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TMI Blog2016 (1) TMI 1510X X X X Extracts X X X X X X X X Extracts X X X X ..... erim order restraining 39 persons/entities from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. HELD THAT:- Large scale trading amongst the PP group entities, which included the Noticees, all of which were synchronized and did not result in change in ownership created an artificial demand in the scrip of GIL and led to a price rise which was misleading and disadvantageous to the genuine investors in the securities market. We find that the Noticees in the present proceedings were related / connected to each other and connived amongst themselves for execution of synchronized and self trades, creation of artificial volume and price manipulation which not only distorted market equilibrium but were also found to be fraudulent in nature. The Noticees have therefore violated the provisions of regulations 3 (a),(b),(c),(d), 4(1), 4(2) (a),(b) (e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. Noticees have submitted that based on the same set of facts and transactions as in the instant case monetary penalti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation into the trading in certain scrips including GIL pursuant to the detection of a huge rise in the traded volumes and/or price of the shares of these companies during the years 2008, 2009 and 2010. 2. Upon analysis of the trading activity in the above scrips, it was prima facie observed that certain entities had indulged in creating artificial volume by trading among themselves, in a synchronized manner and also carrying out off-market transfers among themselves for the purpose of meeting settlement obligations of another, thus contributing also to the price rise in these scrips. 3. In view of the above, in order to protect the interests of investors and to preserve the safety and integrity of the market, SEBI passed an interim order dated February 02, 2011 restraining 39 persons/entities including Mr. Bharat Shantilal Thakkar, Mr. Bipin Jayant Thaker, Mr. Kishore Chauhan, Mr. Bhavesh Pabari, Mr. Prem Mohanlal Parikh, Mr. Hemant Madhusudan Seth, Ms. Mala Hemant Seth, Mr. Ankit Sanchaniya, Mr. Amar Premchand Valmiki, Mr. Samir Sureshbhai Shah, Mr. Pandya Hardik M. and Mr. Bipinkumar Gandhi from accessing the securities market and further prohibited them from buying, selling o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 19, 22, 30, 31. With entity at sl. no. 16. With entities at sl. nos. 8, 16, 19, 22. 7. Navneetlal Jeevanlal Gandhi Entity at sl. no. 26 introduced him for trading a/c. - With entities at sl. nos. 4, 11, 20, 21, 24 8. Chirag Rajnikant Jariwala Same Tel. no. with entity at sl.no.16. Sl. no. 16 is his uncle. Business relations with sl. nos. 5, 6, 9, 16, 22, 30, 31. With entities at sl. nos. 16, 22. With entity at sl. no. 6 9. Kishore Chauhan Join a/c with entity at sl. no. 16 Entity at sl. no. 16 22 are witness for demat a/c. Business relations with entities at sl. nos. 5, 6, 8, 16, 19, 22, 30. With entities at sl. nos. 16, 19, 22. With entities at sl. nos. 16, 19, 22, 31. 10. Manish Suresh Joshi - - - 11. Samir Sureshbhai Shah Entity at sl. No. 7 is his father. Entities at sl. nos. 6, 13, 14, 21, 23, 25, 24 are his clients. Entities at sl. Nos. 4, 12, 15, 26, 17, are Paras Chaplot's friend. Entity at sl. no 11 came in touch with Paras Chaplot as a stock broker. - With Entities at sl. nos. 4, 7, 14, 21, 23, 24, 25, 26, 27 12. Manoj Bhandari - With entities sl. nos. 4, 11, 26. With entities at sl. nos. 4, 5, 16, 30, 9 13. Jignesh C. Shah Entity at sl. no. 26 introduced him for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into off market transactions with entity at sl. No. 16 has fund movement with entity at sl. No. 26. - With entities at sl. nos. 4, 11, 7, 25. Pandya Yaminiben M Same address with entity at sl. No. 26. Knows entity at sl. No. 11 entity sl. No. 26 is his relative. With entities at sl. nos. 26, 11, 31, With entities at sl. nos. 11, 23, 26, 26. Pandya Hardik M Having common Tel. no. with entity at sl. no. 11. Entity at sl. No. 11 is the promoter of Samir Shah Co. and sl. No. 26 is one of its employees. Knows entity at sl. No. 11 entity at sl. No. 25 is his relative. With entities at sl. nos. 12, 18, 4, 11, 17, 25, With entities at sl. nos. 11, 23, 25, 16, 22. 27. Bharatkumar Baldevbhai Parmar Having common Tel. no. with Rameshbhai Parmar. - With entities at sl. nos. 4, 11. 28. Mala Hemant Sheth Entity at sl. no. 28 is the wife of entity at sl. no. 22 and entity at sl. no. 29 is the nephew. With entities at sl. nos. 16, 19. With Entity at sl. no. 22. 