SEBI - ORDERS OF THE MEMBER (TCN)
WTM/TCN/ID3/19/July/2008 dtd. 18-Jul-2008
Order against Shri Amal Parikh in the matter of Color Chips (I) Ltd
Facts of the case
M/s. Color Chip India Limited (CCIL) which was formerly known as Color Chips Animation Park Limited (CCAPL) announced of open offer on January 20, 2000 to acquire 13,69,000 fully paid up equity shares at par value and 6, 51, 100 partly paid up equity shares at a price proportionate to the amount paid up on the shares of a company called “Arham Fiscals Limited”. The said acquisition was done as per the advice of Mr. B. K. Sharma (a known equity and financial consultant in Hyderabad).
CCAPL along with Shri B K Sharma had acquired more than 36 lakhs shares that they had officially declared, from the promoters and existing shareholders of Arham Fiscal Ltd.
They acquired the additional shares in the names of front companies like Kruthika Portfolios and various individuals ... + Read more
Facts of the case
M/s. Color Chip India Limited (CCIL) which was formerly known as Color Chips Animation Park Limited (CCAPL) announced of open offer on January 20, 2000 to acquire 13,69,000 fully paid up equity shares at par value and 6, 51, 100 partly paid up equity shares at a price proportionate to the amount paid up on the shares of a company called “Arham Fiscals Limited”. The said acquisition was done as per the advice of Mr. B. K. Sharma (a known equity and financial consultant in Hyderabad).
CCAPL along with Shri B K Sharma had acquired more than 36 lakhs shares that they had officially declared, from the promoters and existing shareholders of Arham Fiscal Ltd.
They acquired the additional shares in the names of front companies like Kruthika Portfolios and various individuals related to the acquirers.
It has been observed from the BSE reports that the first trade in the scrip of Arham Fiscal Ltd was at Rs. 57 on January 20, 2000 and on the same day it increased upto Rs. 290 and closed at Rs. 216.30.
The lowest price recorded on this day was Rs. 50 and total quantity traded was 2, 30, 800 shares. The trading quantity during the entire investigation period was 23, 00, 900 shares.
Kruthika Portfolio was a client of M/s Ohm Stock Broking P Ltd and Ohm Stock Broking P Ltd executed two of the trades on January 20, 2000 of qty 2,00,000 at price Rs. 50 to two mutual funds.
Shri Amal Parikh (Noticee), Director of Ohm stock Broking Pvt. Ltd. (OSBPL) bought shares from Shri Chanderiah who had been introduced to him by Shri B K Sharma. B K Sharma had approached Amal Parikh and had offered the shares of CCAPL the payment of which was made to CCAPL. However the payment was returned to them by Shri Sharma with a request to make payments to Shri Chanderiah for the shares of CCIL.
The investigations had alleged that Ohm Stock Broking P Ltd was aware of the nefarious designs of Shri B K Sharma all along and colluded with him. It was also alleged that it did not exercise due diligence, especially with regard to verifying the authenticity of the clients and that it had aided and abetted Shri B K Sharma in manipulating the price of CCIL.
In the reply to the show cause notice, noticee mentioned that there was no evidence to establish that the entity was in any way, directly or indirectly, connected to the alleged manipulations and that mere business acquaintance with Shri B K Sharma does not prove the violations specified in the Show Cause Notice. He also submitted that he was only one of the investors in the shares of CCIL on being approached by Shri. B K Sharma and it was only a strategic investment opportunity. It was further submitted that the foundation of the alleged charge in the notice primarily emanates from the single transaction being the sale of 2 lakh shares of CCIL by Kruthika through Ohm, acting as a broker for Kruthika, on January 20, 2000, which shares were purchased by two mutual funds. It was also submitted that there is no evidence on record to state the connection of his participation in the said transaction and that he was not even a member of CCIL on January 20, 2000.
Observations
Vide order dated 23.08.2007, ref. no.WTM/TCN/55/ID3/08/2007 no penalty was levied against the broker, M/s. Ohm Stock Brokers Pvt. Ltd., for their dealing in the scrip of CCIL. The order directed no penalty on OSBPL as OSBPL had ensured compliance of the requisite procedures and also the completion of the transaction appropriately by obtaining delivery of the shares to be sold in advance from its client, and making the payment in favour of KPL by cheque. Also, there has been no personal benefit that accrued to OSBPL out of the transactions for its client and no such allegation has also been made against it, to this effect.
It is observed that the relation between notice & B.K. Sharma could be only in the nature of business acquaintances.
It is found that mere purchase of the shares of CCIL, price of which was manipulated, it cannot be said that the noticee was aiding or abetting anybody involved in it.
It is also observed that the noticee did not make any personal gains.
Order
Dispose of the show cause notice issued to Shri Amal Parikh without any directions in the matter of M/s. Color Chip India Limited.
Members need to ensure strict compliance with the procedures which can avoid any unwarranted issues.
Members need to ensure strict compliance with the procedures which can avoid any unwarranted issues.
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