BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER

Transcription

1 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, In respect of: Sl. No. Name of the entities (Noticees) PAN Order Number 1 Vital Communications Ltd. (VCL) AAACV2016L 72/ Mr. Vijay Jhindal (Mr. Vijay Jhindal) AADPJ9438J 73/ Ms. Shubha Jhindal (Ms. Shubha Jhindal) AAGPJ0051N 74/ Mr. Vinay Talwar (Mr. Vinay Talwar) AAAPT0316L 75/ Master Finlease P. Ltd. (MFL) AAACM6050D 76/ Mr. J. P. Madaan (Mr. Madaan) AIAPM8977E 77/ Mr. R. K. Garg (Mr. R. K. Garg) AAAPG1594P 78/ CBS System Ltd. (CBS System) Not available 79/ Anupama Communications Pvt. Ltd. (Anupama) AACCA4565H 80/ Brut Finance (India) Pvt. Ltd. (Brut Finance) AABCB9386Q 81/ Chankya Apparels Pvt. Ltd. (Chanakya Apparels) AAACC0866H 82/ Chankya Overseas Pvt. Ltd. (Chankya Overseas) AAACC0868K 83/ Cosmo Corporate Services Ltd. (Cosmo Corporate) AAACC3529P 84/ Fashion Tech India Ltd. (Fashion Tech) AAACF0332R 85/ Flair Finance (India) Ltd. (Flair Finance) AAACF2044G 86/ Heritage Corporate Services Ltd. (Heritage Corporate) AAACH2120D 87/ Perfect Car Scanners Pvt. Ltd. (Perfect Car) AAACP7864J 88/ Rajat Stock Investments Pvt. Ltd. (Rajat Stock) AAACR4085K 89/ Troop Trac Chits Pvt. Ltd. (Troop Trac Chits) AAACT0601P 90/ Troop Trac Exports Pvt. Ltd. (Troop Trac Exports) AABCT6785F 91/ Troop Trac Electrodes Pvt. Ltd. (Troop Trac Electriodes) Not available 92/ Wisdom Publishing Pvt. Ltd. (Wisdom Publishing) AAACW0942L 93/ S. V. Stock Land (Stock Land) Not available 94/ Troop Trac Marketing Pvt. Ltd. (Troop Trac Marketing) AABCT6800D 95/2014 Order in the matter of Vital Communications Limited Page 1 of 47

2 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 8 CBS System 9 Anupama 10 Brut Finance None 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 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, 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, 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, Pursuant to the preferential allotment, the shares of the company were listed at Bombay Stock Exchange (BSE) in May, 2000 and at Order in the matter of Vital Communications Limited Page 2 of 47

3 National Stock Exchange of India Limited (NSE) on March 7, 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, 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 Order in the matter of Vital Communications Limited Page 3 of 47

4 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, (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, Table No. 1- Preferential Allotment of Shares by VCL (as informed to SEBI) Sl. no. Preferential Allottees Shares Allotted 1 Anupama Brut Finace Chankya Apparels Chankya Overseas Cosmo Corporate Fashion Tech Flair Finance Heritage Corporate Perfect Car Rajat Stock Troop Trac Chits Troop Trac Exports Troop Trac Electrodes Troop Trac Marketing Wisdom Publishing Total (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: Order in the matter of Vital Communications Limited Page 4 of 47

5 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 Mr. Ghanshyam Das Gupta Chankya Apparels Mr. Ravindra Kumar Cosmo Corporate Fashion Tech Flair Finance Heritage Corporate Perfect Car Rajat Stock Mr. Naresh Kumar Mr. Jyoti Prakash Troop Trac Electrodes Mr. Dharmender Kumar Wisdom Publishing Total (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, 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 Brut Finance Chankya Apparels Chankya Overseas Cosmo Corporate Fashion Tech Flair Finance Heritage Corporate Perfect Car Order in the matter of Vital Communications Limited Page 5 of 47

6 10 Rajat Stock Troop Trac Chits Troop Trac Exports Troop Trac Electrodes Troop Trac Marketing Wisdom Publishing 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 ; 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, 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); Order in the matter of Vital Communications Limited Page 6 of 47

7 b) Address of MFL and VCL was same, i.e., 606, Kailash Building, K. G. Marg, New Delhi ; 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, Mr. R. K. Garg He was director of VCL during April 2002 to July 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, 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. 10 Brut Finance a) 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.; 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. Order in the matter of Vital Communications Limited Page 7 of 47

8 11 Chanakya Apparels a) Had banking transactions with Anupama and VCL; b) 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.; 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; b) 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.; 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. b) 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.; c) Mr. R. K. Mishra is the common director for Cosmo Corporate, Troop Trac Chits, Flair Finance, Chanakya Apparels. 14 Fashion Tech a) Had banking transactions with Anupama. b) 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.; 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. b) 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.; c) Mr. R. K. Mishra is the common director of Cosmo Corporate, Troop Trac Chits, Order in the matter of Vital Communications Limited Page 8 of 47