29. Gaurang Ajit Seth Has common address Tel. no. with entity at sl. no. 22. entities at sl. no. 22 and 16 both directors of Rajnandi Yarns Pvt. Ltd. - - 30. Ankit Sanchaniya Shares Tel. no. with entity at sl. no. 19 and also shares Tel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri, Mr. Prem Mohanlal Parikh, Mr. Hemant Madhusudan Sheth and Mr. Vivek Kishanpal Samant also indulged in self trades on the BSE (i.e. buy client as well as the sell client for a given trade was the same resulting in no change of beneficial ownership). vi. The price volume data analysis revealed that the shares of GIL were traded for 226 trading days during the investigation period on BSE. Out of 226 trading days, the PP group entities, including the above-mentioned 18 entities, traded among themselves on 90 days. It was observed that the volume of trades undertaken by the PP group entities contributed significantly to the daily market volume in the scrip on BSE during the investigation period. PP group entities contributed to 100% of the daily market volume on January 06, 2009 and February 12, 2009. Out of 90 trading days on which the PP group entities traded among themselves, on 44 trading days the trades executed by the PP group entities and contributed to more than 50% of the total market volume in the scrip. vii. Further, it was observed that out of 90 trading days in which the PP group entities traded amongst themselves, on 40 trading days the PP group entities, the abovement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udulent in nature. Consequently, a Show Cause Notice dated September 19, 2014 (hereinafter referred to as the SCN ) was issued to the above mentioned 18 entities (hereinafter collectively referred to as the Noticees ) calling upon them to show cause as to why suitable directions under section 11B read with section 11(4) of the SEBI Act should not be issued against them for the alleged violation of the provisions of regulations 3 (a), (b), (c), (d), 4(1), 4(2) (a),(b) (e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ( PFUTP Regulations ). The provisions of the Regulations alleged to have been contravened by the Noticees are reproduced hereunder: Regulation 3. Prohibition of certain dealings in securities 3. No person shall directly or indirectly (a). buy, sell or otherwise deal in securities in a fraudulent manner; (b). use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein he had stated that he had business relations with certain other noticees. (ii) Mr. Hemant Madhusudan Seth had sought the following documents which were provided to him: a) Details of directors of Rajnadi YarnsPvt. Ltd. evidencing that he and Mr. Bhavesh Pabari were directors. b) Copies of his bank statement of Axis Bank Ltd. evidencing transactions with other noticees. c) His letter to SEBI dated 12.07.2012 wherein he had stated that he had business relations with certain other noticees. (iii) Ms. Mala Hemant Seth had sought the following documents which were provided to her: a) Copies of her bank statement of Axis Bank Ltd. evidencing transactions with other noticees. b) Her letter to SEBI dated 12.07.2012 wherein she had stated that she had business relations with certain other noticees. (iv) Mr. Bhavesh Pabari had sought the following documents which were provided to him: a) Copies of his bank statement of Axis Bank Ltd. evidencing transactions with other noticees b) His letter to SEBI dated 13.07.2012 wherein he had stated that he had business relations with certain other noticees (v) Mr. Bhupesh Rathod had sought the following documents which were provided to him: a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed a copy of the appeal filed by him against the Order passed by AO in the same matter imposing a penalty of ₹5,00,000/- on him. The noticee has submitted following in his reply: In the same matter an order was passed by the AO imposing a penalty of ₹ 5,00,000/- on him. He is aggrieved by the said AO order and he is unable to pay the penalty due to the restrain order passed by SEBI. He has already suffered a prohibition period for more than four years and does not have any financial means and capacity to take service of legal consultation and represent his case in the present proceedings. It has been alleged that Mr. Chirag Jariwala introduced him to Arcadia Shares and Stock Brokers Ltd. However, from the KYC it may be seen that he was not the introducer but the witness to the said form. He placed orders on the system of