoters of VCL. The original

promoter of VCL was Mr. Vinay Talwar, Mr. Ghanshyam Das Binani, Mr. Anil Kumar

Bansal, Mr. Mukesh Gambhir, Mr. P. L. Sandell, Mr. Bajan Lal Dhawan and Mr. Sudesh

Dhawan.

(9) The statement of Mr. J. P. Madaan that the proposals of buyback, preferential allotment

and bonus issue were taken up by the board VCL on verbal instructions of Mr. Vijay

Jhindal is false.

(10) After his resignation from the board of VCL on May 17, 2011, no objection has ever been

raised by VCL against him till date.

(11) His resignation from the board of VCL was submitted to the Registrar of Companies

(RoC) and as such he is not liable for different RoC receipts submitted to SEBI in respect

of his resignation from the board of VCL.

(12) The allegation that he has submitted his letters dated December 05, 2007 and February 12,

2008 from the official address of VCL is baseless. The fact of same address does not

purport any association as there are several companies having the same address but their

actions are independent and different and therefore the same cannot be the basis to say

that he is connected to VCL even after his resignation from the board of VCL.

(13) He was not the director of VCL during May 2002 - July 2002 and as such the allegation


that he was the ultimate beneficiary of the transfer of sale proceeds to MFL is incorrect.

(14) It is common knowledge that the preferential allotment of shares is a private arrangement

and the general investors are not the actual beneficiary hence there cannot be any loss to

any investor at any point of time.

B. Mr. Vinay Talwar:

(1) He was removed as a director of VCL on September 06, 2000 by Mr. Vijay Jhindal,

Chairman of VCL. VCL had also gone ahead and issued advertisements in the

newspapers regarding the said removal. In support of his statement, he has submitted the

advertisement copies and also Form 32 which was filed by VCL with the RoC on

October 04, 2000.

(2) The instant proceedings pertain to the year 2002 while he was already removed from the

post of director on September 6, 2000 and hence the current proceedings needs to be

dropped against him.

(3) He has filed a suit against VCL and its promoters before the Hon’ble Delhi High Court

seeking damages for his removal from the post of the managing director and to reclaim

the 3,38,000 shares owned by him which VCL and its promoter Mr. Vijay Jhindal had

refused to handover.

(4) Vide its order dated February 20, 2008 SEBI had concluded that he was merely used as a

front for the nefarious activities of Mr. Vijay Jhindal and that had no role to play in any of

the said activities.

(5) The period as stated in the SCN when VCL provided the requisite information and

replies to SEBI was subsequent to his removal from the board of VCL on September 6,

2000 and as such he cannot be proceeded against for providing misleading information in

terms of regulation 5(a) of the PFUTP Regulations, 1995, provisions of section 11 C(6)

(a) and (b) of the SEBI Act, 1992.

(6) The violations of the SEBI Act were carried out by Mr. Vijay Jhindal and his associates for

their personal benefit and he has nothing to do with any of it.

(7) VCL had informed SEBI that 7.2 lacs shares were allotted to REPL on October 6, 2000

@ `125/- (including `115/- premium). The said allotment was subsequent to his removal

from the board of VCL on September 6, 2000 and hence he has nothing to do with any

of it.

(8) In the client registration form with the depository participant Abhipra Capital Services

Ltd., MFL and VCL have the common address and Mr. Vijay Jhindal was the director of

MFL.

(9) Further, Flair Finance, Cosmo, Chanakya Apparels, Rajat Stock, Wisdom Publishing, Fashion Tech,

Troop Trac Electrodes, Brut Finance, Chanakya Overseas, Anupama, Troop Trac Exports and


Heritage Corporate are connected to each other through common phone numbers, common

directors, common addresses in KYC with the depository participants.

(10) Mr. Vijay Jhindal is associated in one form or the other with all the above related entities.

(11) He has no role to play and did not benefit in any manner from the alleged activities and as

such the proceedings against him needs to be dropped.

(12) The advertisements by VCL during the period May-July 2002 regarding the proposed

buyback, bonus and preferential issue of shares pertains to the period subsequent to his

removal from the board of VCL on September 6, 2000.

(13) He reiterated his submissions made during the proceedings that culminated in the SEBI

order dated February 20, 2008.

C. Mr. J. P. Madaan:

(1) He rendered services as an employee director of VCL from February 28, 2000 to March

31, 2007, drawing a monthly salary of `20,000 per month. During the said period, the

promoters of VCL were in control and management.

(2) He was mainly involved in matters related to administration and was not involved in the

day to day activities of VCL and after resigning from the employment of VCL, he was

not associated with it in any manner.

(3) The preferential allotment of shares made on December 14, 1999 was made before he

become the director and that Mr. Vijay Jhindal and Mr. Vinay Talwar were the directors at

the time of preferential allotment.

(4) He had no knowledge that the shares allotted in the preferential allotment were sold in

the open market by the preferential allottees after the issuance of the purported misleading

advertisements by VCL.

(5) The promoters effected/influenced the decision making of the board of directors VCL.

(6) He never held shares of VCL and he was not beneficiary in any manner and have no role

in the unusual movements in the stock price.

(7) He came to know about the sale of shares by the preferential allottees much after the sale of

shares.

