WTM/RKA/EFD/DRA-1/150/ 2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER
Under sections 11, 11B and 11(4) of the SEBI Act, 1992 read with clause 17 of the SEBI
(Disclosure and Investor Protection) Guidelines, 2000 and regulations 107 and 111 of the
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 in respect of
Advance Hovercraft & Composites India Ltd. and Shri Prashant Kumar- in the matter of
Shonkh Technologies International Limited.
1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) received a
reference from Serious Fraud Investigation Office (hereinafter referred to as SFIO) alleging
inter alia that Advance Hovercraft & Composites India Limited (hereinafter referred to as
AHCIL), one of the promoters of Shonkh Technologies International Limited (hereinafter
referred to as STIL) had violated the erstwhile Securities and Exchange Board of India
(Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred to as the DIP
Guidelines) by dematerializing and selling certain shares of STIL, which were under the lock-in
period, through its front entities in the securities market in a fraudulent manner. Based on this
reference, SEBI conducted an investigation into the dealings in the shares of STIL.
2. Pursuant to the investigations, a show cause notice (SCN) dated May 21, 2012 was issued to
AHCIL and Mr. Prashant Kumar (hereinafter collectively referred to as the "noticees" or by
their respective names) as to why suitable directions including direction for debarment from
buying, selling or dealing in securities for a specified period should not be issued against them
under sections 11, 11(4) and 11B of the SEBI Act read with clause 17 of the DIP Guidelines
(since rescinded) and regulations 107 and 111 of the SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009 (hereinafter referred to as the ICDR Regulations).
3. The SCN was issued in view of the following facts and background:(a) STIL was incorporated in 1984 in the name of Gaurav Trading and Financing Limited. Its
name was later changed to Shreejee Yatayat India Limited (hereinafter referred to as
SYIL). In July 2000, the SYIL decided to make a foray into the fast growing business of
software and related activities by acquiring a running business undertaking of a software
Company named Shonkh Technologies Limited (hereinafter referred to as STL), an
unlisted company.
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(b) SYIL, vide notice dated July 13, 2000 informed its members that STL "has been negotiating
with the Company for sale of its entire software business undertaking as a going concern in consideration of
the Company issuing on a preferential basis 15,273,093 equity shares to the shareholders of STL in
proportion of their current shareholding in STL and this was being considered for strategic
purposes as the SYIL felt that such a restructuring would greatly enhance its business and
profit.
(c) SYIL, in its Extra Ordinary General Meeting (EGOM) held on July 14, 2000, passed a
resolution according approval to the above proposal of acquiring the entire business
undertaking of STL and allotment of 15,273,093 equity shares of `10/- each at a premium
of `60/- per share to the 55 shareholders of STL in proportion of their current
shareholding in STL. SYIL made the said preferential allotment of its shares on July 18,
2000 wherein promoters of STL received preferential allotment as described in the
following Table:
Table 1- Preferential Allotment to Promoters of STL
Name of the promoter
Ankur Cultivators Private Limited (ACPL)

No. of Shares Distinctive Numbers

1,956,810 2240001 4196810

AHCIL

1,950,000 4198611 6146810

Total no. of shares

3,906,810

(d) As a consequence of the preferential allotment, the management control of SYIL came in
favour of AHCIL and ACPL who were the promoters of erstwhile STL. Out of total
15,273,093 equity shares of SYIL allotted on July 18,200, AHCIL was allotted 1,950,000
shares, which amounted to 12.77% of the total allotted shares.
(e) SYIL, after the purchase of entire business of STL, changed its name to 'Shonkh
Technologies International Limited' (STIL) on July 27, 2000. STIL got the said shares listed
at the Bombay Stock Exchange Ltd. (hereinafter referred to as BSE) on August 2, 2000
and at Delhi Stock Exchange Limited (hereinafter referred to as DSE) on August 16,
2000.
(f) In terms of clause 13.3 of the DIP Guidelines (since rescinded) , shares allotted on preferential
basis to promoters were required to be kept under lock-in period for three years from the
date of allotment, i.e., till July 17, 2003. Thus, 1,950,000 shares allotted to AHCIL were not
to be sold /transferred/ hypothecated by it till expiry of the said lock-in period.

