November 17, 1999
PR No. 263/1999

Press Release

In the wake of sudden payment crisis in the month of June 1998, on BSE and NSE and allegations of manipulation in the scrips of BPL, Videocon and Sterlite, investigations were conducted by SEBI. Investigations prima facie revealed that some brokers acting in a concerted manner for common set of clients built up unusually large positions in these scrips resulting in distortion of the market equilibrium and creation of artificial market. The investigations also brought out that these common set of clients were acting as a front for Shri Harshad S. Mehta, a suspended broker of BSE and an accused in the securities scam of 1992. 
Based on these investigations, enquiry proceedings were initiated against the brokers involved and actions were taken including issuing directions to some of the brokers under Section 11B of the SEBI Act directing them not to undertake any fresh broking activity till the enquiry proceedings were completed. Enquiry proceedings were completed earlier in respect of some of these brokers. Further enquiry proceedings have been completed in respect to the following:

  1. Rajratan R. Mohta, member BSE

  2. Ramrakh R. Bohra, member BSE

  3. Shahrukh N. Tara, member BSE and;

  4. Malar Shareshoppe Ltd., sub-broker to R.R. Bohra

It may be mentioned that the trading terminals of these brokers were switched off by the Stock Exchange, Mumbai earlier. The trading terminals of Rajratan R. Mohta and Shahrukh N. Tara was switched off by BSE from June 12, 1998 and June 15,1998 respectively. Ramrakh R. Bohra and Malar Shareshoppe Ltd were directed not to undertake fresh business by SEBI which came into effect on January 4, 1999 and November 2, 1998 respectively. 
After considering the recommendations of the enquiry officer, submissions made by these brokers and sub broker, i.e. Rajratan R. Mohta, Ramrakh R. Bohra, Shahrukh N. Tara and Malar Shareshoppe Ltd., and the materials and evidences available on record, it was found that these brokers and sub-broker were involved in the manipulations in the scrips of BPL, Videocon and Sterlite. These brokers and sub-broker dealt for common set of clients i.e. Damayanti Group for the first time who did not have any professional expertise in the securities market and financial soundness to deal at such large scale. They did not charge any upfront margins also from these clients. These brokers and sub-broker acting in concert with other brokers cornered a very large quantity of shares of BPL, Videocon and Sterlite (70% of deliverable shares of BPL, 40%/50% of Videocon and Sterlite) and created artificial market & manipulated the prices of these scrips and upset the equilibrium of the market. It was also found that the above brokers and sub-broker made purchases, which were excessive and beyond their or their client’s means & financial resources and failed to honour their pay-in liability in time during the month of June 1998. Further, in the case of Rajratan R. Mohta, it was found that it furnished false certificates to the exchange to the effect that no transaction was carried forward for more than 75 days knowing fully well that it was not true and the transactions were being carried forward beyond 75 days. It was also found that Rajratan R. Mohta did not report the spot transactions entered by it to the stock exchange. Investigations brought out that Rajratan R Mohta also allowed financial transactions in its books on behalf of its clients in the guise of trading in the scrips of BPL, Videocon and Sterlite. 
These brokers and sub-broker were thus, guilty of violating the provisions of SEBI Act, 1992 read with SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 1995, SEBI (Stock brokers and sub-brokers) Regulations, 1992 and its Code of Conduct and Bye-laws of the Exchange where they are members. 
SEBI has ordered cancellation of registration of membership of M/s. S N Tara since the member has already been declared as defaulter by BSE and its card has been sold. Orders have been passed for the suspension of the registration of the remaining three brokers i.e. Rajratan R Mohta, Ramrakh R Bohra and Malar Share Shoppe Ltd. Suspension has been ordered for a period of 3 years for Rajratan R Mohta i.e. till June 11, 2001. In the case of Ramrakh R Bohra and Malar Share Shoppe Ltd., the suspensions have been ordered for a period of 18 months i.e. till July 3, 2000 and May 1, 2000 respectively. The above period of suspensions, have been reckoned from the date when the trading terminal of the member were switched off by BSE / they were directed not to undertake fresh broking business pursuant to SEBI orders.