(8) The ex-chairman Mr. Vinay Talwar has alleged that Mr. Vijay Jhindal was behind all the

mala fide activities of VCL. However, Mr. Vinay Talwar has not made any allegations

against him.

(9) He was not connected with MFL or any of the 15 preferential allottees.

(10) He has never transacted in the scrip of VCL and has not received any consideration of

any nature whatsoever.

(11) He came to know about the transfer of funds in the companies like MFL through the

SCNs.


(12) Further, he does not have any relation with any of the entities who have sold the shares

or to whom the funds have been transferred.

(13) The advertisement were issued on the behest of the promoters of VCL only. He was

looking after the administrative matters and had no knowledge related to the corporate

actions such as bonus issue, buyback of shares, preferential allotment as envisaged by the

promoters of VCL.

(14) VCL had not employed any company secretary at that point of time. Further, since none

of the directors was a professional like chartered accountant or a company secretary, any

agenda of the board meeting, apart from routine matters, was by the instructions/consent

of Mr. Vijay Jhindal.

(15) The advertisements were issued on the instructions of promoters as VCL had not

enough money to pay for it and had never given such advertisements earlier.

(16) The proposal for buyback of shares was considered in the board meeting that was

attended by Mr. R. K. Garg and him despite the observations of the Expert Committee

and lack of funds as the promoters had promised to bring in sufficient funds to execute

the process of the buyback of shares.

(17) He could not sense any mala fide intentions at that time as the information was

simultaneously being provided to BSE for dissemination to public at large.

(18) He has been made a scapegoat in the matter. The game plan was executed by Mr. Vijay

Jhindal.

(19) During his tenure as the director of VCL, he was working under Mr. Vijay Jhindal. He

was carrying activities as assigned to me by Mr. Vijay Jhindal. He had no authority or

power to take any decision in VCL.

12. As regards the other noticees, none of them appeared for personal hearing or filed any reply

before me despite several opportunities. The facts and circumstances discussed above clearly

show that noticees have been deliberately keeping themselves away from the proceedings and

adopting dilatory and delaying tactics by seeking adjournments in the matter on one ground or

the other or by requesting for personal hearing at New Delhi only. The detailed narration given

hereinabove makes it clear that SEBI afforded numerous opportunities to the noticees as it was

making a sincere effort to adhere to the principle of natural justice, especially, considering the

timeline fixed by the Hon’ble SAT vide its order dated June 13, 2014 in respect of the

Miscellaneous Applications filed in the matter of Appeal No. 207 of 2012. However, the

noticees, as it is very clear from their conduct, were interested in only evading the specific reply

and delaying the proceedings. As it is clear now that the noticees are not willing to avail the

opportunities afforded to them and are adopting dilatory and delaying tactics, there would not

be any denial of natural justice, if these proceedings are concluded on the basis of material


available on record. In this regard, it is relevant to mention the following judgment of Hon'ble

Supreme Court in the case of Haryana Financial Corporation vs. Kailashchand Ahuja [2008 (9) SCC

31]:-

"...the theory of reasonable opportunity and principle of natural justice have been evolved to uphold the rule of law and to assist the individual to indicate his just rights. Whether, in fact, prejudice has been caused to an employee or not on account of denial to him of the report has to be considered on the facts and circumstances of each case. Even in cases where procedural requirements have not been complied with, action cannot be ipso facto illegal or void, unless it is shown that non-observance has prejudicially affected the delinquent."

13. Since it is clear now that the noticees in the instant case are not willing to avail the opportunities

afforded to them and are adopting dilatory and delaying tactics, there would not be any denial of

natural justice, if these proceedings are concluded within timeline provided by Hon'ble SAT on

the basis of material available on record.

14. I have carefully considered the SCNs dated September 17, 2007, July 06, 2012 and July 12, 2012,

issued to the respective noticees, their replies/submissions and the relevant material available on

record. I note that the individual SCNs to all the noticees have been issued on the basis of same

facts, same set of transactions in the same scrip, during the same investigation periods. I further

note that the common charge of alleged price and volume manipulation in the scrip of VCL,

fraudulent preferential allotment of equity shares of VCL to its connected entities has been

alleged on the basis of the connection amongst the noticees, inter-linked financial transactions

amongst them and other attendant facts. In view of the nature of alleged transactions,

connections/relations and other facts and circumstances of this case, I deem it appropriate to

deal with the aforementioned three SCNs issued to the twenty four noticees therein by way of

this common order. Before dealing with the charges and allegations in the SCNs against the

noticees herein, I deem it necessary to refer to provisions of law alleged to be violated by the

noticees. These provisions are reproduced hereunder:

SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 -

11C. ..... ―(6) If any person fails without reasonable cause or refuses— (a) to produce to the Investigating Authority or any person authorised by it in this behalf any book, register, other document and record which is his duty under sub-section (2) or sub-section (3) to produce; or (b) to furnish any information which is his duty under sub-section (3) to furnish; or‖

SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)

Regulations, 1995 -

CHAPTER II

PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO


SECURITIES MARKET

Prohibition of certain dealings in securities

3. No person shall buy, sell or otherwise deal in securities in a fraudulent manner.

“Prohibition against Market Manipulation 4. No person shall - (a) effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person; (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market;‖ ....... “Prohibition of misleading statements to induce sale or purchase of securities 5. (1) No person shall make any statement, or disseminate any information which - (a) is misleading in a material particular; and (b) is likely to induce the sale or purchase of securities by any other person or is likely to have the effect of increasing or depressing the market price of securities, if when he makes the statement or disseminates the information- (i) he does not care whether the statement or information is true or false; or (ii) he knows, or ought reasonably to have known that the statement or information is misleading in any material particular. ......‖ Prohibition on unfair trade practice relating to securities 6. No person shall - (a) in the course of his business, knowingly engage in any act, or practice which would operate as a fraud upon any person in connection with the purchase or sale of, or any other dealing in, any securities; (b) ..................... (c) ...................... (d) indulge in falsification of the books, accounts and records (whether maintained manually or in computer or in any other form);

SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - 3. Prohibition of certain dealings in securities No person shall directly or indirectly- (a) ....... (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- ..................................


