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    ORDER

     

    (UNDER THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY THE ADJUDICATING OFFICER) RULES,� 1995)

     

    AGAINST

     

    KISHAN AGARWAL

     

     

    1. On the basis of stock market alerts issued by the National Stock Exchange (NSE) the Securities and Exchange Board of India( SEBI) had taken up the investigation of the alleged market manipulation and irregularities in the trading of the shares of Radaan Mediaworks India Limited (for brevity�s sake, hereinafter� referred to as RMIL) for the period between March 3 2003 and July 7, 2003, as also the possible violation of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating the Securities Market) Regulations, 1995 (hereinafter referred to as FUTP Regulations) at the relevant time and corresponding provisions of Regulations 4(1), (2) (a), (b), (e) and (n) of the FUTP Regulations, 2003 and the SEBI (Stock brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as the Broker Regulations)� by various entities. RMIL was listed on the National Stock Exchange (NSE) at the time of investigation.� The trading details of various entities that had traded in the scrip of RMIL were collected and their trading patterns analysed along with the data and the volumes contributed by these entities, whereafter it was inter alia observed that the rise in the price of the scrip of RMIL was accompanied with increased trading volume, primarily on account of the trades executed by these entities.

     

    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 December 27, 2004 ordered adjudicating proceedings against Kishan to enquire into his alleged acts of omissions and commissions while transacting in the scrip of RMIL.

     

    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 September 02, 2005 in terms of Rule 4(3) of the Rules was sent to Kishan advising him to appear for the hearing scheduled on September 12, 2005. As the� notice was returned undelivered with the remark �left�, another notice of hearing dated September 12, 2005 was sent to Kishan advising him to appear for the hearing scheduled on September 28, 2005. As the notice was returned with the remark �party left�, a notice dated October 7, 2005 advising Kishan to appear on October 28, 2005 was affixed on the door of the last known address of Kishan in the presence of two witnesses. However since Kishan failed to respond to the said notice, a notice dated October 11, 2005 advising Kishan to appear before me on October 28, 2005 was sent to him through Sanchay. In the said notice, Kishan was advised to note that in case he failed to attend the proceedings, the matter would be proceeded with based on the evidence available on record. On the scheduled date, Kishan appeared for the hearing and inter alia stated as follows :-

    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 November 24, 2005 and a copy of the notice sent to him earlier was provided to him at his request.

     

    6.���� Subsequently on November 24, 2005 Kishan appeared and stated that he had traded in many other scrips apart from the scrip of RMIL but could not recall the names of the said scrips. He further stated that all the said trades though executed in his name were in fact placed on the advice of his cousin; Anil Agarwal although the consideration for the said purchases were made by him. He denied having a demat account and pleaded ignorance of the account into which the purchased scrips were placed. Kishan also provided details of his new address. However Kishan did not submit any documents to substantiate the contentions made by him. �

     

    ������������ 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 South India and currently produces television serials in three languages i.e. Tamil, Telugu and Kannada. It was incorporated as a private limited company on 15 Sept, 1999 and then converted into a public limited company with effect from June 6, 2002.

     

    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. April 03, 2003 for acceptance of allotment of money on the equity shares. The Gross Quantity Traded in the scrip on the EQ Segment during the period under scrutiny was 1, 30, 81,318 shares. The Gross Quantity Traded in the scrip on the E1 Segment during the period under scrutiny had 33, 89,284 shares. Lowest price of Rs. 33.00 was observed on March 31, 2003 with a traded quantity of 26,933 shares while the highest price of Rs.119.85 with a volume of 143701 shares was observed on July 7, 2003. The period of investigation with regard to the dealings of Kishan in the scrip of RMIL ranged from March 3, 2003 to July 7, 2003. During this period, the scrip price of RMIL initially fell to Rs. 33.00 from�� Rs. 62.05 on March 03, 2003 and then rose to� Rs. 119.85 on July 07, 2003.

