Order in the matter of Gangotri Textiles Limited

8/18/2019 Order in the matter of Gangotri Textiles Limited

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Order in the matter of Gangotri Textiles Limited Page 1 of 25

WTM/RKA/EFD-DRA-III/49/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

UNDER SECTION 11 AND SECTION 11B OF THE SECURITIES AND EXCHANGE

BOARD OF INDIA ACT, 1992- In respect of:

Sl. No. Entity PAN

1. Mr. Purshottam Khandelwal ADZPK9831B

2. Ms. Sunita Gupta AAHPG4700E

3. Cosmo Corporate Services Ltd. (Cosmo) AAACC3529P

4.

Master Finlease Ltd.(Master Finlease) AAACM6050D5. Avisha Credit Capital Ltd.( Avisha) AAACA5715D

6. Vishvas Projects Ltd. (Vishvas) AAACM2047A

In the matter of Gangotri Textiles Limited

1. Gangotri Textiles Limited (hereinafter referred to as ‘the Company’) is a company having its

shares listed on the Bombay Stock Exchange Limited (hereinafter referred to as ‘BSE’) and the

National Stock Exchange [hereinafter referred to as ‘NSE’). The Company made a further public

offer (FPO) of ` 55 crore which opened on May 18, 2006 and closed on May 23, 2006 with a

fixed price band in the range of ` 41 to ` 46. The shares issued and allotted in the FPO got

listed on the stock exchanges on June 12, 2006. The price of the scrip had risen from ` 50.30 on

April 7, 2006 to ` 70.40 on May 4, 2006 and thereafter fell to ` 45.5 on May 31, 2006.

2. Securities and Exchange Board of India (hereinafter referred as ‘SEBI’) undertook investigation

in the trading in the shares of the Company for the period April 07, 2006 to May 31, 2006

(hereinafter referred as ‘investigation period’). On the basis of investigation, it was alleged that,

Mr. Purshottam Khandelwal, Ms. Sunita Gupta, Cosmo, Master Finlease, Avisha, and Vishvas in

concert with Ishita Finstock Ltd (Ishita), Quantum Global Securities and Leasing Co. Ltd.

(Quantum), ISF Securities Ltd.(ISF), Mr. Praveen Poddar, Anupama Communications Pvt. Ltd,

Mefcom Securities Ltd.( Mefcom), Vishvas Securities Ltd.(VSL), and SIC Stocks and Services

Pvt. Ltd.(SIC) had indulged in large number of circular trades, synchronized trades and created

artificial volume in the scrip. These entities also allegedly indulged in price manipulation by

contributing significant positive and negative Last Traded Price (LTP) variation. These 14


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entities were collectively called as Vishvas Group in the observations of investigation.

3. Pursuant to investigation, a Show Cause Notice (SCN) dated November 5, 2013, bearing no.

IVD/ID6/BR/AKJ/GTL/OW/28289/2013 was issued to Mr. Purshottam Khandelwal, Ms.

Sunita Gupta, Cosmo, Master Finlease, Avisha and Vishvas (hereinafter collectively referred to

as ‘Noticees’). The SCN was issued on the basis of the following observations/findings of the

investigation :

(a) During the investigation period, there were 24,154 trades in the shares of the Company for

the traded quantity of 89,41,975 shares at BSE. Out of these, there were 430 trades for

15,60,914 shares (17.14% of the total traded quantity) which were synchronized trades. At

NSE, there were 21,451 trades for a traded quantity of 68,16,750 shares. Out of these, there

were 495 trades for 14,48,679 shares (21.25% of the total traded quantity) which were

synchronized trades.

(b) Mr. Purshottam Khandelwal, Cosmo, Ms. Sunita Gupta, Avisha, and Vishvas, together with

three other connected entities of Vishvas Group viz. Mr. Praveen Poddar, Mefcom and ISF,

indulged in 210 synchronized trades for 12,26,309 shares (78.56% of total synchronized

quantity and 13.71% of total market quantity) at BSE. Details of entity-wise alleged

synchronized trades at BSE are given in the following table:

Table 1

Client Buy Sell Total

Count

of Buy

Orders

Count

of Buy

Trades

Total

Buy Qty

Count

of Sell

Orders

Count

of Sell

Trades

Total

Sell Qty

Total

Orders

Total

Trades

Total

Trade

Qty

Praveen

Poddar

39 39 269841 21 21 113970 60 60 383811

Mefcom 49 49 195284 27 27 144458 76 76 339742

ISF 28 28 171623 28 28 136717 56 56 308340

Sunita

Gupta

30 30 176813 17 17 74205 47 47 251018

Cosmo 22 22 170236 20 20 120451 42 42 290687

Purshottam

Khandelwal

36 36 152555 97 97 636508 133 133 789063

Avisha 1 1 49999 0 0 0 1 1 49999

Vishvas 5 5 39958 0 0 0 5 5 39958

Total 210 210 1226309 210 210 1226309 420 420 2452618

(c)

Most of the aforesaid alleged synchronized trades were transacted by Vishvas Group

entities. On some of the days, the alleged synchronized quantity of shares traded by


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Vishvas Group constituted more than 15% of the total traded volume. For example, on

May 30, 2006, the total traded volume was 31,756 shares out of which 19,416 shares

(61.14% shares) were synchronized by the eight connected entities of Vishvas Group. It

was also observed that out of total 37 trading days during the investigation period, on 26

trading days, these entities indulged in synchronized trading. The details of 26 tradingdays at BSE are given in the following table:-

Table 2

S N

Date

(A)

Total

mkt.

