TaxTMI 
TaxTMI 
2017 (6) TMI 1411
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..... 50/- to Rs. 559.95/- mainly through singular trades. 2. The investigation, inter alia, revealed that entities namely 1) Jayesh Narendra Kesharia, 2) Prakash Todankar, 3) Rajat Share Broking Pvt. Ltd., and 4) Sanyukta Rungta (hereinafter referred to as 'noticee no 1 to 4 respectively and collectively referred to as the noticees) had entered into transactions at higher prices than the last traded price (LTP) with low volumes in a fraudulent and manipulative manner in the scrip of BCSL. 3. SEBI has, therefore, initiated adjudication proceedings against the noticees for the alleged violation of the provisions of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) & (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relation to Securities Market) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations). Appointment of Adjudicating Officer 4. I have been appointed as Adjudicating Officer vide order dated April 2, 2014 under Section 15 I of the Act read with Rule 3 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as 'Rules') to inquire into and adjudge under Section 15....
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....onal hearing was granted to it on December 14, 2015. 10. The Authorized Representatives (ARs) attended the hearing on December 14, 2015 and reiterated the submissions as made earlier vide letter dated August 01, 2014 and also submitted its additional reply vide letter dated January 1, 2016. The authorised representatives attended the another personal hearing on May 26, 2017 and reiterated the submission as made earlier vide letters dated August 1, 2014 and January 1, 2016. 11. Sanyukta Rungta vide letter dated August 4, 2014, acknowledged the receipt of the said SCN and submitted her reply to the SCN. Thereafter, in the interest of natural justice and in order to conduct an inquiry as per Rule 4(3) of the said Rules, an opportunity of personal hearing was granted to her on December 14, 2015. Vide letter dated December 11, 2015, Sanyukta Rungta acknowledged the receipt of the said hearing notice and submitted her additional reply to the SCN. However, she did not attend the personal hearing scheduled on December 14, 2015. Further one more opportunity of personal hearing was granted to her on May 9, 2017. Vide e-mail dated May 8, 2017, she reiterated the submissions already made....
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....r 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; (e) any act or omission amounting to manipulation of the price of a scrip 15. It is noted that the noticees had placed buy orders at higher prices than the LTP and impacted the price of the scrip by contributing significantly to the price rise. Further the seller to these trades have placed the sell order in tandem to the buy order prices with minimum quantity (on most occasions one share) to establish the new high price. It is, therefore, alleged in the SCN that the noticees had violated the provisions of Regulations 3(a), (b), (c), & (d), 4(1), 4(2)(a) & (e) of PFUTP Regulations. Submissions made by the Noticees: 16. Jayesh Narendra Kesharia, (Noticee no. 1) vide his letter dated August 8, 2014 denied all the charges leveled against him in the SCN and inter- alia submitted as under: (i) That during the IP, he had carried out transactions i....
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....d January 7, 2016 denied the allegation leveled against him in the SCN. He submitted that he had purchased/sold shares of BCSL on the following dates through broker M/s Kotak Securities Ltd as follows (1047 shares due to division became 10470 shares): Purchase Sale Profit/Loss Sr Date Qty Rate Amount Date Qty Rate Amount Amount (+-) 1. 13/09/2011 1 357.75 357.75 - 0 - - 2. 28/09/2011 1 441.65 444.65 - - - 3. 29/09/2011 5 450.45 2252.25 - - - 4. 30/09/2011 5 459.45 2297.25 - - - 5. 03/10/2011 40 468.60 18744.00 - - - 6. 04/10/2011 35 477.95 16728.25 - - - 7. 05/10/2011 5 487.50 2437.50 - - - 8. 07/10/2011 300 497.25 149175.00 - - - 9. 10/10/2011 5 507.15 2535.75 - - - 10. 12/10/2011 250 527.55 131887.50 - - - 11. ....