(k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors;

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - Acquisition of 5% and more shares of a company 7.(1) Any acquirer, who acquires shares or voting rights which (taken together with shares or voting rights, if any, held by him) would entitle him to more than five percent shares or voting rights in a company, in any manner whatsoever, shall disclose the aggregate of his shareholding or voting rights in that company, to the company. (2) The disclosures mentioned in sub-regulations(1) shall be made within four working days of – (a) the receipt of intimation of allotment of shares; or (b) the acquisition of shares or voting rights, as the case may be.

(3) Every company, whose shares are acquired in a manner referred to in sub-regulation(1) shall disclose to all the stock exchanges on which the shares of the said company are listed the aggregate number of shares held by each of such persons referred above within seven days of receipt of information under sub-regulations(1).

CHAPTER III

SUBSTANTIAL ACQUISITION OF SHARES OR VOTING RIGHTS IN AND

ACQUISITION OF CONTROL OVER A LISTED COMPANY

Acquisition of fifteen or more of the shares or voting rights of any company.

10. No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen percent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the Regulations.

Consolidation of holdings

11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, 15per cent or more but less than seventy five per cent.(75%) of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 5% of the voting rights, in any period of 12 months, unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations.

(2) No acquirer, who together with persons acting in concert with him has acquired, in accordance with the provisions of law, 75% of the shares or voting rights in a company, shall acquire either by himself or through persons acting in concert with him any additional shares or voting rights, unless such acquirer makes a public announcement to acquire shares in accordance with the regulations: Provided that in a case where the target company had obtained listing of its shares by making an offer of at least ten per cent. (10%) of issue size to the public in terms of clause (b) of sub-rule (2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957, or in terms of any relaxation granted from strict enforcement of the said rule, this sub-regulation shall apply as if for the words and figures ‗seventy five per cent. (75%)‘, the words and figures ‗ninety per cent. (90%)‘ were substituted.

Explanation:- For the purposes of Regulation 10 and Regulation11, acquisition shall mean and include,-

https://www.sebi.gov.in/acts/tkreg.html#reg 7


https://www.sebi.gov.in/takeover/takeover78.html

https://www.sebi.gov.in/takeover/takeover78.html





(a) direct acquisition in a listed company to which the Regulations apply;

(b) indirect acquisition by virtue of acquisition of holding companies, whether listed or unlisted, whether in India or abroad.‖

15. From the replies of Mr. Vijay Jhindal, Mr. Vinay Talwar and Mr. J.P. Madaan, I note that all of

them have contended that they were not the directors of VCL at the relevant time. Mr. Vijay

Jhindal has claimed that he had resigned as the director of VCL on May 17, 2001 and as such he

was not involved in the issue of advertisements or any of the decisions taken by VCL regarding

buyback of shares, preferential allotment of equity shares and bonus issue. Mr. Vijay Jhindal has

enclosed Form 32 in support of his claim. However, the said Form 32 does not mention any

date. Mr. Vijay Jhindal later contended that the said Form was filed in RoC on June 06, 2002 with

`3,000/- as late fee. Vide his letter dated December 05, 2007, Mr. Vijay Jhindal submitted a copy

of Form 32 wherein the receipt of RoC was dated June 06, 2001 bearing no. 74302 with a late

fee of `3,000/-. If Mr. Vijay Jhindal had resigned on May 17, 2001, the filing of Form 32 within

30 days, i.e., till June 15, 2001 did not require any payment of late fee. Thus, the enclosed receipt

was not for the attached Form 32 claimed to be filed June 06, 2001.

16. Vide letter dated February 12, 2008, Mr. Vijay Jhindal submitted another copy of the said Form

32 wherein the receipt of RoC was dated June 04, 2001 bearing no. 4488 without any late fee. I

note that in the records of RoC the said Form 32 was filed on June 06, 2002 with no. 74302 and

not on June 06, 2001. In view of these facts, I find that Mr. Vijay Jhindal has submitted different

RoC receipts in respect of Form 32 to SEBI on different occasions and thus has tried to mislead

with false and fabricated documents.

