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TMI Blog2021 (2) TMI 1362X X X X Extracts X X X X X X X X Extracts X X X X ..... ble differentia while selecting cases/entities for proposing action and the Noticees cannot plead innocence by merely basing their arguments on such extraneous reasons. Also find it appropriate to observe that though the Noticees have claimed parity with the other entities, who have not been proceeded with, however, these Noticees have not brought any specific instance to my attention which are factually identical or similar to that of the entities so as to stake a claim that they also ought to have been exonerated from the instant proceedings. Considering the foregoing, Reject this contention of the Noticees in limine and do not find it necessary to further deal with this contention. These entities are found to be connected to each other and almost all of their trades have been entered with the connected entities and from their unusual trading pattern in the scrip of the Company, it cannot be stated with confidence that the trades executed by them were mere coincidences without there being any commonality between the Noticees and their trading pattern do not in the scrip of Rutron do not suggest for abnormality. It can be reasonably concluded that the Noticees are enjoying c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn keeping in view the inter se nexus that existed amongst the 6 Noticees during the relevant period. In fact, the repeated matching of such orders suggests how these 6 Noticees have deployed a strategy to defeat the objective of even an anonymous trading platform and have successfully ensured that their trades match with each other as per their preconceived strategy to mark up the price of the scrip of the Company. Therefore, in my considered view, the alleged trades can t by any standard be categorized as trades executed in normal course of trading in securities market. As glaringly show that the trading conduct of Noticee nos. 1, 2, 3, 4, 9 and 11 was evidently laced with malicious intent and fraudulent motive, hence, on the basis of the reasons recorded above, hold that the Noticee nos. 1, 2, 3, 4, 9 and 11 have violated regulations 3(a), (b), (c), (d) and regulation 4(1), 4(2) (a) and (e) of the PFUTP Regulations, 2003 while trading in the scrip of Rutron during Patch-2 of the Investigation period. Whether the acts of the Noticee nos. 3, 5, 6, 7, 8 and 10 during Patch-3 of Investigation Period have resulted in violations of the provisions of regulation 3 (a), (b), (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation Period ) for possible violation, if any, of the provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act, 1992 ) and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP Regulations, 2003 ). 2. It was observed during the investigation that trading in the scrip of the Company was suspended with effect from November 15, 1999 on account of noncompliance of Listing Agreement and the same was revoked by the stock exchange with effect from July 01, 2011. During the course of investigation, the price volume data in the scrip of the Company was analyzed and it was noticed that the scrip opened at a price of ₹5.25 on May 03, 2012 and increased to a level of ₹269.70 (closing price) on September 10, 2013. Subsequently, there was a stock split of existing equity shares of the Company in the ratio of 1:10 with effect from November 22, 2013. Investigation further noticed that subsequent to the stock split, the price of the scrip of Rutron opened at ₹24.45 and thereafter fell down and closed at ₹7.3 on November 28, 2014. 3. Bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.30 6.98 (26/12/2014) 7.38 (04/12/2014) 7973 Volume 14350 100 100 (17/12/2014 1 more day) 54800 (05/12/2014) 5. On the basis of UCC details, financial transactions, MCA data, etc. examined during the course of investigation, certain group of connected entities including the Noticees (hereinafter referred to as connected group entities ) were identified and while analyzing the price and trade movement in the scrip of Rutron, the following facts, inter alia, came to light: Patch-1 (May 03, 2012 to February 11, 2013) a) During Patch-1, the price of the scrip of Rutron opened at ₹5.25 and closed at ₹214.45 and the scrip witnessed a sharp price rise of 3985%, with a net LTP contribution of ₹209.20 to the scrip. b) Investigation revealed that, during Patch-1, 3 entities viz. Noticee no. 12, Noticee no. 13 and Noticee no. 14 (hereinafter referred to as 3 Noticees ) together have sold 866 shares of Rutron in 116 trades. Out of 115 such trades involving trading of only 861 shares, the 3 Noticees have contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile Noticee nos. 4 and 11 were acting as counterparties / sellers. These 6 Noticees while acting in concert by executing intra group trades at prices higher than the LTP, contributed to the price rise in the scrip of Rutron and created a misleading appearance of trading in the scrip. Patch-3 (November 22, 2013 to November 28, 2014) h) With effect from November 22, 2013, there was a stock split of