BEFORE THE ADJUDICATING OFFICER SECURITIES AND … · 1992 READ WITH RULE 5 OF SECURITIES AND...

of 36

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO. EAD-2/ AO/ DSR/ RG/BKM/276-306/2014]

UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995

In respect of:

1. Shri Amar Premchand Walmiki (PAN: AAUPW9971A)

2. Shri Kishore Chauhan (PAN: AFPPC9703G)

3. Shri Bhavesh Pabari (PAN: AKGPP8679N)

4. Shri Anand Kalu Marathe(PAN: AKWPM0699M)

5. Shri Prem Mohanlal Parikh (PAN: ALHPP3489N )

6. Shri Hemant Madhusudan Sheth (PAN: ANOPS8607E)

7. Ms Manisha Navneetlal Gandhi(PAN: AOSPG7834A)

8. Ms Mala Hemant Sheth (PAN: AZXPS0694J)

9. Shri Ankit Sanchaniya (PAN: BLNPS3316L)

10. Spectrum Chemicals Pvt. Ltd (PAN: AAICS2382L)

11. Shri Manish Suresh Joshi (PAN: AFTPJ5897A)

12. Shri Samir Sureshbhai Shah (PAN: AGEPS0157L)

13. Shri Nareshbhai Devabhai Patel (PAN: AMFPP7028N)

14. Shri Bharatkumar Baldevbhai Parmar (PAN: ARTPP9101B)

15. Shri Rajesh Pravin Bhanushali (PAN: AABPB2744H)

16. Shri Bhupesh Rathod (PAN: AACPR3785K)

17. Shri Bharat Shantilal Thakkar (PAN: AAZPT9542R)

18. Shri Bipin Jayant Thaker (PAN: ABYPT4984H)

19. Shri Manoj Bhandari (PAN: AGQPB7879L)

20. Shri Bipin Kumar Gandhi(PAN: AJHPG6989J)

21. Shri Vivek Kishanpal Samant (PAN: BRSPS0294N)

22. Shri Chirag Rajnikant Jariwala (PAN: AFMPJ7543L)

23. Shri Jignesh C Shah (PAN: AIPPS9125H)

24. Shri Shalin Kirti Kumar Parikh (PAN: AJAPP5421B)

25. Ms Rekha Bhandari (PAN: ALHPB9175D)

of 36

26. Shri Devendra Suresh Gupta (PAN:ALLPG9738R)

27. Shri Ashok Kumar Bhikalal Parmar (PAN: AOJPP8746B)

28. Ms Pandya Yaminiben M (PAN: APGPP6166F)

29. Shri Pandya Hardik M (PAN: ARJPP6330Q)

30. Shri Gaurang Ajit Sheth (PAN: BGEPS6596Q)

31. Shri Navneetlal Jeevanlal Gandhi (PAN: ACTPG8728N)

In the matter of Gemstone Investments Limited

1. Securities and Exchange Board of India (hereinafter referred to as „SEBI‟),

pursuant to the detection of a huge rise in the traded volumes and/or price of the

shares of Gemstone Investments Limited (hereinafter referred to as

„GIL/company‟), a company listed at Bombay Stock Exchange Limited (BSE),

conducted an investigation into the alleged irregularity in the trading in the shares

of GIL and into the possible violation of the provisions of the Securities and

Exchange Board of India Act 1992 (hereinafter referred to as the „Act‟) and

various Rules and Regulations made there under during the period from January

06, 2009 to December 30, 2009. It was observed that the price of the scrip

unusually increased from Rs 21.20 to Rs. 78.35 and the daily high-low traded

volume was 1 share to 2,46,015 shares.

2. SEBI vide its interim Order dated February 2, 2011, had restrained 39

persons/entities from accessing the securities market and further, had prohibited

from buying, selling or dealing in securities in any manner whatsoever, till further

directions, in various scrips including GIL. The said order was later confirmed by

SEBI vide its order dated July 8, 2011.

3. The investigation, inter alia, revealed that certain entities namely, 1) Shri Amar

Premchand Walmiki, 2) Shri Kishore Chauhan, 3) Shri Bhavesh Pabari, 4) Shri

Anand Kalu Marathe, 5) Shri Prem Mohanlal Parikh, 6) Shri Hemant

Madhusudan Sheth, 7) Ms Manisha Navneetlal Gandhi, 8) Ms Mala Hemant

Sheth, 9) Shri Ankit Sanchaniya, 10) Spectrum Chemicals Pvt. Ltd, 11) Shri

Manish Suresh Joshi, 12) Shri Samir Sureshbhai Shah, 13) Shri Nareshbhai

of 36

Devabhai Patel, 14) Shri Bharatkumar Baldevbhai Parmar, 15) Shri Rajesh

Pravin Bhanushali, 16) Shri Bhupesh Rathod, 17) Shri Bharat Shantilal Thakkar,

18) Shri Bipin Jayant Thaker, 19) Shri Manoj Bhandari, 20) Shri Bipin Kumar

Gandhi, 21) Shri Vivek Kishanpal Samant, 22) Shri Chirag Rajnikant Jariwala,

23) Shri Jignesh C Shah, 24) Shri Shalin Kirtikumar Parikh, 25) Ms Rekha

Bhandari, 26) Shri Devendra Suresh Gupta, 27) Shri Ashok Kumar Bhikalal

Parmar, 28) Shri Pandya Yaminiben M, 29) Pandya Hardik M, 30) Shri Gaurang

Ajit Sheth and 31) Shri Navneetlal Jeevanlal Gandhi (hereinafter referred to as

Noticee No. 1 to 31 and collectively referred to as the Noticees), connected to

each other by one way or the other, had dealt in the scrip of GIL through multiple

brokers, in a fraudulent and manipulative manner, without real change in

ownership of shares, by indulging in synchronized trades thereby, creating

artificial volumes and price rise in the scrip.

4. It was further observed that the certain Noticees had also indulged in trades

which were self trades in nature thereby, creating artificial volumes which gave a

false and misleading appearance of trading in the scrip of GIL.

5. SEBI has, therefore, initiated adjudication proceedings against Noticees for the

alleged violation of the provisions of Regulations 3(a), (b), (c), (d), 4(1) and

4(2)(a) (b) (e) & (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade

Practices relation to Securities Market) Regulations, 2003 (hereinafter referred to

as the PFUTP Regulations).

Appointment of Adjudicating Officer

6. I have been appointed as Adjudicating Officer, in place of the previous

Adjudication Officer, vide order dated August 29, 2013 under Section 15 I of the

SEBI Act read with Rule 3 of the SEBI (Procedure for Holding Inquiry and

Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to

as „Rules‟) to inquire into and adjudge under Section 15HA of the Act against the

Noticees for the alleged violation of the provisions of PFUTP Regulations.

of 36

Show Cause Notice, Reply and Personal Hearing

7. The Noticees were issued a common show cause notice (hereinafter to as

“SCNs”) dated November 01, 2013 in terms of Rule 4(1) of the said Rules to

show cause as to why an inquiry should not be held and why penalty be not

imposed on them for the aforesaid violations. The SCNs were sent by Registered

Post Ack. Due and were duly delivered to the Noitcees except in case of Noticee

Nos 4, 9, 10, 15 and 20 as the same were returned undelivered. Therefore, the

said SCNs were affixed at the last known addresses of the said Noticees and the

report thereof is available on record.

8. Vide letter dated November 08, 2013 one Ms Rupal K. Chauhan, wife of Noticee

No. 2 informed that the Noticee No. 2 (Shri Kishore Chauhan) passed away on

May 29, 2013 and enclosed a copy of the death certificate of Noticee No. 2 as

issued by the Department of Health and Family Welfare, Government of Gujarat,

in support thereof. In view of the same, the adjudication proceedings initiated

against Noticee No. 2 stand abated. However, I shall examine the role of Noticee

No. 2 for the limited purpose of examining the role and findings against the other

Noticees in the matter.

9. Further, the Noticee No. 1 vide letter dated November 21, 2013 submitted his

reply in the matter. Vide letter dated November 25, 2013 the Noticee No. 7 filed

her reply in the matter. The Noticee No. 12, 27, 28 and 29 vide their separate but

identical letters dated November 25, 2013 requested time till December 20, 2013

to file their replies to the SCN. Accordingly, the Noticee No. 12 vide his letter

dated December 23, 2013 filed his detailed reply to the SCN. Further, Noticee

Nos. 27, 28 and 29 filed their replies vide separate letters dated December 21,

2013. The Noticee No. 11 vide letter dated April 30, 2014 filed his reply. The

Noticee No. 13 vide letter dated November 27, 2013 also filed his reply in the

matter. Further vide letter dated November 21, 2013 the Noticee No. 14 replied

to the SCN. The Noticee Nos. 23 and 24 vide separate but identical letters dated

November 25, 2013 replied to the SCN. The Noticee No. 25 vide letter dated

January 08, 2014 filed her reply to the SCN. The Noticee No. 30 vide letter

dated November 08, 2013 also filed his reply to the SCN. Further the Noticee No.

of 36

31 vide letter dated November 25, 2013 filed his reply to the SCN. The other

Noticees did not file any replies in the matter.