17. Mr. J. P. Madaan has further contended that he was an employee director, working under the

direct instructions from Mr. Vijay Jhindal. Further, the proposals of buy back, preferential

allotment and bonus issue were taken up by the board of VCL and subsequently considered by

it at the behest and verbal instruction of Mr. Vijay Jhindal. The advertisements were issued by

VCL at the instructions of its promoters and the funds for the issuance of advertisements were

provided by Mr. Vijay Jhindal through MFL and Avisha Credit, entities owned by him and his

family members. I also note that the proposal of buy-back, preferential allotment and bonus

shares were discussed in the board meetings of VCL held on June 04, 2002, June 14, 2002 and

July 05, 2002, respectively. All these board meetings were chaired by Mr. J. P. Madaan and

attended by Mr. R. K Garg. As per the minutes of the board meetings, Mr. J. P. Madaan had

initiated the proposal for all these corporate actions. Further, the minutes of these board

meeting were also signed by him. I, therefore, reject the claims of Mr. J.P. Madan and find that

Mr. J. P. Madaan and Mr. R. K. Garg were instrumental in these decisions of the board of VCL

in respect of the above corporate actions and for issuing misleading advertisements to the public

and they can not escape liability for these acts and omissions.


18. I note that during the time of issuance advertisements in 2002, Mr. Vijay Jhindal had received

money from MFL, who in turn received money from the sellers( i.e., the preferential allottees) who

are connected to each other, VCL and its promoters. I note from the bank statements of MFL

that during the period April 2002 to August 2002 the funds received by MFL from the preferential

allottees by selling shares of VCL in the market were transferred either to Mr. Vijay Jhindal or to

his related entities including VCL. Further, the cheques issued by MFL to Ms. Shubha Jhindal,

VCL, etc. were signed by Mr. Vijay Jhindal himself. I note that Mr. Vijay Jhindal has also tried to

mislead by submitting different RoC receipts, to buttress his claim of resignation on May 17,

2001. Even after resignation, all correspondences between him and SEBI carries the official

address of VCL indicating his continued association with VCL even during 2007-08. I,

therefore, do find merit in the argument of Mr. Vijay Jhindal that he has no information about

the activities of VCL in the year 2002 and same addresses does not purport association as there

are several companies having the same addresses but their actions are independent and different

and cannot be the basis to say that he has a relationship or any connection with company post

resignation. I find that Mr. Vijay Jhindal played the central role in transferring funds from the

bank accounts of MFL to the bank accounts of his connected entities. In view of these facts, the

contention of Mr. Vijay Jhindal that he was not the director of VCL during the said period does

not hold good.

19. Mr. Vijay Jhindal has also contended that MFL is an NBFC and the money received by it was on

account of the business activities and that he is not the beneficiary of the said money/funds as

alleged either directly or indirectly. In this regard, as explained above, I find that during the

relevant period, the preferential allottees had transferred the sale proceeds to MFL (an entity

promoted by Mr. Vijay Jhindal and his family members) which in turn transferred the proceeds

either to Mr. Vijay Jhindal or to his related entities including VCL. In view of these facts, do not

find any merit in the contentions of Mr. Vijay Jhindal that he was not the beneficiary of the

funds.

20. I note that Mr. Vijay Jhindal gave wrong information about MFL and Avisha Credit being non-

promoter entities in his submissions dated December 15, 2008 though the investigation revealed

that the shareholding pattern appearing on BSE website for quarters ending June, 2002 and

September, 2002 showed that MFL and Avisha Credit were "persons acting in Concert" in

promoter's category and holding shares. Further, the shareholding pattern of VCL for quarter

ended June 30, 2007 available on BSE website shows that Mr. Vijay Jhindal, his wife and mother

and two other companies, MFL and Avisha Credit were included in promoter and promoter

group and held 15.07% of the share capital. I note that Mr. Vijay Jhindal did not offer any


comments on the above, and stated that the original promoters of VCL were Mr. Vinay Talwar,

Mr. Ghanshyam Das Binani, Mr. Anil Kumar Bansal, Mr. Mukesh Gambhir, Mr. P. L. Sandell,

Mr. Bajan Lal Dhawan and Mr. Sudesh Dhawan.

21. I note Mr. J. P. Madaan has admitted that he was director of VCL from February 28, 2000 to

March 31, 2007. I also note the allegations of Mr. J. P. Madaan that Mr. Vijay Jhindal was behind

all the mala fide activities of VCL and all the activities of the company were carried out on his

instructions, complicity of Mr. J. P. Madaan is established since he was director of the company.

I note that the issue of buyback, preferential allotment and bonus shares were discussed in the

board meetings of VCL on June 04, 2002, June 14, 2002 and July 05, 2002 respectively. All these

meetings were chaired by Mr. J. P. Madaan and the proposal for all these corporate actions were

put forth by him and the minutes of the board meeting were also signed by him.

22. I note the submissions made by Mr. Vinay Talwar that he was removed as a director of VLC on

September 6, 2000 and therefore, did not play any role in the advertisements issued during May-

June, 2002. However, I also note that during the preferential allotment of shares by VCL to 15

entities, Mr. Vinay Talwar was director of VCL. I also note the findings of investigation that Mr.

Vinay Talwar was the introducer to some of the entities viz., Cosmo (A/C 43186), Fashion Tech

(A/C 43160), Heritage (A/C 43194), Rajat Stock (A/C 43208) and Wisdom (A/C 43216) for

opening the bank account and that the account opening dates of these entities was same, i.e.,

March 08, 1999. These entities were allotted shares in the preferential issue made by VCL in

December, 1999. I note that the bank account of VCL (A/c 1400301043178), Bank of

Rajasthan, Barakhambha Road, Delhi) was opened on March 08, 1999. In the list of directors

submitted by company, Mr. Vinay Talwar was the Managing Director and also authorized person.

