BEFORETHEADJUDICATINGOFFICER

SECURITIESANDEXCHANGEBOARDOFINDIA
[ADJUDICATIONORDERNO.AK/AO84/2015]
________________________________________________________________________
UNDERSECTION15IOFSECURITIESANDEXCHANGEBOARDOFINDIAACT,1992READWITHRULE5
OFSEBI(PROCEDUREFORHOLDINGINQUIRYANDIMPOSINGPENALTIESBYADJUDICATINGOFFICER)
RULES,1995
Inrespectof
M/s.GTechStoneLtd.(PAN:AAACG1179K)
Inthematterof
M/s.ERPSoftSystemsLtd.
_______________________________________________________________________

FACTSOFTHECASE

1. SecuritiesandExchangeBoardofIndia(hereinafterreferredtoasSEBI)observedthatM/s.GTech
StoneLtd.(hereinafterreferredtoastheNoticee)washoldingmorethan5%ofthesharecapitalin
the Company viz. M/s. ERP Soft System Ltd.(hereinafter referred to as 'the company') during the
quarterendingDecember2011,andthattheNoticeesholdinghadreducedbymorethan2%during
the quarter ending March 2012. It was furtherobserved that the Noticeehad failed make the
necessary disclosures under the applicable provisions of SEBI (Prohibition of Insider Trading)
Regulations,1992(hereinafterreferredtoas'PITRegulations')andSEBI(SubstantialAcquisitionof
SharesandTakeovers)Regulations,2011(hereinafterreferredtoas'TakeoverRegulations').Hence,
adjudicationproceedingswereinitiatedagainsttheNoticeeunderSection15A(b)ofSecuritiesand
Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act) to inquire into and
adjudicatetheallegedviolationofPITRegulationsandtheTakeoverRegulationsinthematter.The
shares of the Company at the relevant point of time was listed on Bombay Stock Exchange Ltd
(hereinafterreferredtoasBSE).

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APPOINTMENTOFADJUDICATINGOFFICER

2. The undersigned was appointed as Adjudicating Officer vide order dated August 07, 2013 under
Section 15I of SEBI Act read with rule 3 of SEBI (Procedure for Holding Inquiry and Imposing
PenaltiesbyAdjudicatingOfficer)Rules,1995(hereinafterreferredtoasRules)toinquireintoand
adjudgetheallegedviolationsofPITRegulationsandTakeoverRegulations.

SHOWCAUSENOTICE,HEARINGANDREPLY

3. ShowCauseNoticeNo.EAD6/AK/VS/25007/2013datedSeptember30,2013(hereinafterreferred
toas'SCN')wasissuedtotheNoticeeunderrule4oftheRulestoshowcauseastowhyaninquiry
should not be held and penalty be not imposed under Section 15A(b) of SEBI Act for the alleged
violationspecifiedinthesaidSCN.

4. SCNobservedthattheNoticeewasholding3,45,100sharesamountingto8.71%ofthesharecapital
of the company during quarter ended December 2011,which decreased to 2,14,700 shares
amounting to 5.42% of the share capital of the company during quarter ended March 2012. The
decreaseinholdingwasby1,30,400sharesamountingto3.29%ofthesharecapitalofthecompany.
Detailsoftransactionsareasunder:
Dateof
Transaction

Entity

31/01/2012

GTechStone

Preholding
No.ofshares

Purchased/Sold
(No.ofshares)

PostHolding
No.ofshares

3,45,100(8.71%)

1,30,400(3.29%)

2,14,700(5.42%)

It was observed that for the aforesaid transactions the Noticee had not made disclosures under
Regulation13(3)readwith13(5)ofPITRegulationsandRegulation29(2)readwith29(3)ofTakeover
Regulations.

5. TheNoticeevideletterdatedNovember04,2013submitteditsreplytotheSCNdenyingthealleged
chargesinteraliaasfollows:

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a. thataspertheirbooksofaccount,theyhadatnopointoftimeinvestedinthecompanycalledM/s.
ERPSoftSystemsLtd.andtothebestoftheirknowledgeandbelieftheydidnothold,nor,holdany
sharesinthesaidcompany;
b. thattheydonothaveanyrelationshipwiththesaidcompanyinanymanner,nor,havetheyinvested
inthesaidcompany;
c. that in the above stated circumstances, the alleged transaction dated January 31, 2012 i.e. sale
transaction of 1,30,400 shares in the company M/s. ERP Soft Systems Ltd. was not done by them,
sincetheydidnotholdanysharesintheabovesaidcompanyatanypointoftime;
d. thatsincetheallegedtransactiondatedJanuary31,2012wasnotdonebythem,theneedtomake
disclosuresunderRegulation13(3)readwith13(5)ofPITRegulationsandRegulation29(2)readwith
29(3)oftheTakeoverRegulationsdidnotarise;
e. thatinviewoftheaforesaidfacts,theshowcausenoticeissuedmaybecancelled.

