BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO.

EAD-2/21-27/2012] ___________________________________________________________________ UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 Against 1. 2. 3. 4. 5. 6. 7. Shri Yashwant Rampuria Shri Pankaj Sachan Shri Shashi Jain Shri Ashok Agarwal M/s. G.R. Magnets Ltd. Shri Parasmal Rampuria M/s. J.R.P. Holdings Ltd. [PAN: Not Available] [PAN: Not Available] [PAN: Not Available] [PAN: Not Available] [PAN: Not Available] [PAN: Not Available] [PAN: AABCJ3755F]

In the matter of Zigma Software Limited

Background 1. Securities and Exchange Board of India (hereinafter referred to as SEBI) had conducted investigation in to the alleged irregularity in the trading in the shares of Zigma Software Limited (hereinafter referred to as ZSL or the company), and into the possible violations of the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act) and various Rules and Regulations made there-under, for the period from June 01, 2005 to September 30, 2005. ZSL is a public company listed at the Bombay Stock Exchange (BSE) and Calcutta Stock Exchange,

2.

The Investigation revealed that the company had made various positive corporate announcements during the period under investigation some of

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which were false and misleading and aimed at creating artificial demand for the scrip in the market. Shri Yashwant Rampuria, Shri Pankaj Sachan, Shri Shashi Jain and Shri Ashok Agarwal (hereinafter referred to as Group-I Noticees) were the directors of the company during the period when such announcements were made. M/s. G.R. Magnets Ltd (GRML) - promoter of ZSL, and J.R.P. Holding Ltd. (JRPH) - an associate of GRML, allegedly offloaded shares after the said announcements in a fraudulent and manipulative manner. Shri Parasmal Rampuria, father of Shri Yashwant Rampuria, was director of GRML during the investigation period. GRML, JRPH and Shri Parasmal Rampuria are hereinafter together referred to as Group-II Noticees. It was alleged that the Group-I and Group-II Noticees allegedly violated provisions of Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations). Further, GRML allegedly failed to make disclosures as required under Regulation 13 (3) read with 13 (5) of the SEBI (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as the Insider Trading Regulations).

3.

SEBI has therefore, initiated adjudication proceedings under the SEBI Act against Group-I and Group-II Noticees to inquire into and adjudge the alleged violations of the provisions of Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of the PFUTP Regulations by them and the violation of Regulation 13 (3) read with 13 (5) of the Insider Trading Regulation by GRML.

Appointment of Adjudicating Officer 4. SEBI vide order dated April 20, 2009 appointed Shri Deepak Trivedi as the Adjudicating Officer (AO) under Section 15-I of the SEBI Act read with Rule 3 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the Adjudication Rules) to inquire into and adjudge under Section 15HA of the SEBI Act, the alleged violation of the provisions of Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of the PFUTP Regulations by the Group-I and Group-II Noticees and also under Section 15A (b) of the SEBI Act, the alleged violation Page 2 of 14

of the provisions of Regulation 13 (3) read with 13 (5) of the Insider Trading Regulations by GRML. SEBI vide order dated January 04, 2012 appointed the undersigned as the AO in these matters.

Show Cause Notice, Reply and Personal Hearing 5. The AO issued separate notices dated September 01, 2009 and September 03, 2009 (hereinafter referred to as the SCN) under Rule 4 of the Adjudication Rules to the Group-I & II Noticees to show cause as to why an inquiry should not be held against them and penalty be not imposed under Section 15HA of the SEBI Act for their alleged violation of the abovementioned provisions of the PFUTP Regulations and in case of GRML under Section 15A (b) of the SEBI Act also, for its alleged violation of the abovementioned provisions of Insider Trading Regulations..

6.

The SCN alleged that ZSL made misleading announcements pertaining to Bonus issue, preferential issue and development of real estate project at Bangalore, etc. during the period July 18, 2005 to September 05, 2005. It is alleged that the said several positive corporate announcements were not implemented by ZSL, but were only meant to attract the innocent investors to purchase the shares under such fraudulent exercise. The Group-I Noticees were the directors of ZSL during the relevant period. Further, GRML and JRPH bought and/or sold shares of ZSL, allegedly taking advantage of the false positive corporate announcements in a fraudulent manner. Shri Parasmal Rampuria, father of Shri Yashwant Rampuria, was director of GRML during the investigation period. Thus, the Group-I & II Noticees allegedly violated Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of the PFUTP Regulations. Further, GRML was holding shares constituting more than 8.47% of the paid up capital of ZSL as on quarter ended March 2005 and on sale of the shares its holding reduced to 1.91% as on quarter ended June 2005 (i.e. change of more than 2%,) for which it was required to make disclosure to the company which it allegedly failed to do. GRML is thus alleged to have violated Regulation 13 (3) read with 13 (5) of the Insider Trading Regulations.