the stock exchange in the normal course of trading and did not execute synchronized trades. His trades were delivery based. His contribution to the total trades undertaken in the scrip during the investigation period was miniscule (iii) Mr. Bhavesh Pabari vide his letter dated April 30, 2015 submitted his reply to the SCN and enclosed a copy of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 5,00,000/- on him. He is aggrieved by the said order. He is unable to pay the penalty due to the restrain order passed by SEBI. He has already suffered a prohibition period for more than four years and does not have any financial means and capacity to take service of legal consultation and represent his case in the present proceedings. The noticee placed orders on the system of the stock exchange in the normal course of trading and did not execute synchronized trades. His trades were delivery based. The noticee s contribution to the total trades undertaken in the scrip during the investigation period was miniscule The noticee did not carry put any off market trades in the scrip and he did not have any fund movement with any other noticees. He is not Bhavesh Pabari s cousin (v) Mr. Hemant Madhusudan Seth vide his letter dated April 30, 2015 had submitted reply to the SCN and enclosed a copy of the appeal filed by him against the AO Order passed in the same matter imposing a penalty of ₹ 5,00,000/- on him. He had has submitted the following: In the same matter an AO order was passed imposing a penalty of ₹ 5,00,000/- on him. He is aggrieved by the said order and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal connection with him and submits that she is living an independent life and is taking her own independent decisions. She did not have business relationship with other Noticees as alleged and the documents shared with have failed to prove the alleged relationship. She placed orders on the system of the stock exchange in the normal course of trading and did not execute synchronized trades. Her trades were delivery based. Her contribution to the total trades undertaken in the scrip during the investigation period was miniscule (vii) Mr. Ankit Sanchaniya, vide his letter dated April 30, 2015 submitted his reply to the SCN and enclosed a copy of the appeal filed by him against the AO Order passed in the same matter imposing a penalty of ₹ 5,00,000/- on him. He has made following submissions: In the same matter an AO order was passed imposing a penalty of ₹ 5,00,000/- on him. He is aggrieved by the said order and he is unable to pay the penalty due to the restrain order passed by SEBI. He has already suffered a prohibition for more than four years and does not have any financial means and capacity to take service of legal consultation and represent his case in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emchnad Valmiki vide letter dated July 27, 2015 submitted his reply to the SCN and asserted that his contribution was not even one percent of the total volume in the scrip of GIL and therefore was not significant. He further stated that he had not executed any off market trades with any of the entities mentioned in the table. Furthermore, no document was provided to him which could establish his connection with PP group, as alleged. (x) Mr. Samir Sureshbhai Shah, Mr. Jignesh C. Shah, Mr. Pandya Hardik M. and Mr. Shalin Kiritkumar Parikh vide letters dated October 13, 2014 and August 03, 2015 submitted common replies to the SCN, whereby they submitted that they are victims of fraud perpetrated by one Mr. Paras Chaplot and that Mr. Chaplot had lured them so that in exchange of a fixed remuneration per month they had allowed Mr. Chaplot to use their trading and bank accounts. They further submitted that all transactions in GIL were carried out by Mr. Chaplot and they did not receive any proceeds from the trades. In this respect they had also filed a police complaint and sent a communication to Western Regional Office of SEBI providing details of Mr. Paras Chaplot. 8. An opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a common submission that the action proposed chart had not been provided to them and that the trade logs and order logs were provided in a CD format due to which the Noticees were unable to short / purify the data pertaining to them. I have perused the documents sought by the entities and the documents furnished to them. I note that all such relevant documents that were relied upon in the SCN have been duly provided to the Noticees. Further, due to the voluminous nature of the trade logs and order logs, the same were given through a compact disc. I find that to the contrary of the Noticees' submissions data provided in soft form in a CD is easier to short and to made sense than any in any other form. I, therefore, am of the view that the relevant documents/material which was relied upon in the SCN in the present proceedings has been provided to the Noticees. In view thereof, I reject the submissions of the Noticees in this regard. 