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TMI Blog2013 (10) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... or short). During the period of investigation, there was consistent fall in price of the scrip of SIL accompanied by low delivery. Price of SIL scrip had fallen from ₹ 342/- as on February 5, 2001 to a low of ₹ 60.75 as on April 30, 2001 before finally closing at ₹ 73.75 on May 2, 2001. SEBI had also conducted investigation in the scrip of SIL, for the period from February 2000 to August 2000. During that period of investigation it was noticed that price of the scrip had increased from ₹ 10/- in February 2000 to ₹ 696/- in August 2000 and appropriate action was initiated against various persons/entities involved in dealing in scrip therein, including appellant. 4. Based on investigation report for the period February 5, 2001 to May 2, 2001, enquiry officer appointed by SEBI issued notice on June 18, 2008 calling upon appellant to show cause as to why trades executed by appellant on behalf of its client Mr. Heerachand Salecha in the scrip of SIL which were synchronized circular trades and executed between a set group, should not be held to be violative of Regulation 4(a) and (d) of the Securities and Exchange Board of India (Prohibition of Fraudulent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereunder. b. Alleged violations pertain to trades executed in 2001 and impugned order is passed after 12 years contrary to Regulation 28 (2) of Intermediaries Regulations. Relying on decisions of this Tribunal in Appeal No.143 of 2011 decided on November 28, 2011 Aditi Dalal v. SEBI [2012] 25 taxmann.com 48 (Sat - Mum.)) and Appeal no.114 of 2012 (HB Stockholdings Ltd. v. SEBI) decided on 27/8/2013 it is contended that impugned order which suffers from inordinate delay is liable to be quashed and set aside or in the alternative, appellant be let off by warning appellant to be careful in future. c. Where trades executed by a client through a broker are found to be manipulative, broker can be made liable only if there existed relationship more than that of broker-client relationship. In the present case no such relationship is shown to have been existing between appellant (broker) and Heerachand Salecha (client) and hence prohibition imposed against appellant by impugned order is unjustified. d. Neither there is any material on record to suggest that there was any connection between appellant (broker) and Heerachand Salecha (client) nor there is any basis on which it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, the trading of these entities in the scrip reduced drastically, the volume of trades in the scrip became negligible and the price of the scrip also started declining. The 'last traded price' (LTP) analysis for the entire period shows that the price of the scrip varied in the range from -14% to 11.54%. 4. During the investigation period, three different groups were found trading in the scrip of SIL in a circular manner. Out of these, the group consisting of eight (8) brokers/ subbrokers (namely N.C. Jain, Opulant Stock Broking, Bharti Thakkar India Sec. Pvt. Limited, ISJ Securities/ Vintel Securities, Sripal Jain, Joindre Capital Service/ Alwin Securities and Reneissance Securities Limited/ Mellennium Securities) and their clients including Angel Broking Limited (hereinafter referred to as the 'noticee') (identified as 'Group 1') were found trading amongst themselves in circular manner, which led to the creation of artificial volumes in the market. The total volume generated by the said group by way of circular trades was 3,42,800 shares (gross) i.e. about 37.52% of the total quantity traded during the period of investigation. The trading pattern of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the trades entered by the noticee with the counterparties, matched with startling proximity, in terms of the timings of entering of orders, the price and the quantity. An instance of the same has been reproduced below: Table - B Date Buy Order Sell Order Trade Time difference Member Client Time Rate Qty. Member Client Time Rate Qty. Time Qty Price 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 11:58:07 381.50 800 Opulant Broking Ramsudhakara 11:58:07 381.50 700 11:58:08 100 381.50 0:00:00 06/02/01 Angel Broking Heerachand 11:58:07 381.50 800 Opulant Broking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Angel Broking Heerachand 13:01:20 376 700 NC Jain Own 13:01:19 376 700 13:01:21 100 376 0:00:01 06/02/01 Angel Broking Heerachand 13:01:20 376 700 NC Jain Own 13:01:19 376 700 13:01:21 100 376 0:00:01 06/02/01 Angel Broking Heerachand 13:01:20 376 700 NC Jain Own 13:01:19 376 700 13:01:21 100 376 0:00:01 06/02/01 Angel Broking Heerachand 13:01:20 376 700 NC Jain Own 13:01:19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 14:55:55 379.75 700 Shripal Jain Own 14:55:56 379.75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Broking Ramsudhakaran 700 Angel Broking Ltd. Heerachand Salecha ISJ Securities Vintel Securities 700 Bharati Thakkar Govind Chinchani Angel Broking Ltd. Heerachand Salecha 700 Reneissance Sec. Abhayraj Shukla Bharati Thakkar Govind Chinchani 700 N.C. Jain Own Reneissance Sec. Abhayraj Shukla 900 Opulent Broking Ramsudhakaran N.C. Jain Own 900 Angel Broking Ltd. Heerachand Salecha Opulent Broing Ramsudhakaran 900 Bhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in a circular manner among the group of brokers. It is seen that the trades were so well organized that the same number of shares went back to the original seller at the end of the day. I observe from the Enquiry Report that the noticee had executed circular/reversal trades on twelve (12) days when it traded in the scrip of SIL and contributed to 7.12% of the market traded quantity (gross). I note that the group had repeatedly bought and sold the shares amongst themselves through circular trades in a pattern of A to B to C to D to E to F to A with slight changes in the quantity circulated in each cycle. 11. As rightly contended by counsel for respondent, since large number of trades enumerated above got matched regularly and in most cases within seconds from each other, inference drawn in the impugned order is that occurrence of such synchronized deals in a circular manner persistently cannot be said to be a matter of coincidence. It is a matter of record that shares of SIL were being rotated intra-day within a closed group and in such a case though delivery based trades have taken place, in fact such trades do not involve change in the beneficial ownership of the shares. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding some other suspicious trades of Heerachand Salecha cannot be a ground to escape liability in the present case where synchronized circular trades have been executed by appellant. 13. Argument that principles of natural justice have been violated in the present case has no merit because, documents relied upon by SEBI in the show cause notice have been, in fact, supplied to the appellant. Appellant has not established as to how non furnishing entire investigation report has caused prejudice to the appellant. Similarly, grievance that appellant had no opportunity to examine its own client Heerachand Salecha is also without any merit, because it is an admitted fact that appellant had traded on behalf of Heerachand Salecha. If facts on record establish that appellant had indulged in synchronized circular trades over a period of time, then, contrary evidence of Heerachand Salecha if any, would not affect inference drawn against appellant on basis of facts on record. It is not the case of appellant that examination/cross examination of Heerachand Salecha would have altered facts on record. Therefore, failure to examine/cross examine Heerachand Salecha cannot be said to have vitiat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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