Volume

(B)

Total Day

Synchronised

Volume

(C)

Synchronized

trading by eight

entities

(D)

Synch. Trade

volume of eight

entities vs. total

synch. trade

volume in %

(D/C*100)

(E)

Synch. trade volume

of eight entities vs.

total market volume

in %

(D/B)*100

(F)

1 30-05-2006 31756 19416 19416 100.00 61.14

2 31-05-2006 48722 23824 23804 99.92 48.86

3 18-05-2006 337055 125725 124887 99.33 37.05

4 12-05-2006 349076 121904 118404 97.13 33.92

5 21-04-2006 276438 60799 60000 98.69 21.70

6 28-04-2006 363073 78521 74981 95.49 20.65

7 11-05-2006 409252 89785 83755 93.28 20.47

8 29-04-2006 168693 32510 32510 100.00 19.27

9 09-05-2006 494413 119125 85935 72.14 17.38

10 16-05-2006 342392 76559 57955 75.70 16.93

11 02-05-2006 473324 78888 77614 98.39 16.40

12 10-05-2006 488420 107963 77924 72.18 15.9513 08-05-2006 113772 22115 17000 76.87 14.94

14 04-05-2006 642628 87974 86302 98.10 13.43

15 29-05-2006 58042 8485 7485 88.21 12.90

16 25-05-2006 71468 10858 8820 81.23 12.34

17 24-05-2006 108555 14131 13200 93.41 12.16

18 23-05-2006 426111 161773 50215 31.04 11.78

19 19-05-2006 316863 66195 33911 51.23 10.70

20 15-05-2006 370350 46294 38454 83.06 10.38

21 25-04-2006 482177 64699 47571 73.53 9.87

22 26-05-2006 161280 26975 14123 52.36 8.7623 17-05-2006 287561 34115 18724 54.88 6.51

24 27-04-2006 368587 30830 23660 76.74 6.42

25 24-04-2006 354385 24770 22710 91.68 6.41

26 22-05-2006 238886 7379 6949 94.17 2.91


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(d) On 25 days out of aforesaid 26 days, the synchronized trades of Vishvas Group were

more than 50% of total market synchronized trades. Also the contribution of volumes

through such synchronized trades by the above entities was more than 60% of total

traded volume on May 30, 2006 and it was more than 48% on May 31, 2006. On 12 days

out of total 26 days, the alleged synchronized trades of the group entities constitutedmore than 15% to the total market volume.

(e) The entity-wise traded quantity of Vishvas Group through synchronized trading during

the investigation period at BSE is given below:

Table 3

Particulars

Seller Name

BuyerName

PurshottamKhandel

wal

PraveenPodda

r

SunitaGupta

Mefcom Cosmo Avisha Vishvas

ISF Total

PraveenPoddar

189069 00 14774 29621 36377 00 00 00 269841

Mefcom 123830 16999 15455 00 6500 00 00 32500 195284ISF 99968 19990 5500 17146 29019 00 00 00 171623SunitaGupta

47858 14240 00 38951 24367 00 00 51397 176813

Cosmo 101825 15900 23811 21700 00 00 00 7000 170236PurshottamKhandel wal

1 46841 14665 37040 14188 00 00 39820 152555

Avisha 49999 00 00 00 00 00 00 00 49999

Vishvas 23958 00 00 00 10000 00 00 6000 39958 Total 636508

113970

74205 144458 120451 00 00 136717 1226309

(f) Similarly, at NSE, during the investigation period, Cosmo and Master Finlease, together

with five other connected entities of Vishvas Group viz. Ishita VSL, Quantum, Mefcom

and ISF, indulged in 312 synchronized trades for 12,01,751 shares (82.95% of total

alleged synchronized quantity and 17.63% of total market quantity). The entity-wise

details of synchronized trades at NSE are given in the following table:

Table 4

ClientName

Buy Sell Total

Countof BuyOrders

CountofBuy Trades

Total BuyQty

Countof SellOrders

Count ofSell Trades

Total SellQty

TotalOrders

Total Trades

Total TradeQty

Ishita 51 70 296041 65 92 372986 116 162 669027


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ClientName

Buy Sell Total

Countof BuyOrders

CountofBuy Trades

Total BuyQty

Countof SellOrders

Count ofSell Trades

Total SellQty

TotalOrders

Total Trades

Total TradeQty

Mefcom 62 102 318875 58 68 310826 120 170 629701ISF 32 42 161362 23 23 133759 55 65 295121

Quantum 33 51 168456 31 40 176205 64 91 344661Cosmo 36 40 229898 31 68 166330 67 108 396228 VSL 4 4 21315 8 19 34645 12 23 55960Master 3 3 5804 2 2 7000 5 5 12804 Total 221 312 1201751 218 312 1201751 439 624 2403502

(g) Most of the aforesaid synchronized trading were transacted by Vishvas Group. On some

of the days, the synchronized quantity of shares traded by Vishvas Group constituted

more than 15% of the total day traded volume. For example, on May 24, 2006, the total

traded volume was 1,35,845 shares out of which 56,862 shares (41.86% shares) were

synchronized by the seven connected entities of Vishvas Group. It was also observed

that out of total 37 trading days during the investigation period, on 24 trading days, these

entities indulged in synchronized trading at NSE as detailed in the following table :

Table 5

SN

Date(A)

Total mkt. Volume(B)

Total DaySynchronised

Volume(C)

Synchronizedtrading byseven entities(D)

Synch. Trade volume of

sevenentities vs.total synch.trade

volume in %(D/C*100)(E)

Synch. trade

volume ofsevenentities vs.total market

volume in %(D/B)*100(F)

1 24-May-06 135845 82466 56862 68.95 41.86

2 31-May-06 55827 22000 21500 97.73 38.51

3 23-May-06 361836 156445 133145 85.11 36.80

4 18-May-06 286480 99989 98859 98.87 34.51

5 12-May-06 325936 149093 107579 72.16 33.016 10-May-06 508209 172281 164890 95.71 32.45