the existing equity shares in the ratio of 1:10 in the scrip of Rutron. During Patch-3 of the Investigation Period, the price of the scrip opened at ₹24.45 (unadjusted price of ₹244.5), reached a low of ₹6.55 (unadjusted price of ₹65.5) and closed at ₹7.3 (unadjusted price of ₹73), thereby witnessing a fall of 70.14% with a contribution of net negative LTP of ₹17.15 (unadjusted price of 171.5) and total market negative LTP of ₹72.96 (unadjusted price of ₹729.6). i) Investigation further discovered that by executing 201 trades inter se amongst themselves at prices lower than LTP, a group of six Noticees herein viz. Noticee nos. 3, 5, 6, 7, 8 and 10 (hereinafter referred to as six Noticees ) have contributed to a price fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was served through Affixtures / Hand Delivery. For the remaining Noticees viz. Noticee nos. 2, 5, 6, 7 and 10, the SCN was served through Newspaper Publication. In this regard, Public Notices were published on 12.11.2019 in the Ananda Bazar Patrika (Kolkata Edition), the Times of India (West Bengal and Jaipur Edition) and the Rajasthan Patrika to effect service on the aforesaid Noticees. I find that in response to the SCN, certain Noticees have submitted their written replies. Further, Noticee nos. 4 and 8 vide separate letters dated 03.04.2018 have sought inspection of certain documents which was provided to them on 24.08.2018 and 23.08.2018 respectively. Additionally, vide letter(s) dated 23.12.2019, copies of documents which have been relied upon in the SCN were also sent by post to Noticee nos. 4 and 8. I also note that the demand for certain documents including a copy of the entire Investigation Report (for convenience IR ) as sought by the Noticee no. 8 were duly responded to him by stating that all the documents that have been relied upon in the SCN have already been provided to him hence, a further requisition of a copy of entire Investigation Report by him is unwarranted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the Noticees in response to the allegations made in the SCN and by way of their post hearing submissions (as indicated in the preceding table), I summarize their replies hereunder: Noticee no. 3 (Padma Impex Private Limited) a) The Noticee has denied its connection with the other group connected entities. b) With regard to funds transfer by one of the connected group entities, Mr. Anil Agarwal (hereinafter referred to as Anil ), Noticee has submitted that the said money was received by it against repayment of advance taken by Mr. Anil from the Noticee. c) With regard to its financial transaction with Rutron, Noticee has submitted that the said transaction was repayment of loan received from Rutron by the Noticee. d) The alleged trades were carried out in the normal course of business and on the stock exchange platform, wherein the counterparty is unknown. Noticee no. 4 (Ms. Manju Khandelia) e) The Noticee had not received any hearing notice and came to know about the hearing scheduled in the matter only upon publication in the newspaper, which could have been avoided. f) Inspection of only certain documents was provided and documents re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during inspection: Hon ble Supreme Court in matter of Price Waterhouse Co. vs. SEBI (Civil Appeal Nos. 6003-6004 OF 2012) (DoD: 10.01.2017) Hon ble Supreme Court in matter of State of UP vs. Shatrunghan Lal (DoD: 30.07.1998) Hon ble Supreme Court in matter of Kashinath Dikshita vs. Union of India (1986 3 SCC 229) (DoD: 15.05.1986) Hon ble SAT in the matter of Smitaben N Shah vs. SEBI (Appeal No. 37 of 2010) (DoD: 30.07.2010) Hon ble SAT in the matter of Nitin Kumar Didwania vs. SEBI (Appeal No. 41 of 2016) (DoD: 02.05.2016) b) With reference to the funds transaction made by one of its Directors (Mr. Anil) of Noticee no. 8 with Noticee no. 3, the Noticee has informed that it was repayment of a loan availed by Mr. Anil in his personal capacity and not in the capacity of Director / Promoter of the Noticee. Further, no action has been initiated against Mr. Anil by SEBI in this matter. c) With regard to the alleged connection with the Karta of Noticee no. 11, i.e. Mr. Jugal Chandrakant Thacker (hereinafter referred to as Jugal ), the Noticee has submitted that Mr. Jugal was only an Independent Director in the Noticee company and had never been involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard, Noticee has submitted that it has opened and operated only one bank account with HDFC Bank bearing no. 10531930003644 and has submitted the bank account statement of the aforementioned HDFC Bank account to support his contention of having not received any fund from Noticee no. 5. k) With regard to the manipulative trades alleged in the SCN, the Noticee has submitted that a sell trade of 200 shares, wherein a contribution of ₹0.10 to LTP has been made is very miniscule and is only 0.08% of the total positive LTP contributed in the scrip of Rutron during the relevant period. The Noticee has further argued that no allegation of any manipulation has been levelled on sale of 39,800 shares of Rutron. Noticee no. 