adjudication order in respect of mr. prashant kamble

8/20/2019 Adjudication Order in respect of Mr. Prashant Kamble.

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Adjudication order in respect of Mr. PrashantKamble Page 1 of 29

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO.AK/AO-56/2015]

___________________________________________________________________________

UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5

OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER)

RULES, 1995

In respect of

Mr. Prashant Kamble(PAN: AYYPK6664J)

___________________________________________________________________________

FACTS OF THE CASE

1.

Securities and Exchange Board of India (hereinafter referred to as 'SEBI') conducted an investigation

with respect to the trading activities of Mr. PrashantKamble (hereinafter referred to as ‘Noticee') for

the period from August 16, 2008 to June 30, 2010 (hereinafter referred to as the 'investigation

period’). It was alleged that the Noticee indulged in 189 self-trades (i.e. same buy client as well as

the sale client for a given trade resulting in no change of beneficial ownership) while trading in 21

scrips on Bombay Stock Exchange Ltd (hereinafter referred to as ‘BSE’)during the investigation

period and created artificial volume in the scrip, leading to false and misleading appearance of

trading of the scrip in the securities market.

2.

It was therefore alleged that the Noticee violated the provisions of Regulations 3(a), (b), (c) and (d),

4(1), 4(2)(a) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to

Securities Market) Regulations, 2003 (hereinafter referred to as the 'PFUTP Regulations'). The

alleged violations, if established, make the Noticee liable for monetary penalty under Section 15HA

of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’).

APPOINTMENT OF ADJUDICATING OFFICER

3.

The undersigned was appointed as the Adjudicating Officer vide order datedDecember 05, 2013

under Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer)

Rules, 1995 (hereinafter referred to as 'Rules') read with sub-section (2) of Section 15 I of SEBI Act to


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inquire into and adjudge under Section 15HA of the SEBI Act, the alleged violations of the PFUTP

Regulations.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

4.

Show Cause Notice (hereinafter referred to as ‘SCN’) No. EAD-6/AK/RSL/35215/2014 dated

December 10, 2014was issued to Noticee under Rule 4 of the SEBIRules, 1995to show cause as to

why an inquiry should not be held and penalty be not imposed under section 15HA of SEBI Act on

the Noticee for the alleged violations as specified in the SCN.

5.

In the interest of natural justice and in terms of rule 4(3) of the SEBI Rules, the Noticee was granted

an opportunity of personal hearing on February 13, 2015 vide hearing notice dated January 22,

2015. Since no submission was received from the Noticee to the SCN dated December 10, 2014, the

Noticee was given time till February 06, 2015 to make the submissions. The hearing notice was

affixed at the address of the Noticee at : A/201, Vakratund Apartment, LaxmibenChedda Marg,

Nallasopara West, Thane – 401203, however, the Noticee failed to appear before the undersigned

on the date of the hearing and further no submissions to the SCN was received from the Noticee.

6.

Another opportunity of personal hearing was granted to the Noticee on March 12, 2015 vide

hearing notice dated February 24, 2015(inadvertently dated January 24, 2015). The Noticee was yet

again advised to make the submission to the SCN dated December 10, 2014 before the date of the

personal hearing. The said hearing notice was also affixed at the address of the Noticee as stated

above.

7.

Vide email dated March 04, 2015, Mr. Joby Mathew, Advocate, Authorized Representative

(hereinafter referred to as 'AR') on behalf of the Noticeeinter aliasubmitted that the Noticee did not

have any papers relating to the matter and since he was out of Mumbai,requested for another date

for personal hearing. The AR requested that a copy of the SCN and hearing notices issued to the

Noticee may be sent to the AR. The AR also sought time to file reply to the SCN.


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8.

Vide email dated March 04, 2015, the AR was provided the following documents:

8.1

Scanned copy of the SCN dated December 10, 2014 with Annexure I and II along with the SCN

delivery acknowledgment card. (The AR was informed that the CD containing Annexure III may

be collected from the Head office, SEBI);

8.2

Scanned copy of the hearing Notice dated January 22, 2015 along with the Affixture report;

8.3

Scanned copy of the hearing notice dated February 24, 2015 (inadvertently dated January 24,

2015) along with the Affixture report.

9.

It was further brought to the notice of the AR that the SCN and hearing notices had been duly

delivered/affixed at the Noticee’s address as observed from the acknowledgement report and

affixture report. The AR's request for time to file reply to the SCN was acceded to, and AR was

advised vide the aforesaid email to make the submissions by March 20, 2015. Further, the personalhearing scheduled for March 16, 2015 was adjourned and the Noticee was granted another date for

hearing in the matter on March 24, 2015.

10.

The Noticee vide letter dated March 23, 2015 inter aliasubmitted the following while denying the

allegations made against him:

i.

that he is a trader in securities and more specifically into jobbing activities to earn his livelihood.

That he has been buying and selling equity shares and future and options since several years. That

he does not usually takes delivery, but, squares off his open positions;

ii.

that the objective of the trader / jobber is to trade in maximum number of shares (usually with a

thin spread) intraday.

iii.

That a trader does not intend to take delivery of the shares and hence he is permitted by the stock

brokers to take positions based on margins provided by him. Consequently, the stock broker will

square off the open positions by the end of the day irrespective of the profit or loss and hence a

trader will square off his unexecuted / pending orders before the day end;

iv.

That in illiquid scrip, it is quite possible that while squaring off the positions to avoid margin calls

or loss or delivery, the orders of a trader may match his own previous pending orders. It is

erroneous to allege that such trades were malafide, fraudulent and intended to create an artificial

volume;

v.

That trading takes place on the anonymous and automated trading systems of the stock

exchanges where the identity of the counter party broker and client is not disclosed. Orders are


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placed by traders through the systems of the stock broker / member of the stock exchange. Some

of these systems display pending orders, but, some do not. Thus, when the Noticee places an

order, he is not sure whether his earlier orders were executed or not. In such a situation, it is

possible for his orders to match with his own earlier order; but, the same cannot be considered as

malafide;

vi.

That he has never been found guilty of fraud or any malafide action by SEBI or any other person

except in a proceedings before SEBI under Section 11 and 11B of the SEBI Act, based on the very

same trades mentioned in the notice. In this regard, it has been stated that the Whole Time

Member(hereinafter referred to as ‘WTM’ ) of SEBI had passed directions against him in the very

same facts and based on the very same allegations contained in the notice and that the said

directions are in Order dated November 11, 2014. Aggrieved by the said order, he has preferred

an appeal before the Hon’ble Securities Appellate Tribunal (SAT). That since the allegations and findings are under challenge in the said appeal, and further since they are the same as in the

extant SCN, the present proceedings should be kept on hold till the appeal filed with SAT is

disposed of;

vii.

With reference to para 1 of the SCN, the Noticeehas stated that he has not been provided with a

copy of complete investigation report, despite repeated requests for the same in the proceedings

under section 11 and 11B of SEBI Act, 1992. Further that though SEBI vide its letter dated March

7, 2014 has very categorically stated that the said investigation report is not a valid evidence

replied upon by them, it is trite law that an accused person has to be provided with all the

documents and records that were used to arrive at the allegations and findings against him. The

Noticee has again requested for a copy of investigation report;

viii.

