O R D E R
UNDER RULE 5 OF THE SEBI (PROCEDURE FOR HOLDING
ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995
READ WITH SECTION 15A OF THE SEBI ACT, 1992
AGAINST
M/s BHUWANIA VINIMAY PRIVATE LIMITED
1. There were reports of alleged market manipulation and irregularities in the trading of the shares of Prime Capital Market Limited, (for brevity’s sake, hereinafter referred to as PCML). On the said basis, the Securities and Exchange Board of India (SEBI) initiated an investigation into the said matter for the period between March 17, 2005 and September 16, 2005 so as to determine in the said process, the possible violation of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 and the SEBI (Stock brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as FUTP Regulations and the Broker Regulations, respectively) by various entities. The scrip of PCML was listed on the Calcutta Stock Exchange (CSE) at the time of investigation. In connection thereof, the trading details of various entities who had transacted in the scrip of PCML were collected and their trading patterns were analysed along with the data and the volumes contributed by them.
2. The preliminary investigation findings, inter alia revealed that the trades of these entities had largely contributed to the price movement and the false appearance of liquidity and volumes in the said scrip. M/s Bhuwania Vinimay Private Limited (for brevity’s sake, hereinafter referred to as Bhuwania) a common client of M/s Sanju Kabra (SK) and M/s Shivam Stock Broking Private Limited (Shivam), and D B & Co.(DBC) all registered with SEBI as a broker and member of CSE, was along with their brokers; alleged to have played a role in raising the price of the scrip of PCML at the CSE, thus facilitating the manipulation in the scrip of PCML. Incidentally the investigation findings also revealed that another member of the CSE i.e. D K Khandelwala (DKK); had traded extensively in the scrip of PCML through their respective clients and that most of them were inter-related and acting in concert.
3. In view of these findings, during the process of investigation, the various brokers and their respective clients were summoned for examination of their books of accounts and other relevant documents including KYC norms as were also asked to produce other related information viz, trading details etc. Bhuwania, being a client of SK, DBC and Shivam was also summoned by the investigating officer to appear before him and to produce the required documents and books of accounts on certain dates. It has been alleged that the said entity failed to comply with the said summons and thereby violated the provisions of Section 11C(6)(c) of the Act and Regulation 8(1) of the FUTP Regulations, thereby making them liable for being proceeded against in terms of Section 15A of the SEBI Act, 1992 (Act).
4. Accordingly adjudicating proceedings were ordered against Bhuwania and in that context I was appointed as the adjudicating officer vide the order of SEBI dated June 16, 2006 to enquire into the alleged acts of omissions and commissions of Bhuwania.
NOTICE/REPLY/PERSONAL HEARING
5. A notice dated December 22, 2006 under Rule 4 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by the Adjudicating Officer) Rules, 1995 was issued vide dated December 22, 2006 to Bhuwania along with relevant documents annexed thereto with an advice to show cause within 14 days of the receipt of the notice, as to why proceedings should not be initiated against them in terms of the said Rules and why the penalty as prescribed therein should not be levied upon them. However the notice sent by registered post acknowledgement due was returned undelivered by the postal authorities with the remark “not known”.
6. Hence the notice was sent to the eastern regional office of SEBI at Kolkota (ERO) vide letter dated January 22, 2007 with a request to forward the same to Bhuwania. Vide letter dated February 13, 2007, ERO informed that the notice had been be served upon Bhuwania through the broker DBC by way of hand delivery and forwarded the acknowledgement dated February 01, 2007.
7. Thereafter a notice of hearing dated March 07, 2007 was issued to Bhuwania with an advice to appear before me on March 27, 2007. The said notice that was again sent through the ERO under cover of letter dated March 07, 2007, was acknowledged by the director of Bhuwania on March 10, 2007. Another notice dated March 12, 2007 was sent to Bhuwania through ERO communicating the revised date of hearing on March 29, 2007 which was again acknowledged by the director of Bhuwania on March 14, 2007. However neither Bhuwania nor their representative appeared on the scheduled date of hearing nor did they send any letter giving reasons for their failure to appear for the hearing. As there has been adequate service of notice on Bhuwania and as they have, despite the same, failed to reply to the notices issued to them or even participate in the present proceedings, the case is proceeded with based on the material available on record.