12, 13 and 14 l) While denying the allegations made in the SCN, these Noticees have submitted that they do not share common address, as alleged in the SCN. 10. In addition to the above, Noticee no. 4 and Noticee no. 8 have relied on the observations made in the following orders to argue that no action should be initiated against them in absence of any action against the counter party: Hon ble SAT in the matter of HB Stockholdings vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated vide letter dated December 23, 2019 and February 12, 2020 to them. It is noted that these Noticees have been provided with all the relevant extracts of the IR in the form of SCN its annexures and also other documents relied upon in the SCN qua them. Further, Noticee no. 8 has also relied upon observations of Hon ble Supreme Court and Hon ble SAT to support its arguments. Having gone through the judicial decisions referred to by the Noticee, I am of the view that the observations made in those decisions referred to by the Noticee no. 8, are factually distinguishable from the present proceedings, hence, the propositions of law made therein are not applicable in the instant case. For instance, Noticee no. 8 has referred to the following observations of Hon ble Supreme Court in matter of Price Waterhouse (supra): We direct, that all statements recorded during the course of investigation shall be provided to the respondents. We further direct, that all documents collected during investigation shall be permitted to be inspected by the respondents. The authors of such statements (recorded during investigation), which are to be relied upon (against the respondents), shall be of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso vide its letter date February 12, 2020 has already provided detailed reasons for not providing certain other documents including the entire IR as requested for, to the Noticee no. 8. Apparently the other documents and IR as demanded by the Noticee did not have any relevance for the Noticee since all the relevant portions of the IR and other documents that have been relied upon in the SCN against the Noticees have already been made available to them. Regarding the contention of non-supply of complete trade and order logs, it would be apt to refer here to the observations of the Hon ble SAT in the matter of Mayrose Capfin Pvt. Ltd. Vs. SEBI (Appeal No. 20 of 2012 decided on March 30, 2012) wherein the Hon ble Tribunal has, inter alia, stated that: ...no prejudice has been caused to the appellant on this count as the extract of the relevant trade logs and order logs pertaining to the appellant was made available which was enough for him to defend himself or to make proper representation against the proposed action. 14. Thus, from the material available on record, I note that relevant information which have been relied upon from the Investigation Report, had already been provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oad, Goregaon (East), Mumbai-400063. 16. It is further pertinent to note that the SCN categorically asked the Noticees to keep SEBI informed about the change in correspondence address, if any, till the proceedings are complete. As noted above, the Noticee no. 4 in the instant matter, for some reasons best known to her, has failed to do so and only after coming to know about the hearing notice in the newspaper, she has communicated her further changed address to SEBI. As already mentioned above, on the basis of the last known address available, SEBI had sent the hearing notice which could not be served on her as she had already changed her address by then and as an additional measure, the hearing notice was published through newspaper publication which in fact drew her attention and response. Without prejudice to the above, it can be said that pursuant to the service of the hearing notice through the newspaper publication, the Noticee has in fact got sufficient opportunity to defend her case on merit as nor prejudice is presented to have caused to her, hence the issues raised by her on the issue of service of notice lacks any merit and does not require any further consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding other Noticees. I have perused replies of the said Noticees with regard to the connections alleged in the SCN. Before I delve into the specifics of the alleged connection and the basis of such allegation, I find it relevant to observe that the alleged connection amongst the Noticees, whether direct or indirect, which was noticed during investigation is considered as one of the factors for alleging the violations against the Noticees as per the SCN. The said alleged connection of each of the Noticees is mainly corroborated by their conduct, viz., the peculiar ways of trading in the scrip of Rutron in a concerted manner, which remained suspended for trading since November, 1999 for a long period of 12 years till July, 2011 and that has also been considered as another factor for imputing charges against the Noticees. In this background, the unique way of trading done by the Noticees and the connections observed amongst them assume