10. Therefore, in the interest of natural justice and in order to conduct an inquiry as

per rule 4(3) of the Rules, vide separate notices dated March 12, 2014 an

opportunity of personal hearing was granted to the Noticee Nos. 4 and 15 on

April 10, 2012 and to the Noticee Nos. 9, 10 and 20 on April 07, 2014 vide

separate notices dated March 07, 2014. The said notices were delivered to

Noticee Nos. 4, 15 and 20 but returned undelivered in case of Noticee Nos. 9

and 10. Therefore, the said notices were affixed at their last known addresses,

report of affixture is available on record. I note that the Noticee Nos. 4, 9, 10, 15

and 20 did not attend the said hearing on the scheduled date.

11. Further, an opportunity of personal hearing was granted on August 13, 2014 to

all the Noticees including Noticee Nos. 4, 9, 10, 15 and 20 vide separate notices

dated July 24, 2014. The said hearing notices were duly delivered to the

Noticees except for Noticee Nos. 9, 10, 14, 15 and 20 as the same were returned

undelivered. The said notice was affixed at the last known address of Noticee

Nos. 9 and the report is available on record. Further, another opportunity of

personal hearing was granted to Noticee Nos. 15 and 20 on November 10, 2014

and to Noticee No. 10 on November 14, 2014. The said notices were affixed at

the last known addresses of the Noticees and the report thereof is available on

record. Further, another opportunity of personal hearing was granted to Noticee

No. 14 on November 27, 2014 at 11:30 a.m. and the same was affixed at the last

known address of the Noticee, the report thereof is available on record. However,

the Noticee No. 14 did not attend the scheduled hearing.

12. The Noticee Nos. 3 and 6 attended the hearing on August 11, 2014 and made

oral submissions denying the allegations levelled against them in the said SCN.

Further, the Noticees sought one week time for filing replies in the matter.

Accordingly, the Noticees were advised to file replies on or before August 19,

2014 in the matter. The Noticee No. 3 vide letter dated October 30, 2014 and the

Noticee No. 6 vide letter dated November 6, 2014 filed their replies in the matter.

of 36

Further, the Noticee Nos.13 and 23 attended the hearing on August 13, 2014 and

reiterated the submissions made earlier vide letters dated November 27, 2013

and November 25, 2013 respectively. With respect to the Noticee Nos. 1, 4, 7,

12, 24, 25, 26, 27, 28, 29 and 31, the respective Authorized Representatives

(ARs) attended the hearing on August 13, 2014 and reiterated the submissions

made by them separately vide their letters dated mentioned in Para 9 above.

With respect to Noticee Nos. 1, 4, 12, 25, 26, 27, 28 and 29, the AR requested

one weeks time to file additional submissions in the matter. Accordingly, the said

Noticees were advised to file their replies on or before August 21, 2014. The

Noticee No. 1, 4, 25 and 26 filed their additional replies vide separate letters

dated August 21, 2014. Further, vide separate letters dated August 14, 2014, the

Noticee Nos. 12, 27, 28 and 29 also filed their respective replies in the matter.

13. The other Noticees did not attend the hearing on the scheduled date. However,

vide separate letters dated August 08, 2014 and August 11, 2014, the Noticee

Nos. 3, 5, 9, 17, 18, 21 and 22 submitted their preliminary replies to the SCN and

further requested time to file detailed replies in the matter. Accordingly, vide letter

dated November 08, 2014 and November 06, 2014, the Noticee Nos. 5 and 17

submitted their additional replies in the matter. Further, the Noticee Nos. 18 and

22, vide separate letters dated October 05, 2014 filed their replies in the matter.

Also, the Noticee No. 21 vide letter dated November 04, 2014 submitted his

additional reply. I note that the Noticee No. 9 did not file any further reply.

Further, the Noticee Nos. 8 and 16 vide their separate letters dated August 11,

2014 filed their replies in the matter.

14. In view of the above, with respect to Noticee Nos. 10, 15 and 20 I note that

ample opportunities and time was granted to them for filing their replies and

presenting their case in the matter. Further, with respect to Noticee Nos. 9 and

19, I note that the said Noticees have been granted sufficient time to file their

replies in the matter as the SCN in the present case was issued on November

01, 2013 i.e. more than 1 year ago. Therefore, I am proceeding further against

the said Noticees on the basis of material available on record in the matter.

of 36

Consideration of Issues, Evidence and Findings

15. I have carefully perused the charges levelled against the Noticees in the SCN,

written submissions made and all the documents available on record. In the

instant matter, the following issues arise for consideration and determination:

a. Whether the Noticee Nos. 1 and 3 to 31 have violated Regulations 3(a),

(b), (c), (d), 4(1) and 4(2)(a), (b), (e) and (g) of the PFUTP Regulations?

b. Does the violation, if any, on the part of the Noticees attract monetary

penalty under Section 15 HA of the Act?

c. If so, what would be the quantum of monetary penalty that can be

imposed on the Noticees taking into consideration the factors mentioned

in Section 15J of the Act?

16. Before proceeding further, I would like to refer to the relevant provisions of the

PFUTP Regulations which reads as under:

3. Prohibition of certain dealings in securities

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) 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

of 36

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 creates false or misleading appearance of

trading in the securities market;

(b) dealing in a security not intended to effect transfer of beneficial

ownership but intended to operate only as a device to inflate, depress or

cause fluctuations in the price of such security for wrongful gain or

avoidance of loss;

(c).............

(d).............

(e) any act or omission amounting to manipulation of the price of a scrip

(g) entering into a transaction in securities without intention of performing

it or without intention of change of ownership of such security.

17. I find from the SCN that GIL is a company listed on the BSE. On analysis of the

trading activity in the scrip of GIL, it was noticed that a group of entities identified

as the Pabari-Parikh group in the investigation report, including Noticees, who

were all connected to each other in one way or the other, had traded heavily in

the scrip of GIL through multiple brokers. The relationship between the entities is

detailed as under:

Client Name

KYC Relation Fund Movement

Share movement through off market Client

Name

KYC Relation Fund Movement

Share movement through off market

1.Rajesh Pravin Bhanushali

Sl. no.1, 16 & Narendra Ganatra have common office address.

17.Anand Kalu Marathe

Sl. no. 4 is witness in nomination form.

With Sl. No. 19, 26, 4.

2.Bhupesh Rathod

Introduced sl. no.22, 19, 16, 9 for trading a/c and knows sl. No. 28

With Sl. No. 30

18.Rekha Bhandari

Common contact no. as that of Sunil Bhandari.

With Sl. No. 26, 4.

With Sl. No. 4,

of 36

Sl. no. 18 is the wife of Sunil Bhandari.

3.Spectrum Chemicals Pvt. Ltd

Common address as that of Khodiyar Industry (Ramniklal Patel). Ramniklal Patel has same address as that of sl.no. 15 who has share and fund movement with sl. no. 16.

19.Prem Mohanlal Parikh

Sl. no. 19 is cousin of sl. no.16. Common email with sl. 30, 19 & 31. Sl. no. 22 is nominee of sl. no.19. BR* with sl. no. 5, 6, 8, 9, 16, 22, 30, 31.

With sl. no. 16, 22, 9.

With sl. no. 16, 22, 9, 5, 6, 22, 30, 31.

4.Amar Premchand Walmiki

With Sl. No. 12, 17, 16, 11, 18, 26, 25,

With Sl. No. 16, 7, 11, 12, 24, 27,

20.Devendra Suresh Gupta

Has traded with sl. no. 2, 5, 19 & 30, who all have off market share and fund movement with sl. no. 16.

5.Bharat Shantilal Thakkar

Sl. no. 16 is his nephew. Same address with sl. no.16. Sl. no. 16 is his nominee. Joint a/c with sl. no. 16. BR* with sl. no. 6, 8, 9, 19, 22, 30, 31.

With sl. no. 16, 19, 30.

With sl. no. 16, 12.

21.Nareshbhai Devabhai Patel

sl. no. 21 is the client of Samir Shah, who has off market transfer with Amar Premchand Walmiki and who in turn has off market transfer with sl. no. 16.

6.Bipin Jayant Thaker

Same Tel. no. with sl. no. 16. BR* with sl. no. 5, 8, 9, 16, 19, 22, 30, 31,

With sl. no. 16.

With sl. no. 8, 16, 19, 22.