9 Flair Finance, Chanakya Apparels. 16 Heritage Corporate a) Had Banking transaction with Anupama; b) 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.; c) Common address of Troop Trac Exports, Heritage Corporate and Mr. Atul Kumar, Director of Brut Finance; 17 Perfect Car a) Had banking transactions with MFL and Anupama. b) 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.; 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. b) 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.; c) Mr. Ram Singh is the common director of Rajat Stock, Troop Trac Exports, Fashion Tech, Chanakya Overseas. 19 Troop Trac Chits a) Had banking transactions with VCL, promoters of VCL and other related entities including Anupama. b) 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.; c) Mr. R. K. Mishra is the common director for Cosmo Corporate, Troop Trac Chits, Flair Finance, Chanakya Apparels. 20 Troop Trac Exports a) Common address of Troop Trac Exports, Heritage Corporate and Mr. Atul Kumar, Director of Brut Finance; b) 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 Order in the matter of Vital Communications Limited Page 9 of 47

10 Alankit Assignment and Abhipra Capital Services Ltd.; 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, Fashion Tech, Chanakya Overseas. 21 Troop Trac Electrodes a) Had banking transaction with Anupama. b) 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.; 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. b) 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. 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, 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.; 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 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: Order in the matter of Vital Communications Limited Page 10 of 47

11 Table No. 5- Fund transfers by VCL Date Transferred to Cheque No. Amount (in `) 07/12/1999 CBS Systems ,00,000 09/12/1999 Anupama ,50,000 11/12/1999 Anupama ,00,000 14/12/1999 Anupama ,00,000 17/12/1999 Anupama ,00,000 17/12/1999 CBS Systems ,50,000 23/12/1999 Anupama ,00,000 28/12/1999 Anupama ,50,000 11/01/2000 Rajat Stock /01/2000 Cosmo Corporate /02/2000 Anupama /02/2000 Anupama (17) The above bank account of VCL (A/c No with Bank of Rajasthan, Barakhambha Road, Delhi) was opened on March 08, 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/ ,50,000 19/11/ ,50,000 23/12/ ,00,000 26/11/ ,00,000 27/11/ ,50,000 03/12/ ,00,000 23/12/ ,00,000 23/12/ ,75,000 04/01/ ,25,000 Table No. 7- Fund transfers by VCL to Anupama Order in the matter of Vital Communications Limited Page 11 of 47

12 Date Cheque No. Amount (in `) 08/12/ ,50,000 16/12/ ,50,000 11/12/ ,75,000 18/12/ ,00,000 18/01/ ,50,000 11/01/ ,00,000 05/01/ ,60,000 14/01/ ,00,000 21/01/ ,00,000 21/01/ ,00,000 21/01/ ,50,000 29/01/ ,00,000 25/01/ ,00,000 25/01/ ,25,000 02/02/ ,10,000 01/05/ ,00,000 26/04/ ,00,000 06/05/ ,00,000 15/05/ ,00,000 22/05/ ,50,000 26/04/ ,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 Order in the matter of Vital Communications Limited Page 12 of 47

13 31/12/1999 Cosmo Corporate 1,75,000 31/12/1999 Wisdom Publishing 12,50,000 07/01/2000 Troop Trac Electrodes 15,00,000 12/01/2000 Heritage Corporate 19,00,000 14/01/2000 Cosmo Corporate 2,75,000 14/01/2000 Wisdom Publishing 1,25,000 14/01/2000 Troop Trac Chits 2,50,000 17/01/2000 Rajat Stock 2,00,000 17/01/2000 Heritage Corporate 16,00,000 19/01/2000 Heritage Corporate 2,50,000 22/01/2000 Wisdom Publishing 6,50,000 25/01/2000 Heritage Corporate 15,00,000 25/01/2000 Cosmo Corporate 1,00,000 27/01/2000 Wisdom Publishing 4,75,000 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 ,00,000 Money was transferred from the 30/03/2000 MFL ,00,000 account of Anupama or by cash 31/03/2000 Mr. Vijay Jhindal ,00,000 to this account on previous day. 31/03/2000 Ms. Shubha Jhindal ,00,000 12/04/2001 ISF securities /04/2001 ISF securities /04/2001 Ms. Angoori Devi ,00,000 17/04/2001 Ms. Shubha Jhindal ,00,000 Order in the matter of Vital Communications Limited Page 13 of 47