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(g) The aforesaid 1,950,000 shares were allotted to AHCIL in physical form and nine share
certificates bearing no. 4927 to 4935 were issued to it. AHCIL was having a beneficiary
account bearing no. 10058478 with the depository participant, Vivek Financial Focus
Limited. On perusal of the statement of this beneficiary account it was observed that
AHCIL had tendered 19,50,000 shares for dematerialization on December 5, 2001 and the
same were dematerialized and credited in its beneficiary account on December 7, 2001.
Subsequently, AHCIL had transferred 19,50,000 shares to three beneficiary accounts i.e.
Karma Automobiles Limited (6,00,000 shares), Excellent Computers Private Limited
(5,00,000 shares) and Niranjan Constructions Private Limited (8,50,000 shares) during
December 14, 2001 to March 19, 2002 as shown in the following Table:
Table 2 - Transfer of locked-in shares of STIL by AHCIL
Date

Particulars

07/12/2001

By dematerialization

14/12/2001

Credit
19,50,000

Debit

Balance
0

19,50,000

To Indus Portfolio/ 10068854

(Karma Automobiles Limited )

2,00,000

17,50,000

19/12/2001

To Vivek Financial focus/ 10047318

(Niranjan Constructions Private Limited)

4,00,000

13,50,000

20/12/2001

To Indus Portfolio/ 10068854

(Karma Automobiles Limited )

4,00,000

9,50,000

20/12/2001

To Indus Portfolio/ 10071236

(Excellent Computers Private Limited)

5,00,000

4,50,000

11/02/2002

To Vivek Financial focus/ 10047318

(Niranjan Constructions Private Limited)

2,00,000

2,50,000

19/03/2002

To Vivek Financial focus/ 10047318

(Niranjan Constructions Private Limited)