significance. As mentioned in the SCN and Annexure 2 thereto, the connection amongst the Noticees has been alleged based on the analysis of the KYC/ UCC details, details on the MCA website, offmarket transfers and bank account statements of each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elationship/nexus or sharing of information amongst those companies cannot be ruled out especially in a situation when such companies display similar unusual trading interest vis- -vis a particular scrip whose trading was under suspension for 12 years, as noticed in the instant case. Further, the allegation of interconnectedness is required to be evaluated taking into account the totality of the facts circumstances, which indicate such interconnectedness as highlighted above, besides considering various other factors such as the background of the Company, the liquidity/illiquidity of the scrip, trading behavior, trading pattern and other conduct exhibited by the entities who traded in the said scrip etc. Under such circumstances , I would deal with the contentions and explanations offered by the Noticees to assess the extent of connectedness that these Noticees enjoyed and the nature, pattern and peculiarities of the trading conduct adopted by the Noticees including their respective contribution to the LTP of the scrip while dealing in the shares of the Company during the Investigation Period so as to adjudicate if the trading activities of these Noticees possessed elements suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lawful. In the instant case as well, the Board after examining and considering the role of each of the connected group entities, including the Noticees herein, their trades during the relevant period, have consciously decided to initiate proceedings against such entities who were noticed to have role in the commission of the violations as alleged in the SCN. Thus, depending upon attendant facts and circumstances, I observe from records that some of the connected group entities have been made Noticees in the instant proceedings while some other entities have been reportedly proceeded against in separate proceedings including adjudication proceedings. Be that as it may, the Board has set its criteria and exercised intelligible differentia while selecting cases/entities for proposing action and the Noticees cannot plead innocence by merely basing their arguments on such extraneous reasons. I also find it appropriate to observe that though the Noticees have claimed parity with the other entities, who have not been proceeded with, however, these Noticees have not brought any specific instance to my attention which are factually identical or similar to that of the entities so as to sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made thereunder. Regulation 4 of SEBI (PFUTP) Regulations, 2003: - Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (a) indulging in an act which creates false or misleading appearance of trading in the securities market; (e) any act or omission amounting to manipulation of the price of a security 25. It has been alleged in the SCN that the Noticee nos. 12, 13 and 14 have executed artificial and manipulative sell trades in the scrip of Rutron during Patch-1 of the Investigation Period. The deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have cumulatively executed 116 trades and out of these 116 trades, through 115 trades executed by them, they have contributed a total amount of positive LTP of ₹201.97 which is 96.49% of the net market positive LTP of ₹209.20 and 93.33% of the total market positive LTP of ₹216.40, as witnessed in the trading of the scrip of Rutron during the said period. I also observe from the above table that such net positive LTP of ₹201.97 was contributed by the above noted group of 3 Noticees by way of trading in only 861 shares, which is just 14.81% of the total shares traded (5811 shares) in the scrip of Rutron during the Patch-1 of the Investigation Period. The aforesaid trading volumes wherein group of 3 Noticees have contributed to more than 96% of net positive market LTP by executing less than 15% of the total trades in the scrip of Rutron during the said period, raises strong suspicion about the intent behind adopting the peculiar the trading pattern as adopted by the 3 Noticees. 27. I further observe from the trade logs (annexed to the SCN) that each of those 115 positive LTP contributing trades was the first trade executed on the respective trading days. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.49 4.99 500 5 5 7. 09-Jul-12 VANDANA SHARMA 9:15:00 14:14:40 4:59:40 10.81 10.81 10.81 0.51 4.95 500 5 5 8. 10-Jul-12 VANDANA SHARMA 9:15:00 9:29:20 0:14:20 11.35 11.35 11.35 0.54 5 5000 5 5 9. 11-Jul-12 VANDANA SHARMA 9:15:00 11:39:41 2:24:40 11.91 11.91 11.91 0.56 4.93 2000 5 5 10. 16-Jul-12 VANDANA SHARMA 9:15:00 14:41:22 5:26:22 12.5 12.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4:32:34 19.3 19.3 19.3 0.89 4.83 2000 5 5 19. 06-Aug-12 VANDANA SHARMA 9:16:25 14:30:46 5:14:21 20.25 20.25 20.25 0.95 4.92 2000 5 5 20. 07-Aug-12 VANDANA SHARMA 9:15:00 15:14:10 5:59:10 21.25 21.25 21.25 1 4.94 1200 5 5 21. 