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ORDER (UNDER THE SEBI (PROCEDURE FOR HOLDING
INQUIRY AND IMPOSING PENALTIES BY THE ADJUDICATING OFFICER) RULES,� 1995) AGAINST KISHAN AGARWAL
2.
As per the
investigation findings, Kishan Agarwal (for brevity�s sake, hereinafter
referred to as Kishan) a client of M/s Sanchay Finvest Limited, (Sanchay)
member of the National Stock Exchange (NSE), Madhya Pradesh Stock Exchange
(MPSE) and the OTC Exchange of India. (OTCEI) was found to be one of the
entities who had traded extensively in the scrip of RMIL at NSE through their
broker; Sanchay along with other entities; Anil Kumar Agrarwal, Shravan Kumar
Goyal, Shree Shyam Investments and Bhavesh Pabari (hereinafter referred to as
�Anil�, �Shravan�, �SSI� and �Bhavesh� respectively) which significantly
facilitated the market manipulation in the scrip of RMIL and was thereby held
to have contravened the provisions of the FUTP Regulations. 3.
In view of the
same, SEBI vide order dated NOTICE / REPLY /
PERSONAL HEARING 4.
A notice dated August 10, 2005 along with relevant
documents annexed thereto was issued to Kishan under Rule 4 of the SEBI
(Procedure for Holding Inquiry and Imposing Penalties by the Adjudicating
Officer) Rules, 1995 with an advice to show cause within 14 days of the receipt
of the notice, as to why proceedings should not be initiated against him in
terms of the said Rules and why the penalty as prescribed therein should not be
levied upon him. �� 5.
Although the notice
was acknowledged, Kishan failed to reply to the said notice. Hence a notice of
hearing dated i.
He had not received
any of the earlier notices since he had shifted his residence. ii.
He had only indulged in jobbing transactions and had stopped trading since
2003. iii. During the
period of investigation, he had only transacted for around 2-3 months. iv. He was a graduate
in commerce and had never dealt in shares�����
earlier except during the investigation period. v. After sustaining losses,
he was presently involved in taking orders for printing on a commission basis
and was no longer trading. ������� � ��vi. He did not recollect his demat details. ��������� Kishan undertook
to provide the necessary documents and further requested to be granted another
hearing. Accordingly at his request the case was adjourned to 6.���� Subsequently on ������������
APPRECIATION OF EVIDENCE 7.
I have carefully
examined the investigation report especially the findings therein that are
relevant to Kishan, the documents available on record including the submissions
made by him and other facts and circumstances relevant to this case. While
taking into account the issues highlighted in the investigation report as
against Kishan and the submissions made by him in this regard to counter the
said issues, I consider it necessary to recapitulate certain details of the
case giving rise to the present proceedings. 8.
RMIL is a
television content provider in 9.
The promoters of
RMIL were holding 81,33,808 shares which is 75.08% of the total share capital
of RMIL and the public holding was only 13.29% amounting to 14,40,200 shares.
The paid up equity share capital was 1064.77 lakhs and face value of the share
was Rs10/. The trading in the partly paid up equity shares (Series E1/X1) of
RMIL was suspended w.e.f. 10.
The role of the
following entities and these clients were scrutinized during the course of
investigation. �� ������ ���(A) Trading Members of NSE: 1.
Sanchay Finvest
Limited (Sanchay) 2.
ISE Securities
& Services Limited(M/s Anil Mistry) 3.
Haven Financial
Services Pvt. Ltd. (Haven) 4.
Grishma Securities
Pvt. Ltd.(Grishma) 5.
Bonanza Portfolio
Limited (BPL) ������� (B)
CLIENTS 1.
M/s Rajesh Jhaveri 2.
Nrupesh Shah 3.
Shravan Kumar Goyal
(Shravan) 4.
Kishan Agarwal 5.
AK Agarwal 6.
Chirag Pujara 7.