2,50,000

(h) The above three entities, after receiving 19,50,000 shares from AHCIL, sold 10,40,000
shares (i.e., 8,50,000 shares through Integrated Master Securities and 1,90,000 shares
through Abhipra Capital).
(i) It was noted that in the minutes of the board meeting of SYIL held on July 18, 2000, it was
clearly mentioned that 19,50,000 shares allotted to AHCIL shall remain locked- in for a
period of three years from the date of the allotment and the allotment letters/share
certificates issued shall bear, on their face, the fact that these shares shall remain locked in
till July 17, 2003. In the said Board meeting, the Board authorized its directors, Mr.
Prashant Kumar and Mr. Ram Ratan Chowdhary, inter alia, to sign on the share certificates
and to do all acts to give effect to the completion of preferential allotment.
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(j) On July 19, 2000, SYIL made application to BSE for the listing of aforesaid 15,273,093
shares allotted in its preferential allotment including the shares allotted to AHCIL and
ACPL. BSE informed its members about the listing of those 15,273,093 shares with effect
from August 2, 2000 with advice that 39,06,810 shares bearing distinctive No. 22,40,001 to
61,46,810 are not transferable upto July 17, 2003 and would not be good delivery till then.
It was also stated in the BSE notice that STIL had informed that the certificates in respect
of such shares have been enfaced with a stamp regarding their non- transferability period.
(k) Mr. Prashant Kumar in his statement to SFIO on August 17, 2007 confirmed that the
shares held by AHCIL were enfaced with Lock-in in conformity to the stock exchange
listing approval. However, it is noted that in Dematerialization Request Form (hereinafter
referred to as DRF) no. 56070 Mr. Prashant Kumar had declared that -I/We also hereby
declare that the securities surrendered by me/us for dematerialization are free from any lien or charge or
encumbrance and represents the bona fide securities of the company to the best of my/our knowledge and
belief. In that regard he had submitted that:i. AHCIL was controlled and managed by (Late) Mr. Sanjay Mohan Agarwal, Chartered
Accountant.
ii. He himself had signed the blank demat request form but denied filling the
contents/details mentioned in the said DRF.
iii. He handed over share certificates along with blank transfer deeds to Mr. Sanjay Mohan
Agarwal.
iv. Neither he nor STIL, ACPL, AHCIL and its directors had any role in the
dematerialization of lock-in shares of AHCIL and may not derive any benefit out of it
and it seems the handiwork of (Late) Mr. Sanjay Mohan Agarwal only.
Mr. Prashant Kumar was authorized in the board meeting of SYIL dated July 18, 2000 to
do all acts, deeds to give effect to the resolution of preferential allotment. Mr. Prashant
Kumar had also signed the DRF for both the promoters, i.e., AHCIL & ACPL as
Director/Authorised signatory. Thus, Mr. Prashant Kumar was connected with SYIL at
the time of allotment of shares and AHCIL at the time of dematerialization of shares.
(l) It was also observed that, pursuant to the allotment of 19,50,000 shares, AHCIL vide letter
dated July 19, 2000 authorized SYIL to take all such necessary actions for complying with
the Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations). In
pursuance of the same, vide letter dated July 26,2000, SYIL filed a report under regulation
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3(4) of Takeover Regulations and also forwarded a copy of the resolution passed by its
Board of Directors mentioning clearly about the lock-in shares for AHCIL.
(m) Thus, AHCIL was clearly aware about the lock-in condition imposed on 19,50,000 shares,
allotted on preferential basis by SYIL under promoters quota.
4. On the basis of above, it was alleged that the share certificates were dematerialized by AHCIL
with the intention of selling them in the market. It was further alleged that AHCIL and Shri
Prashant Kumar, former director of AHCIL & SYIL, have violated the clause 13.3 of the DIP
Guidelines by transferring the locked-in shares, after dematerialization of the same despite
knowing that the shares were under lockin for a period of 3 years till July 17, 2003.
5. The SCNs were returned undelivered. I note that attempt was also made to serve the SCNs
upon the noticees through substituted service by affixing them at the last known addresses of
the noticees. A copy of the SCN was also posted on SEBI website. Further attempts to serve the
SCNs were made by sending them to alternate addresses of the noticees. However, the same
were also returned undelivered. An advertisement was published in the Delhi edition of a
national newspaper with wide circulation on August 09, 2013. Vide letter dated September 12,
2013 AHCIL requested a copy of the SCN. Vide letter September 20, 2013, a copy of the SCN
was forwarded to AHCIL at its address mentioned in its letter dated September 12, 2013.
However, the same was returned undelivered with remarks no such company. A scanned copy
of the SCN was also sent on October 01, 2013 at the email address provided by AHCIL in its
aforementioned letter. AHCIL responded vide letter dated October 04, 2013 again requesting
for a copy of the SCN citing non-receipt of SCN. A copy of the same was again forwarded to
the same address provided by AHCIL on October 17, 2013 which was again returned
undelivered. On October 29, 2013 a copy of the SCN was delivered to AHCIL by hand delivery
through SEBI Delhi office at the address provided by AHCIL. Vide letter dated October 26,
2013, AHCIL submitted that the management of the company had decided to file a consent
application in the matter within two weeks time and that the matter be kept in abeyance till the
time consent application is decided upon.
6. Vide letter dated November 28, 2013, an opportunity of personal hearing was granted to the
noticees on January 07, 2014 which was returned undelivered. A scanned copy of the notice of
personal hearing was also sent to the noticees at the email address provided by AHCIL. An
attempt to hand deliver the hearing notice was also made through SEBI Delhi office. However,
the owner of the premises refused to accept the notice stating that no such person was
available/ stayed at that address, hence hearing notices were served through affixture.
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7. I note that the noticees did not respond to the hearing notices on any occasion. I also note that
there is no consent application filed by AHCIL which is pending before SEBI at any stage. In
the facts and circumstances of this case, I find that the noticees have been given ample