10-Aug-12 ASHA SHARMA 9:15:00 13:28:24 4:13:24 22.3 22.3 22.3 1.05 4.94 900 5 5 22. 16-Aug-12 ASHA SHARMA 9:15:00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9:15:00 15:28:19 6:13:19 26.9 26.9 26.9 0.5 1.89 500 5 5 31. 07-Sep-12 VANDANA SHARMA 9:15:01 15:25:31 6:10:30 27.4 27.4 27.4 0.5 1.86 1500 5 5 32. 10-Sep-12 ASHA SHARMA 9:15:00 13:35:31 4:20:31 27.9 27.9 27.9 0.5 1.82 200 5 5 33. 11-Sep-12 VANDANA SHARMA 9:15:00 15:29:06 6:14:06 28.45 28.45 28.45 0.55 1.97 500 5 5 34. 12-Sep-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-Oct-12 VANDANA SHARMA 9:15:00 13:48:39 4:33:39 33.8 33.8 33.8 0.65 1.96 500 10 10 43. 15-Oct-12 ASHA SHARMA 9:15:00 15:27:13 6:12:13 34.45 34.45 34.45 0.65 1.92 4000 10 10 44. 17-Oct-12 ASHA SHARMA 9:15:00 14:11:38 4:56:38 35.1 35.1 35.1 0.65 1.89 200 10 10 45. 18-Oct-12 VANDANA SHARMA 9:15:00 10:34:49 1:19:49 35.8 35.8 35.8 0.7 1.99 1200 15 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 10 54. 06-Nov-12 ASHA SHARMA 9:15:00 12:21:39 3:06:39 42.55 42.55 42.55 0.8 1.92 100 5 5 55. 08-Nov-12 ASHA SHARMA 9:15:00 14:51:34 5:36:34 44.65 44.65 44.65 2.1 4.94 2000 5 5 56. 09-Nov-12 VANDANA SHARMA 9:15:00 10:21:13 1:06:13 46.85 46.85 46.85 2.2 4.93 500 5 5 57. 12-Nov-12 VANDANA SHARMA 9:15:00 11:28:37 2:13:37 49.15 49.15 49.15 2.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .35 72.35 3.4 4.93 100 5 5 66. 29-Nov-12 VANDANA SHARMA 9:15:00 13:42:12 4:27:12 75.95 75.8 75.95 3.6 4.98 300 5 5 67. 30-Nov-12 VANDANA SHARMA 9:15:00 14:16:22 5:01:22 79.7 79.7 79.7 3.75 4.94 1500 5 5 68. 03-Dec-12 VANDANA SHARMA 9:15:00 15:13:48 5:58:48 83.65 83.65 83.65 3.95 4.96 500 5 5 69. 04-Dec-12 VANDANA SHARMA 9:15:00 15:11:03 5:56:03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2:47 99.75 99.75 99.75 1.95 1.99 200 5 5 78. 17-Dec-12 MADAN LAL 9:15:00 13:29:30 4:14:29 101.7 101.7 101.7 1.95 1.95 100 5 5 79. 18-Dec-12 MADAN LAL 9:15:00 15:10:47 5:55:47 103.7 103.7 103.7 2 1.97 300 5 5 80. 19-Dec-12 MADAN LAL 9:15:00 15:08:58 5:53:58 105.75 105.75 105.75 2.05 1.98 200 5 5 81. 20-Dec-12 MADAN LAL 9:15:01 11:38:46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15:19:36 6:04:36 126.15 126.15 126.15 2.45 1.98 100 5 5 90. 03-Jan-13 MADAN LAL 9:15:01 14:24:43 5:09:43 128.65 128.65 128.65 2.5 1.98 2000 5 5 91. 04-Jan-13 MADAN LAL 9:15:00 14:12:09 4:57:09 131.2 131.2 131.2 2.55 1.98 2000 5 5 92. 07-Jan-13 MADAN LAL 9:15:00 15:11:05 5:56:05 133.8 133.8 133.8 2.6 1.98 1000 5 5 93. 08-Jan-13 MADAN LAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MADAN LAL 9:15:00 15:19:28 6:04:28 159.65 159.65 159.65 3.1 1.98 100 5 5 102. 22-Jan-13 MADAN LAL 9:15:00 15:14:01 5:59:01 162.8 162.8 162.8 3.15 1.97 100 5 5 103. 23-Jan-13 MADAN LAL 9:15:01 14:15:27 5:00:27 166.05 166.05 166.05 3.25 2 100 5 5 104. 24-Jan-13 MADAN LAL 9:15:00 14:51:15 5:36:15 169.35 169.35 169.35 3.3 1.99 100 5 5 105. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 113. 07-Feb-13 MADAN LAL 9:15:00 10:50:37 1:35:37 206.15 206.15 206.15 4 1.98 100 5 5 114. 08-Feb-13 MADAN LAL 9:15:03 14:39:43 5:24:40 210.25 210.25 210.25 4.1 1.99 500 5 5 115. 11-Feb-13 MADAN LAL 9:15:01 14:53:45 5:38:44 214.45 214.45 214.45 4.2 2 100 10 10 28. It is observed from the details presented in the table no. 4 above that in all of the 115 trades, which contributed to positive LTP in the scrip of Rutron, all the sell orders were placed by the 3 Noticees only on the above listed trading dates, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced at 09:15:00 on September 12, 2012 at a price of ₹29.00, but got executed into a trade after a duration of more than 6 hours (06:13:43) when a sell order was placed by Noticee no. 14 (Asha Sharma) at a price of ₹29.00 which was ₹0.55 (1.93%) higher than LTP. It shows that but for the sell orders placed by the 3 Noticees for miniscule number of shares only to match the long pending buy orders, those corresponding pending buy orders on their own would not have been able to make any manipulative impact on the price of the scrip. In fact, in absence of those sell orders for small quantities placed by the 3 Noticees, no transaction would have fructified and no LTP would have been formed. The peculiar pattern of ensuring execution of trades with minimal shares ostensibly suggests an apparent malicious intent of these Noticees to contribute to the LTP in the scrip. 29. It has been alleged in the SCN that despite holding sizeable quantities of shares, these 3 Noticees released very small number of shares in each of their sell trades above LTP and the number of shares offered by them in their sell orders was most of the times placed in single digits. I further note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, in 71% of the trades, the 3 Noticees chose to release only 5 shares every time, despite the fact that large quantities of buy orders were pending on the trading platform at the same price at which the 3 Noticees desired to sell. Further, in the remaining 29% of their total trades i.e. in 33 trades, the 3 Noticees chose to release quantities of 15 or less shares every time. One can always try to explain their selling strategy by stating that the 3 Noticees were