TaxTMI 
TaxTMI 
2014 (12) TMI 1419
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....s.74.95. During the period July 24, 2013 to March 24, 2014 ("Patch II"), the price of the scrip continuously fell from Rs.74.10 to Rs.4.89. An illustration of price/volume movement in the scrip of Radford during the examination period is given below: 3. The preliminary examination revealed that there was a pattern in which the shares of Radford were being traded. The modus operandi adopted by the traders in the scrip is as under : i. Firstly, shares were allotted on preferential basis in Pre-Patch I to entities connected/related directly or indirectly to Radford. ii. Then, just prior to the expiry of lock-in of shares issued on preferential basis, Radford announced a stock-split to make a passage for preferential allottees to exit on expiry of the lock-in since the stock split would reduce the per share price and increase liquidity. iii. After the expiry of lock-in, it was noted that after the stock split, the preferential allottees sold the shares to entities connected/related, directly or indirectly, to Radford Group/Suspected Entities, thereby raking in huge profits. iv. It was also noted that the said price movement was not backed by funda....
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....ice rise in the scrip as discussed above was not supported by fundamentals of Radford or any other external factor. The price in the scrip increased prior to the expiry of the lock-in period on the shares held by the aforesaid allottees pursuant to preferential allotment and split. After the expiry of the lock-in period, the price and volume in the scrip increased substantially. Considering such pattern, the trading in the scrip in three patches as mentioned above was analyzed. The analysis of the trading during the patches was carried out with a focus on the following:- • The trading frequency; • The volume generated; • Contribution to price rise; • Buying behavior as observed from Last Traded Price ("LTP") data. 8. On analysis of trading activity in the Scrip, it was observed that certain entities was primarily involved in pushing the price up during the lock in period, which is Pre-Patch I, by contributing to positive LTP through first trades with negligible volumes. Another group of entities were acting as buyers in Patch-I in order to provide exit to preferential allottees and in the process creating artificial volume whic....
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....; Total 91 75.21 204.3 246.7 82.81 11. It was also observed that most of these aforementioned entities had also traded and were instrumental in contributing to the price rise of other stocks. It was further observed that Taran Kumar Rungta, Prem Lata Nahar and Rajat Share Broking Pvt. Ltd are related /connected to Shilpa Stock Broker Pvt. Ltd and Bharat Bagri Bagri is related to BCB Brokerage Pvt. Ltd. through whom they have traded. Ms. Prem Lata Nahar is the Mother of Rakesh Nahar who is the owner/director of Shilpa Stock Broker Pvt. Ltd. and Bharat Bagri is the Promoter/ director of BCB Brokerage Pvt. Ltd and share common address with BCB Brokerage Pvt. Ltd. 12. The selection of scrips for trading, the trading pattern and connectivity with brokers cast doubt on the intent of these entities while trading in the securities market. The sheer number of scrips with such dubious price-rise track record in which the said entities and their connected brokers are involved also cast doubts on their conduct in the securities market. 13. On analysis of trading activity during Patch I, certain related/connected entities ("Radford Group") to Radfo....
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.... Buy in Patch I 1 2 3 4 5 6 7=6/4*100 Radford Group 1 Amrusha Mercantile Private Limited AALCA0340D 3317965 5.69 2281121 68.75 2 Spice Merchants Private Limited AAPCS7492G 3287475 5.63 2422355 73.68 3 Shelter Sales Agency Private Limited Shelter Sales Agency Private Limited Shelter Sales Agency Private Limited AASCS1797F 3122146 5.35 2312395 74.06 4 Udbal Mercantile Private Limited AABCU2648C 2767601 4.74 1588720 57.40 5 Devakantha Trading Private Limited AADCD7044B 2475491 4.24 1705206 68.88 6 Winall Vinimay Private Limited Ltd AAACW8004B 2144989 3.68 1764206 82.25 7 Pine Animation Limited AAECM0267A 1858368 3.18 1081586 58.20 8 Limestone Properties Private Limited AACCL0133G 1764054 3.02 1357040 76.93 9 Runicha Merchants Private Limited AAECR0580M 1584913 2.72 1325164 83.61 10 Dhanleela Investments & Trading Company Limited AAACR1770P 1464988 2.51 680586 46.46 11 Apex Commotrade Private Limited Ltd AAJCA4459K 1223735 2.10 1033114 ....