APPRECIATON OF FACTS:
8. I have carefully examined the investigation report, the documents available on record and other facts and circumstances relevant to this case. While taking into account, the issues highlighted in the report as against Bhuwania, I consider it necessary to recapitulate certain details of the case that gave rise to the present proceedings.
9. The average price of the scrip of 'PCML' at the CSE was Rs.14.00 on March 17, 2005 which then went up to Rs.280.40 on September 15, 2005. That is to say, the scrip of PCML witnessed a price rise of 1903% within a period of 5 months and 28 days. Incidentally the scrip of PCML was also suspended from trading at the exchange for various listing irregularities and the company is listed as one of the many vanishing companies, which fact was brought to the notice of the general public by the Ministry of Company Affairs vide Notice dated October 14, 2005.
10. In view of the same, vide an ad interim ex-parte order dated September 29, 2005 passed under Sections 19 read with 11(1), 11B, 11(4)(a) and 11(4)(b) of the SEBI Act, 1992, (Act), SEBI inter alia suspended trading in the shares of PCML on the CSE till further directions and also directed DBC, SK and Shivam not to buy, sell or deal in securities in any manner either directly or indirectly, pending further directions in this regard.
11. The interim order of SEBI dated September 29, 2005 was confirmed by SEBI in the order dated January 12, 2006. The said order also directed that the suspension on the trading in the shares of PCML on the exchange could be withdrawn, subject to the deletion of the name of PCML from the list of vanishing companies as appeared in the Public Notice dated October 14, 2005 issued by the Ministry of Company Affairs.
12. In this context, I have noted on record a letter dated March 9, 2006 addressed by PCML to the Ministry of Company Affairs, Kolkata and another letter dated January 13, 2006, to the Ministry of Company Affairs, Delhi, inter alia requesting for the deletion of the name of PCML from the list of vanishing companies. However there is no evidence on record to verify whether the name of PCML was deleted from the said list.
13. Be that as it may, the role of four brokers and their respective clients in the rise in the share price of PCML from Rs.14/- to Rs.280.40/- was a matter of suspect, primarily because of the nature of the trades executed by them in tandem and the fact that all of them were collectively found to have contributed to the majority of the volume of PCML at the CSE between March 17, 2005 and September 16, 2005. Accordingly proceedings have been initiated against these brokers. These brokers and their clients are listed below:-
a) DBC and their clients; M/s Bhuwania Vinimay Pvt Ltd (Bhuwania) and Taradevi Ratanlal Bafna;
b) SK and their clients; Bhuwania and Zenser;
c) Shivam and their clients; Bhuwania, Zenser, Pravin Kumar Jain and Fine Trade Merchantile Co Ltd;
d) DKK and their clients; Fine Trade Merchantile Co. Pvt. Ltd, Jain Stock & Share Brokers Ltd, Machindra Nath Multi Trade Pvt. Ltd and Silver Flag trading Co. Ltd.
14. A total of 36, 43,606 shares of PCML (both buy and sale) were traded at the exchange. The major brokers were found to be DBC, SK and Shivam while the trades of DKK were found to be to the extent of 22,100 shares constituting 0.6 % of the total volume of PCML at the CSE during the period of investigation (the volume of others i.e. DBC being 41.67%, Shivam being 21.1% and that of SK being 30% of the total volume of PCML at the CSE). As can be seen from the table below, the transactions executed by these brokers together constituted more than 93% of the trading volume at CSE during the period under investigation:
|
Sl.
No.
|
Name of the broker
|
Volume
Buy/Sell
|
Traded from
Rs.
|
Traded upto
Rs.
|
|
1
|
D K Khandelwal & Co.
|
22,100
|
18.00
|
159.00
|
|
2
|
Sanju Kabra
|
10,82,151
|
73.00
|
280.60
|
|
3
|
Shivam Stock Broking
|
7,68,851
|
199.80
|
280.60
|
|
4
|
D B & Co
|
15,18,402
|
229.00
|
281.00
|
15. The trades of SK, Shivam and DBC (Bhuwania being one of their clients) constituted almost 99% of the total trade at the exchange. Almost all the trades of SK, Shivam and DBC were executed as cross deals. All the other mentioned members acted as the counter party of their own transactions. In most of the cases, the buying and the selling client was the same i.e. Bhuwania and Zenzer. The extent of cross deals in the same terminal of SK, Shivam and DBC in the scrip of PCML between March 17 2005 and September 15, 2005 and that with the other brokers are given below.
|
Name of the broker
|
Cross and Matched transactions
|
|
D B & Co
|
Sanju Kabra
|
Shivam Stock Broking
|
|
Qty
|
%
|
Qty
|
%
|
Qty
|
%
|
|
Sanju Kabra
|
3100
|
0.2
|
316400
|
29.2
|
740250
|
68.4
|
16. The cross deals executed by SK in the scrip of PCML constituted a large portion of his trading in the said scrip such that 3,16,400 shares out of 10,82,151 shares which comprised of 29.2% of the volume of his trades in the scrip of PCML was created in a single terminal i.e. of SK.