22.Hemant Madhusudan Sheth

Sl. no. 16 & 22 both directors of Rajnandi Yarns Pvt. Ltd. Same email with sl. no. 31. BR* with 2, 5, 19, 30, 31, 6, 8, 9, & sl. no. 28 is his wife & sl. no. 29 is his nephew.

With sl. no. 16, 19, 9.

With sl. no. 16, 19, 9, 28, 30, 31, 6, 26.

7.Navneetlal Jeevanlal Gandhi

Sl. no. 26 introduced him for trading a/c.

With sl. no. 4, 11, 20, 21, 24, 23.Ashok

kumar Bhikhalal Parmar

Sl. no. 11 introduced him for trading a/c. He knows sl.no. 11 who is a stock broker. Sl. No.

With sl. no. 26, 11,

With sl. no. 11, 25, 26,

8.Chirag Rajnikant Jariwala

Same Tel. no. with sl.no.16. Sl. no. 16 is his uncle. BR* with sl. no. 5, 6, 9, 16, 22, 30, 31.


With sl. no. 6 24.Manis

ha Navneetlal Gandhi

Sl. No. 4 has off market transactions with sl. No. 16 & has fund movement with sl. No. 26.

With sl. no. 4, 11, 7,

9.Kishore Chauhan

Join a/c with sl. no. 16 Sl. no. 16 & 22 are witness for demat a/c. BR* with sl. no. 5, 6, 8, 16, 19, 22, 30.

With sl. no. 16, 19, 22.

With sl. no. 16, 19, 22, 31.

25.Pandya Yaminiben M

Same address with sl. No. 26. Knows sl. No. 11 & sl. No. 26 is his relative.

With sl. no. 26, 11, 31,

With sl. no. 11, 23, 26,

10.Manish Suresh Joshi

26.Pandya Hardik M

Having common Tel. no. with sl. no. 11. Sl. No. 11 is the promoter of Samir Shah & Co. and sl. No. 26 is one of its

With sl. no. 12, 18, 4, 11, 17, 25,

With sl. no. 11, 23, 25, 16, 22.

of 36

employees. Knows sl. No. 11 & sl. No. 25 is his relative.

11.Samir Sureshbhai Shah

Sl. No. 7 is his father. Sl. no. 6, 13, 14, 21, 23, 25, 24 are his clients. Sl. No. 4, 12, 15, 26, 17, are Paras Chaplot friend. He came in touch with Paras Chaplot as a stock broker.

With sl. no. 4, 7, 14, 21, 23, 24, 25, 26, 27,

27.Bharatkumar Baldevbhai Parmar

Having common Tel. no. with Rameshbhai Parmar.

With sl. no. 4, 11.

12.Manoj Bhandari

With sl. no. 4, 11, 26.

With sl. no. 4, 5, 16, 30, 9,

28.Mala Hemant Sheth

Sl. no. 28 is the wife of sl. no. 22 and sl. no. 29 is the nephew.


With sl. no. 22.

13.Jignesh C. Shah

Sl. no. 26 introduced him for trading a/c. Sl. No. 26 has off market transactions with sl. No. 16 & 22.

29.Gaurang Ajit Seth

Has common address & Tel. no. with sl. no. 22. & sl. no. 22 and 16 both directors of Rajnandi Yarns Pvt. Ltd.

14.Shalin Kiritkumar Parikh

Sl. no. 11 introduced him for trading a/c and sl. No. 11 has off market transactions with sl. No. 4 & sl. No. 4 has off market transactions with sl. No. 16.

With sl. no. 11

30.Ankit Sanchaniya

Same Tel. no. with sl. no. 19 and also shares Tel. no. with sl. no. 16 who is the nominee for his a/c. BR* with sl. no.5, 6, 8, 9, 16, 19, 22, 31.


With sl. no. 16, 19, 22, 8, 31.

15.Bipinkumar Gandhi

With sl. no. 16.

31.Vivek Kishanpal Samant

Sl. no. 16 is the brother in law & shares common Tel. no. & sl.no. 16 is the nominee of sl. no. 31 for trading a/c & bank a/c. Shares email with sl. no. 22. Shares email with sl. no. 19.

With sl. no. 22.

With sl. no. 16, 22, 8, 9, 19, 30.

16.Bhavesh Pabari

Sl. no. 5 is his uncle & sl. no. 31 is his brother in law. Sl. no. 19 is cousin of sl. no.16 Sl. no. 16 & 22 both directors of Rajnandi Yarns Pvt. Ltd. Share common Tel. no. with sl. no. 30, 31, 6. Sl. no. 2 introduced him for trading a/c. BR* with sl. no. 6, 8, 9, 19, 22, 28, 30.

With sl. no. 4, 12, 25, 19, 22, 5, 6, 30, 31, 15.

*BR - Business relation.

of 36

18. In addition to the above, it was revealed that the Noticee Nos 1 to 31 had

indulged in certain off-market transfers for 23, 37,086 shares of GIL amongst

themselves during the relevant period. These off-market transfers among the

group further allegedly established the relationship/connection between the

group.

19. From the trade log analysis, I find that the group of entities, as mentioned in

above paras, had purchased 19, 67,956 shares accounting for 39.67% of the

total traded volume and sold 3424824 shares accounting for 69.05% of the total

traded volume during the relevant period. Out of the total purchases and sales,

the Noticee Nos. 1 to 31 traded for 1241518 shares (25.03% of the market

volume) accounting for 63.09 % of the total purchase of the group and 36.25 %

of the total sale of the group within Pabari-Parikh Group entities and 25.03% of

the market volume from within the group entities. Out of the 1241518 shares

traded within the group entities, the buy and sell orders for 256661 shares,

constituting 13.04% of the market volume, were placed within one minute time

difference. Further, it was noted that 256661 shares constituted 13.04% of the

total purchase of Pabari Parikh Group entities and 7.49% of the total sale of the

Pabari Parikh Group entities.

20. Further, out of 256661 shares, for 84749 shares which accounted for 1.71% of

the total market volume, the buy and sale orders were allegedly placed in

synchronised manner (i.e. difference between placement of order by buyer and

seller within one minute and order rate as well as order quantity of buy side and

sale side being same) by Noticee Nos. 1 to 14. The said 84749 shares

accounted for 4.31% of the total purchase of Pabari-Parikh Group entities and

2.47% of the total sale of the Pabari-Parikh Group entities. The summary of the

said synchronized trades entered into by the Noticee Nos 1 to 14 is as under:

of 36

PANNO Client Name Synchronised buy trade

% of sync to total buy by client

% of Market Volume

Synchronised sale trade

% of sync to total sale by client

% of Market Volume

AAICS2382L

Spectrum Chemicals Pvt. Ltd (Noticee No. 10) 0 0.00 0.00 10000 100.00 0.20

AAUPW9971A Amar Premchand Walmiki (Noticee No. 1) 7000 17.11 0.14 15150 20.43 0.31

AFPPC9703G Kishore Chauhan (Noticee No. 2) 0 0.00 0.00 4000 4.35 0.08

AFTPJ5897A Manish Suresh Joshi (Noticee No. 11) 0 0.00 0.00 10000 31.83 0.20

AGEPS0157L Samir Sureshbhai Shah (Noticee No. 12) 6850 24.46 0.14 0 0.00 0.00

AKGPP8679N Bhavesh Pabari (Noticee No. 3) 37000 9.36 0.75 1000 0.15 0.02

AKWPM0699M Anand Kalu Marathe (Noticee No. 4) 11300 21.20 0.23 14000 130.85 0.28

ALHPP3489N Prem Mohanlal Parikh (Noticee No. 5) 1600 0.36 0.03 0 0.00 0.00

AMFPP7028N Nareshbhai Devabhai Patel (Noticee No. 13) 4999 49.99 0.10 0 0.00 0.00

ANOPS8607E Hemant Madhusudan Sheth (Noticee No. 6) 0 0.00 0.00 600 0.10 0.01

AOSPG7834A Manisha Navneetlal Gandhi (Noticee No. 7) 0 0.00 0.00 4999 8.13 0.10

ARTPP9101B

Bharatkumar Baldevbhai Parmar (Noticee No. 14) 7000 31.82 0.14 7000 31.82 0.14

AZXPS0694J Mala Hemant Sheth (Noticee No. 8) 4000 5.51 0.08 5000 1.88 0.10

BLNPS3316L Ankit Sanchaniya (Noticee No. 9) 5000 1.79 0.10 13000 3.48 0.26

Grand Total 84749 4.31 1.71 84749 2.47 1.71

21. I also find that the 3, 5, 6 and 21 had allegedly indulged in certain trades which

were self trades in nature while trading through multiple brokers. The details of

the said fictitious trades are as under:

of 36

PAN Name of the entity Total buy

Total sale

Self trade qty

% of Total Buy

% Total Sale

% of Market Volume

No of Self trades

AKGPP8679N Bhavesh Prakash Pabari (Noticee No. 3) 395464 683133 25233 6.38 3.69 0.51 17

ALHPP3489N Prem Mohanlal Parikh (Noticee No. 5) 449439 554399 56982 12.68 10.28 1.15 19

ANOPS8607E Hemant Madhusudan Sheth (Noticee No. 6) 143503 612700 14322 9.98 2.34 0.29 4

BRSPS0294N Vivek Kishanpal Samant (Noticee No. 21) 30000 16000 2180 7.27 13.63 0.04 1

Grand Total 1018406 1866232 98717 9.69 5.29 1.99 41

22. From the price volume data analysis, I note that the scrip of GIL was traded on

226 days. Out of 226 trading days, the Noticee Nos. 1 to 31 traded among

themselves on 90 days, i.e. 25% of the total number of days the scrip was traded

during the period under investigation. It was noted that the Pabari-Parikh Group

entities had contributed 100% to the daily market volume on January 06, 2009

and February 12, 2009. Further, the said Noticees contributed to the daily market

volume ranging from 0.09% on April 09, 2009 to 99.61% on July 23, 2009. It was

further alleged in the SCN that out of 90 trading days, the Noticee Nos. 1 to 31

had traded amongst themselves, on 44 trading days and thereby had contributed

more than 50% of the total market volume traded in the scrip during the relevant

period.

