Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted an investigation into the scrip of Palred Technologies Limited (hereinafter referred to as ‘PTL’ or ‘the Company’) for the period of September 18, 2012 to November 30, 2013 (hereinafter referred to as ‘the investigation period’), to ascertain the possible violation of the provisions of the SEBI Act, 1992 (hereinafter referred to as ‘SEBI Act’) and SEBI (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as ‘PIT Regulations’).

2. PTL was incorporated in the year 1999. The Company had changed its name from Four Soft Limited to PTL w.e.f. December 09, 2013. The scrip of Palred is listed on National Stock Exchange Limited (hereinafter referred to as ‘NSE’) and Bombay Stock Exchange (hereinafter referred to as ‘BSE’).

The investigation alleged that Mr. Palem Srikanth Reddy, who is also the Chairman and Managing Director (CMD) of PTL, Ms. P. Soujanya Reddy, Mr. Ameen Khwaja, Ms. Noorjahan Khwaja, Mr. Ashik Ali Khwaja, Ms. Rozina Hirani Khwaja, Ms. Shefali Ameen Khwaja, Mr. Shahid Khwaja, Ms. Kukati Parvathi, Mr. Pirani Amyn Abdul Aziz, Mr. Karna Ramanjula Reddy, Mr. Umashankar S, Ms. Raja Lakshmi Srivaiguntam, Mr. Prakash Lohia and Mr. Mohan Krishna Reddy Aryabumi had traded in the scrip of PTL during the investigation period, while in possession of ‘price sensitive information’ (hereinafter also referred to as ‘PSI’).

The Company, in its e-mail dated June 20, 2014 had informed SEBI that Mr. Palem Srikanth Reddy (the Chairman and Managing Director of PTL), Mohan Krishna Reddy and P. Soujanya Reddy were the persons privy to the ‘slump sale of software solutions business to Kewill group’. Mr. Palem Srikanth Reddy was also privy to the information about the declaration of dividend. Mr. Palem Srikanth Reddy being the connected person within the meaning of Regulation 2(c)(i) of the PIT Regulations and having access to the UPSI, as detailed above, is alleged to be an ‘insider’ in terms of the Regulation 2(e) read with Regulation 2(c) of the PIT Regulations.

The investigations have revealed that Mr. Palem S. Reddy had communicated/ counselled, directly or indirectly the UPSI to one Mr. Ameen Khwaja, his relative Ms. Kukati Parvathy and others (hereinafter collectively referred to as the ‘suspected entities’). The details of the connections of suspected connected entities with Mr. Palem S. Reddy are as under:

Mr. Palem Srikanth Reddy and Mr. Ameen Khwaja were the common directors of one Pal Premium Online Media Pvt. Limited (hereinafter referred to as ‘Pal’). The names of both Mr. Palem Srikanth Reddy and Mr. Ameen Khwaja appear in the promoter category of Pal. It was found that Pal had provided services relating to ‘search engine’ to PTL during the period September 2011 to May 2013 (i.e. during the period of UPSI). Further, after the ‘slump sale of business’ by PTL to Kewill group, discussions pertaining to the merger of Palred Media and Entertainment Pvt. Limited and Pal with PTL had begun on December 19, 2013, which later got approved by the Board of Directors of the Company. In view of the same, Mr. Ameen Khwaja is also alleged to be an ‘insider’ and ‘connected person’ in terms of the Regulations 2(e) and (c) of the PIT Regulations.

Mr. Ameen Khwaja appears to have not traded in the scrip of PTL during the period of investigation. However, his immediate family members namely Ms. Noorjahan A. Khwaja, Mr. Ashik Ali Khwaja, Ms. Rozina Hirani Khwaja, Ms. Shefali Ameen Khwaja and Mr. Shahid Khwaja (hereinafter collectively referred to as ‘Khwaja group’) were found to be trading in the scrip of PTL during the UPSI period.