Ashok� Sharma 11.���� Upon analysis of the trading details of the
above mentioned members and clients, following major issues were noted:-
12.���� Apart from these facts, I would also like to highlight the
statements made by some of the entities in question: A)������ Statement of Kishan Agrawal dated a)
He traded as an
individual only. He met Shrawan Kumar Goyal in the train and was introduced to
him. Shrawan introduced him to Anil. b)
Anil is his cousin c)
He did not have any
relationship with SFL, Haven, Chirag, BPL, Ashok or RMIL. d)
He did only jobbing
in the scrip of RMIL. (B)���� Statement of Anil dated a)
He traded in the
scrip of RMIL during the period of investigation b)
There was no
relationship between their company with RMIL. c)
He did only jobbing
in the scrip of RMIL d)
He was introduced
to Shrawan Kumar Goyal by his friend Anil Ruwatia. Shrawan later introduced him
to Sanchay. Shrawan was his friend. e)
Kishan is his
cousin. f)
Kishan also traded
with him at SFL and they were trading together. They stopped trading� in September 2003. Kishan was also introduced
by Shrawan Kumar Goyal. g)
They were related
to Sanchay only as a client. h)
They did not have
any relationship with Haven and BPL
a)
He was the
proprietor of SSI, sub broker of Sanchay FIncom Ltd., broker, BSE. In NSE, he
traded as an individual in his name through Haven. He had traded in the account
of SSI at Sanchay Fincom, member , NSE though he had not applied� as a sub broker b)
He had traded in
the scrip of RMIL during the period from c)
There was no
relationship between his company and RMIL. d)
He did jobbing in
other scrips as well. e)
He did not have any
relationship with Haven and SFL f)
He knew Mahesh
Pujara, uncle of Chirag Pujara since 2 years. g)
He knew A K Agrawal
and Kishan Agrawal as he used to meet them in local trains and had good contact
with them since January 2003 to April 2003. He introduced them to Sanchay as
they wanted to trade in the stock market. (D)�� Statement of Sanjay Chakor of Sanchay Finvest on a)
SFL is a public
limited company incorporated in 1991. Sanchay FIncom Ltd. is their group
company and a member of BSE. b)
They had traded on
behalf of their clients in RMIL. c)
These clients were
A K Agrawal, Kishan Agrawal, Ashok Gupta, Basant Marketing, Shri Shyam
Investments (SSI) etc. d)
He knew A K Agrawal,
Kishan Agrawal and SSI since 5 years. Shravan Kumar Goyal was introduced to
them by Radheshyam Sharma, accounts officer of SFL. e)
SSI, was a
proprietary concern of Shravan, and a sub broker of Sanchay Fincom at BSE. On
NSE, SSI was their client. f)
The trades in RMIL
were done on the instructions of the clients. g)
They did not have
any relationship with Haven, RMIL, Shravan Goyal. h)
They were in the
process of applying for cancellation of the certificate of registration of SSI. i)
They were not aware
of any artificial deals. ����� Introductions
of the clients 13.���� Upon a cumulative analysis of the statements reproduced above,
it is clear that Kishan was one of the main clients of Sanchay as has been
confirmed by Sanchay.� Kishan was
introduced to Sanchay by Shrawan Kumar Goyal, a client of Haven and had entered
into an agreement dated 14.��� Kishan started trading with Sanchay from 15.� As regards the counter party clients, Chirag
and Ashok; trading� through BPL, I have
noted that Chirag had vide his statement dated June 25, 2004 confirmed that he
knew Shrawan since January 2003 and that they were in contact with each other
to get the information of the market. Even Shrawan vide his statement dated
July 22, 2004 made to SEBI, confirmed that he knew Chirag through his uncle
Mahesh Pujara whom he knew for more than 2 years (i.e. before the period of
statement recording). However during the proceedings held before me, Shravan
denied knowing either Ashok or Chirag. Admittedly Chirag was introduced to BPL
by Maitri Investment, their then sub broker, and the fact is corroborated from
the client registration form where the introducing party is shown as Maitri.