     

    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:-

    • The major trading members during the period under scrutiny were Sanchay (accounting for 17.89%), BPL (accounting for 17 %) ISE Securities (accounting for 12.09%) Haven (accounting for 11.74%) and Grishma (accounting for 10.86% of the market gross during the investigation period). These trading members mainly traded on behalf of one or two clients each and were involved in a series of deals found to be structured in nature.
    • Rajesh Jhaveri was the largest client dealing in the scrip during the period under scrutiny, accounting for 10.85% of the gross quantity traded. He had traded through the trading member; Grishma and was the only client trading through the trading member in the said scrip. Of the above mentioned qty, 10.65% of the market gross quantity traded by the said client was done through structured deals and executed between the trading members ISE Securities and Services Limited (client; Nrupesh Shah) trading through Sub-broker, Anil Mistry.
    • Shrawan (trading through Haven) and Kishan Agarwal along with A K Agarwal (trading through Sanchay) had executed a series of structured deals among themselves. Shrawan has also executed structured deals with Ashok and Chirag, who were trading through BPL. In turn, Ashok and Chirag had executed structured deals with Kishan Agarwal and A K Agarwal. Through these structured deals, amongst themselves and with other clients, this group of clients traded for a total of 17,99,392 shares representing 13.75% of the total quantity traded during the entire period under scrutiny.
    • No major cross deals were observed during the period under scrutiny

     

    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 August 30, 2004

     

    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 July 22, 2004.

    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


    (C)���� Statement of Shrawan Kumar Goyal dated
    July 22, 2004.

     

    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 April 3, 2003 to July 7, 2003.

    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 June 25,�� 2004

    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 June 16, 2003 with Sanchay. The client code of Kishan was K031. The other client of Sanchay; Anil was also introduced to them by Shrawan and had entered into an agreement dated July 30, 2002 with them.� Both Kishan and Anil are cousins and were known to Sanchay for about 5 years. Shravan was the friend of these cousins, both of who had stopped trading in the stock market after September 2003 i.e. almost just after the period of investigation. The client code of Anil was A026.� It would thus appear that all these clients who had traded extensively in the scrip of RMIL were introduced to Sanchay by a common person; Shrawan Kumar Goyal, who was the proprietor of SSI; the sub broker of Sanchay Fincom, member BSE and an associate of Sanchay. SSI had also acted as a client to Sanchay on the NSE which fact was also confirmed by them during their statement recording before SEBI on June 25, 2004 and in the proceedings before me. Shrawan Kumar Goel had traded as a client in the scrip of RMIL through the member; Haven and the counterparty in all these trades were Anil and Kishan trading through Sanchay during the same period.

     

    14.��� Kishan started trading with Sanchay from 12-June-2003 i.e. prior to entering into an agreement with them which was on June-16-2003, while the date of commencement of trading by Anil was March 25, 2003. I have examined the details of the trades done by these clients during the period of investigation and noted that although the said clients had traded in other scrips, both Kishan and Anil started trading through Sanchay specifically in the scrip of RMIL and later on traded in other scrips as well. While Kishan had traded for 16 other scrips during the period of investigation, Anil had traded for 8 other scrips during the said period.���

     

    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 May 8, 2003. As per the statement of Ashok, it was Chirag who used to manage his portfolio right from the start of his trading in the stock market and keep all the accounts of trading. Further, Ashok had stopped trading in the market since July 2003 (i.e. just close to the period of price manipulation).I have seen the relevant client registration forms and member client agreements. The introducer of Ashok is Chirag and the client registration form is dated May 8, 2003.

     

    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 August 10, 2005 issued to Kishan in the present proceedings and is hereinafter referred to as Table A.�

     

    �20. �� �The summary of such structured deals is as revealed in the table below:

    TABLE B

     