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7.

The SCNs were duly delivered to the Group-I & II Noticees and Shri Yashwant Rampuria, Ashok Agarwal and JRPH submitted their replies dated June 07, 2010, July 09, 2010 and August 04, 2010 respectively. After considering the submissions, the AO decided to conduct an inquiry in the matter and accordingly granted opportunities of personal hearing to the Group I & II Noticees during August 24-25, 2011 at Kolkata and September 30, 2011 to October 04, 2011 at Mumbai. The Noticees mostly requested for another opportunity of hearing at Mumbai. The undersigned granted opportunities of personal hearing on February 06, 2012 and February 23, 2012 at Mumbai vide letters dated January 20, 2012 and February 13, 2012 respectively which were hand-delivered at their addresses. However, the Noticees did not attend the personal hearings nor sent any communication in this regard.

8.

In view of the above, I am proceeding with the inquiry taking into account the written submissions made by the Noticees and other material as available on record.

Consideration of Issues, Evidence and Findings 9. I have carefully perused the charges against the Noticees mentioned in the SCN, the written submissions of the Noticees and all the materials and documents available on record. The issues that arise for consideration in the present case are:

a) Whether the Noticees have violated the provisions of Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of PFUTP Regulations and whether GRML has violated the provisions of Regulation 13 (3) read with 13 (5) of the Insider Trading Regulations? b) Do the violations, if any, on the part of the Noticees attract any penalty under Section 15HA of the SEBI Act and whether GRML is also liable for penalty under Section 15A (b) of the SEBI Act? c) If yes, what should be the quantum of penalty?

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10.

Before proceeding to decide the above issue, it is important to have a look at the abovementioned provisions which read as follows.

PFUTP Regulations Prohibition of certain dealings in securities 3. No person shall directly or indirectly (b) use or employ, in connection with issue, purchase or sale of any

security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made thereunder; (c) employ any device, scheme or artifice to defraud in connection with

dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or

would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made thereunder. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely : (e) any act or omission amounting to manipulation of the price of a security; (r) planting false or misleading news which may induce sale or purchase of securities. Insider Trading Regulations 13. (3) Any person who holds more than 5% shares for voting rights in any listed company shall disclose to the company in Form C the number of shares or voting rights held and change in shareholding or voting rights, even if such change results in shareholding falling below 5%, if there has been change in such

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holdings from the last disclosure made under sub-regulation (1) or under this subregulation; and such change exceeds 2% of total shareholding or voting rights in the company. (5) The disclosure mentioned in sub-regulations (3) and (4) shall be made within 4 working days of : (a) (b) the receipts of intimation of allotment of shares, or the acquisition or sale of shares or voting rights, as the case may be.

11.

Shri Yashwant Rampuria and Shri Ashok Agarwal in their reply to the SCN have inter alia submitted that all the announcements made during the investigation period were bonafide and genuine in nature for benefit of the company and its shareholders at large. The corporate announcements were made as per Clause 19, 22, 36 41 etc. of the Listing Agreement and as a good governance policy. Price sensitive information was made public for the benefit of investors and there was no malafide intention to mislead the investors. Due efforts and utmost care was taken for implementation of announcements. The announcements were genuine and based on strategic decisions taken by the company for its growth and to benefit investors.

12.

Company made an announcement to issue bonus shares at the ratio 2:1. At EGM held on March 07, 2006, members passed resolution and approved issue of bonus shares. The company applied to stock exchange for InPrinciple approval which was refused on technical ground as the time period of application had lapsed etc. The company made an application to SEBI for condonation of delay and grant of NOC to issue bonus shares. The same proves that there was no malafide intention to deceive investors.

13.