Incidentally, Maitre was a partnership firm (since dissolved) of which, Chirag
was a partner. This apart, the authorized signatory of BPL at their Vashi
Branch; where these entities traded was Shri Bhupesh Gupta who was very close
to Chirag and used to place the orders on behalf of both Chirag and Ashok. In
turn Chirag introduced Ashok only on 16.�� While summing up the inter relationship
existing between the various entities, it is clear that the said brokers and
clients knew each other, both professionally and to a certain extent even
personally, which has been duly accepted by them. They all traded extensively
in the same scrip, during the same period and that too amongst themselves. This
inter relationship between the entities enabled them to act in concert with
each other and execute the deals in a structured/synchronized manner. The
series of synchronised trades which I will be discussing in the later part of
this order took place to such an extent, that the time, price and quantity
matched with each other at almost every point of time. �� 17.�� It would be relevant to bring out the fact that some
correspondence had been exchanged between NSE and Sanchay as regards the� trades executed through them in the scrip of
RMIL during the period of investigation i.e. NSE had taken note of the series
of synchronized trades entered into in the said scrip apparently between
related entities through different trading members, over a period of time and
hence had advised Sanchay to review the trading pattern of their clients and
also advised them to exercise necessary caution while executing similar such
trades for the said clients. It appears that Sanchay had on July 8, 2004
brought to the notice of NSE that the said trades was executed by them as per
the clients� instructions. ��������� Synchronised trades 18.�� The facts discussed above
have also to be read in context with the synchronised trades/ structured deals
entered into with the other clients through their brokers namely Shravan
trading through Haven and Chirag and Ashok sharma trading through BPL. In all,
199 structured deals appear to have been executed by Kishan through Sanchay
with Shravan being the counter party acting through Haven and 130 structured
deals were executed by Kishan through Sanchay with the counter parties being
Ashok Sharma and Chirag acting through BPL. Trades between
Kishan/Sanchay and Shravan/Haven� �19.��� The details of the trades between Kishan
acting in tandem with Anil through Sanchay�
and Shravan trading through Haven (constituting more than 75 pages) have
been annexed as Annexure 2 to the notice dated �20. �� �The summary of such
structured deals is as revealed in the table below: TABLE B
21.���� As per the data pointed
above, the said series of synchronised trades began from ����� Trades
between Kishan-Anil/SFL and Chirag-Ashok/BPL 22.
The
details of the trades between Kishan acting in tandem with Anil executed
through Sanchay with the counter parties being Chirg/Ashok trading through BPL
(constituting more than 75 pages) have been annexed as Annexure 4 to the notice
dated August 10, 2005 issued to Kishan in
the present proceedings and is hereinafter referred to as Table C.� As per the said
data, the series of synchronised trades began from 23.���� The summary of such structured deals is as
revealed in the table below: TABLE D �������������
24.������� The summary reveals that the said trades took place in all the
settlements from 2003093 to 2003122 with the average price ranging between Rs 58.75/- to Rs 90.85/-. The total
quantity so traded was 5,62,288 shares. 25.���� Overall, these trades executed through Sanchay accounted for
17.89% of the market gross during
the�� traded period. 26.� �� Upon
a perusal of the details of the trades as brought out in� Tables A and C, it is seen that while the
orders were placed in a synchronized manner, there was a great deal of reversal
of positions also happening i.e. the buy entity became the sell entity and the
sell entity became the buy entity and vice versa. This trend continued between
the same set of clients and the same set of brokers: i.e. 3 brokers and 6
clients. Reversal of trades reflects the transactions being entered into in a
circular fashion, without the actual change of beneficial ownership taking
place. 27.
Kishan has however denied these allegations
and any relationship with the other entities and the counter party brokers and
has contended that the orders were placed in an anonymous screen based trading
system where the identity of the counter party is never known. 28.
Notwithstanding these contentions, it is clear
that the buy and the sell orders were placed at almost the same time between
the two clients through their brokers, with just a difference of a few seconds.