23. I note that in the instant case, none of the noticees have submitted any reply on merits of the

case. They have not disputed – (a) any of the facts based on which connection/relation amongst

them was alleged; (b) their trades in the scrip of VCL; (c) the fund transfers amongst them; or

(d) the issuance of the alleged misleading advertisements by VCL.

24. I note that on December 14, 1999, VCL made preferential allotment of 72,00,000 shares to

fifteen entities, namely, Anupama, Brut Finance, Chankya Apparels, Chanakya Overseas, Cosmo

Corporate, Fashion Tech, Flair Finance, Heritage Corporate, Perfect Car, Rajat Stock, Troop Trac Chits,

Troop Trac Exports, Troop Trac Electrodes, Wisdom Publishing and Troop Trac Marketing @ `10/- each

at a premium of `2.50/-. The requisite consideration for the said allotment was `9 crore. I note

that prior to the preferential allotment VCL had transferred `58.75 lacs to Anupama which in

turn transferred `43.75 lacs to some of the preferential allotees. This fund was then used by these


preferential allottees including Anupma as application money in the preferential allotment of shares

by VCL to them. Thus, more than 30% of the application monies paid by these preferential

allottees was in fact financed by VCL through Anupama. I further note that VCL had transferred

more than `1 crore to CBS System. CBS System had in turn transferred most of these funds to

some of the preferential allottees. I note that after the preferential allotment (during the period

December 6, 1999 to January 29, 2000), VCL transferred an amount of `2.1 crore to Anupma

out of which Anupama transferred `1.2 crore to some of the preferential allottees. This fund was

then transferred by these preferential allottees including Anupma to VCL as call money on the

shares allotted in the preferential allotment. VCL also transferred `6.5 Lacs to two other

preferential allottees, namely, Rajat Stock and Cosmo Corporate on January 11, 2000. Further, some of

the preferential allottees received money from the entities related to VCL in cash during the month

of December 1999 and January 2000. Thus, VCL has transferred `30.5 lacs to the preferential

allottees directly and `1.68 crore indirectly. In view of these facts, I find that VCL financed more

than 20% of the requisite amount for the preferential allotment of its shares to the preferential

allottes connected with VCL and its promotes/directors Mr. Vijay Jhindal and Mr. Vinay Talwar.

The flow of funds amongst the preferential allottees is enumerated below:

25. The maze of large fund transactions between VCL, Anupama, CBS System and the preferential

allottees around the time of preferential allotment and the connection/relation amongst them

cannot be mere a coincidence but points to the fact that the purpose of these transactions was to


finance the preferential allotment of shares by VCL. On account of the repeated circulation of

same money between different preferential allottees, the receipt of substantial portion of allotment

money for 72,00,000 equity shares was merely a book entry. Considering the facts and

circumstances of this case holistically, I find that VCL had issued 72,00,000 new equity shares

for value of ` 9 crore in the names of the above mentioned 15 preferential allottees but had not

received full consideration as its preferential allotment was financed by VCL itself as discussed

hereinabove. I, therefore, find that the consideration for the shares allotted to the respective

allottees in the preferential allotment of VCL has not been fully paid by the preferential allottees

and the shares were allotted by VCL to the preferential allottess under a fraudulent scheme, artifice

and device employed by the VCL, its promoters/directors and preferential allottes who acting in

concert amongst themselves and also with VCL and its promoters/directors, illegally and

fraudulently acquired 70.25% shares in VCL. In this case, it is established that the payments

made by VCL to the preferential allottees passed through various entities, viz. CBS System and

Anupama to finally reach the subscriber bank account and in turn to VCL in the form of

application money for the preferential allotment. After the sale of shares, the sale proceeds came

back to VCL through layers of entities related to Mr. Vijay Jhindal. In view of these facts, I find

that the whole scheme of VCL, its promoters/directors and the preferential allottess was a ploy to

defraud the investors in securities market.

26. I further note that that VCL during the period May - June, 2002, VCL had issued a spate of

advertisements in several newspapers stating that a meeting of its board of directors was to be

held shortly to inter alia consider buy-back of its shares, issue of bonus shares and preferential

issue of shares within short span of time.

27. As regards the proposal of buy back of shares, I note that VCL had formed a committee in this

regard that had submitted a report dated May 17, 2002 explaining the basic rules and regulations

regarding buyback of shares. I also note that the Articles of Association of VCL do not

specifically permit it for buyback of shares. Thus, VCL published the advertisement regarding

the buyback at the proposal stage itself, i.e., on May 20, 2002 when the proposal for buyback was

to be considered in the board meeting of VCL to be held on June 4, 2002 knowing fully well the

requirements of buy-back of shares. I note that the said advertisement proposed buy-back at

`30/- per share when the share of VCL was trading between `3/- and `12/-. Thus, the

advertisement was a ploy to mislead the investors by benchmarking price of the scrip at `30/-

which would generate interest in the scrip and induce more buying since the investors (buyers)/

shareholders would have envisaged a clear gain of around `20/- per share. As a consequence of

the advertisements, the average volume of trading in the scrip increased by 200% indicating that

more investors had traded during the relevant period, ostensibly considering this advertisement


to be true. I note that the price of the scrip went down after the advertisement period thereby

resulting in loss to investors who bought shares expecting pecuniary gains, consequent to the

advertisements. In view of these facts, I find that the announcement of buy-back of shares was

misleading and without any intention to fulfill and its subsequent withdrawal resulted in a

pecuniary loss to the investors who were influenced to purchase shares on the basis of the

advertisement.

