Market sources said that Banthia might have to step down from his post of director as the exchange bye-laws and recent norms set by SEBI do not permit a member whose trading rights have been suspended, to continue to hold post of a director at a stock exchange.

The role of the promoters and entities related to them of the three companies (including Videocon's creeping acquisition offer), stock exchanges and that of Harshad Mehta will be spelt out in detail in a second report to be finalised shortly.

The first report of the regulator has revealed that the "Big Bull" had operated through seven front companiesbelieved to be owned by his brothers-in-law, Anil Doshi and Dinesh Doshi. These seven front companies in turn dealt through 34 brokers, of which 18 were more prominent, to corner the shares of these scrips, and thus take the price of these shares to dizzy heights in end-May.

The seven companies which allegedly acted as a front for Mehta are: Damyanti Finvest, CDP Fincap, KRN Finvest, Rijuta Finvest, Isku Finvest, Burlington Finance and Money Television.

"The decision making was not done by them and evidence shows that their activities and decision making was in control with Harshad Mehta", said LK Singhvi, senior executive director of SEBI in-charge of surveillance and investigations.

"These persons and their entities have no financial track record or worth of their own nor do they have experience or the professional expertise to undertake such securities transactions," explained Singhvi.

Out of the 18 brokers, 12 belong to BSE and 6 to the National Stock Exchange (NSE). The 12 BSE brokerages are:Harvest Deal Securities where Rajendra Banthia is the main director, GNH Global Securities, Satyanarayan Nangalia, RR Mohta, Sharukh Tara, PR Shah Share & Stock Brokers, Ramrakh R Bohra, Mahico Pvt Ltd, Lalkar Securities, Bharat J Patel and Malar Share Shoppee. Mefcon Securities is common to both BSE and NSE.

The NSE brokers include, Star Share & Stock Brokers, Asian Securities, Stenly Credit Capital, Valfin Financial Services, Digital Leasing and Sony Securities.

Once the detailed inquiry is through the exact quantum of punishment would be determined.

"It has been established through the investigation that these seven entities and the 18 brokers in concert and connivance were responsible for the manipulation of these scrips," explained Singhvi.

"Investigations have also prima-facie established that the set of common clients mentioned with whom these brokers were dealing in these scrips are the entities closely connected to Harshad Mehta and acted as a front for him," he added.

SEBI's investigationsreveal that over 70 per cent of the traded stocks of these securities were accumulated by these entities in a phased manner which reflected on their prices. SEBI officials said that brokers had built up huge carry forward positions in these scrips and even exceeded the exposure limits prescribed for trading.

While in the case of BPL the traded securities reported on the exchange stood at 55 lakh shares, about 30-35 lakh shares were cornered by these brokers. Similarly, in the case of Videocon International and Sterlite about 40-50 per cent traded and deliverable volumes were cornered by these entities. On the BSE, these intermediaries mainly resorted to the carry forward mechanism to accumulate these stocks over a period of 5-9 carry forward sessions.

Reflecting the concerted and phased attempts made by these entities to rig up the prices of these stocks, BPL moved from a low of Rs 100-180 registered during the period between January and March 1998 to a high of Rs 445 on June 4. Interestingly, the stockcrashed to a low of Rs 109 leaving the bulls completed trapped on account of heavy unloading.

Similarly, in the case of Videocon International, where the price manipulators aptly used the "news stories" on 2 per cent creeping acquisition by the promoters to jack up the price from a low of Rs 25 in January, 1998 to Rs 168 on June 4. The stock ultimately came crashing to a low of Rs 43 on July 2.

Sterlite, which was also traded at the lowest ebb of Rs 162 in February 1998, touched a high of Rs 385 in May. However, the post budget phase saw Sterlite register a 60 per cent erosion in its market value to trade at a low of Rs 155 on June 23.

Investigations have also revealed that these 18 brokers transferred funds between them and also shifted positions depending on one broker hitting his gross exposure limit. The exchange of kaplis was also resorted to very frequently.

SEBI has decided to initiate prosecution against the seven clients charged for alleged price manipulation, for failure to cooperate withthe regulator during the course of investigations.

Sources told The Financial Express that none of these clients, which have been accused of having been a front for big bull Harshad Mehta, co-operated with SEBI during the process of investigation.

Although, SEBI will take action against these clients on charges of price manipulation only once the inquiry into the matter is over, it has already decided to file prosecution against them for violating the SEBI Act by not co-operating with the regulator.

Sources informed this paper that the investigation report has relied on two critical facts for determining the nexus between the clients, brokers and Harshad Mehta. According to SEBI sources, all these seven front companies became operational just around the time when Mehta started giving advise on investments through the Internet.

The other critical issue which is believed to have cracked the case is that none of these clients paid any margin to the brokers despite having done hugetransactions.

"Considering that all these seven companies never were active in the market and despite that never paid a single margin on their purchases shows that the brokers were obviously acting on the instructions of someone. Our evidence shows that it was Harshad Mehta", said a SEBI source.