This proximity in the inputting of orders at the same price and for the same
quantity, resulted in getting them matched such that there was almost perfect
matching in all the trades, with all the three parameters i.e. quantity, price
and most importantly, the time, required to conclude the trades which to a
large extent indicates synchronization in the logging in of the orders, albeit
executed on the screen of the exchange. One could accept it as a coincidence in
case of a solitary incident or two. However the same happened regularly. The
phenomenal regularity with which these clients/brokers were counter-parties,
leads one to conclude, that these transactions were not a matter of coincidence
but effectively meant to be� synchronized
as evidenced by the proximity of timing of putting-in the buy and sell orders,
exact matching of price and quantity of shares, resulting in the matching of
trades almost on every occasion between themselves, even when there are more
than a few thousand investors spread over more than 300 cities in the country,
that is to say, it would be an amazing coincidence that such a huge number of
synchronized trades get matched, between the same set of brokers and same set
of clients.� It is my considered belief
that frequency of such trades ensured consistent matching of the orders, where
one entity got themselves as the seller and vice versa purely for the purpose
of projection of the volumes of the shares of RMIL in a way that was not the
market determined volumes, possibly to induce other persons to invest in the
said scrip. �� 29.� While
examining the issue of synchronized trades, the Hon�ble Securities Appellate
Tribunal in Appeal Nos 54 to 57 of 2002 in the case of Nirmal Bang Securities
(P) Ltd. vs. SEBI observed as under: �BEB has been
charged for synchronized deals with First Global. I have examined the data
provided by the parties on this issue. I find many transactions between BEB and
FGSB. There are many instances of such transactions. I find the scrip, quantity
and price for these orders had been synchronized by the counter party brokers. Such
transactions undoubtedly create an artificial market to mislead the genuine
investors. Synchronized trading is violative of all prudential and transparent
norms of trading in securities. Synchronized trading on a large scale can
create false volumes. The argument that the parties had no means of knowing
whether any entity controlled by the client is simultaneously entering any
contra order elsewhere for the reason that in the online trading system,
confidentiality of counter parties is ensured, is untenable. It was submitted
by the Appellants that it was not possible for the broker to know who the
counter party broker is and that trades were not synchronized but it was only a
coincidence in some cases. Theoretically this is OK. But when parties decide to
synchronize the transaction the story is different. There are many transactions
giving an impression that these were all synchronized, otherwise there was no
possibility of such perfect matching of quantity price etc. As the Respondent
rightly stated it is too much of a coincidence over too long a period in too
many transactions when both parties to the transaction had entered buy and sell
orders for the same quantity of shares almost simultaneously. The data
furnished in the show cause notice certainly goes to prove the synchronized
nature of the transaction which is in violation of regulation 4 of the FUTP
Regulations. The facts on record categorically establish that BEB had indulged
in synchronized trading in violation of regulation 47 of the FUTP Regulations. In
a synchronized trading intention is implicit.� (emphasis not supplied) 30.
Keeping in mind the dicta of the SAT as
reproduced above; I see no reason to take a different view.� As far as the argument raised by Kishan about
the apparent lack of nexus between the clients/brokers is concerned, besides
the interlinkages between the parties as has been elaborated above, another
significant factor that requires consideration is that when a peculiar pattern
of trading between a set of clients/brokers is deciphered, it is not necessary
even to build up or establish a set relationship between the concerned
entities. What is more important to consider is the method and the manner in
which such trades were executed. The motive thereafter automatically falls into
line, i.e., the evidence that such trades throws,� adds to the findings of investigation, about
such a nexus, whether direct or indirect. 31.
The important fact to consider is that the
total number of synchronized trades between Kishan acting in tandem with Anil
through Sanchay and Shravan trading Haven were 298 and between Kishan-Anil
through Sanchay and Ashok-Chirag through BPL were 236 and the same has been
reflected in the table. Kishan has failed to explain as to how the said
transactions cannot be adjudged to be synchronsied, when such perfect matching
has been indicated and documents for the same have already been furnished to
him. The matching of mind between the said set of clients/brokers was effected
such that the �disclosed quantity� as defined by NSE was undoubtedly different.
