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TMI Blog2017 (6) TMI 1411X X X X Extracts X X X X X X X X Extracts X X X X ..... in all 8 trades of noticee no. 2 and in 5 out of 11 trades of the noticee no. 3. Further they have repeatedly executed buy orders at the prices higher than LTP and deleted the remaining buy orders in the same manner once they are able to send the misleading message to the investors that the scrip is liquid and marketable enough. The noticee no. 4 also has traded frequently at prices higher than the LTP contributing more than 7% to the total net LTP. The noticees have contributed positively to the price rise of the scrip and the unusual move from Rs. 50/- to Rs. 559.95/- and defrauded the investors in the securities market. On analysis of the first trades of the day, it is noted that out of 340 days, the scrip of BCSL was traded only on 177 trading days, wherein on all trading days the scrip opened at a price higher than LTP, noticees had appeared always quoting price higher than LTP. The arguments of noticees, that only because the price traded is higher than LTP, there is no manipulation and even the transactions of Noticees are minimal i.e. sum quantity of 1650 by noticee no. 1, 1047 by noticee no. 2, 1056 by noticee no. 3 and 1450 by noticee no. 4 which can never influence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e securities market. People who indulge in manipulative, fraudulent and deceptive price rise should be suitably penalized for the said acts of omissions and commissions. Thus impose a monetary penalties on the noticees under Section 15-I of the Act and Rule 5 of Rules. X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 14, 2015. 8. As regards, the Noticee Prakash Todankar is concerned, the SCN was returned undelivered and the same was served by affixing it at his last known address on September 6, 2014. Thereafter, in the interest of natural justice and in order to conduct an inquiry as per Rule 4(3) of the said Rules, an opportunity of personal hearing was granted to him on December 14, 2015. Vide email dated January 8, 2016, Prakash Todankar, forwarded his reply dated January 07, 2016 to the SCN. However, he did not attend the personal hearing on December 14, 2015. Further, another opportunity of personal hearing was granted to him on May 09, 2017. The same was also uploaded on the SEBI website under the head cause list i.e. However, he failed to attend the same. 9. Rajat Share Broking Pvt. Ltd., vide letter dated August 01, 2014 acknowledged the receipt of the said SCN and submitted its reply to the SCN. Thereafter, in the interest of natural justice and in order to conduct an inquiry as per Rule 4(3) of the said Rules, an opportunity of personal hearing was granted to it on December 14, 2015. 10. The Authorized Representatives (ARs) attended the hearing on December 14, 2015 and reitera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a 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 there under. 4. 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 crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aded only on 13 trading days, wherein he had purchased in all 1250 shares out of which he had received for only 800 shares. Out of 500 shares purchased on 27/07/2010, he received shortage of delivery of 450 shares and thus received close-out from the stock exchange on 03/08/2010. Further he submits that when the scrip witnessed desired price of Rs. 400/-, the said 800 shares received by him were sold by him between 29/08/2011 and 09/11/2011. Further noticee no. 1 submitted that mere contribution to the rise in price of the scrip by executing trades at prices higher than the last traded prices cannot and does not amount to alleged violations. More so when the trades executed by him were carried out in the ordinary and regular course of his business in a bonafide manner. 18. Prakash Todankar (noticee no. 2) vide his letter dated January 7, 2016 denied the allegation leveled against him in the SCN. He submitted that he had purchased/sold shares of BCSL on the following dates through broker M/s Kotak Securities Ltd as follows (1047 shares due to division became 10470 shares): Purchase Sale Profit/Loss Sr Date Qty Rate Amount Date Qty Rate Amount Amount (+-) 1. 13/09/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade conformed the same. 6. It fixed its entry level and when sold merely by 11 no. of trades 7. It was not connected with the management of the company. 