7 2-May-06 190824 48813 48713 99.80 25.53

8 28-Apr-06 242491 73740 60240 81.69 24.84

9 19-May-06 305545 82810 72810 87.92 23.83

10 17-May-06 315704 95451 73386 76.88 23.25

11 30-May-06 65199 14500 14500 100.00 22.24


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SN

Date(A)

Total mkt. Volume(B)

Total DaySynchronised

Volume(C)

Synchronizedtrading byseven entities(D)

Synch. Trade volume ofsevenentities vs.total synch.

trade volume in %(D/C*100)(E)

Synch. trade volume ofsevenentities vs.

total market volume in %(D/B)*100(F)

12 11-May-06 294423 70414 64487 91.58 21.90

13 29-Apr-06 138336 26199 25845 98.65 18.68

14 22-May-06 104358 19310 19310 100.00 18.50

15 24-Apr-06 174534 39239 30475 77.67 17.46

16 4-May-06 455206 60161 59350 98.65 13.04

17 15-May-06 186596 21941 21368 97.39 11.45

18 25-May-06 105903 52028 12028 23.12 11.36

19 26-May-06 98820 10950 10950 100.00 11.08

20 21-Apr-06 149401 15490 15000 96.84 10.04

21 29-May-06 56729 6150 5500 89.43 9.70

22 9-May-06 373563 47046 33574 71.36 8.99

23 25-Apr-06 480062 48796 38905 79.73 8.10

24 16-May-06 291367 17675 12475 70.58 4.28

(h) It was observed that on 23 days out of aforesaid 24 days, the alleged synchronized trades

of Vishvas Group was more than 50% of total market synchronized trades. Also the

contribution of volumes through alleged synchronized trades by the above entities wasmore than 40% of total traded volume on 24/05/2006 and it was more than 38% on

31/05/2006. On 15 days out of total 24 days, the alleged synchronized trades of the

Vishvas Group constituted more than 15% to the total market volume. The entity-wise

traded quantity of Vishvas Group through alleged synchronized trading during the

investigation period at NSE is given below:

Table 6

Particulars Seller Name Buyer

Name Ishita

Quant

um VSL Mefcom Cosmo ISF

Master

Finlease Total

Mefcom12273

8 73820 5000 00 56927 53390 7000 318875

Ishita 00 73439 00 136008 42150 44444 00 296041

Cosmo11065

7 4975 00 81341 00 32925 00 229898

Quantum 68063 00 27653 41787 29953 1000 00 168456

ISF 67724 18996 1992 35350 37300 00 00 161362


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Particulars Seller Name BuyerName Ishita

Quantum VSL Mefcom Cosmo ISF

MasterFinlease Total

VSL 00 4975 00 16340 00 00 00 21315Master

Finlease 3804 00 00 00 00 2000 00 5804

Total37298

6 176205 34645 310826 166330 133759 7000 1201751

(i) Analysis of trade log at both BSE and NSE reflected that there were substantial number

of trades in which parties and counterparties to the trade were entities which belong to

Vishvas Group. Thus, the Noticees were creating an artificial volume in the market by

trading among themselves i.e. by circular trading.

(j) At BSE, the Noticees together with three other connected entities of Vishvas Group viz.

Mr. Praveen Poddar, Mefcom, and ISF, allegedly indulged in 2,138 circular trades in 29trading days out of 37 trading days during the investigation period and created artificial

volume of 26,90,184 shares (30.08% of total market volume) by buying and selling

among themselves. Further, out of 29 days wherein alleged circular trades were observed,

on 26 days, these alleged circular trades were entered through 210 alleged synchronized

trades for 12,26,309 shares, the details of which are given in the previous paragraphs.

The summary of circular trades among these nine entities at BSE during the investigation

period is given below:-

Table 7

Circular Trade Sellers

Buyers CosmoSunitaGupta

MasterFinlease

Mefcom

PurshottamKhandelwal ISF

PraveenPoddar

Grand Total

Vishvas 10000 8000 00 00 54509 6000 19597 98106 Avisha 00 00 00 00 50000 00 00 50000Cosmo 5672 43875 00 59535 259186 7000 49152 424420SunitaGupta 38031 00 00 43901 82808 94132 29928 288800MasterFinlease 00 00 00 10000 13399 00 4000 27399Mefcom 9500 36059 00 00 180381 45579 52274 323793

PurshottamKhandelw al 72446 150814 8386 108126 65025 124694 187160 716651ISF 35602 19965 10000 21041 215666 00 38990 341264PraveenPoddar 61559 29674 00 32044 279473 17001 00 419751Grand Total 232810 288387 18386 274647 1200447 294406 381101 2690184


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(k) The day-wise circular trades among the aforesaid nine entities at BSE during theinvestigation period is given below:

Table 8

Sr.No.

Date(A)

Circular Trades by

group(B)

Total Market Volume(C)

% of circular to

Total trades(B/C*100)

1 31-05-2006 39260 48722 80.58%2 30-05-2006 24662 31756 77.66%3 11-05-2006 264716 409252 64.68%4 25-05-2006 41824 71468 58.52%5 29-05-2006 32885 58042 56.66%6 12-05-2006 196999 349076 56.43%7 18-05-2006 167150 337055 49.59%8 21-04-2006 135898 276438 49.16%9 16-05-2006 155579 342392 45.44%

10 02-05-2006 193963 473324 40.98%11 26-05-2006 59835 161280 37.10%

12 10-05-2006 174481 488420 35.72%13 28-04-2006 125220 363073 34.49%14 29-04-2006 51768 168693 30.69%15 15-05-2006 109551 370350 29.58%16 19-05-2006 90663 316863 28.61%17 04-05-2006 179516 642628 27.93%18 09-05-2006 135161 494413 27.34%19 05-05-2006 28946 118530 24.42%20 25-04-2006 115087 482177 23.87%21 27-04-2006 87898 368587 23.85%22 24-04-2006 77899 354385 21.98%23 24-05-2006 18260 108555 16.82%24 08-05-2006 19124 113772 16.81%

25 17-05-2006 47493 287561 16.52%26 23-05-2006 63535 426111 14.91%27 26-04-2006 27118 265051 10.23%28 22-05-2006 22316 238886 9.34%29 03-05-2006 3377 209414 1.61%

(l)

The aforesaid circular trades of these nine entities constituted significant volume of total

traded volume in the scrip. For example, the alleged circular trades of these nine entities

constituted 80.58%, 77.66% and 64.68% of total traded volume on May 31, 2006, May

30, 2006 and May 11, 2006, respectively and on 10 days, the percentage of alleged

circular trade volume of these entities to the total market volume was more than 40%.