6. Intheinterestofnaturaljustice,anopportunityofpersonalhearingwasprovidedtotheNoticeeon
December18,2013videhearingnoticedatedDecember10,2013.TheNoticeevideemailandletter
datedDecember13,2013requestedthehearingtobeadjournedonmedicalgrounds,toanytime
afterfirstweekofJanuary2014.Accordingly,anotheropportunityofpersonalhearingwasprovided
to the Noticee on January 06, 2014 vide hearing notice dated December 30, 2013. Mr Suresh
Chandak, Authorized Representative (hereinafter referred to as AR) appeared on behalf of the
NoticeeandreiteratedthesubmissionsmadebytheNoticeevidereplydatedNovember04,2013.
Duringthehearing,theARsubmittedacopyofletterdatedJanuary02,2014issuedbytheNoticee
to the company viz. M/S. ERP Soft Systems Limited requesting them to provide the Noticee with
copiesofthetransferdeedsandproofofinvestmentincompany.

7. DuringthecourseofadjudicationproceedingsvideemaildatedJanuary06,2014,detailsinrespect
oftransferorandtransfereefromwhomthesharesweretransferred/receivedto/fromalongwith
thedocumentaryproofi.e.copyofsharetransferdeeddulysignedbythetransferor/transferees,
copyoftheunderlyingsharecertificatesetc.wascalledfromtheRegistraroftheCompanyviz.M/s.
CameoCorporateServicesLimited(hereinafterreferredtoasCCSL).CCSLvideemaildatedJanuary
11, 2014 submitted that as per the shareholders data handed over by the company during their
appointment, 3,45,100 shares were held by the Noticee in the company and that the said shares

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were allotted to them in the IPO of the company (formerly known as M/s. Yashasvee Securities
Ltd.).CCSLfurtherinformedthatsubsequenttotheirappointmentasRegistraroftheCompany,the
followingtransferswereaffectedbytheNoticee:
S.No.

Dateoftransfer

NameofTransferee

Numberofshares

31.01.2012

S.Mohan

30,100

31.01.2012

S.Brindha

34,100

31.01.2012

R.KamalaMohan

34,100

31.01.2012

RMohan

32,100

CCSLfurtherinformedthatasonthatdate,theNoticeewasholdingabalanceof2,14,700sharesin
the company. CCSL also provided scanned copies of the transfer deeds in respect of the above
transfers.

8. Thereafter,asupplementaryshowcausenoticeRef:EAD6/AK/VS/6660/2014datedMarch03,2014
wasissuedtotheNoticeebasedontheaboveinformationreceivedfromCCSL.Thesupplementary
SCNinteraliaclarifiedthatthetransactionmadebytheNoticeeonJanuary31,2012obligatedthe
NoticeetomakenecessarydisclosuresunderRegulation13(3)readwithRegulation13(5)ofthePIT
RegulationsandRegulation29(2)readwith29(3)oftheTakeoverRegulations.However,theNoticee
hadfailedtomakesuchdisclosuresinthematter.

9. TheNoticeevideletterdatedMarch17,2014interaliamadethefollowingadditionalsubmissionsin
responsetothesupplementarySCN:
a. ThattheywerenotawarethatM/s.ERPSoftSystemsLtd.isthesamecompanywhichwasearlier
namedasM/s.YashasveeSecuritiesLimited;
b. That Mr. D V Sivakumar Reddy, son of Sri Duvvuru Sinivasulu Reddy, one of the promoters of the
company (the erstwhile M/s. Yashavee Securities Ltd.) was introduced to them by one of their
commonfriends.ThatthisMr.SivakumarReddyhadcometothemseekingforloaninconnection
with his companys (the erstwhile Yashavee Securities ltd.) IPO and had assured them of offering
certainsecuritiesfortheloanextendedforthesaidpurpose;
c. ThataccordinglytheyhadagreedtofinanceMr.DVSivakumarReddytothetuneofRs.37,00,000/,
andtosecuretherepaymentoftheabovesum,itwasproposedtothemthattheysubscribetothe

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equity shares for the then upcoming public issue of the company (the erstwhile M/s. Yashasvee
Securities Ltd.) and hold the equity shares allotted as security till repayment of the above loan
amount.TheNoticeeinbusinessinteresthadagreedtotheaboveproposal.Subsequentlytheabove
sum of Rs.37,00,000/ was repaid to the Noticee on June 14, 1995 and the Noticee had returned
backthesecuritiesgivenforthepurposeandthematterhadendedthere;
d. That further, even though the said Mr. D V SivaKumar Reddy took the signature of the Noticees
ManagingDirectorontheshareapplicationformforallotmentofsharesintheirupcomingpublic
issue of the company (the erstwhile M/s. Yashasvee Securities Ltd.), no share certificates for the
allotmentof3,45,100equitysharesoftheabovesaidcompanyallegedtohavebeenallottedinthe
Noticees name was ever sent to the Noticee. On June 14, 1995, the said loan amount of Rs.
37,00,000/, which was given by the Noticee by way of subscription to the IPO of the above
company,wasreturnedtotheNoticeeandthesaidMr.DVSivakumarReddyhadgotthesignature
of the Noticees Managing Directoron some blank transfer deeds for the purpose of transferring
backthesharesallottedtotheNoticeeinthecompany'sIPO;
e. thatthe Noticeepresumesthattheyarethe saidtransferdeeds bearingthe dateofPresentation
undersection108(1A)(a)oftheCompaniesAct,1956bearingPresentationdatesealof23.V.95;
f.