23. On further examination, I find that out of 90 trading days on which the Pabari-

Parikh Group had entered into trades in the scrip of GIL, on 40 trading days both

buy and sell orders were placed within time difference of one minute. It was,

therefore, alleged in the SCN that the Noticee Nos. 1 to 31, had contributed to

daily market volume of the scrip in the range from 0.06% on February 26, 2009 to

94.89% on April 23, 2009. Out of 40 trading days, on 7 trading days the Noticee

Nos. 1 to 31 had contributed more than 50% to the total market volume by

placing both the buy and sale order within one minute time difference. It was also

alleged that out of 40 trading days, on 13 trading days the trades executed by

Noticee Nos. 1 to 31 were synchronized in nature. By executing synchronized

of 36

trades among the group entities, Pabari-Parikh Group entities contributed to total

market volume ranging from 1.90% on April 02, 2009 to 82.84% on May 27,

2009. Further, on four trading days by entering into synchronized trades the

group entities had contributed more than 50% to the market volume traded in the

scrip during the relevant period.

24. I further note that the price of the scrip opened at Rs. 28.20 and touched a high

of Rs. 82.25 i.e. increase of Rs. 54.05. It was noted that on 20 trading days and

43 occasions a new high price was discovered. Further, out of the 43 occasions

on 12 occasions (i.e. on 6 days out of the 20 days), it was noted that the Noticee

Nos. 3, 9, 18 and 21 had contributed to the increase by Rs. 9.50 (out of a total

increase of Rs. 54.05).

25. It was, therefore, alleged in the SCN that the Noticee Nos. 1 to 31, by indulging in

the manipulative trade practices as mentioned above, had violated Regulations

3(a), (b), (c), (d), 4(1) and 4(2)(a), (b), (e) & (g) of the PFUTP Regulations

thereby, created artificial volumes and price in the scrip of GIL.

Submissions made by the Noticees:

Noticee Nos. 1:

26. The Noticee No. 1, vide his letter dated November 21, 2013 denied all the

charges leveled against him in the SCN. The Noticee submitted that during the

relevant period his trades ranged from Rs. 22 to Rs. 24.30 and therefore, did not

have any impact on the price of the scrip. All the trades executed by him

changed the beneficial ownership. He had purchased shares in the scrip of GIL

between February 04, 2009 to February 12, 2009 and further sold the shares

only on a single day i.e. on April 08, 2009. Further, vide letter dated August 21,

2014 the Noticee Nos. 1 submitted his additional reply in the matter. The Noticee

denied being part of the alleged Pabari-Parikh group entities and further

submitted that he had not carried out any off market transfers with any of the said

entities. He submitted that synchronized trades per se are not illegal in nature

and therefore, the charge of executing fictitious trades is not acceptable. The

of 36

Noticee No. 1 stated that except 6 trades, the other trades had remained pending

in the system from 1 minute time difference to 2 hours before they finally got

executed. He stated that he had entered into trades in the said scrip only on 10

trading days out of the 226 trading days.

Noticee No. 4:

28. Vide letter dated August 21, 2014, the Noticee No. 4 submitted his reply to the

SCN. The Noticee denied being part of the alleged group entities and further

submitted that he had no fund movements or off market transactions with any of

the said entities. He stated that his trades were in the price range of Rs. 22 to Rs.

25 except in one trade which was executed for Rs. 28. Further, the Noticee

contended that he did not execute any trades after April 21, 2009. Out of the total

trading days of 226 days, he had traded in the scrip of GIL only on 12 days. The

Noticee No. 4 submitted that he may be related to the group entities directly or

indirectly which does not make him liable for violating the PFUTP Regulations.

Noticee No. 3, 5, 6, 9, 17, 18, 21 and 22

27. The Noticee No. 3, 5, 6, 9, 17, 18, 21 and 22 vide their separate replies dated

August 08, 2014 and August 11, 2014 submitted that they have been debarred

from buying, selling and dealing in the securities market vide SEBI order dated

February 02, 2011. Further, the said Noticees stated that as the investigation

period is 4 years old, they are in a process of collating the data and file their

detailed reply in the matter.

28. The Noticee No. 3 vide his letter dated October 30, 2014 submitted his detailed

reply and stated that initiation of adjudication proceedings in the matter (although

the earlier debarment being still in force) is a "double jeopardy". The Noticee

stated that he is basically a cloth merchant and has joined the stock market only

in 1996 as an investor, jobber cum trader and arbitrager. Further, the Noticee No.

3 submitted that he has traded in the scrip of GIL on the prevailing market price

and after the price rise and after the fall price. The Noticee submitted that he has

of 36

traded in many other scrips in addition to GIL during the said period. He

confirmed that he had bought 3, 95,464 shares and sold only 6, 83,133 shares of

GIL during the relevant period. However, the said purchase and sale of shares

accounted only for 7.97% and 13.77%, respectively, of the total traded volume in

GIL during the relevant period which is very miniscule quantity to arrive at a

conclusion that the said transactions created artificial volumes in the scrip. The

Noticee further admitted having purchased 2,03,164 shares and sold 2,39,139

shares accounting for 4.10% and 4.82% respectively of the group trades. He

submits that only 0.75% of the market volume traded by him on the buy side was

in the form of synchronised trading and only 0.02% of the market volume traded

by him on the sell side was in the form of synchronised trading. He submitted that

the said trades were entered by his broker on the anonymous trading platform on

the exchange and therefore, he did not know the counter party with whom the

trades were getting executed. Further, there are very few trades out of his total

trading wherein the time difference was less than 1 minute and he submitted that

majority of trading the time difference was more than 1 for the shares purchased

by him and ranging from few seconds to more than 5 hours for the shares sold by

him.

29. The Noticee No. 5 vide his letter dated November 08, 2014 submitted his

detailed reply and stated that initiation of adjudication proceedings in the matter

(although the earlier debarment being still in force) is a "double jeopardy". The

Noticee submitted that he has traded in lot of other scrips including GIL both prior

and after to the investigation period. The Noticee denied being part of the alleged

Pabari Parikh Group and further denied having any business connections with

any of the said entities. He stated that he had bought 4, 49,439 shares and sold

only 5, 54,399 shares though multiple brokers which accounted for 9.06% and

11.18% respectively of the total traded volume in GIL during the relevant period

which is very miniscule quantity to arrive at a conclusion that the said

transactions created artificial volumes in the scrip. The Noticee further submitted

that his total buy volume within the group is 5.20% and total sale volume within

the group is 4.27% of the total traded volume. With respect to the synchronized

trade he has stated that only 0.03% of the market volume is in of synchronized

of 36

manner. Further the trades wherein the Noticee and the other persons of the

group had bought shares account only for 0.39% of the total market volume. With

respect to the self trades the Noticee submitted that only one self trade was

executed for a total of 56982 shares that adjusted the debit and credit with two

different brokers which was negligible in volume.

30. The Noticee No. 6 vide letter dated November 6, 2014 submitted his detailed


the earlier debarment being still in force) is a "double jeopardy". Further, the

Noticee also submitted that his demat account is still frozen. The Noticee

submitted that he has bought 1,43,500 shares and sold 6,12,700 shares and

therefore on net basis he has sold 4,69,200 shares which were all traded on

delivery basis accounting for 2.89% and 12.35% respectively of the total traded

volume in GIL and therefore, it is the case of the Noticee that the same were not

manipulative and huge in volume. With respect to the alleged relationship, the

Noticee submitted the Noticee No. 8 (Ms. Mala Hemant Sheth) is his wife and

that he is not having any business/professional connection with the Noticee No.