(m) At NSE, Cosmo and Master Finlease together with five other connected entities of

Vishvas Group viz. Ishita, VSL, Quantum, Mefcom and ISF indulged in 2,419 alleged

circular trades in 29 trading days out of 37 trading days during the investigation period

and created artificial volume of 23,56,185 shares (34.56% of total market volume) by

buying and selling among themselves. Further, out of 29 days wherein circular trades


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were observed, on 24 days, these alleged circular trades were entered through 312

synchronized trades for 12,01,751 shares, the details of which are given in the previous

paragraphs. The details of circular trades among these seven entities at NSE during the

investigation period is given in the following table:

Table 9Circular Trades Sellers

Buyers ISF Mefcom VSL Cosmo IshitaMasterFinlease Quantum

Grand Total

ISF 625 110961 6552 68158 157108 00 33458 376862Mefcom 68254 550 5000 102992 231230 7040 100574 515640 VSL 26258 24142 497 100 5022 00 14980 70999Cosmo 36925 123702 00 00 143512 00 27975 332114Ishita 157329 188865 2570 183095 92185 29825 107776 761645MasterFinlease 2000 00 00 00 7841 00 00 9841Quantum 2000 76917 48823 59751 101533 00 60 289084

Grand Total 293391 525137 63442 414096 738431 36865 284823 2356185

(n) The day-wise circular trades among these seven entities at NSE during the investigation

period is given in the following table:

Table 10

Sr. No.Date(A)

Circular Trades bygroup(B)


% to TotalMarket Volume(B/C*100)

1 31-May-06 49259 55827 88.24

2 29-May-06 42472 56729 74.87

3 11-May-06 206314 294423 70.07

4 26-May-06 66609 98820 67.40

5 10-May-06 306955 508209 60.40

6 24-May-06 76547 135845 56.35

7 21-Apr-06 78993 149401 52.87

8 12-May-06 146837 325936 45.05

9 28-Apr-06 101720 242491 41.95

10 30-May-06 27070 65199 41.52

11 29-Apr-06 53560 138336 38.72

12 23-May-06 139929 361836 38.67

13 17-May-06 120652 315704 38.22

14 25-Apr-06 180850 480062 37.67

15 2-May-06 69401 190824 36.37

16 18-May-06 100523 286480 35.09

17 25-May-06 35953 105903 33.95

18 4-May-06 146256 455206 32.13


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Sr. No.Date(A)

Circular Trades bygroup(B)


% to TotalMarket Volume(B/C*100)

19 15-May-06 52917 186596 28.36

20 9-May-06 101367 373563 27.14

21 19-May-06 74995 305545 24.54

22 22-May-06 22174 104358 21.25

23 3-May-06 42159 223203 18.89

24 24-Apr-06 32830 174534 18.81

25 27-Apr-06 29939 197354 15.17

26 16-May-06 40058 291367 13.75

27 8-May-06 4848 49250 9.84

28 26-Apr-06 4997 77999 6.41

29 5-May-06 1 21712 0.00

(o) The aforesaid alleged circular trades of these seven entities constituted significant

volume of total traded volume in the scrip. For example, the alleged circular trades of

these seven entities constituted 88.24%, 74.87% and 70.07% of total traded volume on

May 31, 2006, May 29, 2006 and May 11, 2006, respectively and on 10 days, the

percentage of alleged circular trade volume of these entities to the total market volume

was more than 40%.

(p) At BSE, during the investigation period, Mr. Purshottam Khandelwal and Cosmo, in

addition to synchronized and circular trades also indulged in self trades (wherein the

buyer and seller was the same person) as described in the following table:

Table 11

Name of the entity Number of trades Traded Qty

Mr. Purshottam Khandelwal 711 65025

Cosmo 2 5672 Total 713 70697

(q) During the investigation period, the price of the scrip has decreased between April 7,

2006 to April 20, 2006 (Patch 1), increased in the period between April 21, 2006 to May

5, 2006 (Patch 2), and then again decreased between May 8, 2006 to May 31, 2006 (Patch

3) as described in the table below: Table 12

Exchange Opening price(April 07,2006)

Closing price(April 20, 2006)

Tradingdays

% Change in price of thescrip

Average Daily Traded Volume

Patch I (April 7, 2006 to April 20, 2006) BSE 53.25 44.75 8 Days 15.96% 70713


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(Decrease)NSE 56.00 44.40 8 Days 20.70%

(Decrease)68005

Patch II (April 21, 2006 to May 5, 2006 )

BSE 46.00 66.55 11 Days 44.70%(Increase)

338391

NSE 46.00 66.90 11 Days 45.40%(Increase)

213738

Patch III (May 8, 2006 to May 31, 2006) BSE 64.50 44.35 18 Days 31.20%

(Decrease)258554

NSE 63.55 45.40 18 Days 28.60%(Decrease)

217866

(r) It was also observed that all the entities belonging to Vishvas Group had traded only

during Patch 2 (i.e., the period of price rise) and Patch 3 (i.e., the period of price fall) and

had been instrumental to the respective price rise and fall by contributing significant

positive and negative LTP variation during the respective Patch.