21. The noticee no. 3 further submitted that it was reasonably present in the market for a considerable period and bought shares from a number of sellers. It was not connected to any seller. It had a right to roll back its orders at any given point of time. Its purchases were well within the time frame and law. To accumulate the shares in a role of a speculator it bought the shares by putting every day the upper circuit. 22. The noticee no. 3 vide letter dated January 1, 2016 filed its additional reply and submitted that it regularly dealt with shares and securities from its own proprietary accounts and from own source of income. As per the scrip of BCSL is concerned, the share after revocation of suspension started trading at BSE on 21/07/2011 with opening price of Rs. 50/- and closed at Rs. 2/-: a. BSE allowed the said fluctuations in the name of trade practice and opening trade; b. The rest of trades also as per the market practice and as per the fixation of upper circuits. c. BSE/SEBI surveillance department never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/-. Thereafter, the scrip was infrequently traded till March 18, 2011 wherein out of total 167 trading days available for trading, the scrip was traded only on 44 trading days, mainly on account of non-availability of sellers. The details of the top 10 LTP contributors are as follows: All trades Above LTP Below LTP LTP Diff=0 % of Net LTP to mkt net LTP Name of Clients Sum of LTP diff No. of Trades Sum of Qty LTP Impact No. of Trades Sum of Qty LTP Impact No. of Trades Sum of Qty No. of Trades Sum of Qty Prakash Todankar 71.4 16 1047 71.4 8 32 0 0 0 8 1015 14.00% Sarita Chandak 62.2 12 551 62.2 11 501 0 0 0 1 50 12.20% Rajat Share Brkg P L 52.1 18 1056 52.2 11 450 ‐0.1 1 35 6 571 10.22% Jayesh N Kesharia 51.13 15 1650 51.13 14 750 0 0 0 1 500 10.03% Rita Jayendra Kothari 46.05 6 59 46.05 6 59 0 0 0 0 0 9.03% Sanyukta Rungta 36.26 23 1450 36.26 19 1050 0 0 0 4 400 7.10% Ankit M Kachhara 25.1 9 450 25.1 9 450 0 0 0 0 0 4.92% Atulbhai B shah 21.75 6 495 21.75 3 342 0 0 0 3 153 4.26% Bimla Devi Hirawat 16.55 3 150 16.55 3 150 0 0 0 0 0 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% approx). At that time there were no sell orders in the system. From the post event book, I find that the sell order at Rs. 204.15/- was placed by Rohan Dwarkani at 14:12:38 for 50 shares. The buy order of the noticee no. 1 matched with this sell order and the trades got executed resulting in new high price of Rs. 204.15/-, which was the highest price for the day and the only trade of the day. Further the rest of the buy order for 50 shares got deleted at 14:12:38. iii. Further I find from the table above that on July, 28, 2011, the noticee no. 1 placed a buy order for 100 shares at 09:00:00 at an order price of Rs. 214.35/- when the LTP at order entry was Rs. 204.15/- (i.e. order level LTP variation of 2% approx). At that time there were no sell orders in the system. From the post event book, I find that the sell order at Rs. 214.35/- was placed by Swapnil Vishnu Hode at 09:30:16 for 50 shares. The buy order of the noticee no. 1 matched with this sell order and the trades got executed resulting in new high price of .214.35/, which was the highest price for the day and the only trade of the day. Further the rest of the buy order for 50 shares got deleted at 09:30:16. 29. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r quantity 5 shares. The buy order of the noticee no. 2 matched with this sell order and the trades got executed resulting in new high price of Rs. 477.95/- which was the highest price of the day. Further out of the remaining shares of 995 shares got matched with sell order placed by Noticee no. 3 at sell order time 11:54:25, at sell order rate Rs. 477.95/- for 30 shares. This sell order matched the buy order of the noticee no. 2 and trade took place. Further the rest of the order quantity of 965 shares was deleted at time 11:54:25. ii. On Oct 5, 2011, the noticee no. 2 placed a buy order for 750 shares at 09:00:00 at an order price of Rs. 487.5/- when the LTP at order entry was Rs. 477.95/- (i.e. order level LTP variation of 1.95%). At that time there were no sell orders in the system. From the post event book, it is noted that the sell order was placed at Rs. 487.5/- by of the noticee no. 1 at 09:33:01 for 5 shares. The buy order of the noticee no. 2 matched with this sell order and the trades got executed resulting in new high price of Rs. 487.5/-, which was the highest price for the day and the only trade of the day. Further the rest of the