28. I note that VCL issued advertisements dated May 28 and 29, 2002 proposing preferential

allotment of shares at `35/- whereas the board of VCL in its meeting held on June 14, 2002

approved the preferential allotment of shares at a price of `10/-, which indicates that the

advertisement was an attempt to benchmark the price of the scrip to the levels of `30-35 when

the scrip was actually trading in the range of `3-12. When VCL issued the advertisement on

bonus issue of shares on June 17, 2002, it was not eligible for issuing bonus shares, as its share

capital was not fully paid up and sufficient reserves were not available. Further, in its

advertisements regarding the buy-back, VCL had proposed using reserves of `7 crore for

buyback of shares. However, the balance sheet of VCL for the financial year ending March 31,

2002 shows reserves of just `4.68 crores.

29. I also note that these advertisements were issued at the proposal stage itself and there was no

legal requirement for their publication. Further, all these corporate actions were contradictory in

nature as buyback reduces the number of outstanding shares while preferential allotment and

bonus issue increases the number of outstanding shares. In view of these facts, I find that VCL

was not in a position to comply with the financial and legal requirements of buy-back of shares

or issue of bonus shares and it had proposed to proceed with the abovementioned corporate

actions and issued the advertisements to that only to mislead the public. This is also

corroborated by the fact that VCL did not inform or issue advertisements when the said

proposals for buy-back and bonus issue were later rejected by its board.

30. In the facts and circumstances of this case it is noted that all the corporate announcements as

described in the SCN dated July 06, 2012 contained price sensitive information and influenced

the trading behaviour in the scrip of the company. The impugned tainted corporate

announcements were made as ploy to induce trading therein. The acts, omissions and conduct of

noticees in issuing repeated false, misleading and distorted corporate announcements as

impugned in the SCN, are clearly a device or artifice or scheme to defraud in connection with

dealing in securities and are covered by the definition of expressions 'fraud' and 'fraudulent' under

regulation 2(1)(c) of the PFUTP Regulations, 1995 which provides as follows:-


Definition of „fraud” – Regulation 2(1)(c). (c) "fraud" includes any of the following acts committed by a party to a contract, or with his connivance,

or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into

the contract:-

(1) the suggestion, as to a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent;

and "fraudulent" shall be construed accordingly.

................................................................................................................................................".

31. In my view, the fraudulent corporate announcements mentioned in the SCNs in this case had

the potential to induce sale or purchase of or dealing in securities and to influence the

investment decisions of the investors. As such, they attract the prohibitions of section regulation

3(b), (c) and (d) of the PFUTP Regulations, 1995. It is noted that regulation 4(1) of the PFUTP

Regulations, 1995 prohibits indulgence in fraudulent and unfair trade practices in securities.

Further, publishing or causing to publish untrue information, issuing advertisements containing

an advertisement that is misleading or that contains information in a distorted manner and

which may influence the decision of the investors are specifically declared fraudulent and unfair

trade practices under regulation 4(2) (k) of these Regulations. I, therefore, find that by making

false, misleading and distorted announcements, VCL and its directors indulged in fraudulent,

manipulative and unfair activities relating to the securities market that are prohibited under

sections 11(2)(e) of the SEBI Act and regulations 3(b),(c) and (d), regulation 4(1) and 4(2) of the

PFUTP Regulations, 1995 as alleged in the SCNs read with regulation 3, 4(2)(f), (k) and

regulation 13 of the PFUTP Regulations, 2003. I note that these prohibition under PFUTP

Regulations, 1995 are pari materia the prohibitions under PFUTP Regulations,2003 thus, the

following rulings of Hon’ble SAT in matter of V. Natarajan vs. SEBI (Order dated June 29, 2011 in

Appeal no. 104 of 2011) would be relevant in the context of this case:-

―… we are satisfied that the provisions of Regulations 3 and 4 of the Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market),

Regulations, 2003 were violated. These regulations, among others, prohibit any person from employing

any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are

listed or proposed to be listed on an exchange. They also prohibit persons from engaging in any act,

practice, and course of business which operates or would operate as fraud or deceit upon any person in

connection with any dealing in or issue of securities that are listed on stock exchanges.


These regulations also prohibit persons from indulging in a fraudulent or unfair trade practice in

securities which includes publishing any information which is not true or which he does not believe to

be true. Any advertisement that is misleading or contains information in a distorted manner which

may influence the decision of the investors is also an unfair trade practice in securities which is

prohibited. The regulations also make it clear that planting false or misleading news which may

induce the public for selling or purchasing securities would also come within the ambit of unfair

trade practice in securities...."

32. In my view, the facts and circumstances such as, -

a) Mr. Vijay Jhindal was director of VCL during the preferential allotment of shares to 15 entities

in December 1999. These entities were connected to VCL and its promoters/directors and

were provided funds by VCL through another two entities Anupama and CBS System. Prior to

preferential allotment VCL had given large amount of money to Anupama and CBS System.

