The securities appellate tribunal (SAT) has affirmed an order passed by the Securities and Exchange Board of India (SEBI) against three entities for manipulating the price of Mishka Finance and Trading Ltd (Mishka), formerly known as Pyramid Trading and Finance Ltd. The three entities include two directors of Roongta Rising Stock Pvt Ltd (RRSPL) and AK Roongta, a Hindu undivided family (HUF) in which one of the directors of RRSPL is
karta. Mishka was named by
Moneylife in
May 2014 under the stories of price manipulation series.
In an order, the bench of Justice Tarun Agarwala (presiding officer) and Meera Swarup (technical member) says, "In our opinion, these appellants had planted a fraudulent scheme in the securities market whereby a fake stock was identified, activated and consequently transferred to certain entities in the market. This apart all the transactions initiating from the act of purchase of the promoter shares and spreading it out in the market was manipulative and fraudulent. Subsequently, the Roongtas manipulated the price of the scrip and therefore in our opinion noticee no8, 9 and 12 violated the regulation 3 and 4 of the SEBI prohibition of fraudulent and unfair trade practices relating to securities market regulations (PFUTP)."
SAT says, noticee nos8 and 9, namely, Anil Satyanarayan Roongta and Sudha Anil Roongta being directors of RRSPL devised a scheme where they purchased the entire shareholding from the promoters and promoter entities at Rs5 per share and paid valuable consideration.
Mishka was listed on BSE. However, for non-payment of listing fees, trading in the scrip was suspended between 7 January 2002 and 9 May 2012. The suspension was revoked on 10 May 2012.
Mishka had seven promoters who, December 2011 onwards, sold their shares through RRSPL and received payment of Rs21,21,500 directly from the broker and the balance of Rs3,58,500 from the buyers as per the instructions of RRSPL. The promoter and promoter-related entities had transferred 99.60% of their shareholding to 383 entities through RRSPL out of which 19 entities further transferred it to 69 entities and therefore ultimately 99.60% of promoter shareholding was transferred to 452 entities.
Between January and December 2013, the company made several announcements related to bonus shares, and share split.
SEBI noticed a huge rise in the trading volume and price in the scrip of Mishka from 14 February 2013 to 31 December 2014. Accordingly, the market regulator conducted an investigation and found that the price of shares of Mishka moved to Rs327.25 on 15 January 2014 from Rs5.50 on 14 February 2013. After the split of the shares on 30 December 2013, SEBI noticed that the price of the scrip touched a high of Rs49.90 on 14 February 2014.
The investigation further revealed that Mishka had also made a preferential allotment during FY12-13 and, subsequent to the release of the compulsory lock-in period of one year, the preferential allottees and the promoter-related entities were provided an exit at a high price by certain entities allegedly related or connected amongst themselves and with Mishka.
SAT observed that RRSPL had become a single contact point for the buyers of the scrip through the Roongtas. "The whole time member (WTM) of SEBI was justified in holding that when the shares were purchased off market and the issuance of contract notes was a fake transaction as there was no genuine need to issue a contract note for off market transaction in a suspended stock like Mishka. The evidence on record clearly indicates that the funds moved directly from RRSPL’s account to the erstwhile promoters and there was non-levy of brokerage for transactions and consequently the findings that the Roongtas acted as principal and not as an agent broker was rightly arrived at by the WTM."
During the hearing before SEBI, the Roongtas contended that the entire transaction was sourced and concluded by one Subhash Maheshwari and that RRSPL only acted as a broker to the transactions between the buyers and sellers. They also submitted a memorandum of understanding (MoU) executed between Vijay Kumar Jain, director in Mishka and Mr Maheswari, who was mandated to sell the shares of Mishka.
However, the SEBI WTM rejected the contention and found that the MoU was only a piece of paper that was never acted upon and was procured to camouflage the scheme devised by the Roongtas.
The WTM, in
his order on 2 December 2020, had barred the three from markets. While the ban on Anil Roongta and AK Roongta HUF, as per an interim order issued on 17 April 2015, was lifted, Sudha Roongta was barred for four years in the December 2020 order.
Last year in July,
SEBI imposed a penalty of Rs15 lakh on Mishka, Ankit Garodia, Jugalkishore Sharma, Amit Kumar Vasishtha, Rameshwar Wagh and Anand Gupta for failing to provide relevant and adequate information to shareholders while seeking ratification of the diversion and mis-utilisation of funds raised through preferential issues.
(Appeal Nos72/207 of 2021 Date: 14 February 2023)
