2008 (10) TMI 628 - AT - Companies Law

Summary

Issues Involved:
1. Manipulation of the scrip of the appellant company.
2. Publishing false and misleading announcements.
3. Manipulation of accounts for the year 2004-05.

Summary:

1. Manipulation of the scrip of the appellant company:
The appellant was charged with manipulating the market in its own shares by generating large trading volumes to raise the price of the scrip. The Board alleged that a group connected with the appellant indulged in trades among themselves, raising the price from Rs. 4.25 to Rs. 43.85. However, the Tribunal found no evidence of a link between the appellant and the traders. The mere presence of members at the annual general meeting or shared addresses with an associate company was insufficient to establish a connection. The charge of manipulative trading in its own shares by the appellant company, therefore, fails.

2. Publishing false and misleading announcements:
The appellant was accused of making misleading announcements to boost its scrip price, violating regulations 4(2)(k) and 4(2)(r) of the FUTP Regulations. The announcements included launching "worldwide outbound package tour services" and entering the forex business. The Tribunal found that the announcements were based on genuine business plans and agreements, and substantial steps were taken to implement these proposals. The announcements were of a price-sensitive nature, which the appellant was obliged to disclose. Thus, there was no reason to hold that the announcements were made only to mislead and dupe investors.

3. Manipulation of accounts for the year 2004-05:
The appellant was charged with showing inflated profits to lure investors. The profit was attributed to trading in shares of three companies, which the Board alleged were fictitious transactions. The Tribunal noted that the appellant received sale proceeds of more than Rs. 10 crore, and the broker's statement denying the trades was unreliable. The appellant's request for cross-examination of the broker was denied, violating principles of natural justice. The Tribunal found no material evidence that the manipulation in the annual accounts was intended to lure investors. Given the lack of any definite evidence, this charge against the appellant also fails.

Conclusion:
The main charge of manipulative trading in its own shares by the appellant fails due to the absence of any link established by the respondent Board between any of the traders and the appellant company. The charges of making false and misleading announcements and manipulation in the annual accounts of 2004-05 to lure investors also do not succeed. The appeal is allowed, and the impugned order is set aside. No order as to costs.