With reference to para 2 of the SCN, the Noticeehas denied that he had entered into any self-

trades knowingly or withmalafide intention. Further, that on several days, the number of such

trades and the quantity of shares involved therein are insignificant, thus indicating that the trades

were nothing but coincidence;

ix.

With reference to para 3 and 4 of the SCN, the Noticeehas submitted that the proportion of self-

trades to the market trades is insignificant on most days, only on 4 out of 88 days has it been

significant, that the alleged self-trades were executed on 88 days (out of total of 678 days in the

investigation period i.e. less than 13%), that the impact of his said alleged self-trades on the

market volume or the price of the scrip has not been carried out, further that the proportion of

self-trades have been compared to his buy and sell order and not to market volumes;


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x.

With reference to paragraph 5 of the SCN, the Noticeehas inter alia stated that the comparatively

lower number of shares in the self-trades (as compared to the order size) clearly shows that the

trades were not deliberately matched, self-trades occurred at around 3 pm and there was no

reason for any person to create volume in a scrip at 3 pm viz. close to day end;

xi.

That artificial volume allegedly created by the Noticees trades were insignificant, when compared

to the total volume of the scrip traded in the market on that day;

xii.

That since the trades were of 2008 to 2010, the Noticee was unable to recollect the correct

sequence of placing orders or their execution or the reason for the same, however, it is quite

possible that the self-trades occurred because the dealer of the stock broker may have placed the

buy order without realizing the pending sell order or vice versa;

xiii.

That the Noticeemade a loss of Rs.53.09 lacs during the investigation period while trading in 37

scrips. Further that his trades on National Stock Exchange of India Ltd. (hereinafter referred to as‘ NSE ’ ) (during the period August 16, 2009 to September 2009) were not very significant and that

he made a loss of Rs.8,520 while trading in 16 scrips. Also that the percentage of his trades in 8

scrips to the market volume is less than 1% and that he made a loss of Rs.30,747/-;

xiv.

That matching of his own buy and sell orders were only a coincidence and was unknown to him at

the time of trades were executed;

xv.

That In absence of complete trade and order log of the BSE and NSE, it is erroneous to conclude

that his trades were deliberately matched with each other;

xvi.

That the investigation period stretches over almost two years, furthermore, he has done

thousands of trades in 89 scrips during the said period. However, only 189 trades in 21 scrips are

alleged as self-trades. This clearly shows that the said alleged self-trades are nothing, but

coincidence and on account of the automatic and anonymous order matching system of BSE and

NSE, hence, the allegation that the Noticee executed self-trades to provide false and misleading

appearance of trading is baseless, erroneous and false;

xvii.

With reference to para 7 to 9 of the SCN, the Noticeehas inter alia reiterated and denied that he

deliberately and knowingly executed self-trades or that he created artificial volumes meant to

distort market equilibrium and has stated that the trades were in the nature of jobbing or day to

day trading wherein delivery is avoided to extent possible. The Noticee has stated that such trades

are recognized, legal and permitted by BSE and NSE, therefore, it is erroneous to draw a

presumption that his trades were not intended to result in change of beneficial ownership merely

because his orders matched against each other and / or because no delivery was taken by him;


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xviii.

That there is no evidence of any disproportionate gain or unfair advantage and there is no

documentary evidence of any loss suffered by any investor or group of investors due to the

alleged self trades.

11.

Mr. Joby Mathew and Ms. Pretti Bhardwaj, Authorised Representatives (hereinafter referred to as

‘ARs’) appeared on behalf of the Noticeeon March 24, 2015 and inter aliareiterated the submissions

made vide letter dated March 23, 2015. As regards the submission made by the Noticee vide letter

dated March 23, 2015 regarding not providing a copy of the complete investigation report,it was

inter aliabrought to the notice of the ARs that the relevant portion of the Investigation Report

against which the allegations have been framed against the Noticee have already been provided in

the SCN.

12.

The ARs were further also informed that the soft copy of the integrated trade and order log and the

order log of the 21 scrips on the dates where the Noticee was alleged to have executed self trades

was provided to the Noticee as Annexure III along with the SCN and that the same was delivered at

the address of the Noticee. Copy of the said Annexure III was once again provided to the ARs in a CD

at the time of the hearing. The ARs sought to make further submission based on the data provided

in the CD by April 10, 2015.

13.

As regards the submissions made vide letter dated March 23, 2015 that the Noticee had made a loss

of Rs. 53.09 lacs during the investigation period while trading in 37 scrips, it was pointed out to the

ARs that in absence of any analysis supporting the said submission, it was not clear as to loss

pertained to which 37 scripsand also as to how the said loss was arrived at.

14.

The ARs submitted that there was no past non-compliance by the Noticee with respect to SEBI Act

and Regulations framed thereunder and no action has been taken by SEBI in the past against the

Noticee, except Order by WTM of SEBI dated November 11, 2014 in the same matter. The

ARsfurther stated that in case the Noticee intends to make an application for settlementproceedings, the copy of the application for settlement would be filed by April 10, 2015 and the

copy thereof would be submitted along with the written submission by April 10, 2015.


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15.

Since no submissions were received from the ARs in the matter tillApril 20, 2015, the ARs were

advised to make the submission by April 21, 2015. Vide letter April 21, 2015, the ARs inter aliamade

the following submissions on behalf of the Noticee:

15.1

That due to reasons beyond control, including difficulty in obtaining records from the stock

brokers,the Noticee was unable to submit his additional written submission by April 10,

2015;

15.2

That amongst the alleged ‘ self-trades’ set out in the SCN and the annexures thereto, there

were several instances which were transfer of positions from one stock broker to another. As

a trader, the Noticee would be given exposure limits by stock brokers, usually, for a period of

5 days. At the end of said tenure,the Noticee was required to either square off his positions

or to take delivery. In the instances set out in the SCN, the Noticee did not wish to take

delivery, since he did not have sufficient funds to do so; but he did not wish to square off toobecause he would have incurred a loss. Therefore, the Noticee sought exposure limits from

other brokers who granted him the same. In order to transfer the positions from the existing

stock brokers to a new one, the Noticee placed counterparty orders (to his existing positions)

through the new stock brokers and thus transferred the positions. It was stated that the

Noticee required 15 days time to obtain corroborating documents and records from his stock

brokers to substantiate his submission;

15.3

With regard to loss of Rs.53.09 crore, it was stated that the same is recorded in the Annexure

to the show cause notice dated January 10,2014 issued by SEBI under Sections 11 and 11B of

the SEBI Act;

15.4

that the Noticee was not filing an application for settlement;

15.5

that the Noticee be given a further time of 15 days to collect, obtain and submit

corroborating documents and records from his stock brokers to substantiate his submissions

and another opportunity of hearing to clarify the matter.

16.

In view of the same, vide email dated April 21, 2015, the Noticee was given time till May 05, 2015 to

make his submissions and another opportunity of personal hearingon May 12, 2015. The ARs of the

Noticee vide email dated April 21, 2015 sought adjournment of the personal hearing to May 26,

2015 and the same was acceded to vide email of the same date.


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17.