Later this money was transferred to preferential allottees to subscribe the allotment

b) The newspaper advertisements for buyback of shares, preferential allotment and bonus issues

during May-June, 2002 were issued under the instructions of Mr. Vijay Jhindal and the

payments for such advertisements were made by MFL and Avisha Credit. Both MFL and

Avisha Credit are the companies promoted by Mr. Vijay Jhindal and his family members.

c) Allottees in the preferential issue of December 1999 sold their shares based on these

misleading announcements and sale proceeds were transferred back into the account of MFL,

an entity owned by Mr. Vijay Jhindal and his family members i.e. his wife and his mother.

d) Mr.Vijay Jhindal tried to mislead the investigation regarding his resignation from VCL.

e) Mr. J. P. Madaan was the director of VCL, during the period February 28, 2000 to March 31,

2007 therefore, the misleading advertisements pertaining to the buyback of shares, bonus and

preferential issue of shares during period May-June2002 were issued when he was the director.

The unusual aspect of these advertisements were that they were issued at proposal stage itself

and the price/quantity mentioned in the advertisements are normally decided in the board

meeting and announcement after that. Also all these corporate actions were opposite in nature

as buyback reduces the number of outstanding shares while preferential allotment and bonus

issue increases the no. of outstanding shares. Thus, these advertisements were a ploy to

mislead the investors and by issuing the same has resulted in a pecuniary loss to the investors.

f) The issue of buyback, preferential allotment and bonus shares were discussed in the board

meetings of VCL on June 04, 2002, June 14, 2002 and July 05,2002 respectively. All these

meetings were chaired by Mr. J. P. Madaan and the proposal for all these corporate actions

were put forth by him and the minutes of the Board Meeting were also signed by him.

g) Mr. R. K. Garg, other director of VCL was also present in the board meetings of VCL on June

04, 2002, June 14, 2002 and July 05,2002 alongwith Mr. J. P. Madaan where the issue of

buyback, preferential allotment and bonus shares were discussed.


h) Since Mr. Vinay Talwar was Chairman cum Managing Director of VCL at the time of

preferential allotment in 1999 and he was also the introducer for the entities Cosmo Corporate

(A/C 43186), Fashion Tech (A/C 43160), Heritage Corporate (A/C 43194), Rajat Stock (A/C

43208) and Wisdom Publishing (A/C 43216) for opening the bank account. Mr. Vinay Talwar was

therefore, aware that the actual purpose of this preferential allotment was to cheat investors.

Hence, Mr. Vinay Talwar knowingly indulged in an act which was a fraud on investors.

clearly indicate that the whole scheme of things pertaining to preferential allotment during

December 1999 to 15 entities which were connected to VCL, its promoters and directors and

subsequent to sale of shares by these entities in the market during May-July 2002 based on

false, misleading advertisements which were issued at proposal stage, flow of funds from sale

of shares of these entities to the accounts of promoters and their companies,

submissions/statements made by directors, I am inclined to conclude that preferential

allotment during December 1999 and their sale during May-July 2002 were carried out as a

devise to enable fraudulent gains to the promoters and directors.

33. I find that, in this case, VCL made misleading information to the public and the stock

exchanges with regard to the number and identities of the preferential allottess . Further, the

information given by it to SEBI and stock exchanges in that regard was contradictory and

inconsistent. Such act and conduct of VCL further corroborates its mala fide in the transactions

impugned in the SCN. I, therefore, find that such misleading and distorted disclosures to

regulators and public was also a part of the scheme, plan and device employed by VCL and its

promoters/directors in this case.

34. I also find that except Anupama all the preferential allottees were allotted marginally less than 5% of

the post allotment equity share capital of VCL. However, all these 15 connected preferential

allottees acting in concert acquired total 70.25% of post preferential allotment equity capital of

VCL. However, these acquisitions were made in a clandestine manner as the requisite

disclosures with regard to the same under regulation 7 of the Takeovers Regulations, 1997 was

not made. Such active concealment of the material information about substantial acquisition of

shares coupled with hiding the identity of the preferential allottees clearly shows fraudulent and

deceitful behavior of the preferential allottees and VCL. As regards the obligation make open offer

under regulations 10 and 11 of the Takeovers Regulations, 1997, I am of the view that the said

acquisition of 70.25% shares by the preferential allottees was not in accordance with law under

regulation 10. Further, such acquisition was illegal and fraudulent and the preferential allottees

cannot be allowed to enjoy the benefit of their holdings on account of such acquisitions or to

further increase their stake in VCL.


35. A company being a legal person having separate and independent existence than its shareholders

acts through its board of directors who individually and collectively hold the position of trust

and have fiduciary duties towards the company, the shareholders and other stakeholders. It is

settled position that while alleging vicarious liabilities on the directors, the company should also

be proceeded with for its defaults (U.P. Pollution Control Board vs. Modi Distillary AIR 1998 SC

1128). In this case, Mr. Vijay Jhindal alongwith Mr. Vinay Talwar were involved in allotting shares

to 15 entities which were connected to VCL and its promoters, directors during December

1999. These 15 entities were provided funds by VCL through another two entities Anupama and

CBS System. Further, the 15 preferential allottees sold these shares during May-July 2002 after VCL

published false, misleading advertisement regarding buy back of its shares, bonus and

preferential issue of shares under the directions of Mr. Vijay Jhindal. The matter regarding buy

back of shares, bonus and preferential issue of shares were discussed in the board meetings

chaired by Mr. J. P. Madaan and attended by another director Mr. R. K. Garg. The sale proceeds

of the shares held by these 15 preferential allottees was transferred to accounts of MFL a company

promoted by Mr. Vijay Jhindal and his family. Stock Land, which was not a preferential allottees

however, got the shares from some preferential allottees and sold them in the market subsequent to

the issuance of false, misleading advertisements by VCL. The sale proceeds received by Stock

Land was transferred to the accounts of MFL, an entity owned and controlled by Mr. Vijay

Jhindal.