30 i.e. Gaurang Sheth, his nephew. He further stated that he is living an

independent life and takes his own investment decisions. The address of the

Noticee No. 30 is also not same as Noticee No. 30 stays on 3rd floor and Noticee

No. 6 stays on 2nd floor independently. He submits that only 1.21% of the market

volume traded by him on the buy side and only 4.77% of the market volume

traded by him on the sell side was in the form of synchronised trading. Further,

there are very few trades out of his total trading wherein the time difference was

less than 1 minute and that majority of trading was ranging in the time difference

of more than 1 minute ranging from few seconds to more than three and a half

hours for the shares purchased by him and ranging from few seconds to around

1hr 11 minutes for the shares sold by him. With respect to the alleged self trades,

the Noticee submitted that the 4 self trades had taken place only on three days

out of total investigation period of one year and three months which again was for

minuscule volume if compared to the total market volume & that the difference in

time with respect to the said trades ranged from 4 minutes to more than 2 hours

and 29 minutes and quantity ordered at three places was also different.

of 36

31. The Noticee No. 9 vide letter dated November 13, 2014 submitted his detailed


the earlier debarment being still in force) is a "double jeopardy". With respect to

the relationship of the Noticee with other group entities, the Noticee No. 9

submitted that he may be knowing few group entities from the alleged Pabari-

Parikh group but the same has nothing to do with his decision to trade in the

scrip of GIL. The Noticee denied having any fund movements with Noticee Nos.

3 and 5 (Mr. Bhavesh Pabari and Shri Prem Parikh). The Noticee stated that the

off market transfers are out of the purview of the trading mechanism and

therefore cannot be said to have affected the market mechanism. The Noticee

admitted receiving and transferring 4425 shares and 18425 shares respectively

of GIL in off market during the period under consideration. The Noticee submitted

that he had bought 2, 79,790 shares and sold only 3, 73,142 shares. which

accounted for 5.64% and 7.52% respectively of the total traded volume in GIL

during the relevant period which is very miniscule quantity to arrive at a

conclusion that the said transactions created artificial volumes in the scrip. With

respect to synchronized trades, the Noticee submitted that only 0.10% of the

market volume traded by him on the buy side and only 0.26% of the market

volume traded by him on the sell side was in the form of synchronised

trading. Further, there are only couple of trades out of his total trading wherein

the time difference was less than 1 minute and he submitted that majority of

trading was in the time difference of more than 1 minute ranging from few

seconds to more than 5 hours for the shares purchased by him to more than 1

hour and 35 minutes for the shares sold by him. The trades wherein the Noticee

No. 9 had sold shares and the other group entities had bought shares was only

2.18% of the total market volume and the trades wherein the Noticee No. 9 had

bought shares and the other group entities had sold was only 3.40% of the total

traded volume in the scrip of GIL.

32. The Noticee No. 17 vide letter dated November 6, 2014 submitted his additional

reply in the matter. The Noticee submitted that he does not form part of the

alleged Pabari-Parikh group and that he trades in the market based on his own

of 36

decision and research, fundamentals and market news. The Noticee submitted

that he may be knowing few group entities from the alleged Pabari-Parikh group

but the same has nothing to do with his decision to trade in the scrip of GIL. The

Noticee denied having any fund movements with Noticee Nos. 3 (Mr. Bhavesh

Pabari) and other group entities. The Noticee stated that the off market transfers

are out of the purview of the trading mechanism and therefore cannot be said to

have affected the market mechanism. He further submitted that he had traded in

many other scrips including GIL during the relevant period and also prior and

after the investigation period. Also, the Noticee stated that initiation of

adjudication proceedings in the matter (although the earlier debarment being still

in force) is a "double jeopardy". The Noticee submitted that he had bought

10,500 shares and sold only 85,387 shares which accounted for 0.21% and

1.72%, respectively, of the total traded volume in GIL during the relevant period

which is very miniscule quantity to arrive at a conclusion that the said

transactions created artificial volumes in the scrip. He submits that his trading

within the group was only 0.14% of the market volume and that on the sell side

only 0.38% of the volume traded by him was within the group which was

negligible.

33. The Noticee No. 18 vide letter dated October 05, 2014 submitted that he is a

small time trader and carried out jobbing and arbitrage business on BSE and

NSE. Also, the Noticee stated that initiation of adjudication proceedings in the

matter (although the earlier debarment being still in force) is a "double jeopardy".

Further, the Noticee submitted that he is not connected to the alleged Pabari-

Parikh group and that he did not carry out any fund transfers with any of the said

entities. With respect to the off market transfers, the Noticee submitted that he

had not carried out any such transactions. He had bought 52,890 shares and

sold only 43,450 shares which accounted for 1.07% and 0.88%, respectively, of

the total traded volume in GIL during the relevant period which is very miniscule

quantity to arrive at a conclusion that the said transactions created artificial

volumes in the scrip. His total buy within the group was 0.56% and total sale was

0.24% of the total market volume which was negligible. With respect to the

of 36

synchronised trades, he submitted that only 0.10% of the market volume traded

by him was in the form of synchronised trade.

34. The Noticee No. 21 vide letter dated November 04, 2014 submitted that he had

come across certain jobbers/traders/arbitragers who used to earn Rs. 5,000 to

Rs. 10,000 a day just by punching trades and the Noticee started trading on the

platform provided by the exchanges to earn money. Also, the Noticee stated that

initiation of adjudication proceedings in the matter (although the earlier

debarment being still in force) is a "double jeopardy". Further, the Noticee

submitted that he is not connected to the alleged Pabari-Parikh group. The

Noticee denied carrying out any off market transfers with any of the said group

entities. The Noticee submitted that he had bought 30,000 shares and sold only

16,000 shares which accounted only for 0.60% and 0.32%, respectively, of the

total traded volume in GIL during the relevant period which is very miniscule

quantity to arrive at a conclusion that the said transactions created artificial

volumes in the scrip. His total buy within the group was 0.13% and total sale was

0.32% of the total market volume which was negligible. Further, he submitted

that in very few trades out of his total trading the time difference was less than 1

minute and majority of trading was ranging in the time difference of more than 1

minute and in one trade the time difference is more than 53 minutes for the

shares purchased by him and further, for the shares sold by him, only in one or

two instances the time difference is less than one minute and in majority of the

trades it was more than one minute with maximum time difference being 1 hour

and 23 minutes. With respect to the self trades, the Noticee submitted that only

on one day his buy order for 4250 shares got matched with his sell order of 3500

shares and trade for 2180 shares got executed. The same was sheer

coincidence considering the time and price difference. Further, the same cannot

be said to have created artificial volume as the volume is miniscule.

35. The Noticee No. 22 vide letter dated October 05, 2014 submitted that he does

not form part of the alleged group entities and that he has traded independently

in the scrip of GIL. The Noticee also submitted that he has not carried out any off

market transfers with any of the group entities. Further, the Noticee stated that he

of 36

has traded in many other scrips apart from trading in the scrip of GIL during the

relevant period. Also, the Noticee submitted that initiation of adjudication

proceedings in the matter (although the earlier debarment being still in force) is a

"double jeopardy". The Noticee further submitted that he had bought 19,550

shares and sold only 19,550 shares which accounted for 0.39% and 0.39%

respectively of the total traded volume in GIL during the relevant period which is

very miniscule quantity to arrive at a conclusion that the said transactions created

artificial volumes in the scrip. With respect to the synchronised trades, the

Noticee stated that only 0.10% of the market volume traded by him was in the

form of synchronised trade. Further, the trades wherein he had bought the

shares and the group entities had sold the shares accounted for 0.39% and the

trades where he had sold the shares of GIL and the group entities had purchased

the shares accounted for NIL of the total market volume.

Noticee Nos. 7 and 31

36. The Noticee Nos. 7 and 31 vide their separate but identical letters dated

November 25, 2013 have denied the allegation levelled against them in the SCN

and submitted that they on the advice of certain well wishers (Noticee No. 12 i.e.

Samir Sureshbhai Shah) had opened demat accounts and had allowed third party

to use the said accounts for monetary consideration which in turn gave monetary

benefits to the said Noticees. The Noticee Nos. 7 and 31 submitted that they later

found out that their account was operated by one Mr. Paras Chaplot, a market

operator from Mumbai. The Noticees stated that they do not know the said person

or his firm. The Noticees received a sum of Rs 3000/- on each account (monthly

basis) for the said arrangement and Noticee No. 12 earned brokerage for the said

trades.