During the personal hearing on May 26, 2015 the ARs, Mr. Joby Mathew and Mr. Shantibhushan

Nirmal appeared on behalf of the Noticee and reiterated the submissions / claims made vide letter

dated April 21, 2015. The ARs during the hearing also admitted that the Noticee knowingly traded in

a manner that would cause self-trades in order to transfer his positions from the existing stock

broker to new one. The ARs further claimed that the Noticee was given exposure limits by stock

brokers usually for a period of five days and that at the end of the tenure; the Noticee was required

to square off his position or take delivery. In the instances set out in the SCN, the ARs claimed that

the Noticee did not want to take delivery, since he did not have sufficient funds to do so. Also, the

Noticee did not wish to square off, because he would have incurred loss. Therefore, the ARs claimed

that the Noticee transferred his positions from existing stock broker to new one by placing counter

party orders. It was brought to the notice of the ARs at the hearing that the claim made through

written submissions dated April 21, 2015 and at the hearing was not supported by any documentaryproof.The ARs thereafter confirmed that all submissions in the matter had been made.

CONSIDERATION OF ISSUES

18.

I have carefully perused the written submissions wherever submitted by the Noticee, the

submissions put forth by the ARs on behalf of the Noticee during the hearing and the documents

available on record. The allegation against the Noticee is that the Noticee entered into 189 self-

trades in 21 scrips during the investigation period, therebythe Noticee created artificial volume in

the scrip, leading to false and misleading appearance of trading in the underlying scrips in the

securities market, thereby violating Regulation 3 (a), (b), (c) and (d), 4 (1), 4 (2) (a) and (g) of the

PFUTP Regulations.

19.

Before moving forward, it will be appropriate to refer to the relevant provisions ofthe SEBI PFUTP

Regulations, which reads as under:

PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO THE SECURITIES

MARKET

3. Prohibition of certain dealings in securities

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;


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(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 which are listed or

proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or

the rules and the regulations made there under.

4. Prohibition of manipulative, fraudulent and unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an

unfair 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;

(b)...

(c)...

(d)...

(e)...

(f)....

(g) entering into a transaction in securities without intention of performing it or without intention of

change of ownership of such security;

20.

The issues that, therefore, arise for consideration in the present case are :

20.1

Whether the Noticee entered into self-trades in 21 scrips during the investigation period

thereby causing artificial volumes in the said scrips, leading to false and misleading

appearance of trading in the underlying scrips?

20.2

Whether Noticee has thereby violated the provisions of the Regulation 3 (a), (b), (c) and (d),

4 (1), 4 (2) (a) and (g) of the PFUTP Regulation during the investigation period?

20.3

Does the violation, if any, attract monetary penalty under Section 15 HA of SEBI Act?

20.4

If so, what would be the monetary penalty that can be imposed taking into consideration

the factors mentioned in Section 15J of SEBI Act?

FINDINGS

21.

Before going to the facts of the matter, I would like to address the contention of the Noticee that

they had not been provided with a copy of the complete investigation report. In the matter, I note

that the Hon’ble Securities Appellate Tribunal (hereinafter referred to as ‘SAT’) in the case of

MayroseCapfin Private Limited V/s. Securities and Exchange Board of India (Appeal No. 20 of


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2012) dated 30.03.2012 has observed as follows: “The principles of natural justice require that the

inquiry officer should make available such document and material to the delinquent on which

reliance is being placed in the inquiry. It is not necessary for the inquiry officer to make available all

the material that might have been collected during the course of investigation, but, has not been

relied upon for proving charge against the delinquent. No prejudice can, therefore, be said to have

been caused to the appellant on this count ”. A copy of the said Order of the Hon’ble SAT was

provided to the ARs at the time of hearing. Further, the relevant portions of the Investigation Report

against which the allegations have been framed against the Noticee have already been provided in

the SCN.

22.

Further with regard to the request of the Noticee that the present proceedings be kept on hold until

the appeal filed with the Hon’ble SAT against the WTM Order dated November 11, 2014 is disposedof, it was informed to the ARs at the hearing that in the absence of any stay order from the Hon’ble

SAT in the matter, the adjudication proceedings would continue in the extant matter.

23.

With this in place, I now proceed with thefindings in connection with the role of Noticee on the

violations as alleged in thecase. I note that the Noticeeindulged in 189 self-trades (i.e. same buy

client as well as the sale client for a given trade resulting in no change of beneficial ownership) in 21

scrips. The details of the same areas hereunder:

Sr. no. Scrip name Self Trade Qty. No. of Self Trades

1M/s. Crystal Software Solutions Ltd. 15,190 3

2M/s. Sanguine Media Ltd. 10,769 31

3M/s. Jumbo Bag Ltd. 8,215 13

4M/s. Gandhinagar Hotels Ltd 15,473 31

5M/s. G.S. Auto International Ltd., 12,403 29

6M/s. SKS Logistics Ltd 8,741 31

7M/s. GokulRefoils and Solvent Limited 650 1


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Sr. no. Scrip nameSelf Trade Qty. No. of Self Trades

8M/s. SoftechInfinium Solutions Limited 1,200 6

9M/s. Kanani Industries Ltd 1,016 7

10M/s. Arihant Capital Markets Ltd. 911 3

11M/s. Marg Ltd 289 1

12M/s. Gujarat metallic Coal & Coke Ltd. 459 19

13M/s. Syncom Formulations (I) Ltd. 187 1

14M/s. Interworld Digital Ltd. 95 3

15M/s. Panchsheel Organic Ltd.

80 2

16M/s. Indiaco Ventures Ltd. 11 3

17M/s. Meuse Kara &Sungrace Mafatlal Ltd. 10 1

18M/s. SwastiVinayaka Synthetics Ltd. 10 1

19M/s. Shalibhadra Finance Ltd. 10 1

20 M/s. Beckons Industries Ltd. 5 1

21M/s. Sacheta Metals Ltd. 1 1

Total75,725 189

24.

The details of the trade containing the above self-trades entered by the Noticee was provided to the

Noticee along with the SCN.The day-wise,scrip-wise analysis ofNoticee's self-trades in the 21 scrips

as compared to (a) total market volume on BSE during the day on which self trade had occurred; (b)

total buy volume of the Noticee during the day on which self trade had occurred; and (c) total sell

volume of the Noticee during the day on which self trade had occurred; is as given hereunder:


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M/s. Crystal Software Solutions

Trade date Total market

vol. during

the day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

26/12/2008 23,751 14,000 7,604 7,149 30.10 51.06 94.02

30/12/2008 43,709 9,000 11,545 8,041 18.40 89.34 69.65

M/s. Sanguine Media Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self Trade

vol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

02/01/2009 2,04,342 63,381 50,000 25 0.01 0.04 0.05

06/01/2009 63,502 9,376 56,000 7,715 12.15 82.28 13.78

09/01/2009 1,93,439 3,471 1,00,000 50 0.03 1.44 0.05

22/01/2009 61,957 30,195 4,731 2,964 4.78 9.82 62.65

23/01/2009 2,38,060 75,070 64,580 15 0.01 0.02 0.02

M/s. Jumbo Bag Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self-Trade

vol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

14/11/2008 20,833 5,182 4,907 165 0.79 3.18 3.36

16/12/200811,490 3,844 3,000 50 0.44 1.30 1.67

31/12/2008 22,934 17,787 9,089 7,447 32.47 41.87 81.93

22/01/2009 7,343 4,161 1,053 553 7.53 13.29 52.52

M/s. Gandhinagar Hotels Ltd.