17. The details of the cross deals executed by Shivam are given below.
|
Name and address of the broker
|
Cross and Matched transactions
|
|
D B & Co
|
Sanju Kabra
|
Shivam Stock Broking
|
|
Qty
|
%
|
Qty
|
%
|
Qty
|
%
|
|
Shivam Stock Broking Pvt. Ltd.
|
3000
|
0.3
|
740250
|
96.2
|
25600
|
3.3
|
18. As is apparent from the tables above, 7,40,250 shares out of 10,82,151 shares which comprised of 68.4% volume of the trades of SK in the scrip of PCML was is the nature of cross deals with Shivam. Incidentally SK and Shivam shared the same office address i.e. 2, India Exchange Place, 1st Floor, Room No. 2, Kolkatta -700 001. The trades by SK were singly found to have been responsible for raising the price of the scrip of PCML from a lower level of Rs.73/- to Rs.280.60/- Similarly during the period when Shivam was actively trading in the said scrip, the share prices of PCML has gone up from Rs. 199.80 to Rs. 280.60.
19. In the case of DBC, the cross deals constituted 99.5 % of their total volume. The details of these trades are given below.
|
Sl No
|
Name and address of the broker
|
Cross and Matched transactions
|
|
D B & Co
|
Sanju Kabra
|
Shivam Stock Brok-ing (P) Ltd
|
|
Qty
|
%
|
Qty
|
%
|
Qty
|
%
|
|
1
|
D B & Co
7, Lyons Range
1st floor
Kolkata-700 001
|
1511702
|
99.5
|
3100
|
0.2
|
3000
|
0.2
|
20. The common client found to have traded extensively in the scrip of PCML through all the brokers discussed above was Bhuwania. Incidentally Bhuwania and Zenser, a common client of SK and Shivam had purchased 14,10,204 shares i.e. 11,40,454 + 2,69,750 shares respectively out of 16,73,803 shares in PCML during the period of investigation and had purchased 84% of the combined bought position of the three brokers and 77% of the total bought quantity at the exchange.
21. The broker wise trade details of Bhuwania are given below:
|
Sl.
No.
|
Name of the broker
|
Client
Code
|
Quantity
|
% to brokers total volume
|
|
1.
|
DBC
|
B002
|
6,75,802
|
44.5%
|
|
2.
|
Shivam
|
B005
|
3,80,851
|
49.5%
|
|
3.
|
SK
|
B067
|
83,801
|
7.74%
|
|
|
Total
|
|
11,40,454
|
|
22. Considering the facts above stated, it appears that Bhuwania had played a significant role in rigging the price of the scrip of PCML by the placement of such transactions.
23. However due to the lack of information/details about Bhuwania and with a view to determine exactly the extent of their nexus between the various brokers, clients and the management/ employees/promoters of PCML as also their respective roles if any, in the manipulation in the scrip of PCML, the investigating officer of SEBI sent summons to Bhuwania, to reply and to appear before the investigation authority along with the information as called for, the details of which are as follows :-
|
Sl.No.
|
Date of Summons
|
To reply by/to appear on
|
Date of reply / appearance
|
|
1
|
March 31, 2006
|
April 10,2006
|
Sent through speed post but returned undelivered.
|
|
2
|
April 07, 2006
|
April 17, 2006
|
Delivered through DBC and the director of Bhuwania acknowledged the same on April 8, 2006 but did not reply.
|
|
3
|
April 28 , 2006
|
May 09, 2006
|
Received. Bhuwania sought 10 days time for submission
|
|
4
|
May 10,2006
|
May 16, 2006
|
Received and sought time vide letter dated May 16,2006
|
|
5
|
May 17,2006
|
May 24,2006
|
Received by Bhuwania who vide letter dated May 24, 2006 finally submitted information which was unsigned and unauthenticated
|
24. As is apparent from a reading of the table given above, summons were issued to Bhuwania by the investigating authority to appear personally before the investigation authority along with the information as called for on several occasions and upon SEBI persisting, only part of the said information was submitted by the authorized signatory i.e. one of its directors, that too only after the due date.