Noticee No. 8

37. The Noticee No. 8 vide her letter dated August 11, 2014 submitted that vide SEBI

order dated July 08, 2013 the Noticee is still debarred from trading in the

securities market and her demat account stands frozen. The Noticee states that

initiation of adjudication proceedings in the matter (although the earlier

of 36

debarment being still in force) is a "double jeopardy". She further submits that

she had traded in many scrips during and prior to the relevant period and GIL

was one of the scrips. The Noticee No. 8 admits that she is the wife of Noticee

No. 6 i.e. Shri Hemant Madhusudhan Sheth however, denied having any

business or professional connection with him and stated that she takes

independent trading decisions. The Noticee further denied having made any fund

transactions with Noticee Nos. 3 and 5 (Shri Bhavesh pabari and Shri Prem

Mohanlal Parikh). The Noticee No. 8 submitted that she is not connected with

any of the entities forming part of the Pabari-Parikh Group and had dealt in the

shares of GIL independently. Further, she stated that she had bought 72,566

shares and sold only 2, 65,721 shares which accounted for 1.46% and 5.36%

respectively of the total traded volume in GIL during the relevant period which is

very miniscule quantity to arrive at a conclusion that the said transactions created

artificial volumes in the scrip. The Noticee No. 8 has admitted the fact that she

had given 73,579 shares of GIL in an off market transaction to Noticee No. 6, her

husband, which was only once during the relevant period. She further submitted

that only 0.32% of the market volume traded by her on the buy side and only

3.63% of the market volume traded by her on the sell side was in the form of

synchronised trading. The volume of synchronised trades as alleged in the SCN

i.e. 1.46% on the buy side and 5.36% on the sell side is a miniscule volume and

cannot impact the equilibrium of the scrip. Further, there are very few trades out

of her total trading wherein the time difference was less than 1 minute and she

submitted that majority of trading were ranging in the time difference of more

than 1 minute to 53 minutes for the shares purchased by her and from one

minute to more than 1 hour and 23 minutes for the shares sold by her.

38. While trading within the group, Noticee No. 8 submitted that the trades wherein

she had sold shares to the persons belonging to the group constituted only

0.32% of the total market volume of the scrip and the trades wherein she had

bought shares from the group entities constituted only 1.73% of the total market

volume traded in the scrip of GIL. Further, one of the buy transaction for 4,000

shares executed by Noticee No. 8 had matched with the buy transaction of

Noticee No. 2 i.e. Shri Kishore Balubhai Chauhan which is only 0.08% of the total

of 36

market volume. Further, one of the sale transaction for 5,000 shares executed by

Noticee No. 8 had matched with the buy transaction of Noticee No. 9 i.e.

Shri Ankit Sanchaniya which is only 0.10% of total market volume. The Noticee

submitted that the said transactions cannot be said to have created artificial

volumes in the said scrip. With respect to the self trades allegation, the Noticee

No. 8 denied having entered into any self trades.

Noticee No. 11

39. The Noticee No. 11 vide letter dated April 30, 2014 submitted that his only and

single-handed alleged „connection‟ with the alleged Pabari Parikh group is that

one Mr Narendra Ganatra introduced him to one of his brokers Ford Brother

Capital Services Ltd. The Noticee No. 11 submitted that out of his total sale order

of 31416 shares, only 20000 shares got matched with the alleged group entities.

Further, he stated that his trades accounted for a meagre 0.63% of the total

market volume of 49, 60,252 shares during the investigation period is miniscule

so as to have any impact on the price. He stated that a single sell order of 10000

shares got synced with Noticee No. 3 (Shri Bhavesh Pabari) on May 12, 2009

which is mere 0.20% of the market volume which is insignificant so as to have

any impact in the market.

Noticee Nos. 12:

40. The Noticee No 12 vide his letter dated December 23, 2013 submitted his reply

to the SCN and denied the allegation levelled against him. He submitted that he

is not involved in any of the alleged transactions and that the whole fraud was

done by one Mr. Paras Chaplot, a market operator from Mumbai. The said

person is now not available / traceable. He further stated that he is not connected

or related with any of the group entities alleged to be Pabari-Parikh group in the

SCN. Further, vide letter dated August 14, 2014, the Noticee submitted his

additional reply in the matter wherein he reiterated his earlier submissions and

further stated that all the transactions were carried out by Mr. Paras Chaplot.

Further, with respect to the off market transfers, the Noticee stated that the same

would have been carried out by Paras Chaplot for the purpose of closing the deal

of 36

without change of price or for settlement of dues/loans through delivery of shares

of equivalent value.

Noticee No. 13

41. Vide letter dated November 27, 2013, Noticee No. 13 submitted that on the

advice of some well wisher, one Shri Rakesh G. Patel, he had opened Demat

Account and allowed its use by third parties on the instuctions of one Mr. Paras

Chaplot against monetary consideration which gave him income for some

period. He got a sum of Rs 4000/- per month for the use of the said account

during the aforesaid period. Therefore, the Noticee stated that none of the

transactions executed in his demat account and off market transactions have

been carried out by him nor he gave any instructions for such operations at any

point of time.

Noticee No. 14

42. Vide letter dated November 21, 2013, Noticee No. 14 submitted his reply in the

matter and denied the allegation levelled against him in the SCN. He submitted

that his trade had not resulted into price manipulation. He stated that his trades

were in the price range of Rs. 22 to Rs. 25. Further, the Noticee stated that he

had not carried out any trades in the scrip of GIL after April 08, 2009 when the

price actually went up. Further he submitted that the trade executed by him had

changed the beneficial ownership.

Noticee No. 16

43. The Noticee No. 16 vide letter dated August 11, 2014 denied the allegation

levelled against him. The Noticee while denying the connection with the group

entities submitted that certain persons were merely named for the sake of

introduction of their identity by his broker S. P. Jain Securities Private Ltd. as the

said Noticee was already holding a trading account with the said broker. The

Noticee further submitted that he is a cloth merchant and during the course of his

business he came in contact with the Noticee No. 9 ( Shri Ankit Sanchanya). The

of 36

Noticee No. 16 had carried out few business transaction with Noticee No.9 but did

not share any trading activity with him. With respect to Synchronized trade the

Noticee stated that he had traded in the scrip of GIL which accounted for

miniscule quantity and has not indulged in any synchronized trading with any of

the group entities.

Noticee Nos. 23 & 24

44. The Noticee Nos. 23 and 24 vide their separate but identical letters dated

November 25, 2013 submitted that on the advice of their friend i.e. Noticee No. 12

(Shri Samir Shah) they had opened demat accounts and allowed their use by

Noticee No. 12 who in turn earned brokerage for the said transactions. Further, the

Noticees denied carrying out any off market transactions.

Noticee No. 25

45. The Noticee No. 25, vide letter dated January 8, 2014, denied the allegation

levelled against her and submitted that out of 226 trading days she had traded

only for 4 days during investigation period and therefore, her trades were very

insignificant i.e. 1.77% of total market volume. Further, the Noticee denied being

connected to any of the group entities by way of common address or telephone

numbers. The Noticee also denied carrying out any off market transfers within

the group. The Noticee submitted that she has not indulged in any synchronised

trades and that she has not carried out any fictitious trades in the form of self

trades. Further, vide letter dated August 21, 2014, the Noticee 25 reiterated the

submissions made vide her earlier reply dated January 08, 2014. The Noticee

submitted that one Shri. Sunil Bhandari is her husband and stated that the fund

movement with Noticee Nos. 1 and 29 have no relation with any manipulation in

the market. The Noticee submitted that all her trades were bonafide and her

trades during the relevant period merely accounted for 0.63% of market volume

in case of buy trades and 0.61% in case of sell trades. The Noticee also

submitted that she had carried out trades in the scrip of GIL only through one

broker i.e. Arihant Capital Markets Limited and not through multiple brokers.

of 36

Noticee No. 26

46. Vide letter dated August 21, 2014, the Noticee No. 26 denied each of the

allegations contained in the SCN issued to him and submitted that he had bought

4000 shares and sold 5484 shares during the Investigation Period. He further

submitted that he had traded only 2 days out of total 226 trading days and all the

trades executed were delivery based. His trades were in the price range of Rs.

24 to Rs. 24.75. The Noticee had not executed any trades after March 27, 2009.

He had executed only 7 trades out of total 5453 trades executed during the

Investigation Period. Therefore, the Noticee submitted that his total trading in the

scrip of GIL was very negligible. The Noticee further denied being a part of the

alleged Pabari-Parikh group entities and he had no financial connection with any

of the alleged group. It was nothing but a coincidence that few of his trades got

matched with that of the group entities and therefore, the Noticee submitted that

he is not a party to many manipulation in the scrip of GIL. Further, the Noticee

submitted that 5 trades out of 7 trades entered by him remained pending from 1

minute to 1 hour and 20 minutes before they finally got executed. Only 2 trades

out of 7 trades remained pending for less than one minute before execution. The

Noticee also stated that he has not entered into any self trades during the

relevant time.