vol. during

the day in BSE

(A)

Total buy

vol. of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

13/05/2010 5,869 415 150 50 0.85 12.05 33.33

01/06/2010 42,078 21,465 17,630 13,425 31.91 62.54 76.15

03/06/2010 17,443 9,832 4,800 70 0.40 0.71 1.46

07/06/2010 36,097 10,238 10,671 7 0.02 0.07 0.07

08/06/2010 55,970 4,709 34,302 23 0.04 0.49 0.07

14/06/2010 53,018 9,421 24,544 80 0.15 0.85 0.33

16/06/2010 64,627 34,048 6,028 2 0.00 0.01 0.03

23/06/2010 58,680 10,588 24,101 567 0.97 5.36 2.35

30/06/2010 44,338 7,095 10,876 1,249 2.82 17.60 11.48


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M/s. GS Auto International Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

01/02/2010 1,10,283 8,633 8,628 25 0.02 0.29 0.29

09/02/2010 4,71,530 42,273 37,254 65 0.01 0.15 0.17

11/02/2010 2,13,515 10,072 25,796 4 0.00 0.04 0.02

17/02/2010 8,11,691 1,04,852 1,04,640 25 0.00 0.02 0.02

18/02/2010 5,01,516 1,23,593 53,446 5 0.00 0.00 0.01

19/02/2010 7,19,013 1,28,487 1,05,650 23 0.00 0.02 0.02

04/03/2010 1,57,008 6,203 23,021 5 0.00 0.08 0.02

05/03/2010 2,06,622 7,313 32,788 1 0.00 0.01 0.00

09/03/2010 2,39,049 17,238 24,567 40 0.02 0.23 0.16

12/03/2010 2,09,935 23,905 19,019 25 0.01 0.10 0.1322/03/2010 2,79,580 77,010 25 25 0.01 0.03 100.00

26/03/2010 3,33,443 40,480 26,035 11,880 3.56 29.35 45.63

29/03/2010 3,20,621 1,36,827 16,566 25 0.01 0.02 0.15

01/04/2010 5,03,929 18,950 1,09,948 13 0.00 0.07 0.01

05/04/2010 5,24,167 27,171 77,792 125 0.02 0.46 0.16

06/04/2010 3,41,465 9,460 29,982 51 0.01 0.54 0.17

08/04/2010 1,98,042 35,319 11,804 15 0.01 0.04 0.13

12/04/2010 2,21,069 17,807 28,641 40 0.02 0.22 0.14

19/04/2010 1,91,336 28,366 33,182 11 0.01 0.04 0.03

M/s. SKS Logistics Ltd.Trade date Total market

vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

11/05/2010 64,536 15,754 25,434 4,450 6.90 28.25 17.50

12/05/2010 92,831 57,154 2,691 1,976 2.13 3.46 73.43

25/05/2010 1,71,129 57,747 56,781 50 0.03 0.09 0.09

26/05/2010 1,25,244 27,738 27,369 100 0.08 0.36 0.37

31/05/2010 1,06,063 26,817 28,217 574 0.54 2.14 2.03

09/06/2010 1,17,688 88 54,810 3 0.00 3.41 0.01

10/06/2010 1,69,545 4,570 4,558 12 0.01 0.26 0.26

14/06/2010 1,44,779 57,380 14,037 6 0.00 0.01 0.04

15/06/2010 1,80,683 48,438 49,766 156 0.09 0.32 0.31

16/06/2010 1,42,172 43,924 70,897 55 0.04 0.13 0.08

22/06/2010 1,85,223 44,759 43,040 925 0.50 2.07 2.15


14/29

_____________________________________________________________________________________________


M/s. SKS Logistics Ltd. (contd.)

23/06/2010 887 6,536 5,773 25 2.82 0.38 0.43

25/06/2010 64,507 10,964 5,425 35 0.05 0.32 0.65

28/06/2010 1,58,614 35,276 47,293 14 0.01 0.04 0.03

29/06/2010 4,20,579 88,860 63,970 355 0.08 0.40 0.55

30/06/2010 1,68,527 17,693 42,812 5 0.00 0.03 0.01

M/s. GokulRefoils& Solvent Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

11/12/2008 4,148 1,375 1,375 650 15.67 47.27 47.27

M/s. SoftechInfinium Solutions Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

10/03/2010 20,600 8,200 8,500 100 0.49 1.22 1.18

19/03/2010 23,000 2,900 3,200 100 0.43 3.45 3.13

07/04/2010 18,600 2,900 900 100 0.54 3.45 11.11

15/04/2010 39,400 3,900 13,000 100 0.25 2.56 0.77

M/s. Kanani Industries Ltd.


vol during the

day in BSE(A)

Total buy

vol of

theNoticee

(B)

Total sell

vol of

theNoticee

(C)

Self

Tradevol of

the Noticee(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

27/04/2010 24,131 1,054 1,688 5 0.02 0.47 0.30

29/04/2010 38,042 9,987 555 8 0.02 0.08 1.44

30/04/2010 22,877 12,211 1,424 3 0.01 0.02 0.21

06/05/2010 46,135 1,024 19,374 1,000 2.17 97.66 5.16

M/s. Arihant Capital Markets Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

28/06/2010 1,36,266 12,131 12,515 911 0.67 7.51 7.28


15/29

_____________________________________________________________________________________________


M/s. Marg Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

31/12/2008 40,790 5,000 5,098 289 0.71 5.78 5.67

M/s. Syncom Formulations (India) Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

31/05/2010 1,88,175 7,655 7,655 187 0.10 2.44 2.44

M/s. Interworld Digital Ltd.


vol during theday in BSE

(A)

Total buy

vol ofthe

Noticee

(B)

Total sell

vol ofthe

Noticee

(C)

Self Trade

vol ofthe Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

04/03/2010 3,85,187 73,980 85,865 60 0.02 0.08 0.07

07/04/2010 4,41,026 4,815 93,152 35 0.01 0.73 0.04

M/s. Panchsheel Organics Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

04/03/2010 2,25,809 31,592 15,677 80 0.04 0.25 0.51

M/s. Indiaco Ventures Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

16/12/2008 66 50 20 4 6.06 8.00 20.00

01/01/2009 3 3 2 2 66.67 66.67 100.00

02/01/2009 14 6 10 5 35.71 83.33 50.00

M/s. SwastiVinayaka Synthetics Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

12/04/2010 3,13,719 57,652 50,983 10 0.00 0.02 0.02


16/29

_____________________________________________________________________________________________


M/s. Shalibhadra Finance Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self Trade

vol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

16/04/2010 1,74,613 285 8,355 10 0.01 3.51 0.12

M/s. Beckons Industries Ltd.