opportunity to present their case before SEBI but the noticees have not taken any step or shown
any willingness to do the same. I, therefore, find that the principle of natural justice has been
adequately complied with and as such this is a fit case for continuing the proceedings on the
basis of material available on record.
8. I have carefully considered the SCNs and other relevant materials available on record. I note
that a resolution was passed in the Extra Ordinary General Meeting (EGOM) of SYIL held on
July 14, 2000 to acquire the entire business undertaking of STL and to allot 15,273,093 equity
shares of `10/- each at a premium of `60/- per share to the 55 shareholders of STL in
proportion of their current shareholding in STL. Pursuant to the approval at the EGOM, SYIL
made the preferential allotment of its shares on July 18, 2000 wherein promoters of STL,
namely, ACPL and AHCIL received 19,56,810 and 19,50,000 shares respectively.
9. I note that consequent to the preferential allotment in SYIL on July 18, 2000, its management
control came in favour of Ankur Cultivators Private Limited (Ankur) and AHCIL who were the
promoters of erstwhile STL. Thereafter, on July 27, 2000 SYIL changed its name to STIL. Thus,
Ankur and AHCIL became promoters of SYIL/STIL. Hence, the shares allotted to them were
to be locked-in and non- transferable for a period of 3 years, i.e., till July 17, 2003 in terms of
clause 13.3 of the DIP Guidelines (since rescinded). The provision of clause 13.3 of the DIP
Guidelines is enumerated hereunder:
13.3 Non-transferability of financial instruments
13.3.1 (a) The instruments allotted on a preferential basis to the promoter/ promoter group as defined in Chapter
VI in (Explanation I, II and III to clause 6.8.3.2) of these guidelines (and the shares allotted to such promoter
/ promoter group pursuant to exercise of options attached to warrants issued on preferential basis), shall be subject
to lock-in of 3 years from the date of their allotment.
(b)In any case, not more than 20% of the total capital of the company, including capital brought in by way of
preferential issue, shall be subject to lock-in of three years from the date of allotment.
10. I further note that at the time of preferential allotment on July 18, 2000, the board of directors
of SYIL had resolved that the shares allotted to Ankur and AHCIL shall be locked- in till July
17, 2003. Further, while granting listing permission with respect to the shares allotted on
preferential basis in this case, BSE had also notified its members that 3,906,810 shares allotted to
Ankur and AHCIL shall not be transferable upto July 17, 2003 and shall not be good delivery in
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the market till then. SYIL/STIL had confirmed to BSE that the certificates with regard to these
shares had been enfaced with stamp regarding their non-transferability.
11. I note that Mr. Prashant Kumar was a director of STIL and AHCIL during the period July 13,
2000 to December 31, 2004 and December 10, 2001 to December 2004, respectively. I further
note that in the aforesaid board meeting of SYIL held on July 18, 2000, Mr. Prashant Kumar was
authorised to sign the share certificates and to do all acts to give effect to the completion of
preferential allotment. I also note that Mr. Prashant Kumar in his statement to SFIO on August
17, 2007 has confirmed that the shares held by AHCIL were enfaced with Lock-in in
conformity to the stock exchange listing approval. However, despite having the knowledge
about the shares being under the lock-in till July 17, 2003 in terms of clause 13.3 of the DIP
Guidelines (since rescinded), Mr. Prashant Kumar signed the DRF no. 56070 seeking
dematerialization of 19,50,000 shares on behalf of AHCIL that were issued to it pursuant to
preferential allotment. I, therefore, find that Mr. Prashant cooperated and aided AHCIL to
dematerialise the non-transferable shares so as to enable it to sell these shares during the lock-in
period.
12. In view of the aforementioned facts, I find that AHCIL was fully aware that 19,50,000 shares
allotted to it on preferential basis in physical form were locked-in and non-transferable till July
17, 2003. However, it dematerialised those shares on December 05, 2001 and transferred them
to Karma Automobiles Limited (6,00,000 shares), Excellent Computers Private Limited
(5,00,000 shares) and Niranjan Constructions Private Limited (8,50,000 shares) between
December 14, 2001 and March 19, 2002 who in turn sold 10,40,000 shares in the market
through Integrated Market Securities and Abhipra Capital.
13. In the facts and circumstances as described in the SCN it is safe to infer that AHCIL with the
active involvement of Mr. Prashant Kumar dematerialised the 19, 50, 000 shares allotted to it
pursuant to preferential allotment and thereafter transferred the dematerialised shares during the
lock-in period to various entities between December 14, 2001 and March 19, 2002, as
enumerated in Table 2 above. I, therefore, find that by transferring these shares during the lockin period, AHCIL and Mr. Prashant Kumar have contravened the provisions of the clause 13.3
of the then applicable DIP Guidelines, listing conditions stipulated by BSE and the decision of
board of directors of the SYIL/STIL.
14. I, however, note that the violations in the instant case pertain to the year 2001 and 2002. The
only charge against the noticees is that they have transferred shares when they were under lockin. There is no charge or allegation in the SCN that the noticees indulged in the fraudulent or
unfair trade practice. Considering these facts and circumstances, I am of the view that a warning
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to the noticees will be commensurate with violation charged in the SCN. These findings are,
however, without prejudice to charges and findings in any other proceedings against the
noticees.
15. I, therefore, in exercise of the powers conferred upon me by virtue of section 19 read with
sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 read with clause
17 of the then Securities and Exchange Board of India (Disclosure and Investor Protection)
Guidelines, 2000 and regulations 107 and 111 of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009, hereby warn the noticees to
be careful and cautious in the conduct of its stock broking activity and to adhere to and comply
with all the statutory provisions while carrying out its activities in the securities market. The
present proceedings are disposed of accordingly.

Sd/DATE: November 20th, 2015

PLACE: MUMBAI

RAJEEV KUMAR AGARWAL

WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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