ThatthesaidTransferdeedshavingpresentationdateof23.V.95signedinblankhavebeenmisused
by the transferees by signing the transfer deeds on January 26, 2012, making one to believe as
thoughthesaidtransferwasdonebytheNoticee,whichinfactwasnot,astheNoticeedidnothold
anysharesinthecompany.Theexecutionofthetransferdeedsafteragapofnearly17yearson
transferdeedsbearingpresentationdate23.V.95itselfshowsthesuspiciousnatureofthetransfer
andtheevildesignsofthetransfereeswhohavecolludedwiththepromotersandthemanagement
ofthecompany.Ithasbeensubmittedthatoneofthetransfereesviz.R.KamalaMohan(foliono.
1417) is on the Board of the company and another transferee Mr. R Mohan (Folio No. 1415)
appears tobeherhusband. Similarly, theNoticee presumesthat theother twotransfereesviz. S
Mohan (Folio No.1414) and S. Bridha (Folio No.1416) who are husband and wife should also be
relatedtothepromotersofthecompanyandthatallthefourtransfereeshavecolludedalongwith
thesaidcompanyandputtheNoticeeinanembarrassingsituation;

g. TheNoticeehasdeniedhavingcarriedoutanytransferofsharesandhasstatedthatthesameis
evident from the fact that the amount of Rs.37,00,000/ extended by them as loan to Mr. D V
SivakumarReddybywayofsubscriptiontohiscompany'sIPOathisrequest,wasreturnedtothe

AdjudicationorderinthematterofM/s.ERPSoftSystemsLtd.Page5of18

Noticee on June 14, 1995. A copy of the City Union Bank Ltd., T. Nagar, Madras current account
statementofthecompany(theerstwhileM/s.YashasveeSecuritiesLtd.)hasbeenprovidedbythe
Noticeeinsupportofitsclaim;
h. Further, the Noticee has stated that the share application signed by them for the allotment of
shares in the IPO of the company (the erstwhile M/s. Yashashvee Securiteis Ltd.) was only for
security arrangement, and not for actual allotment of shares, and that the blank transfer deeds
bearing date of presentation as 23.V.95 signed by the Managing Director of the Noticee was
handedovertoMr.DVSivakumarReddy,whichprovesthattheyhadnointentionofsubscribingto
thesharesofthecompany,exceptasasecurityfortheamountsextendedasloantothesaidDV
SivakumarReddy,Promoterofthecompany;
Further, that if they had held 3,45,100 equity shares of the company, the same would have got

i.

reflectedintheirbalancesheetfortheyear199596,but,itisnotso,sinceinrealitytheydidnot
holdanysharesofthecompany,astheyhadgotbacktheentireloanamount.Acopyoftheaudited
balance sheet for the financial year 199596 has been provided by the Noticee in support of its
claim;
j.

Thatintheaforesaidcircumstancesandactualfactsexplainedasabove,ithasbeensubmittedthat
the Noticee never held any shares in the company, that the alleged transfer of 1,30,400 equity
sharesonJanuary31,2012wasnotdonebythem,assuch,theyhavenotviolatedRegulation13(3)
readwith13(5)ofPITRegulationsandRegulation29(2)readwith29(3)ofTakeoverRegulations.

10. It was noted that the date of presentation on all the four transfer deeds was 23.V.95, but, the
transferdeedswereexecutedonJanuary26,2012.AsperSection108(1A)(a)oftheCompaniesAct,
1956atransferisvalidforaperiodofoneyearfromthepresentationdateindicatedinthestamp
affixed by the Registrar of Companies (RoC) on the upper portion of the deed or closure date of
Register of Members immediately after the presentation date, whichever is later". Hence, vide e
maildatedMay19,2014,clarificationwassoughtfromCCSLinthematter.

11. CCSLvidetheiremaildatedMay28,2014enclosedscannedcopyofthereversesideofthetransfer
deed,whereinthesamewasrevalidatedbyROC,ChennaionJanuary24,2012.CCSLvidethesaid
emailfurtherstatedthatsincethetransferdeedisconsideredasvalid,ifthesameissubmittedwith

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the company / Registrar & Transfer Agents (RTA) within a period of one month from the date of
revalidation,hence,thedeedwasconsideredasvalidandthetransferwasaffectedaccordingly.

12. VideletterRef:EAD/AK/VS/16198/2014datedJune6,2014,scannedcopyofthereversesideofthe
transferdeedsreceivedfromCCSL,whichrevealedthatthetransferdeedswererevalidatedbythe
ROConJanuary24,2012,wereforwardedtotheNoticee.Itwaspointedoutthereinthatasperthe
availablerecords,theNoticeehadtransferred1,30,400shares(3.29%ofthepaidupcapitalofthe
company) on January 26, 2012, by executing four transfer deeds on January 26, 2012, after the
transferdeedswererevalidatedbyRoConJanuary24,2012,withoutmakinganydisclosuresunder
Regulation13(3)readwithRegulation13(5)ofthePITRegulationsandRegulation29(2)readwith
29(3)oftheTakeoverRegulations.