The trading pattern of Khwaja group entities was found to be in clear deviation from their established trading pattern. Except Ms. Noorjahan Khwaja, no other Khwaja group entity had traded in the market since April 01, 2011 to September 17, 2012. Even the maximum purchase value of Ms. Noorjahan Khwaja at BSE/ NSE was only 2.13 lakh in seven scrips, the same is in sharp contrast to the amount of 16.62 lakh, she had invested in the scrip of PTL (a not-so-frequently traded scrip during the relevant period). Further, it has also been revealed that the trading accounts of four members of Khwaja group were opened only on June 26, 2013, June 27, 2013, July 10, 2013 and July 12, 2013 i.e. during the UPSI period.

Mr. Pirani Amyn Abdul Aziz is also found to be connected to Mr. Ameen Khwaja through mutual friends on ‘Facebook’. He was employed with Deloitte Tax Services India Pvt. Limited (a group company of Deloitte Touche Tohmatsu India Pvt. Limited, which had conducted the due diligence of PTL during the slump sale). During the course of investigation, Mr. Pirani Amyn Abdul Aziz failed to reply to the specific details, as sought by SEBI.

His trading pattern was found in deviation from the established trading pattern. It was found that he had transacted only in the scrip of ‘Cummins India Limited’ for a quantity of only three shares for a consideration of 1,330,which he had purchased and sold during July 2013. Further, he was not found trading in any other scrip since April 2011 except that of investing about 5 lakh in PTL shares from June 2013 onwards, i.e., during the UPSI of ‘slump sale’. The proportion of his investment in PTL shares when considered in relation to his income and that too in a scrip which was not frequently traded (during the relevant period), is not commensurate with the usual investment behavior

It was found that he had opened his trading account with HDFC Securities Limited on June 25, 2013, i.e. just one day prior to his trading (i.e. June 26, 2015), in the scrip of PTL. Further an analysis of his bank account details revealed that he had received a series of cash deposits, prior to each payment to his broker for transacting in the shares of PTL. Mr. Pirani Amyn Abdul Aziz has not furnished any detail of the source of such cash deposits. The same raises serious suspicion on his transactions.

TABLE – 5

Trades during the UPSI of ‘slump sale’

(i.e. between September 18, 2012 –August 10, 2013) S.No.

Name

During 18/09/2012 to 10/08/2013

During 18/08/2013 to 20/08/2013

Total

Buy

Sell

Buy

Sell

Buy

Sell

1

Srikanth Palem Reddy

2,09,968

5,399

0

0

2,09,968

5,399

2

Noorjahan A Khwaja

1,20,972

2,456

0

0

1,20,972

2,456

3

Ashik Ali Khwaja

64,193

0

0

0

64,193

0

4

Rozina Hirani

43,014

0

0

0

43,014

0

5

Shefali Ameen Khwaja

45,000

0

0

0

45,000

0

6

Shahid Khwaja

50,822

0

0

0

50,822

0

7

Pirani Amyn Abdul Aziz

32,305

0

0

0

32,305

0

8

Karna Ramanjula Reddy

13,954

0

0

0

13,954

0

9

Umashankar S.

6,000

5,000

0

0

6,000

5,000

10

Raja Lakshmi Srivaiguntam

16,955

200

0

0

16,955

200

11

Rajpal Suresh Chandra

15,000

5,260

0

0

15,000

5,260

12

K. Parvathi

34,900

0

0

0

34,900

0

13

Prakash Lohia

25,972

2,000

3,500

0

29,472

2,000

14

Soujanya Reddy

17,500

0

0

0

17,500

0

TABLE – 7 Profit/losses incurred by suspected entities during their trading in PTL

Buy Vol.

Buy value in

Sell Vol.