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....erchant Pvt Ltd AADCS5411K 5000 0.01 5000 100.00 39 Scope Vyapar Pvt. Ltd. AAICS6023N 0 0.01 11000 0.00 Total (I) 33946590 58.18 25392663 74.80 Suspected Entities 1 Jayant Security & Financeltd AAACJ4848G 3430961 5.88 1535303 44.75 2 Trimurthi Finvest Ltd AAACT6383N 1051222 1.80 329978 31.39 3 Purvi Finvest Limited AABCP6564C 1077750 1.85 129253 11.99 4 East West Finvest India Limited AAACE6834D 1123353 1.92 224803 20.01 5 East West Finvest India Limited AADCE1236G 221250 0.38 72200 32.63 Total (II) 6904536 11.83 2291537 33.19 Grand Total (I+II) 40851126 70.01 27684200 67.77 16. It is observed that 46 allottees made a collective profit of Rs.313.01 Crore on their total investment of Rs.12.99 crore, a substantial return of approximately 2309 % on their investment in a period of 18 months (including the lock in period). It is evident from the above analysis of trading in Patch I that the entities of Radford Group & Suspected Entities pr....
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....nna Kumar AHEPG0 025A 200000 1000000 3 0 0 1000000 1000000 76.72 73720095 0 14 G S Anith Kumar ADPPK9 874N 200000 1000000 3 0 0 1000000 1000000 77.8 74800649 0 15 Harikisha n S Virmani AAJPV47 54H 100000 500000 3 0 0 500000 500000 82.99 39994974 0 16 Hitesh Jain AABPJ28 35R 100000 500000 3 0 0 500000 500000 82.64 39819781 0 17 Hukamsi ngh Bhawarsi nghji Rajpurohi t AABPR9 949J 100000 500000 3 0 0 500000 500000 81.16 39080552 0 18 Jyoti Anil Trevadia ABWPT8 000C 100000 500000 3 0 0 500000 500000 81.39 39195997 0 19 Jyotsna Jitendra Desai AHPPD4 223L 200000 1000000 3 0 9001 990999 990999 70.65 67041531 0 20 Kalpita Suresh Luniya AAAPL9 611J 100000 500000 3 0 0 500000 500000 58.83 27916282 0 21 Kamal Indur Punwani AFFPP52 07G 100000 500000 3 0 0 500000 500000 79.31 38156782 0 22 Mayuri Darshan Bhanusha li AKJPB85 72F 100000 500000 ....
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.... 0 1250000 239604 78.75 18149101 1010 396 42 Tanvi Bhavik Trevadia AFAPT5 888A 100000 500000 3 0 0 500000 500000 80.07 38535769 0 43 Tarun Aggarwal AOQPA9 034E 150000 750000 3 0 0 750000 750000 79 57001648 0 44 Ujwala Namdev Mane AAEPM5 924H 100000 500000 3 0 0 500000 500000 46.16 21577500 0 45 Uma Songal ANRPS7 987A 225000 1125000 3 0 0 1125000 1125000 78.6 85053164 0 46 Yogesh Popatlal Thakkar AAPPT1 825P 200000 1000000 3 0 0 1000000 1000000 80.15 77154413 0 Total 8660000 43300000 959001 959001 43300000 41599539 Rs.313,01,56,898 1765 336 17. The transactions wherein the entities of Radford Group & Suspected Entities bought most of the shares sold by the allottees cannot be just a coincidence particularly when sellers by virtue of being allotees and prima facie connected / have nexus with Radford and its promoters/ directors and buyers are the entities connected with Radford and its promoters /directors....
