Case: 1. SEBI, 2. Universal Media Network Limited and Its Directors (Mr. Ashok Kumar Mishra, Mr. P.R. Parasuram, Mr. Manish Pardiwala and Mr. Paresh Shantilal Shah) and Ors. Vs 1. In Re: Universal Media Network Limited. Securities and Exchange Board of India

Party Name1. SEBI, 2. Universal Media Network Limited and Its Directors (Mr. Ashok Kumar Mishra, Mr. P.R. Parasuram, Mr. Manish Pardiwala and Mr. Paresh Shantilal Shah) and Ors. Vs 1. In Re: Universal Media Network Limited
JudgesK.M. Abraham, Member
IssueCompany Laws
Judgement DateOctober 01, 2009
CourtSecurities and Exchange Board of India

Order:

K.M. Abraham, Member

  1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) noticed several advertisements made by certain companies during the year 2002 in the newspapers highlighting their past activities, projecting an exceptionally buoyant picture about their future and announcing that the board (of such companies) was considering a corporate action (such as buy back of shares, preferential allotment of shares, bonus issue etc.). It was found that such advertisements were made by the companies on their own accord without being compelled to do so by any law in force. Pursuant to such advertisements, it was noticed that there was an unusual price-volume movement in the shares of those companies which had issued such advertisements. SEBI also noticed that majority of such advertisements were issued through an agency by name, M/s. Garima Communications, Ahmedabad. One such company which had issued similar advertisements in the newspapers during the relevant period was Universal Media Network Limited (hereinafter referred to as the company). The shares of the company were listed at the Bombay Stock Exchange Limited (hereinafter referred to as BSE), the Ahmedabad Stock Exchange Limited (hereinafter referred to as ASE), the Calcutta Stock Exchange Association Limited (hereinafter referred to as CSE) and the Jaipur Stock Exchange Limited (hereinafter referred to as JSE). SEBI noticed that the company had issued advertisements in leading newspapers during last week of June 2002, giving notice that a meeting of the Board of Directors of the Company is scheduled to be held on the 4th day of July, 2002 at the registered office inter alia to take on record consideration of bonus shares. The company had intimated the same to BSE, ASE, CSE and JSE on June 27, 2002. It was found that the first advertisement dated June 24, 2002 was published on June 27, 2002 in the daily, The Economic Times. Similar advertisements were also issued in Gujarat Samachar (on June 28, 2002), Mumbai Samachar (on June 28, 2002) and Investor Guide (on July 01, 2002) and that the total cost of issuance of all the advertisements was approximately Rs. 2.5 lakhs. It prima facie appeared to SEBI, that the advertisements were issued to attract investor interest in the shares of the company and to induce them to trade in the said shares. Therefore, in order to ascertain the veracity of such advertisements and to find out the possible violations, if any, of the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act) and the Rules and Regulations framed thereunder, by the company or any person dealing in the shares of the company, SEBI conducted an investigation into the buying, selling and otherwise dealing in the shares of the company. The findings of the investigation inter alia were that:

    1. the company issued advertisements in prominent business newspapers between June 27, 2002 and July 01, 2002 regarding the proposed board meeting to be held on July 04, 2002, inter alia, to consider the allotment of bonus shares; board meeting to be held on July 04, 2002, inter alia, to consider the allotment of bonus shares;

    2. the advertisements were made in the absence of any legal requirement on the part of the company and that such advertisements were published when the company was incurring losses and also when it was not declaring dividends;

    3. the advertisements and the contents therein were published on unsubstantiated and intangible premise and that there never was any intention to proceed with the bonus issue and that the advertisements were published only with a view to create investor interest in the shares of the company;

    4. Mr. Ashok Kumar Mishra, Mr. Paresh Shantilal Shah, Mr. Manish Pardiwala and Mr. P.R. Parasuram were the directors of the company during the relevant period;

    5. entities/individuals related to the promoter group and their associates namely Galaxy Television Limited, SGP Investments Private Limited, MBS Investments and Trading Private Limited etc., had offloaded a total of 1,38,21,517 shares of the company during the relevant period. Mr. Siddhartha Srivastava was a promoter/controlling shareholder in Galaxy Television Limited and also in the company. He was also the director/authorized signatory for SGP Investments Private Limited and MBS Investments and Trading Private Limited;

    6. some of the transferees had offloaded substantial shares of the company in the market pursuant to the said advertisements, thereby making unfair gains;

    7. there was an increase in the volumes traded in the shares of the company subsequent to the issuance of the advertisements when the price/volume history indicated that the shares were thinly traded;

    8. pursuant to the impugned advertisements, the volumes increased but the share price fell;

    9. though the company published advertisements that bonus shares were to be allotted, no such issue was made by the company thereafter.