positive about the bullish trend in the scrip of Rutron, however, if this was the case, a prudent investor would rather have waited for the price of the scrip to attain a level at which selling the shares would have fetched him the maximum return. Instead, the Noticees chose to sell the shares in miniscule quantities continuously on several dates and it was predominantly because of their LTP contributing trades that the price of the scrip was witnessing an upward trend. Looking at such a strange trading pattern adopted and followed religiously by the 3 Noticees, it can be observed that there was no bona fide intention on the part of these 3 Noticees to sell their shareholdings during the Patch-1 of the Investigation Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 10, 2013. The Company had not made any announcement during the relevant period to entice the investors to buy the scrip that too in off market transaction, when the scrip was very much available on the exchange platform. The records thus reveal a strange co-incidence in which all the 3 Noticees bought shares in off market mode and started selling almost immediately thereafter in small quantities over a long period of time continuously chasing the pending buy orders. The SCN alleges that together 3 Noticees had contributed LTP of ₹201.97, which constitutes 96.49 % of the total market LTP during the period. Details mentioned at table 3 above further reveal that through their 44, 48, 23 trades respectively, the 3 Noticees have contributed ₹122.20, ₹61.92 and ₹17.85, which were 56.47%, 28.61% and 8.25 % of the total market positive LTP contribution made to the scrip during the relevant period. Further, the aforesaid 3 Noticees, are found to have sold almost their entire stocks through their above listed LTP contributing trades, which clearly suggest that the shares were bought in off market with an intent to cause artificial rise in the price of the scrip thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities by chasing the pending buy orders and none of them executing a sell order on any common day etc., essentially suggest that even in the absence of any document to suggest connection, a strong meeting of minds amongst the 3 Noticees while dealing in the shares of the Company cannot be ruled out. The meeting of minds amongst the 3 Noticees is further strengthened by the aforesaid unique trading pattern followed by the entities while executing those 115 trades wherein the 3 Noticees were taking individual turns to execute trades on different trading days over the entire period of Patch-1. The trading pattern devised and followed by the 3 Noticees apparently demonstrate that they have traded in the scrip under a pre-planned strategy to elevate the price of the scrip by continuously contributing to the LTP of the scrip through each of those trades, executed by them. Further, as pointed out earlier, despite the fact that the buyers were willing to buy higher quantities, none of the 3 Noticees sold any sizeable quantities of shares that they possessed, in a single trade. The way these 3 Noticees had been taking individual turns to place their LTP contributing sell orders on differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le selling shares of the Company strongly signifies their inter se association or acting in unison when it comes to trading in the scrip of Rutron. Moreover, even on individual basis, the contributions made by the Noticees to the LTP in the scrip of Rutron were sufficient enough to distort the market mechanism and therefore, from all point of views, the alleged LTP contributing trades were seemingly executed with the sole motive of raising the price of the scrip through those manipulative trades, hence glaringly fall within the mischief of fraudulent trades. 35. It is further noted that in the matter of Shailesh Jain v. SEBI (Appeal No. 15 of 2012, DoD: 01.05.2012), Hon ble SAT has held that The appellant s role has been one of conscious indulgence in manipulation of the trade in a crude and preplanned manner. The very fact that the appellant has placed orders above the last traded price when sell orders were available in the market at a lower price shows the intention behind the trade. 36. Keeping in view the foregoing discussions, I note that the 3 Noticees have failed to give any plausible reason/explanation to defend themselves against the charges levelled against them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation Period needs to be examined. In this regard, details of positive LTP contribution by the trades of 6 Noticees during Patch2 of Investigation Period are tabulated as below: Table 6: Details of trades by the 6 Noticees among themselves in Rutron during Patch-2 Seller Buyer Positive LTP Contribution % of Mkt Positive LTP No of Trades Qty Traded Jugal C Thacker (HUF) (Noticee no. 11) HS Tradecom Pvt. Ltd. (Noticee no. 1) 0.1 0.08 1 200 Sub Total(A) 0.1 0.08 1 200 Manju Khandelia (Noticee no. 4) Esquire Enclave Pvt. Ltd.