    SUMMARY OF STRUCTURED DEALS THROUGH�

    SANCHAY FINVEST LTD AND HAVEN FINANCIALS PVT LTD

    SN

    No. of Structured Deals

    Average price

    Trd. Qty

    % to MKT Gross for the SN

    % to MKT gross for the Period

    2003090

    4

    59.86

    11300

    19.75

    0.09

    2003091

    2

    62.75

    4500

    0.42

    0.03

    2003092

    6

    70.43

    15099

    7.64

    0.12

    2003093

    8

    77.94

    22520

    8.54

    0.17

    2003094

    3

    79.63

    8200

    4.34

    0.06

    2003095

    4

    82.79

    11100

    7.88

    0.08

    2003096

    6

    85.73

    13840

    10.21

    0.11

    2003097

    11

    85.86

    26775

    14.27

    0.20

    2003098

    3

    86.58

    5250

    1.16

    0.04

    2003099

    3

    84.70

    7300

    5.41

    0.06

    2003101

    6

    90.18

    9100

    4.17

    0.07

    2003102

    3

    86.73

    5375

    1.78

    0.04

    2003103

    2

    87.70

    5775

    4.51

    0.04

    2003104

    3

    85.20

    5875

    2.60

    0.04

    2003105

    3

    83.37

    7700

    3.32

    0.06

    2003106

    4

    80.99

    10000

    6.94

    0.08

    2003108

    5

    77.72

    10118

    4.08

    0.08

    2003109

    6

    79.78

    8300

    4.09

    0.06

    2003110

    7

    87.10

    13750

    5.19

    0.11

    2003111

    10

    83.47

    21132

    7.57

    0.16

    2003112

    9

    82.31

    18278

    6.74

    0.14

    2003113

    11

    80.42

    19050

    7.12

    0.15

    2003114

    20

    79.89

    28610

    8.92

    0.22

    2003115

    16

    80.08

    26850

    10.01

    0.21

    2003116

    14

    80.10

    19550

    7.02

    0.15

    2003117

    7

    80.17

    15150

    6.90

    0.12

    2003118

    13

    78.62

    24450

    9.71

    0.19

    2003119

    9

    79.16

    15800

    6.02

    0.12

    2003120

    12

    78.06

    17500

    7.06

    0.13

    2003121

    5

    76.60

    11200

    5.34

    0.09

    2003122

    14

    81.56

    21619

    4.23

    0.17

    2003123

    10

    81.27

    17600

    4.62

    0.13

    2003124

    17

    78.70

    35040

    13.26

    0.27

    2003125

    11

    79.67

    19600

    7.14

    0.15

    2003126

    10

    84.66

    18696

    3.82

    0.14

    2003127

    14

    95.01

    24079

    7.50

    0.18

    2003128

    18

    114.75

    28875

    8.03

    0.22

    2003129

    12

    122.92

    9080

    3.16

    0.07

     

     

    21.���� As per the data pointed above, the said series of synchronised trades began from May 13, 2003 i.e. . settlement no 2003090 and ended on July 7, 2003 i.e. settlement no. 2003129 with the average price range being Rs.59.86 to Rs.122.92/-. The total quantity so traded was 5,94,036 shares..

     

    ����� 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 April 26, 2003 and ended on June 26, 2003.

     

    23.���� The summary of such structured deals is as revealed in the table below:

     