(s) At BSE, total cumulative positive and negative LTP variation was ` 1130.40 and

` 1139.25, respectively during the investigation period wherein noticees together with

three other connected entities of Vishavs Group viz . Praveen Poddar, Mefcom Securities

Ltd, and ISF Securities Ltd. contributed ` 718.05 and ` 468.65, respectively. The details

of alleged contribution of these nine entities belonging to Vishvas Group to cumulative

positive and negative LTP variation is given in the table below: –

Table 13

Sr. No. Client Name Sum of Positive LTP Variations ( ` )

Sum of Negative LTP Variations ( ` )

1 Purshottam Khandelwal 673.50 -431.702 Mefcom 18.30 -24.253 Praveen Poddar 10.20 -3.204 Sunita Gupta 5.70 -4.355 ISF 5.10 -3.056 Cosmo 4.75 -1.707 Avisha 0.15 0.008 Vishvas 0.35 -0.209 Master Finlease 0.00 -0.20Sum of LTP variation by Vishvas Group 718.05 -468.65Cumulative LTP variation during the

period

1130.40 -1139.25

% of LTP variation by Vishvas Group 63.52% 41.14%

(t) At NSE, total cumulative positive and negative LTP variation was ` 995.25 and

` 1007.25, respectively during the investigation period wherein Master Filease Ltd. and

Cosmo Corporate Services Ltd. together with five other connected entities of Vishvas

Group viz. Ishita, Mefcom, VSL, Quantum and ISF allegedly contributed ` 489.05 and


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` 307.90, respectively. The details of alleged contribution of seven entities belonging to

Vishvas Group to cumulative positive and negative LTP variation is given below : –

Table 14

Sr.No.

Client Name Sum of Positive LTP

Variations ( ` )

Sum of Negative LTP

Variations ( ` )

1 Ishita 365.95 -229.202 Mefcom 56.55 -45.003 VSL 32.10 -18.504 Cosmo 14.50 -6.705 Quantum 10.55 -3.706 ISF 8.80 -4.607 Master Finlease 0.60 -0.20Sum of LTP variation by Vishvas group 489.05 -307.90Cumulative LTP variation during the period

995.25 -1007.25

% of LTP variation by Vishvas group 49.14% 30.57%

(u)

An analysis of new high price (NHP) for the period under investigation revealed that atBSE, in total 85 instances, price of the scrip increased by ` 17.70. During Patch 2, the

price rose by ` 13.85 in 69 instances. Vishvas Group entities contributed ` 5.45 (39.35%

of total increase) in 41 instances as given in the table below:-

Table 15

NHP AnalysisDetails Patch II (April 21, 2006 to May 05, 2006)

Total Price Rise (In 69 Instances) ` 13.85

Contribution by Vishvas Group (In 41 Instances) ` 5.45 Purshottam Khandelwal : ` 5.25 in 39Instances

Cosmo: ` 0.20 in 2 InstancesContribution by other Scattered Entities (In 28Instances)

` .8.40

% Contribution by Vishvas Group 39.35%

(v) Analysis of NHP for the period under investigation revealed that at NSE, in total 50

instances, price of the scrip increased by ` 15.05. During patch 2, the price rose by ` 13.90

in 43 instances. Vishvas Group entities contributed ` 4.80 (34.53% of total increase) in 14

instances as given in the table below:-

Table 16

NHP AnalysisDetails Patch II (April 21, 2006 to May 05, 2006) Total Price Rise (In 43 Instances) ₹13.90Contribution by Vishvas Group (In 14 Instances) ₹4.80 Ishita : ₹4.75 in 13 Instances

ISF : ₹0.05 in 1 InstanceContribution by other Scattered Entities (In 29Instances)

₹9.10

% Contribution by Vishvas Group 34.53%


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4. In view of the observations mentioned in the above paragraphs, it has been alleged in the SCN

that the Noticees, in concert with eight other connected entities of Vishvas Group ( viz; have

indulged in large number of synchronized trading, circular trading and price manipulation in the

shares of the Company which created an artificial volume and false or misleading appearance of

trading in the securities market. It is also alleged that those trades were only a device to inflate,

depress or fluctuate the price of the scrip. It is, therefore, alleged in the SCN that the Noticees

have committed following violations:

(a)

that the Noticees have indulged in fraudulent and unfair trade practices and violated the

provisions of section 12A (a), (b), (c) of Securities and Exchange Board of India Act, 1992

and regulations 3(a), (b(c), (d), 4(1), and 4(2) (a), (e) of the Securities and Exchange Board of

India (Prohibition of Fraudulent and Unfair Trade practices relating to Securities Market),

Regulations 2003 ( hereinafter referred to as "the PFUTP Regulations")

(b) that Mr. Purshottam Khandelwal and Cosmo had indulged in self trades without an

intention of performing those trades or change of ownership of shares of the Company and

therefore have violated the provisions of regulation 4(2)(g) of the PFUTP Regulations.

5. The aforesaid provisions are reproduced hereunder:

SEBI Act, 1992

"Prohibition of manipulative and deceptive devices, insider trading and substantial

acquisition of securities or control.

12A. No person shall directly or indirectly – (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be

listed on a recognized stock exchange, any manipulative or deceptive device or contrivance incontravention of the provisions of this Act or the rules or the regulations made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities whichare listed or proposed to be listed on a recognised stock exchange;

(c) engage in any act, practice, course of business which operates or would operate as fraud or deceit uponany person, in connection with the issue, dealing in securities which are listed or proposed to be listed ona recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulationsmade there under; "

PFUTP Regulations

"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;


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(b) use or employ, in connection with issue, purchase or sale of any securities listed or proposed to be listed ina 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 whichare 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 arecognized stock exchange in contravention of the provisions of the Act or the rules and the regulationsmade 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 unfairtrade practice in securities.

