2012 (12) TMI 1145

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....ns of Section 19 read with Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (the Act) and Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (FUTP regulations). The Board detected synchronized trades while investigating the dealings in the scips of Temptation Foods Limited, Bang Overseas Limited (Bang), Confidence Petroleum India Ltd. (Confidence), Cals Refineries Limited (Cals) and Shree Precoated Steels Limited. It was found that a group of connected clients indulged in synchronized trades in the scrips mentioned above contributing to artificial volumes therein. The appellant was found to be connected with the client group which indulged in inflation of volumes in the scrip. A show cause notice was issued to the appellant on July 26, 2011 alleging that the appellant was involved in creating artificial volumes in the scrips of Bang, Confidence and Cals through synchronized / reversal / self trades and so there was violation of the provisions of Regulation 3 and 4 of the FUTP regulations. The appellant replied to the show cause notice denying al....

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....tion of the trades as a whole which would have revealed the fact that the appellant's volume of transactions was too insignificant to be matched. There was no financial connection among the parties and the whole time member has not brought on record the necessary factors to prove close connection of the appellant with the entities in question to establish a case of meeting of minds. It is also contended by the appellant that the allegation of self trade cannot be sustained since it related to only shifting of position from one broker to another which has been explained by way of an additional affidavit during the hearing of the appeal. A reference was made to the case of Lalkar Securities P. Ltd. in which an order has been passed by the whole time member (WTM/RKA/ID-4/47/2012 dated October 9, 2012) in which the appellant was let off with a warning and it is argued that the appellant's case is also similar in nature. 4. The learned senior counsel appearing for the Board submitted that trades have taken place in the impugned scrips through a group of connected entities like Maruti Group and Maniar Group through reversal, self trades and off market transactions and the trades of th....

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....ade logs which show the transactions of the appellant in a synchronized manner. The appellant has consistently indulged herself in synchronized and reversal trades on various dates. On March 10, 2008, 5000 shares got matched in its transaction with the counter party client. It is true that the order quantity was 92,596. But similar matching has taken place repeatedly on several dates during 2008. This cannot be brushed aside as casual or coincidental. The contention of the appellant that there is a vast difference between the quantity order and the quantity matched cannot be taken as a ground to prove the innocence of the appellant. In market manipulation perfect synchronization and exact matching of trades may not be available. In the present case matching / reversal, though of different quantities, has taken place consistently over a period of time. This has happened because the transactions were put through a central broker Shri C.J. Dalal, appellant's husband. We cannot agree with the submission that the appellant's trades were insignificant compared to the market volume. It is not a case of a few shares getting matched on one or two occasions. It is a process of continuous, pe....

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....sactions are obviously fictitious and meant only to create false volumes on the trading screen of the exchange". The appellant has executed self trades in the shares of Bang and Confidence. There has been no convincing explanation for the self trades in the reply to the show cause notice. However, during the hearing of the appeal, an affidavit was filed stating that the self trades were for shifting of position from one broker account to another broker account. Again we cannot accept this contention. The appellant has not clarified as to why this has been put through in the form of purchase and sale instead of through proper book entries. In the affidavit, while dealing with self trades of 28,968 shares the appellant would give credit for the so-called transfer entries to the impugned shares except 500 shares. This means that the self trades in respect of 500 shares remain admitted.  8. It is not necessary to consider the issue of extra benefits accruing from volume manipulation since it is evident that the appellant has indulged herself in manipulative activity which is prohibited in FUTP regulations.  9. In view of the discussion above, we uphold the finding arriv....