13. In response, vide letter dated June 26, 2014, the Noticee inter alia made the following additional
submissions:
a. That the transfer deeds having the presentation date of May 23, 1995 and signed in blank, have
been misused by the transferees to get the transfer deed revalidated by ROC, by misusing the
signaturesignedinblank;
b. That they did not have any knowledge of the revalidation, that they did not know any of the
transferees, nor, did they receive any payment from them. It has been submitted that there is no
reason for anyone to execute the transfer deeds on January 26, 2012, with the transfer deed
presentation dated as May 23, 1995 and to get them revalidated, unless it is a fraudulent
transaction/motive;
c. ThattheamountofRs.37,00,000/wasrepaidmuchbeforetheallotmentofshares,thattheshare
certificateswerenotissued,thattheyhadnointentionofsubscribingtothesharesofthecompany,
except as a security for the amounts extended as loan to the said Mr. D V Sivakumar Reddy,
promoterofthecompany;
d. That they have already filed a criminal complaint in Tamil, No. CSR/123/E3X/14 against the
promoterandaswellasthetransferees.AcopyofPolicecomplaintfiled(includingtranslationdone
inEnglish)andacopyofCSRissuedbythePoliceDepartmentwasprovided.

14. In view of various correspondence had with CCSL and the Noticee after the first hearing, another
opportunityofhearingwasprovidedtotheNoticeeonOctober14,2014videhearingnoticedated

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September 19, 2014. The Noticee vide letter dated October 01, 2014 requested to adjourn the
hearingtoanydayafterOctober14,2014.Accordingly,anotherdateofhearingwasprovidedtothe
Noticee on October 17, 2014 vide hearing notice dated October 07, 2014. Mr.L R Shivaprasad,
Managing Director of the Noticee and Mr Suresh Chandak Authorized Representative (hereinafter
referredtoasARs)appearedandreiteratedthesubmissionmadevideletterdatedMarch17,2014
andsoughttomakefurthersubmissionintheformofAffidavitbyNovember5,2014.

15. VideletterdatedNovember04,2014,theNoticeehasfiledanAffidavitonplainpapersignedbythe
ManagingDirectoroftheNoticee.TheManagingDirectoroftheNoticeeMr.LRShivaprasadvide
theaffidavitonplainpaperhasreiteratedthesubmissionsmadebytheNoticeevidelettersdated
March17,2014andJune26,2014andsubmittedthattheexecutionoftransferdeedsafteragapof
19 years, even though allowed under law, gives a strong presumption that it had been done
fraudulently.IthasbeenstatedthatifatallthethirdpartieswereknowntotheNoticee,theycould
have come to the Noticee and taken fresh transfer deed with the present date and done the
transfer.Itwasinteraliafurtherprayedinthesaidaffidavitthattakingintoaccountallthefactsand
alsothefactthattheNoticeeisavictimofcircumstancesasevidentfromthefactsofthecase,the
adjudicationproceedingsinthemattermaybedropped.

16. VideemaildatedMarch12,2015theNoticeewasadvisedtofurnishthefollowing:
a. CopyofSharePurchaseAgreement,ShareSubscriptionAgreement,LoanAgreementetc.entered
by the Noticee or its promoters/ directors with the company (the erstwhile Yashasvee Securities
Ltd.)oritspromoters/directors,ifany,highlightingthesalientfeaturesofsuchagreement;
b. In absence of receipt of shares as claimed, the reason for signing on thefour transfer deeds as
transferor of shares in respect of 30,100 shares, 32,100 shares, 34,100 shares and 34,100 shares
heldbytheNoticeeinthecompany.

17. VidetheirletterdatedMarch17,2015,theNoticeehasinteraliasubmittedasbelow:
a. that there is no share purchase agreement/share subscription agreement, loan agreement etc.
entered by the Noticee or its promoters/directors with the company (erstwhile M/s Yashasvee
SecuritiesLimited)oritspromoters/directors;

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b. thatthesaidMr.DVSivakumarReddy,fortheloanavailed,hadgivenpronotesandchequesas
securityfortheloanamountadvancedbytheNoticee;
c. thateventhoughthesaidMr.DVSivakumarReddytookthesignatureoftheManagingDirectorof
the Noticee on the share application form for allotment of shares in their public issue of the
company(theerstwhileM/s.YashasveeSecuritiesLimited),nosharecertificatefortheallotmentof
3,45,100 equity shares of the company, alleged to have been allotted in the Noticees name was
eversenttotheNoticee.

18. In support of their claim of extending loan of Rs. 37,00,000/ to the company (the erstwhile M/s.
Yashasvee Securities Ltd.), the Noticee vide email dated May 15, 2015 was advised to furnish
supporting documents, viz. bank account statement and details of interest paid, if any, by the
companytotheNoticee.TheNoticeevideitsreplyletterdatedMay20,2015hasstatedthatthe
said amount was paid by them through a cheque drawn on State Bank of India, Thousand Lights
Branch,Chennai,however,theconnectedbookscannotbetraced.Asregardstheinterestportion,
theNoticeehasstatedthatinterestattherateof18%p.a.fromthedateoftheloantillthedateof
repayment was received by cash. The Noticee was not able to provide the exact date when the
amountwasgiventothecompanyalongwithdocumentalproof,thoughbankentryreflectingthe
repaymentmadebythecompanyasperthebooksofthecompanywasproducedbytheNoticee.