(Noticee no. 9) 0.25 0.01 1 2000 HS Tradecom Pvt. Ltd. (Noticee no. 1) 8.00 2.51 32 5765 Dhanlakshmi Brokers Pvt. Ltd. (Noticee no. 2) 7.70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w-cause notice. This being so, it has to be presumed that the charges alleged against them in the showcause notice were admitted by them . 41. Moving on to the argument of Noticee no. 4 with respect to her trades executed in the scrip of Rutron, she has taken a plea that the total volume in the scrip of Rutron during the Investigation period was 10,23,62,427 shares. Therefore, Noticee s trading volume of 15,615 shares i.e. only 0.02% of the total market volume is exceedingly miniscule to attract any serious charge of fraudulent and unfair trade practice and price manipulation. It is pertinent to note here that the charge on Noticee no. 4 is of contributing to the positive LTP in the price of the scrip of Rutron during the Patch-2 of the Investigation Period and not during the entire Investigation Period as projected by the Noticee. Further, by examining the trades detailed out in the table no. 6 of this Order, I note that though the 6 Noticees together have executed 64 trades while contributing positive LTP to the tune of ₹16.85 (5.26% of total market positive LTP), Noticee no. 4 was acting as seller in 63 out of such 64 trades. Through such 63 trades, she had alone contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion: 16.01.2020, Appeal 97 of 2019) .the Tribunal held that the charge of raising price artificially has to be established and the element of collusion between the buyer and the seller is a sine quo non. We are in the entire agreement with the aforesaid decisions and reiterate that in the absence of any finding of collusion between the buyer and the seller the charge contributing to the LTP cannot be sustained. no. 4 has already made parties to the SCN. 3 Hon ble SAT in the matter of Narrotam Gandhi vs. SEBI (Date of Decision: 21.01.2020, Appeal 225 of 2019) Observations of Hon ble SAT In the instant case, we find that the investigation report itself indicates that there is no connection between the appellants, with the buyer, promoter or with the company. In the absence of any connection between the seller and the buyer, the appellants could not be charged with manipulating the scrips nor the trading pattern of the appellants could infer manipulating the price of the scrip. 4 SEBI WTM order in the matter of First Financial Services dated 02.04.2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal) in CFL. Noticee no. 11 has further contended that its Karta (Mr. Jugal) was appointed as a Director of the CFL on August 02, 2014, i.e. nearly one and half years after it carried out trades in scrip of Rutron. I have gone through the records available before me and find that the alleged trade was executed by Noticee no. 11 on March 22, 2013, whereas, he was appointed as Director in CFL with effect from August 02, 2014. In this regard, I note that though there is no dispute that Mr. Jugal (Karta of Noticee no. 11) became the Director of CFL after the alleged trades were executed by him, the fact that the connection of the Noticee no. 11 is established with other connected group entities on the basis of said Directorship also remains undisputed. I further note that Noticee no. 11 has disputed its fund transaction with Noticee no. 5 as alleged in the SCN and has contended that it has opened and operated only one bank account with HDFC Bank bearing no 10531930003644 . However, I note from the bank account statement of Noticee no. 5 available before me that there was indeed a fund transfer of ₹5 lacs from Noticee no. 5 to HDFC Bank Account of Noticee no. 11. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was constituting just 0.46% of the total number of trades (14038) executed in the scrip of Rutron during Patch-2 of the Investigation Period, the 6 Noticees have contributed 5.26% of the total market positive LTP in the said scrip. The malafide intent on the part of these 6 Noticees for marking up the price of the scrip of Rutron is further demonstrated by the peculiar trading pattern adopted and executed by the 6 Noticees in an anonymous screen based trading system wherein the buy and sell orders placed by these 6 Noticees got matched amongst themselves on a numerous occasion, which in my considered view, cannot be seen as mere coincidences of matching of orders. Instead such unusual LTP contributing trades executed amongst the connected entities strengthens the allegations made in the SCN that these trades have been deliberately executed with a fraudulent intent of manipulating the price and causing misleading appearances of trading in the scrip, thereby causing inducement to the investors at large., It is highly inconceivable that the trades of the 6 Noticees executed on an anonymous trading platform matched with their connected entities on a numerous occasions by sheer coinci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t out of the said group of six Noticees, Noticee nos. 3, 5 and 8 (hereinafter referred to as seller Noticees ) were acting as sellers / counterparties to the remaining 3 Noticees viz. Noticee nos. 6, 7 and 10 (hereinafter referred to as buyer Noticees ) who purchased the shares of the Company in those alleged 201 trades which contributed to negative LTP in the scrip of Rutron during Patch-3 of the Investigation Period. In this regard, details of negative LTP contribution by the trades executed by of the said six Noticees as buyers and sellers during Patch-3 of Investigation Period are tabulated below: Table 7: Details of trades by the six Noticees amongst themselves in Rutron during Patch-3 Seller Buyer Negative LTP Contribution % of Mkt Negative LTP No of Trades Qty Traded Padma Impex Pvt. Ltd. (Noticee no. 3) Astabhuja Construction Pvt. Ltd. (Noticee no. 7) - 0.05 0.07 1 3 Ramdut Infraprojects Pvt. Ltd. (Noticee no. 6) -10.