TaxTMI 
TaxTMI 
2013 (10) TMI 1532
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....IL' for short) during February 5, 2001 to May 2, 2001 ('investigation period' for short). During the period of investigation, there was consistent fall in price of the scrip of SIL accompanied by low delivery. Price of SIL scrip had fallen from Rs. 342/- as on February 5, 2001 to a low of Rs. 60.75 as on April 30, 2001 before finally closing at Rs. 73.75 on May 2, 2001. SEBI had also conducted investigation in the scrip of SIL, for the period from February 2000 to August 2000. During that period of investigation it was noticed that price of the scrip had increased from Rs. 10/- in February 2000 to Rs. 696/- in August 2000 and appropriate action was initiated against various persons/entities involved in dealing in scrip therein, including appellant. 4. Based on investigation report for the period February 5, 2001 to May 2, 2001, enquiry officer appointed by SEBI issued notice on June 18, 2008 calling upon appellant to show cause as to why trades executed by appellant on behalf of its client Mr. Heerachand Salecha in the scrip of SIL which were synchronized circular trades and executed between a set group, should not be held to be violative of Regulation 4(a) and (d) o....
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....gh appellant have been found to be violative of SEBI Act and regulations made thereunder. b. Alleged violations pertain to trades executed in 2001 and impugned order is passed after 12 years contrary to Regulation 28 (2) of Intermediaries Regulations. Relying on decisions of this Tribunal in Appeal No.143 of 2011 decided on November 28, 2011 Aditi Dalal v. SEBI [2012] 25 taxmann.com 48 (Sat - Mum.)) and Appeal no.114 of 2012 (HB Stockholdings Ltd. v. SEBI) decided on 27/8/2013 it is contended that impugned order which suffers from inordinate delay is liable to be quashed and set aside or in the alternative, appellant be let off by warning appellant to be careful in future. c. Where trades executed by a client through a broker are found to be manipulative, broker can be made liable only if there existed relationship more than that of broker-client relationship. In the present case no such relationship is shown to have been existing between appellant (broker) and Heerachand Salecha (client) and hence prohibition imposed against appellant by impugned order is unjustified. d. Neither there is any material on record to suggest that there was any connection bet....
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....e price of the scrip had stayed in the range of Rs. 342 to Rs. 296 (opening price). Thereafter, the trading of these entities in the scrip reduced drastically, the volume of trades in the scrip became negligible and the price of the scrip also started declining. The 'last traded price' (LTP) analysis for the entire period shows that the price of the scrip varied in the range from -14% to 11.54%. 4. During the investigation period, three different groups were found trading in the scrip of SIL in a circular manner. Out of these, the group consisting of eight (8) brokers/ subbrokers (namely N.C. Jain, Opulant Stock Broking, Bharti Thakkar India Sec. Pvt. Limited, ISJ Securities/ Vintel Securities, Sripal Jain, Joindre Capital Service/ Alwin Securities and Reneissance Securities Limited/ Mellennium Securities) and their clients including Angel Broking Limited (hereinafter referred to as the 'noticee') (identified as 'Group 1') were found trading amongst themselves in circular manner, which led to the creation of artificial volumes in the market. The total volume generated by the said group by way of circular trades was 3,42,800 shares (gross) i.e. about....
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....:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 ....
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.... 0:00:01 06/02/01 Angel Broking Heerachand 13:01:20 376 700 NC Jain Own 13:01:19 376 700 13:01:21 100 376 0:00:01 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 ....
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....mber of trades got matched regularly and during most instances, within seconds from each other. The occurrence of such synchronized deals in a circular manner persistently cannot be said to be a co-incidence as the shares were being rotated intra-day within a closed group and there was no change in the beneficial ownership of the shares. Such pattern creates a false impression of active trading in the scrip. c. I observe from the available records that the majority of the trades of the noticee were matched within the group with Opulant Stock Broking (4 day), Bharti Thakkar India Sec. Pvt. Limited (5 days), ISJ Securities (8 days), N.C. Jain (4 days), Sripal Jain (3 days), Joindre Capital Services (4 days) and Reneissance Securities Limited (3 days). I have seen the pattern of circular trading that was being followed by the noticee and the other brokers in the group, while trading in the scrip of SIL. A few instances of such trading pattern are being reproduced below on sample basis: Table - C Date Buy Sell Qty. Broker Client Broker Client 05/02/2001 N.C. Jain Own Reneissance Sec. Abhayraj Shukla 700 ....
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.... (12) days when it traded in the scrip of SIL and contributed to 7.12% of the market traded quantity (gross). I note that the group had repeatedly bought and sold the shares amongst themselves through circular trades in a pattern of A to B to C to D to E to F to A with slight changes in the quantity circulated in each cycle." 11. As rightly contended by counsel for respondent, since large number of trades enumerated above got matched regularly and in most cases within seconds from each other, inference drawn in the impugned order is that occurrence of such synchronized deals in a circular manner persistently cannot be said to be a matter of coincidence. It is a matter of record that shares of SIL were being rotated intra-day within a closed group and in such a case though delivery based trades have taken place, in fact such trades do not involve change in the beneficial ownership of the shares. From table C set out herein above as also the chart at page 128 of the paper book, it is evident that on 5/2/2001, in the first round of circular trade, 700 shares of SIL were sold by Reneissance Securities (broker) within the group including appellant herein and at the end of circular tr....
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....no merit because, documents relied upon by SEBI in the show cause notice have been, in fact, supplied to the appellant. Appellant has not established as to how non furnishing entire investigation report has caused prejudice to the appellant. Similarly, grievance that appellant had no opportunity to examine its own client Heerachand Salecha is also without any merit, because it is an admitted fact that appellant had traded on behalf of Heerachand Salecha. If facts on record establish that appellant had indulged in synchronized circular trades over a period of time, then, contrary evidence of Heerachand Salecha if any, would not affect inference drawn against appellant on basis of facts on record. It is not the case of appellant that examination/cross examination of Heerachand Salecha would have altered facts on record. Therefore, failure to examine/cross examine Heerachand Salecha cannot be said to have vitiated the impugned order. 14. Grievance of appellant that impugned order suffers from delay no doubt deserves consideration. In respect of trades executed by appellant on behalf of his client in 2001, SEBI had initiated proceedings in October 2002 but final order has been passe....