CONSIDERATIONOFISSUES

19. IhavecarefullyperusedthewrittensubmissionsmadebytheNoticee,thesubmissionsmadeatthe
personalhearingandthedocumentsavailableonrecord.Itisobservedthattheallegationagainst
the Noticee is that the Noticee has failed to make the relevant disclosure under the provisions of
Regulation 13(3) read with Regulation 13(5) of PIT Regulations and Regulation 29(2) read with
Regulation29(3)oftheTakeoversRegulations.

20. Theissuesthat,therefore,ariseforconsiderationinthepresentcaseare:
a. WhethertheNoticeehasviolatedtheprovisionsofRegulation13(3)readwithRegulation13(5)
of PIT Regulations and Regulation 29(2) read with Regulation 29(3) of the Takeovers
Regulationsduetosaleof1,30,400sharesofthecompanyonJanuary31,2012?

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b. Doestheviolation,ifany,attractmonetarypenaltyunderSection15A(b)ofSEBIAct?
c. If so, what would be the monetary penalty that can be imposed taking into consideration the
factorsmentionedinSection15JofSEBIAct?

21. Before moving forward, it will be appropriate to refer to the relevant provisions of the PIT
RegulationandtheTakeoversRegulations,whichreadsasunder:
PITRegulations
Continualdisclosure
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
shareholdingorvotingrights,evenifsuchchangeresultsinshareholdingfallingbelow5%,ifthere
has been change in such holdings from the last disclosure made under subregulation (1) or under
this subregulation; and such change exceeds 2% of total shareholding or voting rights in the
company.
13(5)Thedisclosurementionedinsubregulations(3),(4)and(4A)shallbemadewithintwoworking
daysof:
(a)thereceiptsofintimationofallotmentofshares,or
(b)theacquisitionorsaleofsharesorvotingrights,asthecasemaybe.
TakeoverRegulations
29(2)Anyperson,whotogetherwithpersonsactinginconcertwithhim,holdssharesorvotingrights
entitling them to five per cent or more of the shares or voting rights in a target company, shall
disclosethenumberofsharesorvotingrightsheldandchangeinshareholdingorvotingrights,even
if such change results in shareholding falling below five per cent, if there has been change in such
holdings from the last disclosure made under subregulation (1) or under this subregulation; and
such change exceeds two per cent of total shareholding or voting rights in the target company, in
suchformasmaybespecified.
29(3)Thedisclosuresrequiredundersubregulation(1)andsubregulation(2)shallbemadewithin
twoworkingdaysofthereceiptofintimationofallotmentofshares,ortheacquisitionofsharesor
votingrightsinthetargetcompanyto,
(a)everystockexchangewherethesharesofthetargetcompanyarelisted;and
(b)thetargetcompanyatitsregisteredoffice.

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FINDINGS

22. InowproceedtoexaminetheallegedviolationsofPITRegulationsandTakeoverRegulationsbythe
Noticee.AspertheBSEwebsite,IobservethattheNoticeewasholding3,45,100sharesamounting
to 8.71% of the share capital of the company during quarter ending December 2011, which
decreasedto2,14,700 shares amountingto 5.42% of sharecapitalofthecompany duringquarter
endingMarch2012.Thedecreaseinholdingwasby1,30,400sharesamountingto3.29%ofshare
capitalofthecompany.

23. I note here that the Noticee has inter alia stated that no share certificate for the allotment of
3,45,100 equity shares of the company, alleged to have been allotted in the Noticees name was
eversenttotheNoticee.Ifsobeit,inwhichcase,IdonotfindanyreasonfortheManagingDirector
oftheNoticeetoputhissignatureonfourtransferdeedsastransferorsforsaleof30,100shares,
32,100shares,34,100sharesand34,100shares(totalof1,30,400shares)heldbytheNoticeeinthe
company.IfindfromtherepliesoftheNoticeethattheNoticeehasinteraliaclaimedthatMr.DV
Sivakumar Reddy, son of Sri Duvvuru Sinivasulu Reddy, who was one of the promoters of the
company and was introduced to the Noticee by one of the Noticee's common friends had
approachedtheNoticeeforseekingloaninconnectionwiththecompany'sIPO.Furtherthathehad
assured the Noticee of offering certain securities for the loan extended to them for the said
purpose. I find that the Noticee has claimed that after mutual discussions, the Noticee agreed to
financetothetuneofRs.37,00,000/,andtosecuretherepaymentoftheabovesumhadagreedto
subscribetotheIPOofthecompanyandholdtheequitysharesallottedassecuritytillrepaymentof
the above loan amount.The Noticee has stated that the sum of Rs.37,00,000/ was repaid by the
companytotheNoticeeonJune14,1995andthatthesaidMr.DVSivakumarReddyhadgotthe
signature of the Noticees Managing Director on some blank transfer deeds for the purpose of
transferringbackthesharesallottedtotheNoticeeinthecompany'sIPO.Videthesaidreply,the
Noticee, I find, has stated that they presume that the transfer deeds signed in blank by their
Managing Director are the same transfer deeds which CCSL, the Registrar to the company has
providedascannedcopyofvideemaildatedJanuary11,2014.