    TABLE D

    �������������

    SUMMARY OF STRUCTURED DEALS BETWEEN

    �SANCHAY FINVEST LTD AND BONANZA PORTFOLIO LTD

    SN

    No. of Structured Deals

    Average price

    Trd. Qty

    % to MKT Gross for the SN

    % to MKT gross for the Period

    2003093

    3

    77.90

    7575

    2.87

    0.06

    2003096

    3

    84.25

    7700

    5.68

    0.06

    2003097

    1

    86.50

    1125

    0.60

    0.01

    2003098

    2

    85.95

    6150

    1.35

    0.05

    2003099

    1

    84.75

    2500

    1.85

    0.02

    2003101

    1

    90.85

    1150

    0.53

    0.01

    2003102

    2

    88.63

    6650

    2.20

    0.05

    2003104

    1

    84.25

    2450

    1.09

    0.02

    2003108

    2

    79.48

    3850

    1.55

    0.03

    2003110

    2

    87.58

    4500

    1.70

    0.03

    2003111

    2

    83.45

    4143

    1.48

    0.03

    2003112

    2

    82.40

    3775

    1.39

    0.03

    2003113

    3

    80.43

    5750

    2.15

    0.04

    2003114

    5

    80.27

    8150

    2.54

    0.06

    2003115

    3

    79.98

    5300

    1.98

    0.04

    2003116

    5

    80.03

    7400

    2.66

    0.06

    2003117

    2

    80.30

    3850

    1.75

    0.03

    2003118

    6

    78.65

    10300

    4.09

    0.08

    2003119

    3

    79.15

    5950

    2.27

    0.05

    2003120

    2

    77.98

    2500

    1.01

    0.02

    2003121

    2

    78.53

    3250

    1.55

    0.02

    2003122

    2

    81.03

    3750

    0.73

    0.03

    2003093

    2

    76.70

    5500

    2.09

    0.04

    2003097

    3

    86.82

    9250

    4.93

    0.07

    2003102

    1

    89.10

    1875

    0.62

    0.01

    2003103

    2

    86.88

    5275

    4.12

    0.04

    2003108

    2

    76.08

    3400

    1.37

    0.03

    2003112

    3

    82.17

    7000

    2.58

    0.05

    2003113

    1

    80.60

    2000

    0.75

    0.02

    2003114

    5

    80.41

    6200

    1.93

    0.05

    2003115

    2

    80.53

    2500

    0.93

    0.02

    2003116

    1

    80.50

    1500

    0.54

    0.01

    2003117

    3

    79.88

    6700

    3.05

    0.05

    2003118

    6

    78.90

    12200

    4.84

    0.09

    2003119

    2

    78.38

    4975

    1.90

    0.04

    2003120

    4

    77.86

    5400

    2.18

    0.04

    2003121

    1

    77.90

    1750

    0.83

    0.01

    2003122

    1

    81.55

    2250

    0.44

    0.02

    2003096

    2

    87.58

    3375

    2.49

    0.03

    2003097

    1

    86.10

    500

    0.27

    0.00

    2003102

    1

    88.10

    2500

    0.83

    0.02

    2003105

    1

    84.50

    3000

    1.30

    0.02

    2003115

    2

    79.65

    3750

    1.40

    0.03

    2003118

    1

    78.50

    1700

    0.68

    0.01

    2003120

    2

    78.58

    3750

    1.51

    0.03

    2003093

    2

    77.58

    5530

    2.10

    0.04

    2003097

    1

    84.95

    2500

    1.33

    0.02

    2003101

    1

    89.25

    700

    0.32

    0.01

    2003103

    1

    87.90

    2250

    1.76

    0.02

    2003104

    1

    86.10

    1275

    0.57

    0.01

    2003106

    1

    80.85

    2625

    1.82

    0.02

    2003109

    1

    79.40

    1750

    0.86

    0.01

    2003110

    1

    86.45

    1750

    0.66

    0.01

    2003111

    1

    84.75

    1950

    0.70

    0.01

    2003112

    1

    82.25

    1700

    0.63

    0.01

    2003113

    4

    80.28

    7950

    2.97

    0.06

    2003114

    4

    80.55

    7000

    2.18

    0.05

    2003115

    5

    80.21

    6650

    2.48

    0.05

    2003116

    1

    80.00

    1150

    0.41

    0.01

    2003117

    2

    80.33

    3550

    1.62

    0.03

    2003118

    1

    78.35

    1000

    0.40

    0.01

    2003119

    1

    79.65

    1500

    0.57

    0.01

    2003120

    1

    78.10

    2150

    0.87

    0.02

    2003121

    1

    74.60

    600

    0.29

    0.00

    2003122

    2

    82.65

    2800

    0.55

    0.02

    2003097

    1

    85.90

    2250

    1.20

    0.02

    2003104

    1

    86.75

    1400

    0.62

    0.01

    2003110

    1

    89.45

    1050

    0.40

    0.01

    2003116

    1

    79.75

    775

    0.28

    0.01

    2003117

    2

    80.10

    4250

    1.93

    0.03

    2003122

    1

    80.10

    1650

    0.32

    0.01

    2003094

    1

    79.85

    3500

    1.85

    0.03

    2003101

    2

    90.20

    3000

    1.37

    0.02

    2003109

    1

    79.75

    1250

    0.62

    0.01

    2003115

    2

    79.50

    4500

    1.68

    0.03

    2003116

    2

    80.33