Preferential issue was proposed in the Board meeting held on August 24, 2005. Thereon, the company put all the efforts to carry out preferential issue for which the authorized share capital of the company was increased and necessary fee was paid to ROC.

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14.

Payment of Rs. 76 Lakhs was made to Bennett Coleman & Co. Ltd. for the development of real estate project at Bangalore. The said project could not be implemented as the area was declared a green belt and construction of apartments was not permitted. The intimation by Bennett Coleman & Co. Ltd. to BSE regarding frustration of contract is its unilateral decision and the company is yet to get the refund of money paid.

15.

Quarterly result for June quarter was duly declared as per format of Clause 41 of the Listing Agreement.

16.

Non implementation of announcement or delay in issue of bonus shares or preferential shares is all because of various reasons both procedural and technical beyond ones control. All necessary steps, efforts and procedure as called for were taken but could not happen. The SCN is silent about what disclosure was to be made to the exchange and how they were responsible for the same. Only because they were holding an office of director in the company does not make them guilty for violation, if any, by the company. They had not done any transaction, nor benefited directly or indirectly by the corporate announcements. The Noticees have submitted various documents in support of their contentions mentioned above.

17.

Further, JRPH in its reply has inter alia contended that they are shareholders of the company and were not responsible for the various corporate announcements made by the company. They were holding shares under Public Holding and rightly categorized under Public Shareholder in shareholding pattern filed by ZSL to stock exchange. They have done investment from long term prospective. They have purchased share in year 2003 and sold them in 2005 when they felt there was opportunity for best price in market. There was no synchronized/circular/structured trade when shares were sold. They have done investment in shares of ZSL in normal course of business. They had no/prior advance information/data about company likely to make any such corporate announcements.

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18.

They sold shares on August 04, 12, 16 and 18, 2005. None of the transactions was made subsequent or immediately preceding to the corporate announcements and there was a minimum gap of 20 days between them. When they sold shares in August 2005, the price of the scrip increased instead of falling. Had they been aware of the rise in price, they would not have sold shares at low price. They have made all the disclosures under the Insider Trading Regulations. They have no role to play in giving any announcement pertaining to Bonus issue, preferential issue, development of real estate project etc. they have no role to play in carrying out those announcements. There is no evidence to prove that they acted in concert with directors and promoters of ZSL. The information about various corporate announcements was available/ published in BSE website and was public information/news. Like any genuine investor, they decided to sell shares to meet their requirements and fetch maximum/good returns.

19.

I find that the issues therefore to be ascertained and determined are (a) whether ZSL made false and misleading corporate announcements during the investigation period and the Group-I Noticees being directors of the company were liable for the same. (b) whether the Group-II Noticees fraudulently offloaded shares by acting in concert with Group-I Noticees and (c) whether GRML failed to make disclosures as required under the provisions of Insider Trading Regulations.

20.

I find from available records that ZSL made various corporate announcements during the investigation period regarding sub-division of face value of shares, bonus issue, declaration of dividend, issue of preferential shares,

development of a real estate project at Bangalore and declaration of quarterly results for June 2005. It was alleged in the SCN that the announcements pertaining to bonus issue, preferential issue and development of real estate project at Bangalore were misleading as ZSL had not made any application for in-principle approval for the bonus issue and for in-principle approval for listing preferential warrants. The real estate project was not implemented and the same was not informed to the stock exchanges and to the general investors. Page 8 of 14

21.

I have noted the submissions of the Noticees that the company had indeed applied to BSE for in-principle approval for the bonus issue. In support of the same, they have submitted a letter (Ref. No. ZSL/BSE_Bonus/05-06) dated March 27, 2006 by ZSL addressed to BSE wherein ZSL requested BSE to grant ZSL in-principle approval for issue and allotment of bonus shares which was approved by its board on July 18, 2005 and its shareholders on March 07, 2006. The said letter dated March 27, 2006 also refers to ZSLs earlier letter dated March 07, 2006 sent to BSE in connection with the bonus issue. The Noticees have also submitted a copy of an undated letter (Ref. No. ZSL/SEBI/NOC/BONUS/2008) by ZSL addressed to SEBI which bears the stamp of SEBI with November 11, 2008 as the date of receipt. The subject of the said letter was Application for NOC pertaining to Bonus Issue of Zigma Software Ltd. In the said letter, the said issue of bonus shares was mentioned. The said letter inter alia contained the following: After the necessary correspondence & communications with the authorities of the Bombay Stock Exchange Ltd (BSE), the authorities of BSE required an No Objection Certificate (NOC) from the Regulatory Authorities i.e. Securities Exchange Board of India (SEBI). ZSL vide the said letter requested SEBI to condone the delay on part of execution of issue & allotment of aforesaid Bonus Issue in the year 2005 and to grant them the NOC to proceed with the matter. I find from an extract copy of the public announcements dated November 04, 2008 as available on record that ZSL informed BSE regarding issuance of bonus shares subject to the necessary NOC from regulatory authorities.