order for 745 shares was deleted at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of Rs. 330.65/- when the LTP at order entry was Rs. 324.2/- (i.e. order level LTP variation of 1.95% approx). At that time there were no sell orders in the system. From the post event (i.e. when the order was placed) order book position, it is noted that there was one sell order at Rs. 330.65/- which was placed by noticee no. 1 at 09:32:39 for 1 share. The buy order of noticee no. 3 matched with this sell order and the trade got executed resulting in new high price of 330.65, which was the highest price for the day and the only trade of the day. Further, the rest of the order for 1054 shares was deleted at 09:32:39. ii. Similar pattern of trading was observed on September 5th and 6 th of 2011, details of the same given in the above table, wherein the sell order was placed for a minimum quantity i.e. one share at the buy price and trade was executed, thereby increasing the price of the scrip. For the remaining 8 trades also, similar pattern was observed.Out of 11 trades of the noticee no. 3 in 5 trades, the counterparty seller was noticee no. 1 only and contribution to positive LTP was Rs. 31.05/- i.e. 6.08% of total net LTP market wide. 32. I find that the noticee no 4 i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l LTP variation of 2% approx). At that time there were no sell orders in the system. From the post event book, it is noted that sell order at Rs. 152.4/- was placed by Prahalad at 14:44:52 for 50 shares. The buy order matched with this sell order and the trades got executed resulting in new high price of Rs. 152.4/-, which was the highest price for the day and the only trade of the day. iv. From above trades, it is noted that the noticee no. 4 placed buy orders at higher LTP and contributed to the price rise in the scrip in 19 trades for the quantity of 1050 shares. 33. I do not find merit in the submissions made by the noticees in view of the fact that the Net LTP percentages of the Noticee no. 1 to 4 to the Market Net LTP are 10.03%, 14%, 10.22% & 7.10% (Total 41.35%) respectively which is a substantial quantity and the same got created due to the buy orders of the noticees at higher price than the LTP thus contributing to the unusual price rise in the scrip. 34. In the instant case, I find that the noticee no. 1 executed the frequent buy orders at price higher than the LTP and once the 50% of buy order was matched with the sale order, he was successful in sending the mislead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h low trading volume in the scrip. 37. Here, it is important to refer to the observations made by the Hon ble Securities Appellate Tribunal (SAT) in its order dated March 21, 2014 in Saumil Bhavnagari Vs. SEBI which are as under: "... but by purchasing shares at the higher price in LTP in most of the trades, the notice had given a wrong impression about the liquidity of the scrip in the market. It must not be forgotten that every trade establishes the price of the scrip and the noticee's trading at higher than LTP resulted in the price of the scrip going up and were done with a view to set the price at a desired level and thereby influencing the innocent/gullible investors. By purchasing at a higher price in most of his trades, the noticee had given the wrong impression about the price of the scrip in the market. It is an accepted state of affairs that in cases of manipulation of the volume and / or price of a particular scrip, it is usually an arduous task to obtain direct evidence. However, the analysis of the trade and order logs as undertaken hereinabove, establishes the malafide intention of the appellant." 38. It may be relevant to refer to the observations of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of twenty five crore rupees or three times the amount of profits made out of such practices, whichever is higher. 41. Here, it is important to refer to the observation of the Hon'ble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL 216(SC) wherein it was held that: "In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant...". 42. While determining the quantum of penalty under Sections 15HA, it is important to consider the factors stipulated in Section 15J of SEBI Act, which reads as under:- 15J - Factors to be taken into account by the adjudicating officer While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely:- (a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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