12. I note that to establish connection between the Noticees inter alia constituting PP group, particulars/ details in KYC documents, inter se off-market trading activities and fund transfers have been relied. The Noticees have contested some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubhai Chauhan have joint accounts. It is also noted that Mr. Bhavesh Pabari is one of the witnesses for demat account of Mr. Kishor Balubhai Chauhan. Further, as shown in Table no. 1 above, Mr. Bhavesh Pabari and Mr. Hemant Madhusudan are connected with Mr. Kishor Balubhai Chauha, Mr. Ankit R Sanchaniya and Mr. Prem Mohanlal Parikh and other PP group entities through fund movements, of market transfer of shares and other factors. Therefore, the contention of Mr. Bhavesh Pabari and Mr. Hemant Madhusudan Seth that they had no role in the investment decisions of Rajnandi Yarns Private Limited cannot be accepted. 16. Another Noticee, Ms. Mala Hemant Seth has accepted fund movement with certain Noticees. She has further stated that while it is true that she is the wife of Mr. Hemant Madhusudan Seth, however, she denies having any business/ professional connection with him and submits that she is living an independent life and is taking her own independent decisions. I note that Ms. Mala Hemant Seth also has fund movements and off market transactions with Mr. Bhavesh Pabari and Mr. Prem Mohanlal Parikh. Vide her letter dated July 8, 2012; a copy of which has been provided to her, it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a consideration had allowed Mr. Chaplot to use their account, I, therefore find that even if the contention of these noticees are accepted, they cannot plead innocent. I am of the view that in the present circumstances these Noticees cannot escape the consequence of any manipulation done through such accounts. 20. The Noticees have raised another common contention that the transactions carried out by them were genuine and bona fide and the quantities of their transactions were so minuscule that they could not have led to creation of artificial volume and price manipulation in the scrip of GIL. In this regard, I note that the SCN clearly brings out that there have been number of transactions among the Noticees which were synchronized with the orders with identical rates placed within a span of less than one minute. The particulars of the synchronised trades carried out by the Noticees are as under: Table 3 - Synchronized trades by the Noticees. Sl. No. Client Name Synchronised buy trade % of synchronised trades to total buy by client % of Market Volume Synchronised sale trade % of synchronised trades to total sale by client % of Market Volume 1. Spectrum Chemicals Pvt. Ltd 0 0.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Noticees executed multiple self trades wherein one or the other Noticee was on either side of the transaction thereby creating artificial volume in the scrip. The details of the self trades executed by the Noticees are as below: Table 4 - Self trades by the Noticees . Sl. No. Name of the entity Total buy Total sell Self trade qty % of Total Buy % Total Sell % of Market Volume No of Self trades 1. Bhabesh Prakash Pabari 395464 683133 25233 6.38 3.69 0.51 17 2. Prem Mohanlal Parikh 449439 554399 56982 12.68 10.28 1.15 19 3. Hemant Madhusudan Sheth 143503 612700 14322 9.98 2.34 0.29 4 4. Vivek Kishanpal Samant 30000 16000 2180 7.27 13.63 0.04 1 1018406 1866232 98717 9.69 5.29 1.99 41 23. The above self-trades clearly did not involve change in beneficial ownership of traded shares and were, therefore, illegal. It is relevant to mention that with regard to the nature and effect of self-trades the Hon ble SAT, in the matter of M/s. Jayantilal Khandwala Sons Pvt. Ltd. vs. SEBI (Appeal no. 24 of 2011 decided on June 8, 2011), has held that : one cannot buy and sell shares from himself. Such transactions are obviously fictitious and meant only to create false volumes on the trading scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Samant 72 17 10.00 6 -3.60 49 6.40 25. In addition to the above, the PP group entities including the