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24. InotefromthesamethattheNoticeehasadmittedthattheirManagingDirectorhadsignedfour
blanktransferdeedsfortransferringatotalof1,30,400sharesofthecompanyandhandedoverthe
same to the promoter of the company. The Noticee has claimed that the transfer deeds having
presentation date of 23.V.95, signed in blank, have been misused by the transferees, who the
Noticee claims are the relatives of the promoters. However, from the Noticees own admission, I
find that the Noticee by signing on blank transfer deeds and handing over to the promoter, had
given implied authority to the promoter of the company to execute the same as and when the
promoterwishedtotransferthesharesandtowhosoeverthepromoterwishedtotransfer.Besides,
thisconductoftheNoticeeofgoingaheadandsigningontheblanktransferdeedsastransferorof
shares,negatestheNoticeesclaimofnotreceivinganysharespursuanttoallotmentintheIPOof
thecompany.IncaseshareswerenotreceivedasclaimedbytheNoticee,therewasnoreasonfor
the Noticee to sign on blank transfer deeds as transferors. Also, without the underlying share
certificates, either in physical or demat form, the transfer could not have been registered in the
booksofthecompany.Also,sincethedateofexecutionwasleftblank,thetransfereecouldexercise
their right to become a shareholder by getting their name on the register in place of the
transferor,asandwhentheychoseto.Inthepresentcase,itisnotedfromthescannedcopyofthe
transferdeedsprovidedbyCCSLthatthoughthedateofpresentationonallthefourtransferdeeds
was23.V.95,but,thetransferdeedswereexecutedonJanuary26,2012aftergettingthetransfer
deedsrevalidatedbyROC,ChennaionJanuary24,2012.ThoughtheNoticeehassubmittedthatthe
executionofthetransferdeedsbearingpresentationdate23.05.95afteragapofnearly17years,
itself shows the suspicious nature of the transfer and the evil designs of the transferees viz. R.
KamalaMohan,Mr.RMohan,SMohanandS.Bridhawhohavecolludedwiththepromotersandthe
managementofthecompany,forthereasonsstatedasabove,Ifindthatthetransferwasdoneby
followingthedueproceduresunderlaw.

25. Atthisjuncture,IwouldliketorelyontheHon'bleSATjudgmentinthematterofM/s.Heliosand
Matheson Information Technology Limited Vs. SEBI bearing Appeal No. 69 of 2011decided on
November16,2011,whereinitwasheldthat:
"Itisbynowwellsettledthatinthecaseoftransferofsharesheldinthephysicalform,thetransfer
is complete the moment blank transfer deeds are executed by the sellers and delivered to the
purchaser.ReferenceinthisregardbemadetoaDivisionBenchjudgmentoftheMadrasHighCourt

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inCommissionerofIncometaxvs.M.Ramaswamy(1985)151ITR122whereinithasbeenheldthat
asbetweenthetransferorandthetransferee,thetransactionofsaleofsharesiscompletewhenthe
blanksharetransferformsareexecutedbythetransferorandmerelybecausethecompanyhasnot
recognised the transfer and made entries in the share registers, the transfer cannot be said to be
incomplete. The learned Judges of the Madras High Court relied upon a judgment of the Supreme
Court in Vasudev Ramchandra Shelat vs. Pranlal Jayanand Thakkar and Ors. AIR 1974 SC 1728
whereinitwasheldthatownershipofsharesstoodtransferredfromtheassesseetothepurchaser
upontheexecutionofblanktransferdeedsnotwithstandingthefactthatthetransferofshareshad
notbeenregisteredinthecompanysbooks.Itwasheldthatifatransferorhastransferredtheright
togetthesharecertificatesfromthecompanyinthenameofthetransferee,then,asbetweenthe
transferor and the transferee, the transfer is complete though the transferee cannot exercise his
rightsasashareholdervisavisthecompanyuntilthetransferofsharesisrecordedintheregisterof
shareholdersinthecompany.Inthepresentcase,whenthesharecertificatesalongwiththetransfer
deedswereexecutedbythesellers,thedealregardingtransferofthesharesasbetweenthesellers
and the appellant was complete and the adjudicating officer in our view was in error in holding
otherwise."