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice it involves fraud andmay 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 security;………………………………………………………………………………. (g) entering into a transaction in securities without intention of performing it or without intention of change ofownership of such security;"

6. By the SCN these 6 Noticees were called upon to show cause as to why directions under

sections 11(1), 11(4) and 11B of the SEBI Act should not be issued against them. All the

Noticees except Cosmo filed their respective reply to the SCN on different dates as mentioned

in the following table:

Table 17

Sl. No. Entity Date of Reply1. Mr. Purshottam Khandelwal November 24, 2013 2. Ms. Sunita Gupta November 20, 20133. Master Finlease November 22, 2013 4. Avisha November 22, 2013 5.

Vishvas November 26, 2013

7. Opportunities of personal hearings were granted to the Noticees on several dates which few of

them availed after seeking adjournments. Cosmo did not avail any of the opportunities despite

service of notices in this regard. Mr. Purshottam Khandelwal and Ms. Sunita Gupta availed the

opportunity. However, Master Finlease, Avisha and Vishvas did not avail any of the

opportunities of personal hearings despite hearings scheduled at SEBI-NRO as requested by

them but they filed written representations and sought further time for personal hearing on

some or the other grounds. Fresh opportunity given to all the Noticees on July 23, 2015 was

only availed by Ms. Sunita Gupta. Opportunities given on December 03,2015 and February 11,

2016 were not availed by any of the Noticees but vide letter dated February 9, 2016, Master


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Finlease requested for adjournment.

8. I note that Cosmo has neither filed any reply to the SCN nor did it avail the opportunities of

personal hearings despite service of notices upon it. Hence no further opportunities should be

granted to this Noticee. Ms. Sunita Gupta has filed a reply to the SCN, has availed the

opportunity of personal hearing on July 23, 2015 has also filed post hearing written submissions

vide her letter dated August 03, 2015. During the course of hearings in the matter, the other

three notices viz., Master Finlease, Avisha and Vishvas have filed their written

representations/submissions. Considering these facts and circumstances, I am of the view that

sufficient opportunities have been given to the Noticees and the mater can be proceeded with

on the basis of SCN, replies, oral/written submissions of the Noticees during the course of

hearing and material available on record and no further opportunity need to be granted. Replies

and submissions of the respective Noticees are summarised as under:-

Mr. Purshottam Khandelwal

9. He has submitted that he had no relation with any other entities of the Vishvas Group. He has

further submitted that one Mr. Nirmal Jain, entered into the trades his name and he has nothing

to do with the alleged manipulative trades.

Ms. Sunita Gupta

10. She has submitted that a penalty of ` 60 lakh has been imposed on her vide adjudication order

dated July 22, 2014 for the same cause of action. Therefore, initiating a proceeding under section

11B of the SEBI Act would be excessive as the entity has already been penalized for the same

cause of action and would amount to double jeopardy. She has further submitted that there was

nothing available on record to establish any connection with the Vishvas Group entities for

creating false and misleading appearance in the market while dealing in the scrip of the

Company. She had worked in good faith as a sub-broker.

Master Finlease

11. It has submitted that it had no relation with any other entities of the Vishvas Group except

Avisha. On the same issue as that in the SCN, SEBI has already imposed a penalty and as such

proceedings qua it be quashed. It had bought only 5804 shares and sold 7000 shares during the

investigation period, which is not sufficient to have resulted in the creation of any artificial

volume or any price manipulation.

Avisha

12. It has submitted that it had no relation with any other entities of the Vishvas Group except


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Master Finlease. On the same issue as that in the SCN, SEBI has already imposed a penalty and

as such proceedings qua it be quashed. It had bought only 50,000 shares during the investigation

period, which is not sufficient to have resulted in the creation of any artificial volume or any

price manipulation.

Vishvas

13. It has submitted that it had no relation with any entity of the Vishvas Group. On the same issue

as that in the SCN, SEBI has already imposed a penalty and as such proceedings qua it be

quashed. It had bought only 39,958 shares during the investigation period, which is not

sufficient to have resulted in the creation of any artificial volume or any price manipulation.

14. I have carefully considered the common SCN issued to the respective Noticees, their

replies/submissions and relevant material available on record. I note that the common SCN has

been issued to all the Noticees on the basis of same set of facts and circumstances. I, therefore,

deem it appropriate to deal with the SCN issued to all the Noticees herein by way of this

common order. It is further noted that the SCN has alleged that the Noticees, in concert with

eight other connected entities of Vishvas Group (viz; Ishita, Quantum, ISF, Mr. Praveen

Poddar, Anupama Communications Pvt. Ltd., Mefcom, VSL and SIC) indulged in the alleged

creation of artificial volume, false or misleading appearance of trading and price manipulation in

the scrip during the investigation period. However, these alleged 8 connected entities of Vishvas

Group are not Noticees in this SCN and as mentioned therein separate and independent

proceedings have been initiated against them. Hence, nothing in this order shall be construed as

any finding against them on merits.

15. Before dealing with the merits of the case, I deem it necessary to deal with technical objections

of the Noticees namely Ms. Sunita Gupta, Master Finlease, Avisha and Vishvas who have

contended that for the same set of alleged violations SEBI has imposed monetary penalty in

adjudication proceedings against them and the instant proceedings should be quashed on this

ground as it amounts to double jeopardy. In this regard, I note that the principle of double

jeopardy flows from the fundamental right enshrined in Article 20(2) of the Constitution of

India. I note that it is judicially settled position that in order to claim the protection of Article

20(2) it is necessary to show that - (a) there was a previous prosecution, (b) as a result of whichthe accused was punished, and (c) the punishment was for the same offence. Unless all the three

conditions are fulfilled, Article 20 (2) of the Constitution of India is not attracted.