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rutron are presented in the table below: Table 8: Date wise details of combination of buyers and sellers in 201 trades during Patch-3 Buyer / Seller Period of Trading Noticee no. 7 (Buyer) Noticee no. 3 (Seller) 29-11-13 Noticee no. 7 (Buyer) Noticee no. 5 (Seller) 06-12-13 Noticee no. 10 (Buyer) Noticee no. 5 (Seller) 07-05-14 Noticee no. 6 (Buyer) Noticee no. 5 (Seller) 04-06-14 to 19-06-14 Noticee no. 6 (Buyer) Noticee no. 3 (Seller) 20-06-14 to 22-07-14 Noticee no. 6 (Buyer) Noticee no. 3 and 8 (Seller) 23-07-14 Noticee no. 6 (Buyer) Noticee no. 3 (Seller) 24-07-14 to 24-11-14 51. The aforesaid trading pattern of approaching the market on different trading days to contribute price fall in the scrip of Rutron has not been rebutted by any of the six Noticees. Therefore, it becomes clear that the six Noticees were not acting as ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made parties to the SCN. Further, such a peculiar trading pattern wherein a buyer places an order at the opening of the market at around 9:15 a.m., which is matched with a sell order placed by the Noticee which is also part of the connected group entities around closure of the securities market at around 3 p.m., cannot be a mere coincidence of matching of orders . Such a trading pattern, in fact, draws attention to a premeditated strategy to bring the LTP of the scrip down by every succeeding matched trade over a period of time. The malafide of the seller Noticees further becomes conspicuous from the fact that the price of the scrip of the Company, which had witnessed a phenomenal rise in recent past during the Patch-1 and 2, started showing decline so much so that the seller notice was willing to sell shares at prices lower than the LTP. Seller Noticees have not advanced any justification as to what development suddenly took place in the market, which prompted them to sell their shares at lower prices on a continuous basis. Such an undisputed fact coupled with the matching of their orders with the orders of the counter parities over the period on a frequent basis are sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant proceedings. Therefore, the contention of the Noticee no. 8 that no action has been initiated against the counterparties is factually erroneous and requires no further consideration. 56. As observed earlier that there is no strong reasoning available on record to suggest as to why these six Noticees executed such trades on a regular basis in the scrip of Rutron thereby contributing a cumulative market negative LTP of ₹12.74. However, the pattern of trades adopted by these six Noticees negates any such universally accepted business prudence of trading in securities. The nefarious intent on the part of the six Noticees for pulling the price lower in the scrip of Rutron is further demonstrated by the trading pattern adopted and executed by the six Noticees. I further observe that the strange coincidence with which the orders placed by the Noticees matched with each other repeatedly on a numerous times on an anonymous screen based trading system in itself adequate to hold that these six Noticees have been deliberately trading in a manner to ensure that the buy sell orders placed by them match with each other so as to distort the integrity of orderly functioning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the above noted six Noticees, I am constrained to hold that the Noticee nos. 3, 5, 6, 7, 8 and 10 were not acting as genuine market participants and had no bona fide intention to trade in the shares of Rutron. Directions 60. In view of the above, having found that the charges levelled against Noticees in the SCN stand established, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4) and 11B(1) read with Section 19 of the Securities and Exchange Board of India Act, 1992, hereby hold that considering the volume of trades executed and percentage of contribution to the LTP by the Noticees and their impact on the price of the scrip of Rutron, it would be proper and in the interest of Securities Market that such entities should be restrained from being associated with the Securities Market and accordingly, I restrain all the Noticees from accessing the securities market and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, for a period of six (06) months from the date of this Order. 61. It is clarified that during the period of restrai ..... 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