However the total traded quantity between the said clients/brokers involving
the traded time and the price were matched at every point in time. 32.
�In this
context, a better elaboration is required. An order with a Disclosed Quantity (DQ)
condition allows the trading member to disclose only a part of the order
quantity to the market. For example, an order of 1000, with a disclosed
quantity condition of 200 would mean that 200 is displayed to the market at a
time. After this is traded, another 200 is automatically released and so on
till the full order is executed. Most often, the Exchanges set a minimum
disclosed quantity criteria, from time to time. 33.
This situation can be exemplified by referring
to the trades executed between Kishan through Sanchay and Shravan through Haven
and for this I consider it sufficient to refer to one of the trades in the
series of further transactions that were executed between them. As pointed out
to the trades in Table A, the first synchronized trade between the said clients
through their respective brokers was of the total traded quantity of 1950,
where the disclosed quantity of Kishan was 200 with �the original buy volume�
being 1950 shares of RMIL and the disclosed quantity of Shravan was 300 with
the �original buy volume� being 1950 shares of RMIL. It is thus possible that
the quantity of the orders so disclosed on the screen could be matched with the
one disclosed by the other client/broker and it is also possible that the
disclosed quantities may not be the same for both of them. Ultimately, however,
it is the original buy volume of one client/broker that should be compared with
that of the original buy volume of the other client/broker for the purpose of
perceiving the element of synchronization between them. In the present case,
200 shares of Shravan would first get matched with 200 shares of Kishan. (i.e.
100 would remain out of 300 for him as 200 would have been matched)� The other 200 shares of Shravan would then
automatically be sucked out of the remaining i.e. (1950-200 = 1750) and this
process would continue, till all the deals are executed. However, what is more
important is the total traded quantity and the behind the scene, �buy original
volume� so put forth by them. In the present case, both the clients through
their brokers continued to put the same �buy original volumes� but the
disclosed quantities projected were different for almost all the trades as
pointed out earlier in the Tables. Thus, while the total traded quantity
remained the same (as the original buy volume with the completion of trades,
was done at the same time and same price) the said original buy volume which
was the same for both the clients through the brokers was not displayed on the
screen. This enabled the two parties to present a fa�ade of ignorance of the
identity of the counter party, which was in reality not the case. 34.
�The
fact that at every point of time, the original buy volume was the same, while
putting different disclosed quantities in the system revealed the prior tacit
understanding between the two clients. Infact Kishan did not choose to point
out anything on this aspect when provided with all the documents pertaining to
the said trades. The total number of synchronized trades between Kishan acting
in tandem with Anil through Sanchay and Shrawan through Haven were 298 and
between Kishan-Anil through Sanchay and Chirag-Ashok/BPL were 236, as has been
reflected very well in the earlier tables. 35.
Had all these trades executed through Sanchay
with other clients through their respective brokers been in the normal course
of business as a broker, the possibility of such perfect matching would not
have been possible.� The buy and sell
prices of the trades executed through Sanchay were close to the buy/sell rates
of Shravan trading through Haven and Chirag-Ashok trading through BPL in all
the settlements, such that the trades of these entities were always matched.
Trades to the extent of 298+236 i.e. 534 deals as pointed in the tables
earlier, and spread over a period of 2 months are definitely done with some
inbuilt component of �intent� involved. Greater the numbers of synchronized
trades, the larger are the chances of trades not being genuine in nature which
is bound to affect the market equilibrium. A trade can be executed on the
screen and still be manipulative in nature. Trades like cross deals, reverse
transactions, circular trades, synchronized trades are all executed on the
screen and with proper delivery versus payment system. However, considering the
number of such trades, it is clear that there has been a gross misutlisation of
the screen based system. 36.