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

22/02/2010 39,466 3,999 6,655 5 0.01 0.13 0.08

M/s. Sacheta Metals Ltd.


vol during theday in BSE

(A)

Total buy

vol ofthe

Noticee

(B)

Total sell

vol ofthe

Noticee

(C)

Self

Tradevol ofthe Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

28/06/2010 5,173 642 1 1 0.02 0.16 100.00

M/s. Gujarat Metallic Coal and Coke Ltd (Previously known as M/s. Arvind Chemicals Pvt. Ltd.)


vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

10/12/2009 2,65,034 46,622 36,889 17 0.01 0.04 0.0511/12/2009 2,61,206 6,079 15,932 2 0.00 0.03 0.01

18/12/2009 7,07,573 27,194 27,189 9 0.00 0.03 0.03

23/12/2009 9,82,514 14,721 14,721 353 0.04 2.40 2.40

24/12/2009 8,66,177 3,970 3,941 15 0.00 0.38 0.38

30/12/2009 8,88,855 32,82 4,093 3 0.00 0.09 0.07

31/12/2009 7,99,163 34,010 33,997 25 0.00 0.07 0.07

13/01/2010 12,19,873 55,245 54,843 10 0.00 0.02 0.02

19/01/2010 6,58,230 35,934 35,904 5 0.00 0.01 0.01

25/01/2010 5,00,955 96,952 68,526 20 0.00 0.02 0.03

M/s. Meuse Kara &Sungrace Mafatlal Ltd (Previously known as M/s. Bio Green Industries Ltd.)Trade date Total market

vol during the

day in BSE

(A)

Total buy

vol of

the

Noticee

(B)

Total sell

vol of

the

Noticee

(C)

Self

Tradevol of

the Noticee

(D)

% of (D)

to (A)

% of (D)

to (B)

% of (D)

to (C)

01/04/2009 7,740 35 3,510 10 0.13 28.57 0.28


17/29

_____________________________________________________________________________________________


25.

In the matter, I note that the Noticee has stated that though the investigation period covers almost

two years and that the Noticee has done thousands of trades in 89 scrips during the said period,

only 189 trades in 21 scrips are alleged as self-trades. Also that the proportion of self-trades to the

market trades is insignificant on most days, only on 4 out of 88 days has it been significant, and that

the alleged self-trades were executed on 88 days out of a total of 678 days in the investigation

period i.e. less than 13%. In the matter, it becomes necessary to quote the order of Hon'ble

Securities and Appellate Tribunal (SAT) in ChiragTanna vs. the Adjudicating Officer dated June 16,

2011 wherein SAT had held as follows:

"..we have on record the trade and order logs from which it has been pointed out by the learned

counsel for the respondent Board that the appellant had executed self trades i.e. trades in which he

was both the buyer and seller. Such trades are, admittedly, fictitious and create artificial volumes in

the traded scrip."

26.

Considering each scrip and trade date separately (though trade dates when self-trades were

executed by the Noticee across the 21 scrips may be coinciding), I further find that the analysis

above reveals that the self-trades of the Noticee while trading in the aforesaid 21 scrips were more

than 95%, 80%, 50%, 25%, 10% and 5%of the total buy quantity of the Noticee during the day on BSE

on 1,4,7,12,15 and 20 trade days respectively out of the 88 trade dayswhen the self-trades were

executed by the Noticee. Similarly, the self- trades were more than 100%, 80%, 50%, 25%, 10% and

5%of the total sell quantity of the Noticee during the day on BSE on 3, 5,11,14,19 and 22 trade days

respectively out of the 88 trade days when the self-trades were executed by the Noticee. Also, the

self-trades were more than 50%, 25%, 10% and 5% of the total market volumein the scripduring the

day on BSEon 1, 4, 8 and 11 trade days respectively out of the 88 trade days when the self- trades

were executed by the Noticee. I also find that the trade dates when self-trades were executed by

the Noticee across 21 scrips were coinciding for atleast 10 trade dates in respect of two or more

scrips. Further, though I note that the Noticee has stated that the self trades were nothing but

coincidence, such large number of self trades on several days across scrips cannot happen by

coincidence.

27.

The said argument can be better appreciated by considering the instances below detailing the

manner in which buy and sell orders were placed by the Noticee that resulted in self trades. The

instances below are merely illustrative in nature to demonstrate the fact thatthe self-trades


18/29

_____________________________________________________________________________________________


executed by the Noticee for 75,725 shares, across 21 scrips,through 189 trades and on 88 trade days

during the investigation period, were not mere coincidence, but, with an intention to create artificial

volume in the respective scrips:

A.

Crystal Software Solutions Ltd.

Trade Date 26-12-2008, Self-trade on 26.12.2008 for 3,538 and 3,611 shares

On 26.12.2008, a total of 23,751 shares got traded on BSE. It is observed that on the said date, the

Noticee bought 14,000 shares and sold 7,604 shares. Thus, almost one-third of the market volume

on 26.12.2008 was due to the trades of the Noticee.

Sell Order of the Noticee on 26.12.2008vide sellOrder id 49824400000006525

Vide Order id 49824400000006525, the Noticee placed sell order for 5,000 shares at Rs. 8.99 at

10:03:11; The said order was updated at 10:10:22 from 5,000 shares to 10,000 shares at the same rate Rs.

8.99;

At 10:10:43, the said order of 10,000 shares was updated to lower the price to Rs. 8.94;

At 10:52:10, the Order was updated to lower the quantity from 10,000 shares to 8,450 shares by

deleting 1,550 shares;

At 11:29:10, the order was updated to increase the rate from Rs. 8.94 to Rs. 9.14;

At 14:03:44, the order was further updated to increase the rate from Rs. 9.14 to Rs. 9.15;

At 14:07:34, the order was again updated to increase the rate from Rs. 9.15 to Rs. 9.39;

At 15:02:14, the order was updated to reduce the rate from Rs. 9.39 to Rs. 9.38;

At 15:09:30, the order was updated to reveal quantity of 86;

At 15:24:05, the order was again updated to reduce the price to Rs. 8.54;

At 15:25:13, the order was updated to lower the quantity by 2 shares.

It is observed from the trade log that at 10:03:11, when the sell order for 5,000 shares at Rs..

8.99 was placed, the trades immediately prior to the same were getting executed at Rs. 9 and

even above, despite the same, the Noticee placed the sell order on the lower side. Further, at

11:29:10, when the trades immediately prior were getting executed between Rs. 8.54 to Rs.

8.92, the Noticee increased the sell order rate from Rs. 8.94 to Rs. 9.14. At 14:07:34, when the

trade rate immediately prior from 14:04:12 to 14:04:26 had moved up to Rs.. 8.98/ Rs. 8.99, the

Noticee increased the sell order rate further from Rs. 9.15 to Rs. 9.39.


19/29

_____________________________________________________________________________________________


Buy Orders for 10,000 shares and 4,000 shares of the Noticee on 26.12.2008

Vide Order id 39121000021124063, the Noticee placed buy order for 10,000 shares at Rs. 9.40

at 15:05:27;

Again vide Order id 39121000021124073, the Noticee placed sell order for 4,000 shares at Rs.

9.38 at 15:07:28;

It is observed from the trade log that before the Noticee placed the aforesaid two buy orders at

Rs. 9.40 and Rs. 9.38, trades from 10:04:48.135050 upto 15:00:03.891084 were getting

executed at a price less than Rs. 9/-. The last trade prior to the Noticee’s placing buy order id

39121000021124063 was at 15:05:27 was at Rs. 8.54. However, despite the same the Noticee

placedthe two buy orders for 10,000 shares and 4,000 shares at Rs. 9.40 and 9.38 at 15:05:27

and 15:07:28 respectively.