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....te the shares in a role of a speculator it bought the shares by putting every day the upper circuit. 22. The noticee no. 3 vide letter dated January 1, 2016 filed its additional reply and submitted that it regularly dealt with shares and securities from its own proprietary accounts and from own source of income. As per the scrip of BCSL is concerned, the share after revocation of suspension started trading at BSE on 21/07/2011 with opening price of Rs. 50/- and closed at Rs. 2/-: a. BSE allowed the said fluctuations in the name of trade practice and opening trade; b. The rest of trades also as per the market practice and as per the fixation of upper circuits. c. BSE/SEBI surveillance department never cautioned any investor to not to deal with this share. d. BSE allowed the share to rise again from Rs. 2/- to Rs. 560/- 23. Sanyukta Rungta (noticee no. 4), vide letter dated July 30, 2014 denied all the charges leveled against her in the SCN. The noticee no. 4 submitted that she had purchased the scrip BCSL for investment purpose and wanted to buy at prevailing price. But the scrip was very infrequently traded and there were always buyers at u....
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.... Sum of LTP diff No. of Trades Sum of Qty LTP Impact No. of Trades Sum of Qty LTP Impact No. of Trades Sum of Qty No. of Trades Sum of Qty Prakash Todankar 71.4 16 1047 71.4 8 32 0 0 0 8 1015 14.00% Sarita Chandak 62.2 12 551 62.2 11 501 0 0 0 1 50 12.20% Rajat Share Brkg P L 52.1 18 1056 52.2 11 450 ‐0.1 1 35 6 571 10.22% Jayesh N Kesharia 51.13 15 1650 51.13 14 750 0 0 0 1 500 10.03% Rita Jayendra Kothari 46.05 6 59 46.05 6 59 0 0 0 0 0 9.03% Sanyukta Rungta 36.26 23 1450 36.26 19 1050 0 0 0 4 400 7.10% Ankit M Kachhara 25.1 9 450 25.1 9 450 0 0 0 0 0 4.92% Atulbhai B shah 21.75 6 495 21.75 3 342 0 0 0 3 153 4.26% Bimla Devi Hirawat 16.55 3 150 16.55 3 150 0 0 0 0 0 3.25% Krishna M Kumar 13 8 20 13 5 17 0 0 0 3 3 2.55% Top 10 LTP contributors 395.54 11....
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.... no. 1 placed a buy order for 100 shares at 09:00:00 at an order price of Rs. 204.15/- when the LTP at order entry was Rs. 194.45/- (i.e. order level LTP variation of 2% approx). At that time there were no sell orders in the system. From the post event book, I find that the sell order at Rs. 204.15/- was placed by Rohan Dwarkani at 14:12:38 for 50 shares. The buy order of the noticee no. 1 matched with this sell order and the trades got executed resulting in new high price of Rs. 204.15/-, which was the highest price for the day and the only trade of the day. Further the rest of the buy order for 50 shares got deleted at 14:12:38. iii. Further I find from the table above that on July, 28, 2011, the noticee no. 1 placed a buy order for 100 shares at 09:00:00 at an order price of Rs. 214.35/- when the LTP at order entry was Rs. 204.15/- (i.e. order level LTP variation of 2% approx). At that time there were no sell orders in the system. From the post event book, I find that the sell order at Rs. 214.35/- was placed by Swapnil Vishnu Hode at 09:30:16 for 50 shares. The buy order of the noticee no. 1 matched with this sell order and the trades got executed resulting in new high....
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.... 477.95 477.95 NA NA NA NA NA NA i. On Oct 4, 2011, the noticee no. 2 placed a buy order for 1000 shares at 09:02:29 at order price of Rs. 477.95/- when the LTP was Rs. 468.6/- (i.e. order level LTP variation of 1.95%). At that time, there were no sell orders in the system. From the post event book, it is noted that there was only one sell order at Rs. 477.95/- at time 09:36:16 for quantity 5 shares. The buy order of the noticee no. 2 matched with this sell order and the trades got executed resulting in new high price of Rs. 477.95/- which was the highest price of the day. Further out of the remaining shares of 995 shares got matched with sell order placed by Noticee no. 3 at sell order time 11:54:25, at sell order rate Rs. 477.95/- for 30 shares. This sell order matched the buy order of the noticee no. 2 and trade took place. Further the rest of the order quantity of 965 shares was deleted at time 11:54:25. ii. On Oct 5, 2011, the noticee no. 2 placed a buy order for 750 shares at 09:00:00 at an order price of Rs. 487.5/- when the LTP at order entry was Rs. 477.95/- (i.e. order level LTP variation of 1.95%). At that time there were no sell ....