Thus the very act of Kishan manipulating the
scrip of RMIL is revealed in him acting in tandem with other entities through
their respective brokers, based on the nexus existing between them which
reveals the inherent intention of manipulating the said scrip. 37.
I am also aware of the fact that clients�
trades of such magnitude are left undone, and generally cannot take place,
without the broker being party to it. It is quite evident that these trades
were entered into due to the concerted effort of the concerned brokers i.e.
Sanchay, Haven and BPL which ensured a semblance of trading activity, almost
every day during the investigation period which was earlier not observed. Had
the situation contemplated some other set of individuals and had some other
clients/brokers entered into the trading system of RMIL, this would have eroded
or nullified the extent of the allegations. However here is a case where there
was no transfer of beneficial ownership in the trades executed by them. These
trades as discussed earlier were in the nature of reversal of trades/ matched
deals with the same set of clients on both sides, trading through the same set
of brokers. Furthermore, when a client reveals a clear and set pattern/
behavior in a particular scrip, such as execution of a large number of trades,
on the same day, in the same scrip, consistently throughout the month and with
the same set of brokers, then the same is indicative of a concerted level of
activity and a definite finding that there was an element of intent while
executing the said deals, precipitated due to a mutual understanding, which
aspect can be pointed out by any layman / an ordinary investor, leave apart the
regulatory authorities. 38.
Furthermore, price manipulation does not only
involve only manipulation in the prices of the scrip but also includes building
up volumes.� The very fact that the total
quantities of structured deals entered into through Sanchay and Haven were
around 6 lakh shares which represented around 4.5% of the gross traded quantity
with just one broker during the entire period of investigation and merely for
three to four clients (i.e. Anil, Kishen, Bhavesh and Kuber) speaks volumes
about the level of concerted activity of these entities. Further the total
quantity traded through structured deals between Sanchay and BPL was around 5.7
lakh shares of RMIL representing approximately 4.3% of the total quantity
traded on the exchange during the entire period, with just one broker during
the entire period of investigation and for merely three clients (SSI, Anil and
Kishan) is also a clear indication of the concerted activity between them. 39.
In this context, I would also like to bring
out certain additional yet relevant facts. The scrip of RMIL was listed on the
NSE only on 40.
Upon perusal of the historical scrip wise
price volume data of the scrip of RMIL from 41.� �� The
trading in the EQ series commenced on 42. ��� During May, the largest traded
quantity was recorded on 43.���� The volumes which were in mere thousands at
that time then shot to lakhs from April 28, 2003 and
after May 22, 2003 the volumes were consistently found to be in lakhs, during which time, all the entities as discussed
above were found to have entered into the arena where trades were taking place
in sync with a set of common entities. Thereafter the trades which were in lakhs declined and ran into thousands after 44.
On the basis of these facts and figures, the
involvement of the impugned entities in the manipulation cannot be denied. It
would also be relevant to bring out the fact that the findings of investigation
revealed that these entities accounted for 94.37% of the gross quantity traded
in the scrip of RMIL during the period under scrutiny. 45.
On a cumulative analysis of the facts
mentioned above, it is clear that the modus operandi of Kishan to manipulate
the scrip of RMIL in a concerted manner was effected in the following manner: a) Trading
extensively in the same scrip i.e. RMIL through the same set of brokers i.e.
Sanchay, Haven and BPL and an identified set of clients. b) Involvement in
large scale synchronized trades with the disclosed buy or sell volume being the
same not being reflected on the screens. c) Execution of
trades which led to a reversal of positions at the end of the settlement,
resulting in no actual transfer of beneficial ownership. Squaring off most of
the trades d)
Nexus existing between him and the other counter party clients� and the brokers. 46.