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.... on preferential basis at a premium, pumping the share price artificially and then dumping the price so that the same cycle could be repeated, demonstrates the mala fide of the Radford Group & Suspected Entities . Also the mechanism is being presumably used to deceive the authorities by laundering black money and raking in tax-free profits. 21. It was noted that the price movement of the shares are negligible Post examination period till the date of this order. 22. From the above examination and factors as described in Annexure B, I note that the allottees, Radford and Radford Group & Suspected Entities are connected to each other. In this regard, I note that the Hon'ble SAT has, in many cases such as Classic Credit Ltd. vs. SEBI (SAT Appeal no. 68/2003, Order dated December 8, 2006), Classic Credit Ltd. vs. SEBI (SAT Appeal no. 76/ 2003, Order dated January 9, 2007) and Veronica Financial Services Ltd. vs. SEBI (SAT Order dated August 24, 2012), held that connection/relations can be established on the basis of factors including the common addresses, common directors/ shareholders, etc. 23. It is pertinent to mention that the key to the scheme of operations employed by....
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....ion. 26. Since prior to the trading in its scrip during the Examination Period, Radford did not have any significant financial standing in the securities market, in my view, the only way it could have increased its share value is by way of market manipulation. In this case, it is noted that the traded volume and price of the scrip increased substantially only after Radford Group & Suspected Entities and allottees started trading in the scrip. The average volume increased by 5,05,066 % (5050 times) during the Patch I, i.e., from 98 shares per day to 4,95,063 shares per day and the price increased by 74.8% during the same period, i.e., from Rs.49.2 to Rs.86. Radford Group & Suspected Entities were trading in the scrip above the LTP and their trades created artificial volumes and manipulated the price of the scrip during the examination period. It is further noted that on the days when Radford Group & Suspected Entities were not trading, the trading volumes in the scrip were very low and the substantial increase in traded volumes as observed in this case was mainly due to their trading. I further note that Radford Group & Suspected Entities and allottees traded amongst themselves a....
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.... of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder;" PFUTP REGULATIONS, 2003 "Prohibition of certain dealings in securities 3. No person shall directly or indirectly- (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities whi....
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....e into the probable violations of the securities laws, the matter may also be referred to other law enforcement agencies such as Income Tax Department, Enforcement Directorate and Financial Intelligence Unit for necessary action at their end as may be deemed appropriate by them. 30. SEBI strives to safeguard the interests of a genuine investor in the Indian securities market. The acts of artificially increasing the price of scrip mislead investors and the fundamental tenets of market integrity get violated with impunity due for such acts. Under the facts and circumstances of this case, I prima facie find that the acts and omissions of Radford Group & Suspected Entities and allottees as described above is inimical to the interests of participants in the securities market. Therefore, allowing the entities that are prima facie found to be involved in such fraudulent, unfair and manipulative transactions to continue to operate in the market would shake the confidence of the investors in the securities market. 31. Considering these facts and the indulgence of a listed company in such a fraudulent scheme, plan, device and artifice as prima facie found in this case, I am convinced t....
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.... MayuriDarshanBhanushali AKJPB8572F 34 MohanMittal APFPM0496Q 35 MohitAggarwal ADSPA9301K 36 MukeshMittal AJGPM2125D 37 NareshNemchandShah ACRPS0182J 38 NeerajSingal ANRPS7986B 39 NishitAgarwalBenTrust AABTN3350K 40 PinkyAgarwal ACGPA7438L 41 PratikAgarwalBenTrust AABTP7516K 42 PraveenKumarAgarwal ACSPA4725A 43 PraveenKumarAgarwalHuf AAIHP6229C 44 RajendraMangilalJain ACPPJ9853R 45 RenuAggarwal AAEPA1694C 46 RenuMittal AGMPM1488Q 47 RituSingal ABHPS3711M 48 SantoshAggarwal ABAPA4548E 49 ShaileshMangilalJain AAAPJ6765F 50 ShilpaAggarwal AEXPA1230M 51 SmtUjwalaNamdevMane AAEPM5924H 52 SurendraBJiwrajka AACPJ4316L 53 SushantInvestments ACAFS8650G 54 TanviBhavikTrevadia AFAPT5888A 55 TarunAggarwal AOQPA9034E 56 UmaSingal ANRPS7987A 57 YogeshPopatlalThakkar AAPPT1825P Radford Group 58 Amrit Sales Promotion Pvt Limited AACCA3220D 59 Amrusha Mercantile Private Ltd AALCA0340D 60 Anjali Suppliers Private Limited AAJCA1784D 61 Apex Commotr....