Noticees had indulged in offmarket transfer of 23,37,086 shares of GIL amongst themselves (during the period January 06, 2009 and December 30, 2009) which further corroborated the connection among them. The details of the off market transactions undertaken by the PP group entities are as under: Table 6 Off-market transitions of PP group entities in the scrip Sl. No. Client Name Counter Party Client Name Dr or Cr Total Quantity 1 Gandhi Aditi M Samir Sureshbhai Shah D 23370 2 Samir Sureshbhai Shah Gandhi Aditi M C 23370 3 Samir Sureshbhai Shah Shobhnaben R Parmar C 6220 4 Shobhnaben R Parmar Samir Sureshbhai Shah D 6220 5 Hemant Madhusudan Sheth Vivek Kishanpal Samant C 400000 6 Vivek Kishanpal Samant Hemant Madhusudan Sheth D 400000 7 Ankit Rajendra Sanchaniya Hemant M Sheth D 1925 8 Bhavesh Prakash Pabari Hemant Madhusudan Sheth D 29000 9 Bhavesh Prakash Pabari Prem Mohanlal Parikh D 20000 10 Hemant Madhusudan Sheth Bhavesh Prakash Pabari C 29000 11 Hemant Madhusudan Sheth Hemant M Sheth D 42000 12 Hemant M Sheth Ankit Rajendra Sanchaniya C 1925 13 Prem Mohanlal Parikh Bhavesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Raj Nandi Yarns Private Limited D 12000 55 Raj Nandi Yarns Private Limited Bhavesh Prakash Pabari C 4000 56 Raj Nandi Yarns Private Limited Hemant Madhusudan Sheth C 12000 57 Prem Mohanlal Parikh Raj Nandi Yarns Private Limited D 4937 58 Raj Nandi Yarns Private Limited Prem Mohanlal Parikh C 4937 59 Raj Nandi Yarns Private Limited Samant Vivek Kishanpal C 11400 60 Samant Vivek Kishanpal Raj Nandi Yarns Private Limited D 11400 61 Kishorbhai B Chauhan Kishor Balubhai Chauhan D 20000 62 Kishor Balubhai Chauhan Raj Nandi Yarns Private Limited D 20000 63 Bipin Jayant Thakar Bipin Jayant Thaker D 12790 64 Ankit R Sanchaniya Raj Nandi Yarns Private Limited D 2500 65 Raj Nandi Yarns Private Limited Ankit R Sanchaniya C 2500 66 Pandya Yaminiben M Pandya Yaminiben M. D 4695 67 Pandya Yaminiben M Pandya Yaminiben M C 4695 68 Laxman Dhirubhai Parmar Pandya Yaminiben M. C 4695 69 Pandya Yaminiben M. Laxman Dhirubhai Parmar D 4695 70 Hemant Madhusudan Sheth Hemant Madhusudan Sheth D 20000 2337086 26. This large scale trading amongst the PP group entities, which included the Noticees, all of which were synchronized and did not result in change in ownership created an artificial demand in the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng appropriate directions against the appellants to protect the integrity of the market and the interests of the investoRs. This is, indeed a very serious market illegality/irregularity and, in our view, imposing a monetary penalty alone on the company and its promoters will not meet the ends of justice. We are constrained to make these observations because the lenient view taken by the Board does not, in our opinion, protect the integrity of the market and not even the interest of the investors which is its primary duty. This kind of a lenient view will not be a deterrent for others and would send a wrong signal that the delinquent could continue with their nefarious activities by paying a monetary penalty. 29. I note that vide the interim order dated February 02, 2011, SEBI had restrained, inter alia, some of the Noticees herein from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. The directions in the interim order qua these Noticees are still in force. I also note from the material on record that Mr. Kishore Chauhan has passed away on May 29, 2013 and therefore, these pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 11B thereof and regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 hereby restrain the following entities 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, whatsoever, for the period as mentioned in the table below: Sl. No. Name of Entity PAN Period 1. Mr. Bharat Shantilal Thakkar AAZPT9542R 7 Years 2. Mr. Bipin Jayant Thaker ABYPT4984H 7 Years 3. Mr. Bhavesh Pabari AKGPP8679N 7 Years 4. Mr. Prem Mohanlal Parikh ALHPP3489N 7 Years 5. Mr. Hemant Madhusudan Seth ANOPS8607E 7 Years 6. Ms. Mala Hemant Seth AZXPS0694J 7 Years 7. Mr. Ankit Sanchaniya BLNPS3316L 7 Years 8. Spectrum Chemicals Ltd. AAICS2382L 6 Years 9. Mr. Anand Kalu Marathe AKWPM0699M 6 Years 10. Mr. Rajesh Pravin Bhanushali AABPB2744H 5 Years 11. Mr. Amar Premchand Valmiki AAUPW9971A 6 Years 12. Mr. Samir Sureshbhai Shah AGEPS0157L 6 Years 13. Mr. Jignesh C. Shah AIPPS9125H 6 Years 14. Mr. Pandya Hardik M. ARJPP6330Q 6 Years 15. Mr. Shalin Kiritkumar Parik ..... X X X X Extracts X X X X X X X X Extracts X X X X
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