    3475

    1.25

    0.03

    2003122

    1

    81.75

    1500

    0.29

    0.01

    2003093

    2

    76.95

    5075

    1.92

    0.04

    2003097

    1

    84.90

    2500

    1.33

    0.02

    2003098

    1

    87.45

    2750

    0.61

    0.02

    2003106

    1

    81.60

    2700

    1.87

    0.02

    2003108

    2

    77.55

    4150

    1.67

    0.03

    2003109

    4

    79.95

    5225

    2.58

    0.04

    2003111

    1

    83.50

    2500

    0.90

    0.02

    2003112

    4

    82.36

    8000

    2.95

    0.06

    2003115

    1

    80.55

    1500

    0.56

    0.01

    2003118

    1

    78.05

    2150

    0.85

    0.02

    2003120

    1

    78.20

    1650

    0.67

    0.01

    2003121

    2

    75.48

    4650

    2.22

    0.04

    2003122

    1

    80.00

    100

    0.02

    0.00

    2003103

    1

    86.25

    2300

    1.80

    0.02

    2003114

    1

    80.05

    1250

    0.39

    0.01

    2003093

    1

    75.65

    2720

    1.03

    0.02

    2003097

    1

    86.95

    2000

    1.07

    0.02

    2003110

    1

    89.35

    1500

    0.57

    0.01

    2003114

    1

    81.60

    2000

    0.62

    0.02

    2003119

    1

    79.75

    1725

    0.66

    0.01

    2003093

    1

    78.30

    3000

    1.14

    0.02

    2003095

    1

    83.85

    2250

    1.60

    0.02

    2003097

    1

    86.65

    2750

    1.47

    0.02

    2003099

    1

    84.75

    900

    0.67

    0.01

    2003102

    1

    87.75

    2600

    0.86

    0.02

    2003104

    1

    86.85

    2000

    0.89

    0.02

    2003108

    1

    79.25

    2000

    0.81

    0.02

    2003109

    1

    79.35

    2150

    1.06

    0.02

    2003110

    1

    85.90

    1750

    0.66

    0.01

    2003115

    1

    80.50

    2250

    0.84

    0.02

    2003118

    1

    76.90

    3150

    1.25

    0.02

    2003119

    1

    79.75

    2400

    0.91

    0.02

    2003095

    1

    83.15

    3250

    2.31

    0.02

    2003096

    1

    84.25

    3000

    2.21

    0.02

    2003110

    1

    86.25

    2950

    1.11

    0.02

    2003114

    1

    80.10

    1500

    0.47

    0.01

    2003109

    1

    79.35

    1350

    0.67

    0.01

    2003098

    1

    86.45

    2000

    0.44

    0.02

    2003096

    1

    87.65

    2625

    1.94

    0.02

    2003103

    1

    88.10

    3000

    2.34

    0.02

    2003106

    1

    80.65

    1425

    0.99

    0.01

    2003105

    1

    81.75

    550

    0.24

    0.00

    2003101

    1

    89.75

    1450

    0.66

    0.01

    2003110

    1

    85.75

    150

    0.06

    0.00

    2003098

    1

    85.85

    1150

    0.25

    0.01

    2003102

    1

    86.25

    2500

    0.83

    0.02

    2003091

    1

    63.60

    500

    0.05

    0.00

    2003103

    1

    87.15

    2000

    1.56

    0.02

    2003105

    1

    81.75

    2475

    1.07

    0.02

    2003095

    1

    82.05

    1850

    1.31

    0.01

    2003105

    1

    83.70

    2425

    1.05

    0.02

    2003114

    1

    74.80

    2250

    0.70

    0.02

    2003118

    1

    77.30

    200

    0.08

    0.00

    2003104

    1

    85.10

    4200

    1.86

    0.03

    2003080

    1

    60.90

    2912

    0.54

    0.02

    2003112

    1

    82.50

    1950

    0.72

    0.01

    2003082

    1

    59.30

    2750

    2.80

    0.02

    2003092

    1

    70.75

    2500

    1.27

    0.02

    2003080

    1

    60.75

    2000

    0.37

    0.02

    2003092

    1

    70.85

    2650

    1.34

    0.02

    2003080

    1

    61.60

    3100

    0.57

    0.02

    2003081

    1

    61.50

    1800

    2.20

    0.01

    2003083

    1

    59.25

    3000

    5.00

    0.02

    2003111

    1

    84.90

    2650

    0.95

    0.02

    2003113

    1

    81.95

    2500

    0.93

    0.02

    2003110

    1

    88.55

    1500

    0.57

    0.01

    2003081

    1

    61.00

    774

    0.95

    0.01

    2003092

    1

    70.90

    2140

    1.08

    0.02

    2003081

    1

    61.85

    2500

    3.06

    0.02

    2003083

    1

    59.30

    3000

    5.00

    0.02

    2003092

    2

    70.70

    3200

    1.62

    0.02

    2003110

    1

    87.75

    2897

    1.09

    0.02

    2003080

    1

    61.75

    1475

    0.27

    0.01

    2003083

    1

    59.40

    4250

    7.08

    0.03

    2003082

    4

    59.49

    4421

    4.50

    0.03

    2003083

    1

    59.30

    3750

    6.25

    0.03

    2003082

    1

    59.00

    2500

    2.54

    0.02

    2003113

    1

    82.90

    2750

    1.03

    0.02

    2003083

    1

    59.15