Kishan has thus,
for the said acts, been charged under the penal provisions of Sections 15HA and
15HB of the Act which inter alia provide as follows: Section 15HA Penalty for fraudulent and unfair trade practices 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. Section 15HB Penalty for contraventions where no separate
penalty has been provided Whoever
fails to comply with any provision of this Act, the rules or the regulations
made or directions issued by the Board thereunder for which no separate penalty
has been provided, shall be liable to a penalty which may extend to one crore
rupees. 47.���� Reference in this context may also be made to
the relevant provisions of Regulation 4 of the SEBI (Prohibition of Fraudulent
and Unfair Trade Practices relating to Securities Market) Regulations, 2003
which reads as under: Regulation 4 of
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; (e) any act or omission amounting to manipulation
of the price of a��� security; (n) circular transactions in respect of a security
entered into between intermediaries in order to increase commission to provide
a false appearance of trading in such security or to inflate, depress or cause
fluctuations in the price of such security; 48 .��� In order to establish the
fraudulent nature of trades indulged in by Kishan it would also be relevant to
read the definition of fraud laid down in Regulation 2 (c) of the FUTP
Regulations, 2003 which provides as follows: "2 (c) "fraud" includes any act, expression, omission or
concealment committed whether in a deceitful manner or not by a person or by
any other person with his connivance or by his agent to deal in securities,
whether or not there is any wrongful gain or avoidance of any loss, ���" 49.
�As opposed to the above, upon a reading of
Section 15HB of the Act, it is clear the said provision is a generalized penal
provision and takes into account those acts of an intermediary which have not
been separately dealt with. 50.
In my viewpoint,
the facts of the present case, clearly bring out the element of fraud and
unfair trade practices indulged in by Kishan along with the other entities,
since by way of generating
artificial volumes, all of them created a false impression amongst the general
investors as regards the trading activity in the scrip of RMIL and thus tried
to induce the general public to deal in those securities.� As a
clear cut violation of the provisions of the above cited FUTP Regulations has
been established, the provisions of Section 15HA of the SEBI Act, 1992 would be
attracted. Therefore, for the purpose of considering the imposition of an
appropriate penalty, the provisions of Section 15H of the Act alone ought to be
considered. 51.
However I am
cognizant of the fact that the onus in this activity would lie more upon the
broker, since being� a registered
intermediary, their responsibility to maintain the standards of
integrity, promptitude and fairness required of that of a broker and carry out
their business operations in accordance with the provisions of law would be
larger. 52.
Notwithstanding these facts, people who
indulge in manipulative, fraudulent and deceptive transactions, or abet the
carrying out of such transactions which are fraudulent and deceptive, should be
suitably penalized for the said acts of omissions and commissions. 53.
However certain
factors as enumerated under Section 15J of the Act are required to be taken
into account while adjudging the quantum of penalty and these include the
amount of disproportionate gain or unfair advantage, wherever
quantifiable, made as a result of the said
default, the amount of loss caused to the investors and the repetitive nature
of default. 54.
It is very
difficult in cases of such nature to quantify the disproportionate gains or
unfair advantage enjoyed by an entity. Further manipulation is a serious issue
and it is difficult to arrive at any specific figure to compute the amount of
loss caused to the investing public especially in a large country like ���������
PENALTY 55. ��� On analyzing the material available on record as also the facts
and circumstances of this case including the extent of trades executed by
Kishan, on a judicious exercise of the powers conferred upon me in terms of
Rule 5 of SEBI (Procedure for holding inquiry and Imposing penalties by the
Adjudicating Officer ) Rules, 1995,� I am
of the considered view that for the aforementioned violations as discussed
earlier, it would be appropriate to impose a penalty of Rs. 5,00,000/- (Rupees
Five Lakhs only) on Kishan Agarwal. �56.��� The
penalty amount shall be paid within a period of 45 days from the date of
receipt of this order through a cross demand draft drawn in favour
of �SEBI- Penalties remittable to the Government of India� and payable at
Mumbai which may be sent to Shri P.K. Nagpal, Chief General Manager, Securities
and Exchange Board of India, Mittal Court, B Wing, 224 Nariman Point, Mumbai �
400021. �������� PLACE
: MUMBAI������������������� � G. BABITA RAYUDU ���������
DATE�� : � |
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