SMS Techsoft from raising additional capital through securities market, either directly or indirectly.
How SMS Techsoft lured investors
A flurry of mobile SMSes recommending investors to buy SMS Techsoft stock led the regulator to investigate the matter and what it found was a long-drawn plan to manipulate the stock and cheat retail investors.
The investigation revealed that SMS Techsoft that had a paid up capital of Rs 5.05 crore with 50.57 lakh shares as on December 2011, had in March 2012 decided to issued three crore preference shares of Rs 10 each to three promoters and 28 other entities. Sebi found that out of the 28 entities, 27 has the same mobile number and a common email id and it belonged to a person named Rajesh Mangilal Ranka (an employee with the company) whom Sebi had restrained (by order dated July 28, 2010) from participating in the market for two years. The regulator determined that all 28 were connected to each other.
A closer look into the issuance of preference shares revealed a maze of transactions between Ranka, Manjulaben Shah (wife of an allottee Maheshchandra Chunilal Shah), SMS Techsoft and 19 allottee including the three promoters.
Apparently, while the company should have received Rs 30 crore as proceeds for preferential allotment of three crore share issued to the 31 entities including the promoters, the money never came to the company.
Sebi figured out that Ranka transferred Rs 1 crore into the joint account of Maheshchandra and Manjulaben Shah and that money was then transferred to the company’s account which it transferred back to Manjulaben’s account. It was after that through a series of 59 transactions with the same money between Manjulaben, SMS Techsoft and 18 other allottees that allotment was carried out for them.
However, the money, after all this was completed, moved back from where it originated — into the bank account of Rajesh Ranka. All this was completed in a matter of 17 days between March 3, 2012 to March 20, 2012.
Other than this, Sebi also figured out that the addresses provided by the company were incorrect.
While the company disclosed