25. The extent of the information sought for from Bhuwania and the details if any as provided by them is given below: -
i. The address of Bhuwania. The same was provided.
ii. Name and address of the promoter/director/partner, if the entity is not an individual. The names and addresses of two directors i.e. Rajendra Kumar Kothatri and Dhruva Narayan Jha was provided.
iii. PAN No which was provided.
iv. Demat Account Details, which was provided.
v. Details of transactions in the scrip of PCML during the period from January 1, 2005 to September 30, 2005 with details of the date, quantity, rate of shares purchased/sold and the dates, if and when the shares were sold /bought during this period and also the holding statement if the shares were still on hold, which was provided.
vi. Copy of the Contract Notes issued by the broker for the transactions in the scrip for the period January 1, 2005 to September 30, 2005. The information was provided.
vii. Copy of the relevant statement of accounts issued by the broker for the transactions of Bhuwania in the scrip during the period January 1, 2005 to September 30, 2005. The same was provided.
viii. Statement of deliveries made to the broker and received from the broker for the transactions of Bhuwania in the scrip during the period giving details of the date of transaction, quantity of shares bought/sold, dates of delivery i.e. received from and made to the broker and quantity received and delivered. The same was provided.
ix. Details of relevant bank transactions, evidencing the receipts and payments from/to the broker for the transactions of Bhuwania pertaining to the scrip of PCML. The same was provided.
x. Details of all off market transactions, if any, in the scrip during the period from January 1, 2005 to September 30, 2005. It was stated that no off market deals were done.
xi. Details of relationship with the promoters/directors of the company, if any. It was stated that there was no relationship with the promoters/directors of the company.
xii. Details of relationship with the brokers dealing in the scrip, if any - It was stated that there was no relationship with the brokers.
xiii. Reasons for trading in this scrip. Bhuwania stated that there were no specific reasons.
26. I have perused the information submitted by Bhuwania and have noted that this information submitted by them was clearly meant to mislead SEBI and was capable of hampering the process of investigation. This is so since at times incomplete /wrong information was provided which could be made out based on cross checking this information from that received from certain other sources.
27. For instance the details of all the transactions furnished by Bhuwania for all the brokers who traded for them in the scrip of PCML vide their letter dated May 24, 2005 indicate that the transactions from June 27, 2005 to August 26, 2005, were all buy transactions thereby indicating that there were no sell transactions from their side during this period.
28. However, from the material available on record, I do not find this to be the true state of affairs since several cross deals were found to be executed by them with all the three brokers viz. DBC, SK and Shivam. Therefore, the information furnished is not authentic and reliable.
29. Certain other findings, some of which have been analysed from the information submitted by Bhuwania and certain other important facts clearly not provided by Bhuwania are noteworthy of repetition.
a. Bhuwania was a common client of SK, Shivam and DBC while Zenser and Bhuwania were common clients of SK and Shivam. Together both had purchased 14,10,204 shares of PCML i.e. 269750 and 1140454 shares respectively out of 16,73,803 shares purchased in PCML during the period of investigation i.e. 84% of the combined bought position of the three brokers and 77% of the total bought quantity at the exchange.
b. The addresses of SK and Shivam were the same i.e. 2, India Exchange Place, 1st Floor, Room No. 2, Kolkatta -700 001.
c. Bhuwania and Zenser had common directors; Shri Rajendra Kothari and Shri Dhruv Narayan Jha, another common director to both Zenzer and Bhuwania, and also one of the two directors of M/s Jain Stock and Share Brokers Limited, a client of DKK, and also earlier a director of PCML for more that 4 years i.e. from August 12, 2001 to October 15, 2005 whereafter he had resigned from PCML allegedly on personal grounds on December 15, 2005 soon after the interim order was passed by SEBI, suspending trading of the shares of PCML.
d. The Managing Director of PCML; Jagdish Purohit had confirmed in his statement made on May 8, 2006 that Sarbeshwar Parida was the staff of PCML.
e. Sarbeshwar Parida was also the Chief Executive of both Bhuwania and Zenser.
f. Sarbeshwar Parida was also stated to have placed buy and sell orders with SK on behalf of their clients.