The sell order of the Noticee placed vide sell order id 49824400000006525 was pending execution,

except for a trade of 450 shares which had got executed at 10:39:02.367416 at Rs. 8.94. The buy

order id 39121000021124063 of the Noticee for 10,000 shares first matched with the pending sell

orders in the system, before matching with the pending sell order of the Noticee himself, thereby

resulting in self trade for 3,538 shares at 15:05:27.895349. Thus, 4,462 shares (8,450-450-3,538) of

sell order id 49824400000006525 remained unexecuted. Immediately thereafter at 15:07:28, it is

observed that the Noticee placed another buy order id 39121000021124073 for 4,000 shares at Rs.

9.38, of which 3,611 shares matched with his own pending sell order id 49824400000006525, 5

shares got executed with third party and balance 844 (846-2) shares remained unexecuted.

From the above, it becomes clear that though the Noticee placed the sell order id

49824400000006525 much before he placed the buy order id 39121000021124063, till such time

that the buy order was placed, the Noticee had kept the sell order rate away from the market rate -

either below or above, so that the trade does not get executed. I note here that the Noticee has

claimed that his trades were in the nature of jobbing. However, I find that the Noticee was placing

his buy orders much above the prevalent trade rate at the relevant point of time. The proximity of

time, thus, lost its significance, since the buy and sell orders were placed at rates away from the

prevailing market rates. Further immediately after self-trade was executed for 3,538 shares at

15:05:27, he placed another buy order id 39121000021124073 to match with the pending sell order


20/29

_____________________________________________________________________________________________


id 49824400000006525, after which self- trade for 3,611 shares got executed. Thus, it is observed

that the Noticee placed the sell Order vide sell order id 49824400000006525 and buy orders for

10,000 shares vide buy Order id 39121000021124063 and 4,000 shares vide buy order id

39121000021124073 only with the intention to execute self-trade so as to create artificial volume in

the scrip. Further the buy orders of the Noticee each time moved the price up fromRs. 8.54 to Rs.

9.38 i.e. by Rs. 0.84 (9.84%).

B.

Gandhinagar Hotels Ltd.

Trade Date 01-06-2010, Self-trade on 01.06.2010 for 1,000, 11,819 and 581 shares

On 01.06.2010, a total of 42,078 shares got traded on BSE. It is observed that on the said date, the

Noticee bought 21,465 shares and sold 17,630 shares.

Self-trade on 01.06.2010 for 11,819 and 581 shares At 15:17:51, the Noticee placed a sell order for 12,400 shares at Rs.93.25 vide Sell Order id

17000067027187. The last trade prior to the Noticee’s placing of the sell order was at

14:48:06.477242 which had got executed at Rs.90. Trades prior to the same from

14:16:44.631180 to 14:48:06.477007 were getting executed in the range of Rs. 89.75 to Rs.91.

Thus, it is noted that the sell order was placed at a price higher to the prevailing market rate;

On 01-06-2010, when the Noticee placed buy order for 12,500 shares at Rs.93.25 vide buy order

id 12000060029393 at 15:21:09, trades immediately prior to placing the said order from

15:20:45.131178 upto 15:20:52.141759 were getting executed between Rs. 89 to Rs. 90.75.

Despite the same, the Noticee placed buy order for 12,500 shares at Rs. 93.25, matching his sell

order rate;

As a result at 15:21:09.458223, 15:21:09.462188 and 15:21:09.478210 buy order id

12000060029393 matched with pending sell order of third parties resulting in trades for 81

shares, 500 shares and 100 shares respectively before self- trade for 11,819 shares got executed

at 15:21:09.478556 due to matching of the balance shares of buy order id 12000060029393 with

sell order id 17000067027187;

Thus, 581 shares (12,400 – 11,819) of sell order id 17000067027187 remained unexecuted;

Immediately thereafter at 15:21:12, the Noticee placed buy order for 600 shares at Rs.93.25

vide buy order id 13000058043084 and thereafter at 15:21:17 updated the said order to reduce

the order by 14 shares to 586 shares (i.e. 600-14);


21/29

_____________________________________________________________________________________________


At 15:21:13.016616, the buy order id 13000058043084 of the Noticee matched with pending

sell order id 17000067027187 of the Noticee resulting in self trade of 581 shares;

The balance 5 shares of buy order id 13000058043084 matched with third parties at

15:21:36.770395;

It is further pertinent to note here that buy order id 12000060029393 of the Noticee resulted in

increase in the price of the scrip from Rs. 89 to Rs. 92.8, then to Rs. 93.1 and then to Rs. 93.25

when trades of 81 shares, 500 shares and 100 shares got executed with third parties before self

trade of 11,819 shares got executed;

Thus, it is observed that the buy order id 12000060029393 of the Noticee which resulted in self

trade getting executed for 11,819 shares resulted in increase in the price of the scrip by Rs.4.25

(93.25-89) over the last traded price (LTP) i.e. an increase of 4.77% over the LTP;

From all of the above it becomes clear that the Noticee placed the sell Order for 12,400 sharesvide sell order id 17000067027187 at Rs. 93.25 and buy orders for 12,500 shares at Rs. 93.25

vide buy Order id 12000060029393 and 600 shares at Rs. 93.25 vide buy order id

13000058043084, which was further reduced to 586 shares, only with the intention to execute

self-trade so as to create artificial volume in the scrip and also simultaneously to increase the

price of the scrip.

C.

G.S. Auto International

On 26.03.2010, a total of 3,33,443 shares got traded on BSE. It is observed that on the said date, the

Noticee bought 40,480 shares and sold 26,035 shares.

Self trade on 26.03.2010 for 10,880 and 1,000 shares

Vide sell Order id 17000032042376, the Noticee placed a sell order for 12,000 shares at Rs. 45 at

15:29:29;

Vide buy order id 20000031036539, the Noticee placed a buy order for 11,900 shares at Rs.

45.20 at 15:57:11;

Between trade time 15:29:29 to 15:42:00.515155 only 3 trades for 50 shares, 10 shares and 1

share got executed;

The next trade was only at 15:57:11.609580, when 1020 shares of the Noticee’s buy order id

20000031036539 matched with the pending sell order of the third party;


22/29

_____________________________________________________________________________________________


Immediately thereafter at 15:57:11.610133, buy order id 20000031036539 of the Noticee

matched with sell order id 17000032042376 of the Noticee resulting in self trade of 10,880

shares;

Thus, 1120 shares of sell order id 17000032042376 of the Noticee remained unexecuted;

Immediately thereafter at 15:57:28, the Noticee placed a buy order for 1,000 shares at Rs. 45.20

vide buy order id 23000033041956;

The said buy order id 23000033041956 matched with the pending sell order id 17000032042376

of the Noticee resulting in self trade for 1,000 shares;

Out of the balance 120 shares of sell order id 17000032042376, 26 shares matched with third

party at the end of the trade session for the day and balance of 94 shares remained unexecuted;

Thus, it is observed that the Noticee placed the sell Order for 12,000 shares vide sell order id

17000032042376 at Rs. 45 and buy orders for 11,900 shares at Rs. 45.20 vide buy Orderid20000031036539 and 1,000 shares at Rs. 45.20 vide buy order id 23000033041956 only with

the intention to execute self trade so as to create artificial volume in the scrip.

28.

