Sebi bans Nirmal Kotecha, Saminathan, others

W, X, Y, Z, I and Q are the only unlucky alphabets in English language that did not have one of the 230 Kotecha benami entities name starting with them.

In a meticulously planned, cunningly executed, but in the end hopelessly messed up, criminal operation that could land him in jail for years under stringent anti-money laundering laws, Nirmal Kotecha used these 230 entities, the demat account and mobile phone of a 24-old college student Amol Kokane (brother-in-law of Kotecha’s accountant, who died in a “bus accident” in the middle of the operation),  his own wife’s bank account, his brokers India Capital Markets, Pyramid promoter PS Saminathan, journalist Rajesh Unnikrishnan and public relations executive Rakesh Sharma to artificially inflate the price of shares of Pyramid Saimira and enrich himself.

Kotecha & Co forged a Sebi letter and disseminated it to media houses on Saturday, December 20, 2008.

On December 22, Kotecha directly and through the aforesaid entities sold a huge chunk of Pyramid shares at artificially inflated prices due to the fake letter.

All the aforesaid entities were banned from the stock market by Sebi until further orders in an elaborate 54-page order that detailed the modus operandi.

It has also barred Keynote Capital from giving any stock recommendations.

While the ban itself will hurt Kotecha and company, Sebi has referred the matter to the Financial Intelligence Unit, which may lead to more stringent action.  

“As the matter appears to be concerning money laundering activities detrimental to the genuine investors at large, a copy of the order is also being sent to the Financial Intelligence Unit (FIU) – India and to the Reserve Bank of India for further verification of these accounts, and for necessary preventive and punitive action, in accordance with law against the concerned entities/persons as may be necessary, in the matter,” K M Abraham, wholetime member, Sebi said in the ex parte, interim order.

DNA was the first and only paper to report the direct Kotecha connection on January 6, 2009.

DNA has also in subsequent reports exposed the connection between Saminathan, Kotecha and their active involvement in pumping up and dumping the stock.

Sebi found Saminathan guilty of making untrue corporate announcement so as to aid Kotecha to offload the stock at higher prices.

Saminathan and Kotecha orchestrated a fictitious transaction through their broker Keynote Capital in June, 2008 wherein Saminathan bought 4.8% from Kotecha at a price of Rs 250.

Sebi found that there was no receipt of funds by Nirmal Kotecha from Saminathan on
the date of the transaction and that on the basis of the letter from Shri Nirmal
Kotecha, Keynote has only made book entries.

The shares were also not exchanged on the pay-out date. “The announcement and the timing by the company, based on information provided by Shri Saminathan and Shri Nirmal Kotecha to the company, were therefore misleading,” Sebi concluded.
Saminathan was not reachable on Thursday.

Kanhu Charan Sahu, company secretary, Pyramid Saimira, said, “We have not gone through the report yet. There is a strike in Tamil Nadu today, because of which we are not working. We have only heard of it from the media and would require to go through the report before making an official comment.”

But Pyramid promoter-director N Narayanan said: “We welcome the Sebi order. As a promoter, it only vindicates our stand that we have been a victim of price manipulation. This order will help us protect the interest of shareholders.”

Kotecha was also not reachable in any of his multiple mobile phones.

But DNA spoke to Amol Kokane, whose mobile phone and demat account were fraudulently used by the scamster to buy low and sell high Pyramid shares, before and after forging the Sebi letter, respectively.

Kokane said Kotecha had used his account and phone number, without his knowledge.
“My brother-in-law, Sanjeev Javhne used to work in Nirmal Kotecha’s office before he passed away. He (Sanjeev Javhne) had asked me to open a demat account and used to trade on my behalf until he passed away. He used to work for Kotecha at Nariman Point. He died in a bus accident, he fell off while going to work on October 16. I don’t know about the stock markets. I am 24 years old. I am studying at an engineering college in Navi Mumbai,” he said.

Sebi has also filed a separate police complaint against Kotecha for preventing Sebi officials from probing  Kokane in February.

Kokane says “Some people from Sebi had come and were asking about the transactions. Somebody from home called Nirmal Kotecha because we did not understand what it was about. By the time he came, the questioning was over and though I did not know much I told them what I did know. When Kotecha came, he asked me not to say anything.”