22.

The Noticees have submitted copies of a series of letters exchanged between ZSL and BSE on the issue of prior in-principle approval for preferential issue of warrants. ZSL letter dated September 20, 2005 addressed to BSE with heading Re: Request for prior in-principle approval for issuing/allotting the proposed 48,00,00,000 warrants on preferential basis. reveals that ZSL had communication with BSE on the said issue prior to the said letter also. The Noticees have also produced a letter of BSE dated October 04, 2005 addressed to ZSL wherein the said letter dated September 20, 2005 is Page 9 of 14

referred to. The Noticees have also submitted copy of ZSLs letter dated October 13, 2005 to BSE on the same subject, which bears the stamp of Inward Section of BSE showing October 17, 2005 as the date of receipt. The Noticees have further submitted copies of BSEs letter dated December 23, 2005 to ZSL and ZSLs letters dated December 26, 2005, January 06, 2006 and January 19, 2007 to BSE on the same issue. I find from the copy of extracts of public announcements dated August 22, 2007 as available on record that ZSL informed BSE regarding withdrawal of issue of share warrants on preferential basis.

23.

The Noticees have submitted that ZSL proposed to implement the real estate project for which it paid Rs. 76 Lakhs to Bennett Coleman & Co. Ltd. which as on date was still lying with them. The project got delayed due to statutory approvals from the government but it has not been given up. Had it been nonimplementation of the project, ZSL would have made efforts to get Rs. 76 Lakhs back from Bennett Coleman & Co. The intimation by Bennett Coleman to BSE regarding frustration of contract is its unilateral decision and hence the same should not be considered as valid. They continue to hold the said amount of Rs. 76 Lakhs which proves that the contract is still subsisting and not revoked. The Noticees have submitted a copy of statement of ZSLs bank account with Kotak Mahindra Bank showing a payment of Rs. 76 Lakhs to B C C Ltd. on September 21, 2005. I find from the available records that Bennett Coleman & Co. Ltd. vide letter dated January 19, 2009 confirmed the agreement they entered into with ZSL for the development project and that the said agreement was terminated vide their letter dated May 08, 2008 as the agreement became frustrated due to certain new guidelines issued by the Karnatake state government.

24.

From the foregoing, I am of the view that the corroborative evidences available are insufficient to establish beyond reasonable doubt that the GroupI Noticees made false and misleading corporate announcements during the investigation period as alleged in the SCN and therefore I am inclined to give benefit of doubt to the Group-I Noticees.

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25.

The next issue is whether the Group-II Noticees fraudulently off-loaded shares by acting in concert with Group-I Noticees. I have noted the submissions of JRPH as detailed above. Further, I find that JRPH sold 85,72,020 shares constituting 5.9% of the paid up capital of the company at prices ranging from Rs.2.97 to Rs.3.36 during the period from August 08, 2005 to August 19, 2005 and that the disclosures as required under provisions of Insider Trading Regulations were made. The corporate announcement of issue of bonus shares and issue of preferential shares were initially made public on July 12, 2005, almost a month prior to the sale of shares by JRPH. The corporate announcement on development of real estate project was made after August 19, 2005 i.e. after the sale of shares by JPRH.

26.

Similarly, GRML bought 3,29,871 shares of Rs.10 at prices ranging from Rs.22.85 to Rs.26.80 and sold 7,58,444 shares at prices ranging from Rs.24.35 to Rs.26.45 during June 01, 2005 to July 12, 2005. Further, GRML bought 7,21,720 shares of Re.1 each at prices ranging from Rs.3.75 to Rs.4.50 and sold 19,42,560 shares of Re.1 each at prices ranging from Rs.3.01 to Rs.4.55 post split of shares, during the period from July 19, 2005 to August 16, 2005. I have noted that the first set of transactions was executed prior to the corporate announcement regarding issue of bonus shares and issue of preferential shares which was initially made public on July 12, 2005. The second set of transactions was executed much after the above announcements were made and before the announcement regarding development of real estate project was made after August 16, 2005.