14 B. Chanakya Apparels through its account number 341, Federal Bank, Karol Bagh, New Delhi: Table No Fund transfers from Chanakya Apparels Date Transferred to Cheque No. Amount (in `) Remark 09/12/1999 VCL ,00,000 Money was deposited in the 11/12/1999 VCL ,00,000 account one/two day prior. 14/12/1999 VCL ,00,000 24/04/2000 VCL ,00,000 03/05/2000 VCL ,00,000 13/05/2000 VCL ,50,000 07/03/2001 Anupama ,00,000 94,50,000 C. Chanakya Overseas through its current account number 348, Federal Bank Ltd, Karol Bagh, New Delhi. Table No Fund transfers from Chanakya Overseas Date Transferred to Cheque No. Amount (in `) Remark 09/12/1999 VCL ,00,000 15/12/1999 VCL ,00,000 25/04/2000 VCL ,00,000 Money was deposited in the account 02/05/2000 VCL ,00,000 one/two day prior by cash or related 13/05/2000 VCL ,50,000 entities. 18/04/2001 Anupama ,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 Fund transfers from Troop Trac Chits Date Transferred to Cheque No. Amount (`) Remark 06/12/1999 VCL ,50,000 Money was deposited in the account 14/12/1999 VCL ,50,000 one/two day prior by cash or related 05/01/2000 Shubha Jhindal ,50,000 entities. 17/01/2000 VCL ,50,000 29/04/2000 VCL ,00,000 13/05/2000 VCL ,50,000 Order in the matter of Vital Communications Limited Page 14 of 47

15 17/03/2001 Anupama ,00,000 29/03/2001 Anupama ,00,000 E. Further, Fashion Tech received `30 lacs on March 14, 2001 and transferred the same amount to Anupama on March 15, Similarly, Further, Fashion Tech received `20 lacs on April 10, 2001 and transferred the same amount to Anupama on April 11, 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 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/ /05/2002 and 28/05/ /05/2002 Economic Times Business Standard Buyback up to 10,00,000 shares at maximum price of `30/- 27/05/ /05/ /05/2002 Business Standard Economic Times Preferential allotment of equity shares up to 10,00,000 at the rate of `35/- (Going price in BSE- `7.55/-) 17/06/ /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. Order in the matter of Vital Communications Limited Page 15 of 47

16 (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 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 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 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:- Order in the matter of Vital Communications Limited Page 16 of 47

17 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/ lacs Anupama 05/07/2002 Troop Trac Perfect Car 05/07/2002 Marketing 05/07/ lacs Stock Land 13/07/2002 Perfect Car 15/07/ lacs Fashion Tech 15/07/2002 Troop Trac Stock Land 17/07/2002 Marketing 18/07/ lacs (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 Order in the matter of Vital Communications Limited Page 17 of 47

18 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. 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) 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. 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. 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. 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. 4. Mr. Vijay Jhindal VCL and its promoters and directors orchestrated ploy to create an artificial demand for shares of VCL and induce 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, 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). 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, 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 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, Regulations 3 and 6(a) of the PFUTP Regulations, 1995 Regulations 3, 4, 5(1) and 6(a) of the PFUTP Regulations, 1995 read with regulations 3, 4(2)(f) and 17/09/ /05/ /09/ /05/ /09/ /05/2005 Order in the matter of Vital Communications Limited Page 18 of 47

19 innocent investors for purchasing shares so as to absorb sales by the promoter related entities. 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. 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. 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. Issuing misleading advertisements to the public which led to creation of artificial volume and defraud the gullible investors 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. Issuing misleading advertisements to the public which led to creation of artificial volume and defraud the gullible investors 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 4(2)(k) of the PFUTP Regulations, Regulations 3, 4(a) and 4(b), 5(1)(a) and (b), 6(a) and (d) of the PFUTP Regulations, 1995 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, 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, 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 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, 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 Regulations 3 and 6(a) of the PFUTP Regulations, /09/ /09/ /05/ /09/ /05/ /09/ /09/2007 Order in the matter of Vital Communications Limited Page 19 of 47

20 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. 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. 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. 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. 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. 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. 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. 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 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. Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, /09/ /09/ /09/ /09/ /09/ /09/ /09/ /09/ /09/2007 Order in the matter of Vital Communications Limited Page 20 of 47

21 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. 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. 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. Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, 1997 Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, /09/ /09/ /09/ 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. Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, /09/ 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. Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, /09/ 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. Regulations 3 and 6(a) of the PFUTP Regulations, 1995 as well as regulation 10 and 11 of the Takeover Regulations, /09/2007 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 6(a) of the PFUTP Regulations, 1995 read with regulation 3(c) and 3(d), of the PFUTP Regulations, 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. Order in the matter of Vital Communications Limited Page 21 of 47

22 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 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 `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 20/05/ /05/2002 and 28/05/2002 Newspaper Economic Times 29/05/2002 Business Standard Matter in the advertisement Buyback of upto 10,00,000 shares at the maximum price of `30/- 27/05/ /05/2002 Business Standard Preferential allotment of equity shares upto `20 lacs at the rate of 29/05/2002 Economic Times `35/- (Market price at BSE `7.55/-) 17/06/ /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. Order in the matter of Vital Communications Limited Page 22 of 47