Noticee Nos. 27, 28 and 29

47. Vide letter separate but identical letters dated December 21, 2013, the Noticee

Nos. 27, 28 and 29 submitted their replies to the SCN and denied the allegation

levelled against them. They submitted that they are not involved in any of the

alleged transactions and that the whole fraud was done by one Mr. Paras

Chaplot, a market operator from Mumbai. The said person is now not available /

traceable. Further, vide separate but identical letters dated August 14, 2014, the

Noticees reiterated the submissions made by they in their earlier reply and

further they got a sum of Rs 6000/- per month for the purpose of third party use

of their demat accounts. As regards GIL is concerned, Noticee No. 27 has

submitted that there were only two transactions carried into his account - one

of 36

being buy of 9000 shares @Rs 22.85 on June 10, 2009 and second being sale of

9026 shares @Rs. 38.30. As the Noticees did not have their own email IDs, Mr.

Pars Chaplot used to send emails on Noticee No. 12's (i.e. Mr. Samir Shah)

email ID to inform about the transactions carried out in the said demat accounts.

48. Further, the Noticee No. 28 submitted that she is a housewife aged around 63

years with no literacy/knowlwdge of capital market. Her son, Mr. Hardik Pandya

(Noticee No. 29) was employed with Mr. Paras Chaplot (Mobile No.

09819842584, 09987394637, 09004092584, 09892554433) and Mr. Rakesh

Sanghvi (Mobile No. 09320633133, 09867433247) having their office at “Wealth

Hub”, 3rd Floor, 24, Onlooker Building, Opp. Axis Bank Main Branch, Sir P. M.

Road, Mumbai for their share business activities in Vadodara. Mr. Paras Chaplot,

by influencing Noticee No. 29 had made him open demat accounts in her name

and fraudulently carried out transactions in it without their knowledge and

information.

Noticee No. 30

49. The Noticee No. 30 vide his reply dated November 08, 2013 denies being

connected/ related with Noticee No. 6 by way of having same address and

telephone numbers. The Noticee also denied having executed any synchronised

or self trades in the scrip of GIL. Further, vide letter dated August 11, 2014, the

Noticee submitted his additional reply and reiterated the submissions made by

him in his earlier reply. He further submitted that he has not dealt in any off

market transactions in the scrip of GIL and had traded independently. The

Noticee states that the synchronised trades which have alleged in the SCN are

miniscule in quantity. The Noticee inter-alia submitted that he is not staying with

Noticee No. 6 i.e. Shri Hemant Madhusudan Sheth and also is not sharing a

common telephone number. The Noticee stated that he has not entered into any

fund or off market transactions with Noticee No. 3 i.e. Shri Bhavesh Pabari.

Further, the Noticee submitted that Noticee No. 6 and 3 are directors of Rajnandi

Yarns (P) Ltd but the said fact does not bring out his connection with both the

of 36

parties. He had bought 18087 shares and sold 15042 shares in scrip of GIL

during the period from May 29, 2009 to April 30, 2010.

FINDINGS:

50. I find from the SCN and the material available on record that during the relevant

period, the Noticee Nos. 1 to 31 who were all connected to each other and

referred to as the Pabari-Parikh Group entities in the investigation report, had

traded significantly in the shares of GIL i.e. purchased 19, 67,956 shares

constituting 39.67% and sold 34, 24,824 shares constituting 69.05%,

respectively, of the total traded volume in the scrip. I find that the relationship

table as mentioned in para 17 above clearly shows that the said Noticees were

connected to each other either by way of having similar addresses / telephone

numbers, relatives, business associates and/or having fund movements between

themselves except in case of Noticee No. 11. Further, the relationship of the

Noticees is established by way of off market transactions between them as

mentioned in para 18 above. However, on perusal of the data, I note that the

Noticee No. 11 had not carried out any such transactions. I note that the

Noticees had traded for 12,41,518 shares (i.e. 25.03% of the market volume)

accounting for 63.09 % of the total purchase of the group entities and 36.25% of

the total sale of the said group within the said Pabari-Parikh Group entities in the

scrip of GIL on the exchange platform. Out of the 12,41,518 shares traded within

the group entities, the buy and sell orders for 2,56,661 shares, constituting 5.17%

of the market volume, were placed within one minute time difference. Further, I

find that 2,56,661 shares constituted 13.04% of the total purchase of group

entities and 7.49% of the total sale of the said Group entities. The quantity of

shares and the pattern of trading indulged into by the Noticees within the group

further substantiates the fact that they all had a meeting of minds and traded in

the scrip of GIL in collusion with each other. Therefore, I do not find any merit in

the submissions made by the Noticees that they had no relationship with each

other and had traded in the scrip of GIL independently and in the ordinary course

of business. However, I conclude that in case of the Noticee No. 11, no

relationship has been established with the other group entities either by way of

of 36

having common addresses/telephone numbers/relatives or by way of carrying on

off market transactions/ fund flows and therefore, he does not form a part of the

Group.

51. I further find that the Noticee Nos. 1 to 14 had indulged in certain synchronised

trades in the shares of GIL thereby, creating false and misleading appearance of

trading in the scrip. I note that out of 2,56,661 shares traded by the Noticees for

84,749 shares, which accounted for 1.71% of the total market volume, the buy

and sell orders were placed in synchronised manner. 84,749 shares constituted

for 4.31% of the total purchases made by Pabari-Parikh Group entities and for

2.47% of the total sales done by the said Group entities. On perusal of the details

of synchronised trades as given in para 20 above and the order and trade log, I

find that the Noticee Nos. 1 to 14 did indulge in manipulative activities in the said

scrip and traded in a synchronised manner within the group without any intention

of change in beneficial ownership of shares and I don't find merit in the

contentions made by the Noticees. Further, I find that the Noticee No. 11 who

does not form a part of the Pabari-Parikh Group entities has also executed

certain trades which have matched with the group entities. However, I find that

just because the said trades got matched with the group entities does not make

him liable of violating the provisions of PFUTP Regulations as his individual

connection with the said group does not stand established.

52. I find that during the relevant period the shares of GIL were traded on 226 trading

days. Out of 226 trading days, the Noticee Nos. 1 to 31 had traded among

themselves on 90 days, i.e. 25% of the total numbers of days the scrip was

traded. The said group entities had by trading among themselves contributed to

daily market volume of the scrip in the range from 0.09% on April 09, 2009 to

99.61% on July 23, 2009. Further, out of the 90 days, I find that on 44 trading

days, the Noticee Nos. 1 to 31 by trading amongst themselves had contributed

for more than 50% to the total traded volumes in the scrip.

53. Also, I find that out of 90 trading days on which the Pabari-Parikh Group entities

had entered into trades in the scrip of GIL, on 40 trading days both the buy and

of 36

sell orders were placed within time difference of one minute. By executing trades

in the said manner, the Noticee Nos. 1 to 31 had collectively contributed to daily

market volume of the scrip in the range from 0.06% on February 26, 2009 to

94.89% on April 23, 2009. Further, out of 40 trading days, on 7 trading days the

Noticee Nos. 1 to 31 had contributed more than 50% to the total market volume

by placing both the buy and sell order within one minute time difference. On

further analysis, out of 40 trading days, on 13 trading days the trades executed

by the Noticee Nos. 1 to 31 were synchronised trades by which they had

contributed to total market volume of the scrip in the range from 1.90% on April

02, 2009 to 82.84% on May 27, 2009.

54. In view of the above, I do not find any merit in the contention of the Noticees that

they had entered into trades individually and synchronised trades indulged in by

the Noticees were insignificant / miniscule in volume if compared to the total

volumes traded in the scrip of GIL. I find that the manipulative trading practices

indulged in by the Noticees cannot be viewed independently and have to be

viewed collectively as the overall impact of the synchronised trading done by the

Noticee Nos. 1 to 31 in the scrip of GIL was quiet significant. Further, I also find

that such pattern of trading cannot be executed without prior meeting of minds

and prior understanding between the said Noticees. However, as Noticee No. 11

does not form a part of the group entities, therefore, Noticee No. 11 cannot be

held guilty of the said manipulative trades or creating artificial volumes in the

scrip of GIL.

55. I find from para 21 above that Noticee Nos. 3, 5, 6 and 21 had even entered into

certain self trades i.e. fictitious trades wherein the entity appears on both the buy

and sell side of the trade. The said Noticees had executed a total of 41 self

trades for a quantity of 98,717 shares thereby, inflated the volumes in the scrip

by 1.99%. The Noticee Nos. 3, 5, 6 and 21 had executed the said fictitious trades

through multiple brokers. Therefore, I find that by executing the self trades,

Noticee Nos. 3, 5, 6 and 21 had further created a false market and gave a

misleading appearance of trading in the scrip.

of 36

56. I further find that the price of the scrip had opened at `28.20 and touched a high

of ` 82.25, i.e. there was an increase of ` 54.05. I find that on 20 trading days

and on 43 occasions a new high price was discovered. Out of the 43 occasions,

on 12 occasions (i.e. on six days out of the 20 days), Noticee Nos. 3, 9, 18 and

21 had contributed to the increase in the price by ` 9.50 (out of a total increase of

`54.05). I find that the same is sufficient to establish that the price of the scrip

increased because of placing of the orders by the said Noticees in a manipulative

manner. Therefore, I do not find merit in the submissions made by the said

Noticees and I conclude that the trading done by Noticee Nos. 3, 9, 18 and 21 is

in violation of Regulation 4(2)(e) of the PFUTP Regulations.