16. The words 'offence', 'prosecution' and 'punishment' in the context of Article 20(2) of the Constitution

of India contemplate proceedings of criminal nature before a court of law. The Hon'ble High


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Court of Bombay in the matter of SEBI Vs. Cabot International Capital Corporation (2004) to Comp L J

held that "the adjudication for imposition of penalty by Adjudication Officer, after due inquiry, is neither a

criminal nor a quasi criminal proceeding. The penalty leviable under this Chapter or under these sections, is

penalty in cases of default or failure of statutory obligation or in other words, breach of civil obligation. The

provisions and scheme of penalty under SEBI Act and the regulations, there is not element of criminal offence or punishment as contemplated under criminal proceedings." The Hon'ble Supreme Court in Shriram Mutual

Fund & Anr. {Appeal (civil) 9523-9524 of 2003}, has also held that adjudication proceedings

under SEBI Act are civil proceedings. Further the present proceedings are also civil proceedings.

Therefore, in my view, principle of double jeopardy do not apply to the present civil proceedings

and the earlier adjudication proceedings that were settled by the order dated July 21, 2008, do

not bar the civil actions by way of directions under section 11 and 11B of the SEBI Act. In this

regard, the order of the Hon’ble SAT dated December 02, 2010, in the matter of Appeal no. 70

of 2010 – Yashraj Containeurs Ltd. vs SEBI is also worth mentioning:

“...After arguing these appeals for some time, the learned counsel appearing for the appellants pray that they

may be allowed to withdraw the appeals. While granting this prayer, we cannot resist observing that in view of

the serious allegations made against the appellants which stand established during the course of the adjudication

proceedings, the Securities and Exchange Board of India (for short the Board) should not have been content

with initiating only adjudication proceedings against the appellants in which only a monetary penalty could be

levied. This is a fit case where the Board should have considered initiating proceedings under Sections 11 and

11B of the Securities and Exchange Board of India Act, 1992 for issuing appropriate directions against the

appellants to protect the integrity of the market and the interests of the investors.”

17.

I, therefore, am of the view that the directions contemplated under sections 11(1), 11(4)(b),11A(1)(b) and 11B of the SEBI Act and imposition of monetary penalty under the SEBI Act are

civil actions and imposition of monetary penalty would not bar additional civil action by way of

directions as contemplated in the SCN.

18. Having addressed the aforesaid technical objections, I now proceed to deal with the merits of

the case. I note that all the Noticees have disputed their connections with Vishvas Group

entities except Master Finlease and Avisha who have admitted connections amongst themselves.

I note that such Noticees have made ipse dixit denials in this regard and have not been able to

substantiate their contentions on the basis of any material. In fact the SCN clearly brings out theconnections of the Noticees with Vishvas Group entities on the basis of following factors which

none of the Noticees have disputed-


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Table 18

Sr.No

Entity Name(Broker’s Name)

Connection with other entities of Group

1 Master Finlease

(Integrated Master Securities Pvt.Ltd.)

Same address as Avisha and Vishvas.

Shareholder in VSL. (Unlisted Company - 19.24%shareholding as on September 30, 2006)

Off market transfers with VSL.

2 Mr. Purshottam Khandelwal

(SIC)

Off Market Transfers from Anupama Communications Pvt.Ltd.

Entered into synchronized trades with Mr. Praveen Poddar andMs. Sunita Gupta.

3Cosmo(Integrated Master Securities Ltd.)

Entered into off market transfers with Master Finlease.

Entered into Synchronized trades with Quantum, Ishita, Mr.Praveen Poddar and Ms. Sunita Gupta.

4 Ms. Sunita Gupta

(Parasram Holdings)

Entered into large no. of synchronized trades with Mr.Purshottam Khandelwal, Cosmo, ISF, Mr. Praveen Poddar,Mefcom.

5 Avisha

(Shriram Insight Share BrokersLtd.)

Holder of 25% stake in VSL (Unlisted Co.) 3,37,380 shares ason September 30, 2006.

Same address as Vishvas and Master Finlease.

Directors of Avisha (Ms. Shubha Jhindal, Mr. Vijay Jhindaland Mr. Rakesh Agarwal) are also directors in Master Finlease.

6 Vishvas (Formerly Known asMefcom Agro Industries Ltd.)(Mefcom)

Same address as Avisha and Master Finlease.

19.

It is noted from the SCN that during investigation period, Mr. Purshottam Khandelwal had

bought 29,27,835 shares and sold 28,82,486 shares of the Company during investigation period.

Out of the total 420 synchronized trades in the scrip during the investigation period, 133 trades

were entered into by Mr. Purshottam Khandelwal. Out of the total shares bought by the him, his

buy orders for total 1,52,555 shares were synchronized with sell orders of Ms. Sunita Gupta,

Cosmo and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. Further,

his sell orders for 6,36,508 shares were synchronized with buy orders of Ms. Sunita Gupta,

Cosmo, Avisha, Vishvas and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom,

and ISF. He had bought 7,16,651 shares of the Company through circular trades with Ms. Sunita

Gupta, Cosmo, Master Finlease and the entities of Vishvas Group viz; Mr. Praveen Poddar,

Mefcom and ISF. Further, he had sold 12,00,447 shares through circular trades with remaining 5

Noticees and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. He had

also indulged in 711 self trades (for 65,025 shares) in the scrip during investigation period. His

trades had also contributed in LTP/NHP manipulation as described in the SCN.