I find here that the Noticee has submitted that he was a trader in securities and more specifically

into jobbing activities to earn his livelihood. As regards the same, the usual rule of thumb is that

jobbing or any other purchase / sell activity in securities market has to follow the basic rule viz. buy

cheap and sell costly to earn a profit. The same was also observed by the Hon'ble SAT in the matter

of Angel Broking Ltd. (Order dated October 1, 2014). In the matter, I find thatthe Noticee too vide

reply dated March 23, 2015 has inter alia argued that the objective of the trader / jobber is to trade

in maximum number of shares (usually with a thin spread) intraday. However, as demonstrated in

para 27 above, it is observed that the Noticee was placing buy orders at a huge increment to the last

traded price, and in a manner,so as to match with his pending sale orders. For example, in the scrip

of M/s. Gandhinagar Hotels Ltd., it is noted that the Noticee had placed the sell order for 12,400

shares and buy orders for 12,500 shares and 600 shares, at the same price of Rs. 93.25, just three

minutes apart. I find here that the Noticee had placed the buy order at Rs. 93.25 to match his own

pending sell order price, although trades immediately prior were getting executed at much lower

price between Rs. 89 to Rs. 90.75. Same is the case in the scrip of M/s. Crystal Software Solutions

Ltd., wherein the buy orders for 10,000 shares and 4,000 shares were placed by the Noticee at Rs.

9.40 and Rs. 9.38 respectively, i.e. at a steep increment to the last traded price of Rs. 8.54, so as to

match with his own pending sell order for 10,000 shares, whose price was updated to Rs. 9.38. In


23/29

_____________________________________________________________________________________________


such a scenario, I am unable to accept the argument of the Noticee that thematching of his own buy

and sell orders were only a coincidence and was unknown to him at the time the trades were

executed. On the other hand, the manner in which buy order rates were matched with the sell order

rates placed/ updated a few minutes apart, only strengthens the case against the Noticee that the

self trades were executed by the Noticee to defeat the purpose of anonymity of the trading system

of the stock exchanges and were not mere coincidences. In fact, it is observed that there were 111

(59% of total self-trades) trades for 53,185 (70% of total self -trades) shares, where the time

difference between placing the buy orders and the sell orders was less than 10 minutes.

29.

In the matter, I note further that the Noticee has stated that the trades were in the nature of

jobbing or day to day trading, wherein delivery is avoided to extent possible. However, I note that

the actual trades were observed to be contrary to the rationale of jobbing as the Noticee wasplacing the buy orders at steep increment to the last traded price and matching his buy order rates

to match with his pending sell order rates. The Noticee, I find, has inter aliafurther stated that such

trades are recognized, legal and permitted by BSE and NSE, therefore, it is erroneous to draw a

presumption that the Noticee’s trades were not intended to result in change of beneficial

ownership, merely because Noticee’sorders matched against each other and / or because no

delivery was taken by him. In the matter, I find that the Hon'ble Securities Appellate Tribunal (SAT),

in the case of Anita Dalal vs. SEBI (Order dated 03.12.2012) has held that:

"7. The appellant has been found guilty of self trade as well. Self trades admittedly are illegal. This

Tribunal has held in several cases that self trades call for punitive action since they are illegal in

nature. In M/s. JayantilalKhandwala& Sons Pvt. Ltd. vs. Securities and Exchange Board of India

(Appeal no. 24 of 2011 decided on June 8, 2011) this Tribunal has held that “one cannot buy and sell

shares from himself. Such transactions are obviously fictitious and meant only to create false

volumes on the trading screen of the exchange."

30.

In the matter, I find that the Noticee has inter aliafurther stated that in an illiquid scrip, it is quite

possible that while squaring off the positions to avoid margin calls or loss or delivery, the orders of a

trader may match his own previous pending orders and it is erroneous to allege that such trades

were malafide, fraudulent and intended to create an artificial volume. However, in the extant case,

the manner in which the Noticee was placing/ updating the orders by keeping his buy/ sell order

rates away from the market rates and then matching them with the corresponding sell/ buy orders, I


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find that the intent of the Noticee was clearly to cause self trades and create artificial volumes in

the scrip. I note that the Noticee has stated that there was no reason for any person to create

volume in a scrip at 3 pm viz. close to day end. However, volume created at the end of the day also

forms a part of the total volume made in the scrip on that day, and the said information will be

available to traders and investors when the scrip opens for trading on the next day. The Noticee was

free to trade adopt any business/ risk containment model, but, had to ensure that it was in

conformity with the regulatory framework.

31.

Further, contrary to the stand taken as such vide letter dated March 23, 2015 and at the first

hearing that self trades occurred as mere coincidences while carrying out jobbing transactions, I find

that vide subsequent letter dated April 21, 2015, the ARs changed the said stand to claim that self

trades had occurred as a result of transfer of positions from one stock broker to another. It hasbeen stated that the Noticee was given exposure limits by stock brokers, usually for a period of 5

days, andat the end of said tenure, Noticee was required to either square off his positions or to take

delivery. It has been further stated that the Noticee neither wished to take delivery, since he did not

have sufficient funds to do so, nor, did he wish to square off too, because he would then have

incurred a loss. The Noticee, it has been argued, hence, sought exposure limits from other brokers

who granted him the same. And while transferring his positions from the existing stock brokers to

the new ones by placing counterparty orders (to his existing positions) through the new stock

brokers, self trades got executed.

32.

I find ithard to believe that any new stock broker could have allowed transfer of client position and

provided exposure limits to a client, who did not have sufficient funds to take delivery. It is pertinent

to mention here that despite allowing the Noticee time as sought to obtain the corroborating

documents and records from his stock brokers to substantiate thesaid submission, the Noticee was

not able to produce any document in support of his aforesaid claim that new stock brokers provided

exposure limits to him. Further, an opportunity of second hearing was granted to the Noticeein view

of the specific request made by the ARs on behalf of the Noticee vide letter dated April 21, 2015.

Contrary to the earlier stand that self trades were mere coincidences that happened while carrying

out jobbing transactions, ARs at the second hearing claimed that the Noticee knowingly traded in a

manner that would cause self-trades, in order to transfer his positions from the existing stock broker

to the new ones, who allowed him exposure limits. The ARs too did not produce any documentary


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evidence in support of the said claim. The ARs at the second hearing thereafter confirmed that all

submissions in the matter were made on the behalf of the Noticee. Thus, I presume that the

changed version was an afterthought by the ARs on behalf of the Noticee in an attempt to try and

convincingly explain those self trades, wherein one leg of the transaction was done through one

stock broker and other leg through another stock broker. However, vide both the versions, I note

that the Noticee/ AR on behalf of the Noticee has admitted execution of self trades by the Noticee.

33.

I note that Regulation 3 of PFUTP Regulations prevents any person from buying, selling or dealing in

securities in fraudulent manner, 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 which are listed or proposed to be listed on a recognized stock exchange in contravention

of the provisions of the Act or the rules and the regulations made there under. Regulation 4(1) of

PFUTP Regulations lays that no person shall indulge in a fraudulent or an unfair trade practice in

securities. Regulation 4(2) (a) of PFUTP Regulations, prohibits a person from indulging in an act

which creates false or misleading appearance of trading in the securities market. Regulation 4(2)(g)

of PFUTP Regulations, inter aliaprohibits entering into a transaction in securities without intention

of performing it or without intention of change of ownership of such security.

34.