57. I note that certain Noticees have in their submissions stated that they have been

restrained from trading in the securities market vide SEBI order dated February

02, 2011 which was confirmed on July 08, 2011 and the said debarment order is

still in force. Further, I also note that certain Noticees in their submissions have

contended that the present adjudication proceedings are double jeopardy as

SEBI has already vide its order, debarred the Noticees from trading in the market

for the same violations. At this juncture, I rely on judgement of the Hon'ble High

Court of Bombay in the case of SEBI Vs. Cabot International Capital

Corporation (2004) wherein it was observed that "the adjudication for imposition

of penalty by Adjudication Officer, after due inquiry, is neither a criminal nor a

quasi criminal proceeding. The penalty leviable under this Chapter or under

these sections is penalty in cases of default or failure of statutory obligation or in

other words, breach of civil obligation. The provisions and scheme of penalty

under SEBI Act and the regulations, there is not element of criminal offence or

punishment as contemplated under criminal proceedings." In view of this, I do not

find merit in the contention of the said Noticees.

58. Also, I note that some of the Noticees had requested for a copy of the entire

investigation report and certain documents which were relied upon while issuing

the SCN in the matter. Here, I note that the relevant extract of the investigation

report formed part of the SCN. I further note that the following information was

of 36

provided to the Noticees along with the SCN in a CD form. (a) Order appointing

the Adjudicating Officer (Annexure I)

BSE trading:

(b) Details of purchase and sale of 31 Pabari-Parikh Group entities dealing

through multiple brokers (Annexure A and B)

(c) Details of off market transfers (Annexure DD)

(d) Trading details of 31 Pabari-Parikh entities (Annexure C)

(e) Trade and Order details of trading within Pabari-Parikh Group entities

(Annexure D)

(f) Trading among 31 entities (Annexure E)

(g) Trade and Order details of synchronized Trades (Annexure F)

(h) Details of Trade and Order log containing self trades (Annexure G)

(i) Details of day wise volume contribution to the total volume traded (Annexure

H).

Therefore, I find that the material relevant in the present matter was already

provided to the Noticees.

59. From the foregoing, I find that the Noticee Nos. 1 to 10 and 12 to 31 by trading

amongst themselves had indulged in synchronised trades on numerous

occasions, resulting in no change of beneficial ownership thereby, created

artificial volume in the scrip of GIL which gave a false and misleading

appearance of trading in the said scrip. Further, I also conclude that the Noticee

Nos. 3, 5, 6 and 21 had entered into self trades and inflated the volumes in the

market thereby, giving a false and misleading appearance of trading in the scrip

of GIL. Also, the Noticee Nos. 3, 9, 18 and 21 by executing trades (which

created new high price) manipulated the price of the scrip of GIL and violated

the provisions of Regulation 4(2)(e) of the PFUTP Regulations. Therefore, I

conclude that the Noticee Nos. 1 to 10 and 12 to 31 have violated the provisions

of Regulation 3(a), (b), (c), (d), 4(1) and 4(2)(a), (b) & (g) of the PFUTP

Regulations thus, liable for monetary penalty as prescribed under Section 15HA

of the Act which reads as under:

Penalty for fraudulent and unfair trade practices

of 36

15HA. If any person indulges in 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.

60. 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…”.

61. 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 investor or group of investors as a result of

the default;

(c) the repetitive nature of the default.

62. I observe that from the material available on record, it is not possible to quantify

any gain or unfair advantage accrued to the Noticees or the extent of loss

suffered by the investors as a result of the default of the Noticees. However, I

find that the defaults were repetitive in nature. Further, the Noticees traded in the

scrip in a manner meant to create artificial volumes and liquidity which is an

important criterion capable of misleading the investors while making an

investment decision. In fact, liquidity/volumes in particular scrip raise the issue of

of 36

„demand‟ in the securities market. The greater the liquidity, the higher is the

investors‟ attraction towards investing in that scrip. Hence, anyone could have

been carried away by the unusual fluctuations in the volumes and induced into

investing in the said scrip. Besides, this kind of activity seriously affects the

normal price discovery mechanism of the securities market. People who indulge

in manipulative, fraudulent and deceptive transactions should be suitably

penalized for the said acts of omissions and commissions.

ORDER

63. In view of the above, after considering all the facts and circumstances of the case

and exercising the powers conferred upon me under Section 15-I (2) of the SEBI

Act read with Rule 5 of the Adjudication Rules, I conclude that the proceedings

against Noticee No. 2 i.e. Shri Kishor Chauhan stand abated. Also, I find that the

charges leveled against the Noticee No. 11 i.e. Shri Manish Suresh Joshi do not

stand established. Further, I hereby impose the following monetary penalties on

the other Noticees:

Sr. No.

Name of the Noticee Penal provisions

as per the SEBI

Act, 1992

Penalty Amount (in `)

1 Shri Amar Premchand Walmiki

(Noticee No. 1)

15HA 5,00,000 (Rupees Five Lakh Only)

2 Shri Bhavesh Pabari

(Noticee No. 3)

15HA 6,00,000 (Rupees Six Lakh Only)

3 Shri Anand Kalu Marathe

(Noticee No. 4)


4 Shri Prem Mohanlal Parikh

(Noticee No. 5)


5 Shri Hemant Madhusudan Sheth

(Noticee No. 6)


6 Ms Manisha Navneetlal Gandhi 15HA 5,00,000 (Rupees Five Lakh Only)

of 36

(Noticee No. 7)

7 Ms Mala Hemant Sheth

(Noticee No. 8)


8 Shri Ankit Sanchaniya

(Noticee No. 9)


9 M/s Spectrum Chemicals Pvt. Ltd

(Noticee No. 10)


10 Shri Samir Sureshbhai Shah

(Noticee No. 12)


11 Shri Nareshbhai Devabhai Patel

(Noticee No. 13)


12 Shri Bharatkumar Baldevbhai

Parmar (Noticee No. 14)


13 Shri Rajesh Pravin Bhanushali

(Noticee No. 15)


14 Shri Bhupesh Rathod

(Noticee No. 16)


15 Shri Bharat Shantilal Thakkar

(Noticee No. 17)


16 Shri Bipin Jayant Thaker

(Noticee No. 18)


17 Shri Manoj Bhandari

(Noticee No. 19)


18 Shri Bipin Kumar Gandhi

(Noticee No. 20)


19 Shri Vivek Kishanpal Samant

(Noticee No. 21)


20 Shri Chirag Rajnikant Jariwala

(Noticee No. 22)


21 Shri Jignesh C Shah

(Noticee No. 23)


22 Shri Shalin Kirti Kumar Parikh

(Noticee No. 24)


23 Ms Rekha Bhandari

(Noticee No. 25)


of 36

24 Shri Devendra Suresh Gupta

(Noticee No. 26)


25 Shri Ashok Kumar Bhikalal Parmar

(Noticee No. 27)


26 Ms Pandya Yaminiben M

(Noticee No. 28)


27 Shri Pandya Hardik M

(Noticee No. 29)


28 Shri Gaurang Ajit Sheth

(Noticee No. 30)


29 Shri Navneetlal Jeevanlal Gandhi

( Noticee No. 31)


TOTAL 1,49,00,000 (Rupees One Crore Forty Nine Lakh Only)

64. In my view, the penalties imposed on the Noticees are commensurate with the

defaults committed by them.

65. The penalty amounts as mentioned above shall be paid by the Noticees through

duly crossed demand drafts drawn in favour of “SEBI – Penalties Remittable to

Government of India” and payable at Mumbai, within 45 days of receipt of this

order. The said demand drafts should be forwarded to the Division Chief,

Enforcement Department (DRA-II), SEBI Bhavan, Plot No. C4-A, „G‟ Block,

Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.

66. In terms of Rule 6 of the Rules, copies of this order are sent to the Noticees and

also to the Securities and Exchange Board of India.

Date: November 28, 2014 D. SURA REDDY

GENERAL MANAGER &

Place: Mumbai ADJUDICATING OFFICER

BEFORE THE ADJUDICATING OFFICER SECURITIES AND … · 1992 READ WITH RULE 5 OF SECURITIES AND...

Documents

Transcript of BEFORE THE ADJUDICATING OFFICER SECURITIES AND … · 1992 READ WITH RULE 5 OF SECURITIES AND...