27.

I find from the Investigation Report that GRML bought and sold shares before the announcements but there is no clear pattern of insider trading. Further, it is observed that the analysis of trade and order log does not reveal any consistent efforts by brokers/clients in influencing the scrip price. The price of the scrip rose gradually and mainly due to positive news announced by the company such as bonus issue etc. and also due to the buying pressure during both the periods.

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28.

Taking into account of the above observations, I am of view that the corroborative evidences as available on record are insufficient to establish beyond doubt that the Group-II Noticees acted in concert with ZSL and its directors in making false misleading positive corporate announcements and traded in a fraudulent manner and therefore I am inclined to benefit of doubt to them.

29.

The next issue to be decided is whether GRML failed to make disclosures as required under the provisions of Insider Trading Regulations. I find from available records that GRMLs shareholding in ZSL stood at more than 8.47% as on quarter ended March 2005. The same reduced to 1.91% of the total paid up capital of ZSL as on quarter ended June 2005. The change in shareholding was more than 2% which required disclosures to be made as per the provisions of Regulation 13 (3) read with 13 (5) of the Insider Trading Regulations. There is nothing on record to show that GRML made the said required disclosures.

30.

From the foregoing findings and analysis I conclude that the allegation of violation of the provisions of Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of PFUTP Regulations against Group I & II Noticees do not stand established beyond reasonable doubt. However, I conclude that the allegation of violation of the provisions of Regulation 13 (3) read with 13 (5) of the Insider Trading Regulations by GRML stands established, which makes it liable for penalty under Section 15A (b) of the SEBI Act.

31.

The provisions of Section 15A (b) of the SEBI Act read as follows:

Penalty for failure to furnish information, return, etc. 15A. If any person, who is required under this Act or any rules or regulations made thereunder, (b) to file any return or furnish any information, books or other documents

within the time specified therefor in the regulations, fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to

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a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less;

32.

While imposing penalty it is important to consider the factors stipulated in Section 15J of SEBI Act, which reads as under:

15J - Factors to be taken into account by the adjudicating officer While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely:(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of investors as a result of the default; (c) the repetitive nature of the default.

33.

I observe that from the material available on record it is difficult to quantify any gain or unfair advantage accrued to the GRML or the extent of loss suffered by the investors as a result of the defaults and whether the default is repetitive in nature.

Order 34. In view of the above, after considering all the facts and circumstances of the case and exercising the powers conferred upon me under Section 15-I (2) of the SEBI Act read with Rule 5 of the Adjudication Rules, I conclude that the allegation of violation of the provisions of Regulations 3 (b), 3 (c), 3 (d), 4 (1), 4 (2) (e) and 4 (2) (r) of PFUTP Regulations against Group-I and Group-II Noticees as mentioned in the SCN do not stand established beyond reasonable doubt. Accordingly, the above charges against them are disposed of.

35.

However, I conclude that the allegation of violation of the provisions of Regulation 13 (3) read with 13 (5) of the Insider Trading Regulations by GRML stands established. Therefore, exercising the powers conferred upon

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me under Section 15-I (2) of the SEBI Act read with Rule 5 of the Adjudication Rules, I hereby impose a penalty of ` 5,00,000/- (Rupees Five lakh Only) on GRML under Section 15A (b) of the SEBI Act. In my view, the penalty is commensurate with the defaults committed by GRML.

36.

The above penalty amount shall be paid by GRML through a duly crossed demand draft drawn in favour of SEBI Penalties Remittable to Government of India and payable at Mumbai, within 45 days of receipt of this order. The said demand draft shall be forwarded to the Division Chief, IVD-ID8, Securities and Exchange Board of India, Plot No. C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.

37.

In terms of the provisions of Rule 6 of the Adjudication Rules the copies of this order are sent to the Noticees and also to Securities and Exchange Board of India.

Date: March 29, 2012 Place: Mumbai

P K KURIACHEN ADJUDICATING OFFICER

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