26. Inthegivencase,IfindthattheNoticeehasadmittedlysignedthetransferdeedasatransferor.This
meansthattheNoticeehadsignedthetransferdeedwiththeintentionofeffectingthetransfer.No
other reasonable construction can be put on this act of the Noticee. And if the Noticee has
entrusted such signed transfer deed to the promoter of the company as per Noticees own
admission, I suppose that the Noticee had given the right to the promoter of the company to
complete the transfer. However, to be duly executed by the sellers, besides signature of the
transferors,paymentofstampduty,dateofexecution,attestationbywitnessesetc.alsohadtobe
complied with. I note here that by not entering the date of execution on the transfer deed, the
Noticeedidnotcompletetheexecutionprocessandleftittothetransfereetocompletethesameat
anappropriatetime.Asapractice,thetransferorwhoexecutesthetransferinblank,confersonthe
holderofthedocumentsforthetimebeinganauthoritytofillinthenameofthetransferee,and
eachsuccessiveholderforthetimebeing,asandwhenthedocumentspassthroughseveralhands,
itpassesonthisauthority.Thus,primafaciebasedonthefactsbeforeme,Idonotseeanymisuse
ofthetransferdeedsbythetransfereesasclaimedbytheNoticee.

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27. Thus,inthegivencase,InotethattheNoticeebysigningthetransferdeedasatransferor,but,not
enteringthedateofexecution,hadkepttheexecutionprocessopenatthehandsofthetransferees
tocompletethesameasandwhentheydesired.Ifindfromrecordthatthetransfereesaftergetting
the transfer deed revalidated by RoC on January 24, 2012, have executed each of the 4 transfer
deedsfor30,100shares,32,100shares,34,100sharesand34,100sharesonJanuary26,2012.

28. Inotethatasperregulation13(3)ofthePITRegulations,anypersonwhoholdsmorethan5%shares
orvotingrightsinanylistedcompanyisrequiredtodisclosethenumberofsharesorvotingrights
heldandchangeinshareholdingorvotingrights,evenifsuchchangeresultsinshareholdingfalling
below5%,iftherehasbeenchangeinsuchholdingsfromthelastdisclosuremadeandsuchchange
exceeds2%oftotalshareholdingorvotingrightsinthecompany.Inthecaseinhand,theNoticee
washolding3,45,100sharesamountingto8.71%ofthesharecapitalofthecompanyduringquarter
ending December 2011, which decreased to 2,14,700 shares i.e. 5.42% of share capital during
quarterendingMarch2012,thus,thedecreaseinholdingwasby1,30,400sharesi.e.3.29%ofshare
capital of the company. Hence the Noticee was required to disclose under Regulation 13(3) read
with Regulation 13(5) of PIT Regulations to the company, the change in share holding within two
working days from the sale of shares or voting rights. However, the Noticee failed to disclose the
same.

29. Similarly,asperregulation29(2)oftheTakeoverregulation,anyperson,whotogetherwithpersons
actinginconcert,holdssharesorvotingrightsentitlinghimtofivepercentormoreofthesharesor
voting rights in the target company, is required to disclose the number of shares or voting rights
heldandchangeinshareholdingorvotingrights,evenifsuchchangeresultsinshareholdingfalling
belowfivepercent,iftherehasbeenchangeinsuchholdingfromthelastdisclosuremadeandsuch
changeexceedstwopercentoftotalshareholdingorvotingrightsinthetargetcompany.Hencethe
Noticeewasalsorequiredtodisclosetothecompanyandtothestockexchangewherethesharesof
thecompanywerelisted,thechangeinshareholdingwithintwoworkingdaysfromthepurchase/
saleofsharesorvotingrightsunderRegulation29(2)readwith29(3)oftheTakeoverRegulations,
however,theNoticeefailedtodisclosethesame.

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30. I note further from the shareholding patternas available on the BSE website that as on quarter
endedJune2006,theNoticee'sshareholdingwas3,65,200sharesamountingto9.22%oftheshare
capitalofthecompanyandcontinuedtobethesametillquarterendedJune2009.Atquarterended
September2009,theNoticee'sshareholdingreducedto3,64,300sharesamountingto9.20%ofthe
share capital and continued as such till quarter ended March 2010. Again at quarter ended June
2010, the Noticee's shareholding reduced to 3,45,100 shares amounting to 8.71% of the share
capitalandcontinuedassuchtillquarterendedDecember2011.OnceagainatquarterendedMarch
2012,theshareholdingreducedto2,14,700sharesamountingto5.42%ofthesharecapital.Thus,I
notethattherearechangesintheshareholdingoftheNoticeeonthreeoccasionsfromthequarter
endingJune2006toquarterendingMarch2012.SincetheholdingoftheNoticeeinthecompany
andthechangestheretowereavailableinthepublicdomainonBSEwebsite,Idonotfindmeritin
theNoticeessubmissionthatitwasnotawareofthefactthattheshareswereallottedtothem.

31. Inviewofalloftheabove,itstandsestablishedthattheNoticeehasviolatedRegulation13(3)read
withRegulation13(5)ofthePITRegulationsandRegulation29(2)readwith29(3)oftheTakeover
Regulations.The Honble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund
[2006] 68 SCL 216(SC) held that:In our considered opinion, penalty is attracted as soon as the
contravention of the statutory obligation as contemplated by the Act and the Regulations is
established and hence the intention of the parties committing such violation becomes wholly
irrelevant.FurtherinthematterofRanjanVarghesev.SEBI(AppealNo.177of2009andOrder
dated April 08, 2010), the Honble SAT had observed Once it is established that the mandatory
provisionsoftakeovercodewasviolatedthepenaltymustfollow.

