Case: 1. SEBI, 2. In Re: Somplast Leather Industries Limited Vs Mr. Sandeep Janamdas Merchant. Securities and Exchange Board of India

JudgesK.M. Abraham, Member
IssueCompany Law
Judgement DateNovember 27, 2009
CourtSecurities and Exchange Board of India


K.M. Abraham, Member

  1. Securities and Exchange Board of India (hereinafter referred to as SEBI) conducted an investigation into the alleged price manipulation in the shares of Somplast Leather Industries Limited (hereinafter referred to as the company) during the period January 2, 2002 to October 1, 2002 (hereinafter referred to as the investigation period). It was observed that the share price of the company had increased from Rs. 283/- (on January 2, 2002) to Rs. 416.90/- (on April 23, 2002). During the period under investigation, the share price reached its peak at Rs. 482/- on September 13, 2002. The traded volumes were found to be irregular, with volumes ranging between 7,000 shares on January 31, 2002 to 5 shares on May 30, 2002. The investigation conducted by SEBI observed that Mr. Sandeep Janamdas Merchant (hereinafter referred to as the noticee) had entered into structured/synchronized/circular trades in the shares of the company during the investigation period. The noticee was found to have traded through multiple stock brokers namely Crescent Finstock Limited and Bharti Thakkar India Securities Private Limited, the counter party being (i) M/s Om Gayatri Securities [Trading Member- M/s Shripal B. Jain] and (ii) M/s Shree Shyam Investment [Trading Member-Sanchay Fincom Limited]. It was inter alia observed that the trades of the noticee not only created artificial volume in the shares of the company but also impacted its market price and hence the noticee had prima facie violated Regulation 4 (a), (b), (c) and (d) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as the PFUTP Regulations). Accordingly, SEBI issued a show cause notice dated September 23, 2005 to the noticee in respect of the alleged violations. The trade details of the noticee and the price-volume data in the shares of the company were also provided to the noticee with the show cause notice. Thereafter, M/s Thakurdas Madgavkar, Advocates & Solicitors, on behalf of the noticee, vide letter dated December 22, 2005, informed that they would reply to the show cause notice, shortly. As no reply was received on behalf of the noticee, SEBI sent letters dated January 30, 2006 and March 2, 2006 to the noticee advising it to file the reply within the period specified therein. However, the noticee failed to submit any reply to the show cause cause notice.

  2. Thereafter, an opportunity of hearing was granted to the noticee on March 31, 2009. However, the letter intimating the date of such hearing could not be delivered at the last known address of the noticee. In view of the above, another opportunity of hearing was granted to the noticee on July 14, 2009. The said letter was posted in SEBI website under the heading 'undelivered notices and summons'. Since, the hearing notice could not be delivered on the noticee, an advertisement was published on August 13, 2009 in a national news paper and a vernacular news paper having vide circulation in the region where the last known address of the notice was located, giving fifteen days...

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