36. In view of the above facts and circumstances, I find that the noticees have contravened the

provisions of regulation 3, 4, 5 and 6 of the PFUTP Regulations, 1995 read with regulations 3

and 4 of the PFUTP Regulations, 2003. VCL and the preferential allottees have also violated

regulation 7 of the Takeover Regulations, 1997. Further, the preferential allottees, on account of

illegal and fraudulent acquisition of 70.25% equity shares of VCL, have violated regulations 10

and 11 of the Takeover Regulations, 1997.

37. I also note that both Mr. R. K. Garg and VCL were restrained by earlier SEBI order dated

February 20, 2008 for a period of two years and they have completed the term of the restrain.

Further, Ms. Shubha Jhindal was appointed as Director of VCL on July 5, 2002 and she did not

attend the board meetings on July 5, 2002 in which the deliberation with respect to buyback of

shares, preferential and bonus issues was made, I give her a benefit of doubt. However she was

also a director of MFL alongwith Mr. Vijay Jhindal and Ms. Angoori Devi (mother of Mr. Vijay

Jhindal). MFL received part of the sale consideration from some of preferential allottees who sold

their shares during May-July 2002 based on false misleading advertisements issued by VCL at

the proposal stage itself and she cannot escape liability in this regard.


38. Considering the above facts and circumstances, I, in order to protect the interest of investors

and the integrity of the securities market, in exercise of powers conferred upon me by virtue of

section 19 read with sections 11 and 11B of the Securities and Exchange Board of India Act,

1992 read with regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices

relating to Securities Market) Regulations, 2003 and regulation 44 of the SEBI (Substantial

Acquisition of Shares and Takeovers) Regulations, 1997 hereby:

(a) restrain the following entities from accessing the securities market and further prohibit them

from buying, selling or otherwise dealing in securities, directly or indirectly, or being

associated with the securities market in any manner, whatsoever, for the period as mentioned

in the following table :-

Sr. No. Entities PAN Period

1 Vital Communications Ltd. AAACV2016L 3years

2 Mr. Vijay Jhindal AADPJ9438J 3 years

3 Ms. Shubha Jhindal AAGPJ0051N 1 year

4 Mr. Vinay Talwar AAAPT0316L 3 years

5 Master Finlease Pvt. Ltd. AAACM6050D 3 years

6 Mr. J. P. Madaan AIAPM8977E 3 years

7 Mr. R. K. Garg AAAPG1594P 3 years

8 CBS System Ltd Not available 3 years

9 Anupama Communications Pvt. Ltd. AACCA4565H 3 years

10 Brut Finance (India)Pvt. Ltd. AABCB9386Q 3 years

11 Chankya Apparels Pvt. Ltd. AAACC0866H 3 years

12 Chankya Overseas Pvt. Ltd. AAACC0868K 3 years

13 Cosmo corporate Services Ltd. AAACC3529P 3 years

14 Fashion Tech India Ltd. AAACF0332R 3 years

15 Flair Finance (India) Ltd. AAACF2044G 3 years

16 Heritage Corporate Services Ltd. AAACH2120D 3 years

17 Perfect Car Scanners Pvt. Ltd. AAACP7864J 3 years

18 Rajat Stock Investments Pvt. Ltd. AAACR4085K 3 years

19 Troop Trac Chits Pvt. Ltd. AAACT0601P 3 years

20 Troop Trac Exports Pvt. Ltd. AABCT6785F 3 years

21 Troop Trac Electrodes Pvt. Ltd. Not available 3 years

22 Wisdom Publishing Pvt. Ltd. AAACW0942L 3 years

23 S. V. Stock Land Not available 3 years

24 Troop Trac Marketing Pvt. Ltd. AABCT6800D 3 years

(b) direct that the preferentially allotted shares of VCL lying in the demat accounts of the

preferential allottees shall remain frozen;

(c) direct VCL not to give effect to transfer of any shares acquired and held by the preferential

allottees in the preferential allotment dated December 14, 1999;

(d) restrain the preferential allottees from exercising any voting rights (including through nominee


or proxy) or other rights attached to the shares acquired and held by them in the preferential

allotment dated December 14, 1999.

39. The period of prohibition already undergone by VCL and Mr. R. K. Garg , pursuant to the

Order dated February 20, 2008 shall be taken into account for the purpose of computing the

period of prohibition imposed in para. 38 (a) of this Order.

40. This order shall come into force with immediate effect.

41. A copy of this order shall also be served upon the depositories and stock exchanges for

necessary action on their part.

DATE: JULY 31st , 2014 RAJEEV KUMAR AGARWAL

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

wtm/rka/ivd/id-08/72-95/2014 before the securities and … · the price of scrip had increased up...

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