I find that the submissions made by the Noticee can’t suffice for his inability and non complicity in

the aforesaid transactions and can’t establish that he was not guilty of the violation of the

aforementioned allegations. Therefore, I don’t find the explanations of the Noticee

satisfactory.Further, the Noticee cannot absolve from the liabilities by claiming that the trades were

nothing but coincidenceor that they got executed while transfer his positions from the existing

stock broker to the new ones, who allowed him exposure limits. Thus, in the instant case in light of

the facts of the case and materials available on record, I conclude that Noticee has violated the

provisions of Regulation 3 (a), (b), (c) and (d), 4 (1), 4 (2) (a) and (g) of the PFUTP Regulations.

35.

Now, the next issue for consideration is what would be the monetary penalty that can be imposed

on the Noticee for violation of Regulation 3 (a), (b), (c) and (d), 4 (1), 4 (2) (a) and (g) of the PFUTP

Regulation. The Hon’ble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund

[2006] 68 SCL 216(SC) held that “In our considered opinion, penalty is attracted as soon as the


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contravention of the statutory obligation as contemplated by the Act and the Regulations is

established and hence the intention of the parties committing such violation becomes wholly

irrelevant…”.

36.

Thus, the aforesaid violations by the Noticee makes him liable for penalty under Section 15HA of the

SEBI Act, which read as follows:

15HA - Penalty for fraudulent and unfair trade practices- 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.

37.

While determining the quantum of penalty under sections 15HA, it is important to consider the

factors stipulated in section 15J of SEBI Act, which reads as under:

15J - Factors to be taken into account by the adjudicating officer

While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due

regard to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a

result of the default;

(b) the amount of loss caused to an investor or group of investors as a result of the default;

(c) the repetitive nature of the default.

38.

It is difficult, in cases of such nature, to quantify exactly the disproportionate gains or unfair

advantage enjoyed by an entity and the consequent losses suffered by the investors. I have noted

that the investigation report also does not dwell on the extent of specific gains made by the Noticee.

However, I find that the Noticee by executing self trades, which implies the trades in which both

buyer and seller are the same party and does not result in change of beneficial ownership, created

artificial volumes in the respective scrips in which he traded, thereby sending wrong signal to the lay

investors about trading in the said scrip. Self trades are, hence, considered to be serious violation,

even in the absence of noticeable market effect, because they do not reflect the forces of supply

and demand and give a false impression with respect to the market liquidity.


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39.

I note that person found to be guilty of violating PFUTP Regulations can be imposed a penalty of

Rs.25 crore or three times the amount of profit made, whichever is higher, under Section 15HA of

the Act. The detailed analysis, brought out as above, of the orders placed by the Noticee that

resulted in self-trades, dismisses the Noticee’s version that the alleged self -trades were in the

nature of jobbing or day trades and the same were nothing but coincidences. On the contrary, the

analysis above clearly demonstrates that the Noticee knowingly engaged in execution of self-trades;

which were more than 95%, 80%, 50%, 25%, 10% and 5%of the total buy quantity of the Noticee

during the day on BSE on 1,4,7,12,15 and 20 trade days respectively, more than 100%, 80%, 50%,

25%, 10% and 5%of the total sell quantity of the Noticee during the day on BSE on 3, 5,11,14,19 and

22 trade days respectively and were more than 50%, 25%, 10% and 5% of the total market

volumeduring the day on BSE on 1, 4, 8 and 11 trade days respectively out of the 88 trade days

when the self- trades were executed by the Noticee in 21 scrips.I find that this is sufficient to provethat the Noticee has created a false or misleading appearance of trading in violation of Regulation 3

(a), (b), (c) and (d), 4 (1), 4 (2) (a) and (g) of the PFUTP Regulations.

40.

Further, it is apparent from the case laws referred above that self trades are, ordinarily and of their

nature, baneful practices which will, invariably, have the purpose and, often, the effect of interfering

with the integrity of securities market, even though such self trades may be miniscule in quantity.

Vide Order dated October 22, 2013, the Hon’bleSAT while upholding the Order passed by the WTM

of SEBI in the matter of M/s. Angel Broking Pvt. Ltd. has held that the argument that the turnover in

M/s. Sun Infoway Ltd. scrip was miniscule compared to the large turnover of the appellant and

hence penalty need not be imposed against ABL cannot be accepted, because imposition of penalty

for violating provisions of SEBI Act and regulations made thereunder are not dependent upon total

turnover of person violating the provisions of SEBI Act/ regulations made thereunder. The Hon’ble

SAT has opined that one who has violated the provisions of SEBI Act and regulations made

thereunder, must suffer even if turnover in the scrip in which violations are found is miniscule

compared to the total turnover of that person. This sort of activity is, therefore, rightly considered

to be illegal, and justifiably so.

41.

I find that in the matter of M/s. Angel Broking Private Ltd., the Hon’ble SAT vide Order dated

October 01, 2014 has upheld the penalty of Rs. 10 lacs imposed on client M/s. Angel Infin Private

Ltd. under section 15HA of SEBI Act, and Rs. 10 lacs under section 15HA of SEBI Act & Rs. 10


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lacsunder 15HB of the SEBI Act on the stock broker M/s. Angel Broking Private Ltd., in respect of 4

self-trades for 9,866 shares. Although M/s. Angel Broking Private Ltd had appealed before the

Hon'ble Supreme Court in the matter, the Hon'ble Supreme Court dismissed the appeal observing

that “We find no ground to interfere with the impugned order passed by the Securities Appellate

Tribunal.” Similarly, I find, in the case of M/s. ISF Securities Ltd., the Hon’ble SAT vide Order dated

December 19, 2014 has upheld the penalty of 10 lacsunder 15HA of the SEBI Act and Rs. 1 lacs under

15HB of the SEBI Act imposed on stock broker M/s. ISF Securities Ltd. in respect of self-trades for

7,534 shares on 8 trade days.

42.

In the instant case, I find that the Noticee has executed such an illegal operation repeatedly by

indulging in 189 self trades,on 88 trade days, in a total of 21 scrips,for 75,725 shares during the

investigation period, thus, detrimental to the smooth functioning of the securities market, andhence, deserves to be viewed seriously. Out of the same, I find that the Noticee had executed self

trades for 44,434 shares on 8 trade days, across 6 scrips, wherein self trade volume as a percentage

of the total market volume on BSE on the day was more than 10%.

ORDER

43.

After taking into consideration all the facts and circumstances of the case, I impose a penalty of Rs.

50,00,000/- (Rupees Fifty LakhOnly) under section 15HA of the SEBI Act on the Noticee Mr.

PrashantKamble,which will be commensurate with the violations committed by the Noticee.

44.

The Noticee shall pay the said amount of penalty by way of demand draft in favour of“SEBI -

Penalties Remittable to Government of India”, payable at Mumbai, within 45 days of receipt of this

order. The said demand draft should be forwarded to theEnforcement Department (DRA) - II, SEBI

Bhavan, Plot No. C – 4 A, “G” Block, BandraKurla Complex, Bandra (E), Mumbai – 400 051.


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45.

In terms of rule 6 of the Rules, copies of this order are sent to the Noticee and also to the Securities

and Exchange Board of India.

Date: July 31, 2015 Anita Kenkare

Place: Mumbai Adjudicating Officer

adjudication order in respect of mr. prashant kamble

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