    2850

    4.75

    0.02

    2003080

    1

    60.65

    3200

    0.59

    0.02

    2003081

    1

    60.80

    2500

    3.06

    0.02

    2003082

    1

    59.50

    3200

    3.26

    0.02

    2003113

    1

    82.55

    2410

    0.90

    0.02

    2003081

    1

    61.80

    3000

    3.67

    0.02

    2003080

    1

    62.05

    3200

    0.59

    0.02

    2003083

    1

    58.50

    1970

    3.28

    0.02

    2003112

    1

    82.00

    2500

    0.92

    0.02

    2003080

    2

    61.65

    5800

    1.07

    0.04

    2003082

    1

    59.70

    2500

    2.54

    0.02

    2003080

    1

    62.30

    2500

    0.46

    0.02

    2003081

    1

    61.50

    2450

    3.00

    0.02

    2003092

    1

    70.95

    2750

    1.39

    0.02

    2003082

    1

    59.85

    3200

    3.26

    0.02

    2003080

    1

    62.60

    3200

    0.59

    0.02

    2003081

    1

    62.05

    2000

    2.45

    0.02

    2003113

    1

    81.75

    2500

    0.93

    0.02

    2003082

    2

    59.33

    5650

    5.75

    0.04

    2003080

    1

    60.70

    2600

    0.48

    0.02

    2003092

    1

    70.10

    2700

    1.37

    0.02

    2003113

    1

    80.50

    2600

    0.97

    0.02

    2003080

    1

    62.30

    350

    0.06

    0.00

    2003081

    2

    62.13

    4720

    5.78

    0.04

    2003117

    1

    79.65

    2250

    1.02

    0.02

    2003082

    1

    58.75

    1300

    1.32

    0.01

    2003112

    2

    82.63

    4500

    1.66

    0.03

    2003080

    1

    60.80

    2900

    0.53

    0.02

    2003081

    1

    61.15

    2476

    3.03

    0.02

     

    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 February 27, 2003 i.e. a Thursday although the trading in the said scrip actually commenced from March 3, 2003 i.e. for the first two days, the trading did not take place. The said scrip was listed in the EQ and E1 series.

     

    40.             Upon perusal of the historical scrip wise price volume data of the scrip of RMIL from February 2, 2003 to July 7, 2003 in the EQ segment, I have noted the following facts.

    41.� �� The trading in the EQ series commenced on March 3, 2003 on which date, the total traded quantity was 3258 shares. These shares continued to be traded merely in thousands till the last week of March. Thereafter there was a steady rise such that by the end of March, the total traded quantity was around 27,000 shares of RMIL. In April, the largest total quantity traded was 2,71,368 which was on April 28, 2003. From the details of the synchronized trades as discussed earlier, it is gathered that the synchronized trades in huge volumes were executed by Sanchay and BPL from April 28, 2003 onwards.

    42. ���  During May, the largest traded quantity was recorded on May 14, 2003 being 5,32,621 shares. Coincidentally Sanchay along with Haven started executing large scale synchronized trades from May 13, 2003 while BPL with Haven started executing large scale synchronized trades from May 14, 2003 onwards amongst themselves. Grishma and Anil Mistry were found to have entered into the synchronized dealings from May 27, 2003 onwards.

    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 July 7, 2003.

    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 India. Accordingly the investigation report also does not dwell on the extent of specific gains made by Kishan or the losses suffered by the investors. Suffice to state that keeping in mind the practices indulged in by them, gains per se were made by them in that Kishan certainly traded in the scrip of RMIL, in a manner meant to create volumes. It cannot be denied that the creation of a trading activity gives rise to an appearance of volumes and liquidity in particular scrip which is an important criterion, apart from price, capable of misleading the investors while making an investment decision. In fact, liquidity/volumes in particular scrip raise the issue of �demand� in the securities market.� The greater the liquidity, the higher is the investors� attraction towards investing in that scrip.� It would not be wrong to assume that any one could be carried away by the unusual fluctuations in the volumes and be induced into investing in the said scrip. Besides, this kind of activity seriously affects the normal price discovery mechanism of the securities market. Considering their continuous effort in this aspect, it can be said that the nature of default was repetitive as the synchronized trades were carried out over a period of two months.

     

    ��������� 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�� : JUNE 09, 2006 �� ������ ��ADJUDICATING OFFICER

     

    �



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