  2. The investigation alleged that the company and its directors had issued the impugned advertisements for the sole purpose of creating investor interest in the scrip and to enable related entities/individuals to offload their stake to unsuspecting buyers in an artificially created market for the shares of the company. The company, its directors and other related entities/individuals were therefore alleged to have violated the provisions of the 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). Subsequently, show cause notices dated December 02, 2004 were issued by SEBI, inter alia to the company, its directors (namely Mr. Ashok Kumar Mishra, Mr. Paresh Shantilal Shah, Mr. Manish Pardiwala and Mr. P R Parasuram), Mr. Siddhartha Srivastava, promoter related entities i.e. MBS Investments & Trading Private Limited, S G P Investments Private Limited and Galaxy Television Limited, requiring them to show cause as to why suitable directions including directions of debarring them from dealing in securities for a specific period should not be passed. They were advised to reply to the said notice within twenty one days from the date of receipt and also informed that in case no reply was received with the specified period, it would be presumed that they have no explanations to offer and that action may be initiated as per law. For the sake of convenience, Universal Media Network Limited and its directors (Mr. Ashok Kumar Mishra, Mr. Paresh Shantilal Shah, Mr. Manish Pardiwala & Mr. P R Parasuram), Mr. Siddhartha Srivastava, MBS Investments & Trading Private Limited, SGP Investments Private Limited and Galaxy Television Limited shall henceforth be collectively be referred to as noticees and individually by their respective names. The noticees and two Ahmedabad based individuals, Mr. Atul Shah and Mr. Raju Shah (who were also covered under the aforesaid show cause notice), had subsequently filed their applications with SEBI for settling the case under consent in terms of SEBI Circular dated April 20, 2007. Therefore, the proceedings in respect of them were kept in abeyance. With respect to the seven other individuals [Mr. Kishore Vithalbhai Thakkar, Mr. Ashit H Vora, Mr. Maulik Patwa, Mrs. Swati Aslesh Shah, Mr. Sanjiv P. Shah, Mr. Dixit Babubhai Patel and Mr. Mukesh Bachubhai Vadecha] covered under the aforesaid show cause notice, SEBI, vide order dated February 18, 2008, held them guilty of violating the provisions of Regulations 3, 4(b), 5 and 6(a) of the PFUTP Regulations and restrained them from accessing the securities market and also prohibited them from buying, selling or otherwise dealing or associating with the securities market in any manner whatsoever for a period of Securities Market) Regulations, 1995 (hereinafter referred to as the PFUTP Regulations). Subsequently, show cause notices dated December 02, 2004 were issued by SEBI, inter alia to the company, its directors (namely Mr. Ashok Kumar Mishra, Mr. Paresh Shantilal Shah, Mr. Manish Pardiwala and Mr. P R Parasuram), Mr. Siddhartha Srivastava, promoter related entities i.e. MBS Investments & Trading Private Limited, S G P Investments Private Limited and Galaxy Television Limited, requiring them to show cause as to why suitable directions including directions of debarring them from dealing in securities for a specific period should not be passed. They were advised to reply to the said notice within twenty one days from the date of receipt and also informed that in case no reply was received with the specified period, it would be presumed that they have no explanations to offer and that action may be initiated as per law. For the sake of convenience, Universal Media Network Limited and its directors (Mr. Ashok Kumar Mishra, Mr. Paresh Shantilal Shah, Mr. Manish Pardiwala & Mr. P R Parasuram), Mr. Siddhartha Srivastava, MBS Investments & Trading Private Limited, SGP Investments Private Limited and Galaxy Television Limited shall henceforth be collectively be referred to as noticees and individually by their respective names. The noticees and two Ahmedabad based individuals, Mr. Atul Shah and Mr. Raju Shah (who were also covered under the aforesaid show cause notice), had subsequently filed their applications with SEBI for settling the case under consent in terms of SEBI Circular dated April 20, 2007. Therefore, the proceedings in respect of them were kept in abeyance. With respect to the seven other individuals [Mr. Kishore Vithalbhai Thakkar, Mr. Ashit H Vora, Mr. Maulik Patwa, Mrs. Swati Aslesh Shah, Mr. Sanjiv P. Shah, Mr. Dixit Babubhai Patel and Mr. Mukesh Bachubhai Vadecha] covered under the aforesaid show cause notice, SEBI, vide order dated February 18, 2008, held them guilty of violating the provisions of Regulations 3, 4(b), 5 and 6(a) of the PFUTP Regulations and restrained them from accessing...

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