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....1000091000007 Add 09:00:01 500 324.2 317.85 324.2 1 09.31.20 1 324.2 324.2 to 324.2 21000091000007 Del 09:31:20 499 324.2 324.1 NA NA NA NA NA 5‐Sep‐11 17000080000011 Add 09:00:00 500 317.85 311.65 317.85 1 09.17.38 1 317.85 317.85 to 317.85 17000080000011 Del 09:17:38 499 317.85 317.85 NA NA NA NA NA i. On Sep 7, 2011, the noticee no. 3 through trading member Shilpa Stock Broker Pvt. Ltd. placed a buy order for 1055 shares at 09:00:00 at an order price of Rs. 330.65/- when the LTP at order entry was Rs. 324.2/- (i.e. order level LTP variation of 1.95% approx). At that time there were no sell orders in the system. From the post event (i.e. when the order was placed) order book position, it is noted that there was one sell order at Rs. 330.65/- which was placed by noticee no. 1 at 09:32:39 for 1 share. The buy order of noticee no. 3 matched with this sell order and the trade got executed resulting in new high price of 330.65, which was the highest price for the day and the only trade of ....
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.... ii. Further I find that on Jul 18, 2011, the noticee no. 4 placed a buy order for 50 shares at 09:00:00 at an order price of Rs. 145.15/- when the LTP at order entry was Rs. 138.25/- (i.e. order level LTP variation of 2% approx). At that time there were no sell orders in the system. From the post event book, I note that the sell order at Rs. 145.15/- was placed by Ruhi Jhunhunwala at 12:04:33 for 50 shares. The buy order of the noticee no. 4 matched with this sell order and the trades got executed resulting in new high price of Rs. 145.15/-, which was the highest price for the day and the only trade of the day. iii. Further I note that on Jul 19, 2011, the noticee no. 4 placed a buy order for 50 shares at 09:00:00 at an order price of Rs. 152.4/- when the LTP at order entry was Rs. 145.15/- (i.e. order level LTP variation of 2% approx). At that time there were no sell orders in the system. From the post event book, it is noted that sell order at Rs. 152.4/- was placed by Prahalad at 14:44:52 for 50 shares. The buy order matched with this sell order and the trades got executed resulting in new high price of Rs. 152.4/-, which was the highest price for the day and the ....
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....e on a daily basis was observed to be only few shares on all days with singular trades. Thus, it is clear that there was very little trading interest in the scrip. In my opinion, it is normal in the securities market to sell the scrip when a higher price is offered . But by purchasing shares at higher price than the LTP in all of their trades, the noticees had generated the wrong impression about the liquidity of the scrip in the market. It must not be forgotten that every trade establishes the price of the scrip and the trading of noticees at higher than LTP resulted in the price of the scrip going up and were done with a view to set the price or benchmark the price at a desired level and thereby influencing the innocent / gullible investors. Therefore, it can be concluded that the price of the scrip was manipulated by the noticees with low trading volume in the scrip. 37. Here, it is important to refer to the observations made by the Hon ble Securities Appellate Tribunal (SAT) in its order dated March 21, 2014 in Saumil Bhavnagari Vs. SEBI which are as under: "... but by purchasing shares at the higher price in LTP in most of the trades, the notice had given a wrong i....
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....at 09:00 am. Such trades would lead to an artificial rise in the price of the scrip and the same would misguide the general public. The modus operandi adopted by the noticees is detrimental to the smooth functioning of the securities market, and hence, deserve to be viewed seriously. 40. In view of above facts and circumstances of the case, it is established that the price of the scrip increased because of placing of the orders by the said noticees in a manipulative manner. Therefore, I conclude that the trades done by the noticees are in violation of Regulations 3(a), (b), (c), & (d), 4(1), 4(2)(a) & (e) of PFUTP Regulations., thus, liable for monetary penalties as prescribed under Section 15HA of the Act (as existed during the period of violation) which reads as under: Penalty for fraudulent and unfair trade practices 15HA. 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. 41. Here, it is important to refer to the observation of the Hon'ble Supreme Court of India in the matte....