32. In view of the foregoing, I am convinced that it is a fit case to impose monetary penalty under
section15A(b)oftheSEBIAct,whichreadsasunder:
15A(b).Penaltyforfailuretofurnishinformation,return,etc.
To file any return or furnish any information, books or other documents within the time specified
thereforintheregulations,failstofilereturnorfurnishthesamewithinthetimespecifiedthereforin
the regulations, he shall be liable to a penalty of one lakh rupees for each day during which such
failurecontinuesoronecrorerupees,whicheverisless.

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33. While determining the quantum of penalty under Section 15A (b) of SEBI Act, it is important to
considerthefactorsstipulatedinsection15JofSEBIAct,whichreadsasunder:
15JFactorstobetakenintoaccountbytheadjudicatingofficer
While adjudging quantum of penalty under section 15I, the adjudicating officer shall have due
regardtothefollowingfactors,namely:
(a)the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a
resultofthedefault;
(b)theamountoflosscausedtoaninvestororgroupofinvestorsasaresultofthedefault;
(c)therepetitivenatureofthedefault.

34. In view of the charges as established, the facts and circumstances of the case and the judgments
referred to and mentioned hereinabove, the quantum of penalty would depend on the factors
referredinSection15JofSEBIActandstatedasabove.Itisnotedthatnoquantifiablefiguresare
availabletoassessthedisproportionategainorunfairadvantagemadeasaresultofsuchdefaultby
theNoticees.Furtherfromthematerialavailableonrecord,itmaynotbepossibletoascertainthe
exact monetary loss to the investors on account of default by the Noticees. However, the main
objective of the Takeover Regulations is to afford fair treatment for shareholders who may be
affected by the change in control. The Regulation seeks to achieve fair treatment by inter alia
mandating disclosure of timely and adequate information to enable shareholders to make an
informeddecisionandensuringthatthereisafairandinformedmarketinthesharesofcompanies
affectedbysuchchangeincontrol.ThedisclosuresunderRegulation13ofthePITRegulationsaims
tomakeinsidertradingtransparentbyfacilitatingexposureofanyillegaltradeandtherebyserving
asadeterrent.Correctandtimelydisclosuresarealsoanessentialpartoftheproperfunctioningof
thesecuritiesmarketandfailuretodosoresultsinpreventinginvestorsfromtakingwellinformed
decision. Thus, the cornerstone of the Takeover Regulations and PIT Regulations is investor
protection.

35. AsperSection15A(b)oftheSEBIAct,theNoticeeisliabletoapenaltyofonelakhrupeesforeach
dayduringwhichsuchfailurecontinuesoronecrorerupees,whicheverisless.Fromrecords,Ido
notfindthedefaulttobeofrepetitivenature.

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36. I find that the Noticee has violated Regulation 13(3) read with Regulation 13(5) of the PIT
Regulations on 1 occasion and Regulation 29(2) read with 29(3) of the Takeover Regulations on 1
occasion.

37. IfindthatanytransactionwhichrequirescomplianceoftheTakeoverand/orPITRegulations,ifnot
complied, cannot be considered a mere "technical" violation, since other shareholders/ investors
aredeprivedoftheinformation.Inthisregard,IwouldliketorelyuponthefindingsofHonbleSAT
inthematterofMilanMahendraSecuritiesPvt.LtdVs.SEBI(AppealNo.66of2003andOrderdated
November 15, 2006) regarding the importance of disclosure in which SAT has observed that: the
purposeofthesedisclosuresistobringabouttransparencyinthetransactionsandassistRegulator
toeffectivelymonitorthetransactionsinthemarket.

ORDER

38. After taking into consideration all the facts and circumstances of the case, I impose the following
penaltyagainsttheNoticeeunderRegulation15A(b)oftheSEBIActfortheviolationofRegulation
13(3)readwithRegulation13(5)ofthePITRegulations,1992andRegulation29(2)readwith29(3)
oftheTakeoverRegulations,2011,asapplicable:

Sr. Noticee
Regulationviolated
PenaltyAmount
No.
1
M/s. GTech Stone Regulation 13(3) read with Rs.3,00,000/ (Rupees ThreeLakh
Ltd.
Regulation 13(5) of the PIT only)
Regulations,1992

Regulation 29(2) read with

29(3) of the Takeover
Regulations,2011

39. Inthefactsandcircumstancesofthecase,Iamoftheviewthatthesaidpenaltyiscommensurate
withthedefaultcommittedbytheNoticee.

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40. The Noticee shall pay the said amount of penalty by way of demand draft in favour of SEBI
PenaltiesRemittabletoGovernmentofIndia,payableatMumbai,within45daysofreceiptofthis
order. The said demand draft should be forwarded toChief General Manager, Integrated
SurveillanceDepartment,SEBIBhavan,PlotNo.C4A,GBlock,BandraKurlaComplex,Bandra
(E),Mumbai400051.

41. Intermsofrule6oftheRules,copiesofthisorderaresenttotheNoticeeandalsototheSecurities
andExchangeBoardofIndia.

Date:September24,2015
Place:Mumbai

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AnitaKenkare
AdjudicatingOfficer