Sell value in

Remaining shares unsold till UPSI 14.10.2013

Closing price on day of PSI

Notional sell value of shares

Gain (₹)

A

B

C

D

E=A-C

F

G=E*F

H=G+D-B

Srikanth Palem Reddy

209968

2799682

5399

91651

204569

39.2

8019105

5311074

Noorjahan A Khwaja

120972

1661672

2456

52634

118516

39.2

4645827.2

3036789

Khwaja Ashik Ali

64193

1010859

0

0

64193

39.2

2516365.6

1505507

Rozina Hirani

43014

636791

0

0

43014

39.2

1686148.8

1049358

Shefali Ameen Khwaja

45000

701666

0

0

45000

39.2

1764000

1062334

Shahid Khwaja

50822

914136

0

0

50822

39.2

1992222.4

1078086

Pirani Amyn Abdul Aziz

32305

499986

0

0

32305

39.2

1266356

766370

Mohankrishna Reddy Aryabumi

9300

273005

0

0

9300

39.2

364560

91555

Karna Ramanjula Reddy

16250

296240

0

0

16250

39.2

637000

340760

Umashankar S.

10450

230004

5000

71746

5450

39.2

213640

55382

Raja Lakshmi Srivaiguntam

16955

282090

200

3360

16755

39.2

656796

378066

K. Parvathi

35800

593167

0

0

35800

39.2

1403360

810193

Prakash Lohia

25972

374023

2000

37900

23972

39.2

939702.4

603579

Soujanya Reddy

17500

215924

0

0

17500

39.2

686000

470076

Total

698501

15055

683446

16559129

TABLE – 8 S.No.

Entity Name

PAN

Profit (₹)

Interest 12% p.a.**

Total (₹)

1.

Mr. Palem Srikanth Reddy

AAMPP9497N

53,11,074

20,63,898

73,74,972

2.

Ms. Noorjahan A. Khwaja

ACAPK3460G

30,36,789

9,53,469

39,90,258

3.

Mr. Ashik Ali Khwaja

ADMPA1271E

15,05,507

4,67,243

19,72,750

4.

Ms. Rozina Hirani Khwaja

ABQPH3900B

10,49,358

3,25,675

13,75,032

5.

Ms. Shefali Ameen Khwaja

ADTPV2598L

10,62,334

3,29,003

13,91,337

6.

Mr. Shahid Khwaja

ATXPK3630J

10,78,086

3,29,629

14,07,715

7.

Mr. Pirani Amyn Abdul Aziz

AONPP0697R

7,66,370

2,39,107

10,05,477

8.

Mr. Mohan Krishna Reddy Aryabumi

ABLPA2405R

91,555

26,097

1,17,652

9.

Mr. Karna Ramanjula Reddy

APAPK7847J

3,40,760

1,12,031

4,52,791

10.

Mr. Umashankar S.

ANUPS2006D

55,382

17,498

72,880

11.

Ms. Raja Lakshmi Srivaiguntam

BOPPS3150H

3,78,066

1,16,216

4,94,282

12.

Ms. Kukati Parvathi

ACIPP8586G

8,10,193

3,02,857

11,13,050

13.

Mr. Prakash Lohia

ABTPL5701F

6,03,759

1,91,095

7,94,674

14.

Ms. P. Soujanya Reddy

AAQPP2729R

4,70,076

1,81,436

6,51,512

TOTAL

1,65,59,129

56,55,254

2,22,14,383

* Interest calculated on illegal gains from the individual date of buy transaction till January 31, 2016

10. Considering the facts and circumstances of the case, the balance of convenience lies in favour of SEBI. With the initiation of investigation and quasi-judicial proceedings, it is possible that the noticees may divert the unlawful gains (subject to the adjudication of the allegation on the merits in the final order), which may result in defeating the effective implementation of the direction of disgorgement, if any to be passed after adjudication on merits. Non-interference by the Regulator at this stage would therefore result in irreparable injury to interests of the securities market and the investors.

In view of the foregoing, I, in exercise of the powers conferred upon me by virtue of Section 19 read with Sections 11(1), 11(4)(d) and 11(B) of the SEBI Act, 1992, hereby order to impound the alleged unlawful gains of a sum of 2,22,14,383 (alleged gain of 1,65,59,129 + interest of 56,55,254 from the date of buy transactions to January 31, 2016), jointly and severally from the persons tabulated in the paragraph above. If the funds are found to be insufficient to meet the figure of unlawful gains, as directed above, then the securities lying in the demat account of these persons shall be frozen to the extent of the remaining value.

Source:

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1454682584239.pdf

Advertisements