30. This apart, I have perused the KYC form of Bhuwania on file (as per the details stated to have been provided by Bhuwania while registering for trading through SK) from which it appears that the date of incorporation of Bhuwania was March 7, 2005 i.e. the time just prior to the commencement of the relevant investigation period. Bhuwania never appeared before the investigating officer of SEBI despite several summons being issued to them nor did any representative appear on their behalf. The summons sent directly to them returned while the ones served through the broker were acknowledged. These facts when read in conjunction with the other related facts on record compel me to wonder as to the credibility of the entity. The address of Bhuwania as provided by them, while enclosing the relevant details with their letter dated May 24, 2006 in response to the summons issued by SEBI, as is provided in their transaction statement of NSDL and the statement of accounts of Centurion Bank and HDFC Bank and the portfolio statement of ABN Amro Bank, is the same as that of PCML i.e., P-27, Princep Street Street, Kolkata – 700 072. The address of Dhruv Jha is also the same as that of PCML and Bhuwania i.e. P-27, Princep Street Street, Kolkata – 700 072. Incidentally PCML and M/s Jain Stock and Share Brokers Limited were also found to share the same office address. It is also noted that in their letter dated May 10, 2005, the address of Bhuwania and Zenser mentioned by PCML were the same i.e. 37/7, Mirapara Road, Bhattanagar, Liluah, Howrah – 711 203. Thus contrary to the contention made on behalf of Bhuwania, there was a well established relationship between all the entities i.e. the brokers, the ‘clients’ and the management of PCML and there was a specific reason for Bhuwania to trade in the scrip of PCML. Coincidentally all the trades executed by Bhuwania along with the others were all found to be in the nature of cross deals and were also synchronized in nature, which contributed to the manipulation of the scrip of PCML.
31. This once again fortifies the finding that both the entities i.e. Bhuwania and Zenser may have been front companies created by the manipulators of the scrip of PCML. This becomes all the more apparent when the summons /notices served directly upon Bhuwania return as “not known” but those served through the broker are easily served upon them or that Bhuwania never appeared either before the investigative authority or even before me during the course of the present proceedings.
32. It would also be relevant to mention here that for the years ended March 31, 2002 and March 31, 2003, PCML incurred a net loss of Rs.4 lakhs and Rs.6 lakhs respectively. However during the year 2004-05, PCML earned a profit of Rs.5.46 lakhs (unaudited) and for the three months period ending June 30, 2005 (unaudited), PCML earned a profit of only Rs.68, 000 and had a negative reserve of Rs.2.81 lakhs. It stands to reason that the financials of PCML were not strong enough to have boosted the share price from Rs.14/- to Rs.280.40/- without sufficient cause, clearly indicating that, but for the trading of Bhuwania along with the other persons acting in concert, such a steep price rise in the said scrip would not have been witnessed.
33. In this context, I have examined the provisions of Section 11C(3) of the Act which read as under:
“The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to or produce such books, or registers, or other documents, or record before him or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers or other documents, or record is relevant or necessary for the purposes of its investigation”.
34. Further 11C(5) of the Act reads as under:
“Any person, directed to make an investigation under sub-section (1), may examine on oath, any manager, managing director, officer and other employee of any intermediary or any person associated with securities market in any manner, in relation to the affairs of his business and may administer an oath accordingly and for that purpose may require any of those persons to appear before it personally”.
35. Further 8(1) of SEBI FUTP Regulation reads as under
1) It shall be the duty of every person in respect of whom an investigation has been ordered under regulation 7-
(a) to produce to the Investigating Authority or any person authorized by him such books, accounts and other documents and record in his custody or control and to furnish such statements and information as the Investigation Authority or the person so authorized by him may reasonably require for the purposes of the investigation;
(b) to appear before the Investigation Authority personally when required to do so by him under regulation 6 or regulation 7 to answer any question which is put to him by the Investigation Authority in pursuance of the powers under the said regulations.
36. Thus every entity connected with an investigation process is obliged legally or morally, to cooperate with the Investigating Authority and furnish the information as sought for by the Investigating Authority. The decision to call for such information and the judgment as to its relevancy is completely the discretion of the investigating authority and is in furtherance of the discharge of its official duties.
37. From a perusal of the Annexure listing the information sought for from Bhuwania by the investigating authority, it is clear that this information was crucial and central to the investigation findings. Moreover the presence of Bhuwania along with the necessary documents was also essential, among other things, to examine the credibility of the entity in question. However, as Bhuwania did not provide the said information accurately, the same thwarted the attempts of SEBI to effectively gather vital evidence for the timely conclusion of the investigation proceedings.
38. Taking into account the sensitivity of the securities market, an early conclusion of investigation is a very important objective. Although there is evidence on record that the said summons were acknowledged by them on their behalf, it is apparent that Bhuwania were not willing to and in fact delayed sending the information sought for. In fact even in the present proceedings, Bhuwania could have availed of the opportunity of being heard in person but they failed to do so which clearly brings out their involvement in the manipulation of the shares of the PCML in the market.
39. Due to the failure on the part of Bhuwania to appear before SEBI or even before me to furnish the correct information as sought for and in the absence of any adequate explanation on their part as regards their non appearance even before me, it can be reasonably concluded that they have failed to comply with a regulatory directive. Such an act on the part of Bhuwania suggests blatant and deliberate non-cooperation clearly warranting severe action and hence they should be penalized in as much as any evasion of the regulatory provisions of the regulator issued in the interests of the investors or non-adherence to the same for any reason whatsoever is bound to affect the interests of such investors as also the sound and smooth functioning of the capital market. If no cognizance were to be taken of the same, and no liability fixed there upon, the entire purpose of incorporating the provisions in the said enactments would become redundant.
40. Hence, Bhuwania is liable for a penalty under Section 15A of the SEBI Act, 1992 for their failure to comply with summons issued by SEBI by failing to furnish the timely and accurate information and by failing to appear in person before the investigating team. Section 15 A of the SEBI Act, 1992 inter alia provides that in case of failure to furnish any information to the Board, the same would invite a liability of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.
41. At the time of levying penalty certain factors are also be taken in to account by the adjudicating officer, as is evident from the provisions of Section 15J of the Act which also find mention in Rule 5(2) of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 i.e. the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; the amount of loss caused to an investor or group of investors as a result of the default and the repetitive nature of the default.
42. These factors mentioned above, are to be relied upon with due discretion that is to be exercised judiciously, depending upon the facts and circumstances of each case as well as after analysing all the relevant material available on record. In the present case, manipulation is a serious issue and fraudulent activities such as these are per se illegal and are bound to affect a lot of parties in a way, not necessarily expressly highlighted at all times. Moreover 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.
43. However in a limited way, there is some record of the extent of gains made in this case by some entities. As per the information provided by PCML, I have noted that Bhuwania had transferred 5,69,050 shares of PCML to various entities on September 20, 2005. During this period, the share price of PCML was around Rs.280/-. Bhuwania has sold these shares for Rs.15,93,34,000./-Therefore the gain made out of these transfers can be estimated to be Rs.1.1 crores (approx). This is because the acquisition price of 5,69,050 shares works out to Rs.14,74,06,372.43 i.e.
Rs.30,16,67,704.60 (total value of the purchase details of Bhuwanai)
11,64,563 (total purchase quantity of Bhuwania in PCML) x 5,69,050 (total shares of PCML transferred to various entities)
= Rs.14,74,06,372.43.
44. From the figures given above and keeping in mind the relationship between Bhuwania and the others as highlighted above, there can be no two opinions on the fact that Bhuwania too made disproportionate gains and enjoyed unfair advantage in the whole scenario to the detriment of thousands of innocent investors. This is because Bhuwania traded in the scrip of PCML in a manipulative manner, so as to create volumes which in turn affected the normal price discovery mechanism of the securities market and gave rise to an appearance of volumes and liquidity in a particular scrip which is an important criterion, apart from price, capable of misleading the investors while making an investment decision. Moreover the nature of offence in this case is repetitive in nature.
PENALTY:
45. Keeping in mind these facts, I am of the view that the imposition of a penalty is warranted and hence in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, in the interest of justice, equity and good conscience, think it is appropriate to levy a penalty of Rs One Crore (Rupees 1,00,00,000/-only ) on M/s Bhuwania Vinimaya Private Limited.
46. 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 Jayanta Jash, Deputy General Manager, Securities and Exchange Board of India, L&T Chambers, 16, Camac Street, Kolkata 700017.
PLACE: MUMBAI G. BABITA RAYUDU
DATE: MAY 30, 2007 ADJUDICATING OFFICER