20. Mr. Purshottam Khandelwal has not denied these transactions. However, he has claimed that

one Mr. Nirmal Jain had entered into the trades his name and he had nothing to do with the


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alleged manipulative trades. It is noted that Mr. Purshottam Khandelwal has not initiated any

legal action against Mr. Nirmal Jain so as to prove his innocence in the matter. He has failed to

establish any of his claims on the basis of any evidence and the documents shared with him deny

his claim. it is noted that such contention of Mr. Purshottam Khandelwal has been considered

during investigation in the matter and the SCN has clearly brought out that he himself hadopened his trading account and had received a cheque from the Company and he was thus aware

that shares of the Company were credited in his account. In absence of any legal action by him

against Mr. Nirmal Jain he had been charged in the SCN that his submissions were a ploy and an

afterthought to avoid regulatory actions. Despite such clear allegations based on the factors

which Mr. Purshottam Khandelwal is privy to, he has failed to substantiate his claim. I,

therefore, do not find any reason to differ with the charges and the allegations against him in the

SCN.

21.

It has been alleged in the SCN that Ms. Sunita Gupta had indulged in synchronized trades andcircular trades. Out of the 3,42,246 shares of the Company bought by Ms. Sunita Gupta trades

for 1,76,813 shares were synchronized with trades of Mr. Purshottam Khandelwal, Cosmo and

the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. Further, out of

3,42,246 shares sold by her, trades for 74,205 shares were synchronized with trades of Mr.

Purshottam Khandelwal, Cosmo and the entities of Vishvas Group viz; Mr. Praveen Poddar,

Mefcom and ISF. Further, out of 3,42,246 shares of the Company bought by Ms. Sunita Gupta

during the investigation period 2,88,800 shares were involved in circular trading with Mr.

Purshottam Khandelwal, Cosmo and the entities of Vishvas Group viz; Mr. Praveen Poddar,

Mefcom and ISF and out of the 3,42,246 shares sold by her 288,387 shares were involved in

circular trading with Mr. Purshottam Khandelwal, Cosmo, Vishvas and the entities of Vishvas

Group viz; Mr. Praveen Poddar, Mefcom and ISF. Her trades had also contributed in

LTP/NHP manipulation as described in the SCN. Ms. Sunita Gupta has not given any plausible

explanation to these types of trades with connected entities rather she has admitted to have

indulged in those trades as sub- broker and has claimed her transactions to be bona fide . Thus, by

her own admissions, she has not only admitted her alleged trades but also to be acting as sub-

broker which requires registration with SEBI. I, therefore, reject her contentions.

22.

It has been alleged in the SCN that Cosmos had indulged in synchronized trades and circular

trades in the scrip during the investigation period. Its buy orders for 1,70,236 shares were

synchronized with sell orders of Mr. Purshottam Khandelwal, Ms. Sunita Gupta and the entities

of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. Its sell orders for 1,20,451 shares

were synchronised with buy orders of Mr. Purshottam Khandelwal, Ms. Sunita Gupta, Vishvas

and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. Further, it had


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bought 4,24,420 shares of the Company through circular trading from Mr. Purshottam

Khandelwal, Ms. Sunita Gupta, and the entities of Vishvas Group viz; Mr. Praveen Poddar,

Mefcom and ISF. Further, Cosmo had sold 2,32,810 shares of the Company through circular

trades from Mr. Purshottam Khandelwal, Ms. Sunita Gupta, Vishvas and the entities of Vishvas

Group viz; Mr. Praveen Poddar, Mefcom and ISF. It had also indulged in self trades for 5,672shares of the Company during the investigation period. Its trades had also contributed in

LTP/NHP manipulation as described in the SCN. Cosmo has not filed any reply and has also

failed to avail the opportunity of personal hearing. I, therefore, find that it has no explanations

to the allegations and charges as leveled in the SCN.

23. As alleged in the SCN, Master Finlease had bought 38,000 shares and 20,500 shares of the

Company at BSE and NSE, respectively, and sold 18,386 shares and 1,11,400 shares of the

Company at BSE and NSE, respectively. Master Finlease had indulged in synchronized trades

and circular trades. At BSE, out of the 38000 shares bought by it, 27399 shares were involved incircular trading with other entities of the Vishvas Group; viz; Mr. Praveen Poddar, and Mefcom

and all of 1,83,868 shares sold by it were involved in circular trading with other entities of the

Vishvas Group. Further, at NSE, out of the 20,500 shares bought by Master Finlease, 9,841

shares were involved in circular trading with other entities of the Vishvas Group and out of

1,11,400 shares sold by it, 36,865 shares were involved in circular trading with other entities of

the Vishvas Group. Further, out of 439 synchronized trades at NSE, Master Finlease indulged in

5 synchronised trades. At NSE, its buy orders for 5804 shares were synchronized with the sell

orders of the entities of Vishvas Group viz; Ishita and ISF. Its sell orders for 7,000 shares were

synchronised with buy orders of the entity of Vishvas Group namely, Mefcom. Further, at BSE,

it had bought 27,399 shares of the Company through circular trading with Mr. Purshottam

Khandelwal and the entities of Vishvas Group viz; Mr. Praveen Poddar and Mefcom. Similarly,

at NSE, it had bought 9,841 shares of the Company through circular trading with the entities of

Vishvas Group viz; ISF and Ishita. Further, at BSE, Master Finlease had sold 18,386 shares of

the Company through circular trades with Mr. Purshottam Khandelwal and the entity of Vishvas

Group, viz; ISF. At NSE, Master Finlease had sold 36,865 shares of the Company through

circular trades with the entities of Vishvas Group, viz; Mefcom and Ishita. Its trades had also

contributed in LTP/NHP manipulation as described in the SCN. These trading data are based

on order log/ trade log annexed in the Annexures to the SCN. Master Finlease has not disputed

this data and has contended that it had bought only 5,804 shares and sold 7,000 shares during

the investigation period. In view of established data in order log/trade log, I find the

submissions of Master Finlease without any basis.

24. Further, as per the SCN, Avisha had bought 50,000 shares of the Company at BSE during


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investigation period. Total 49,999 shares were bought by Avisha through synchronized

transaction with Mr. Purshottam Khandelwal. Further, Vishvas had bought 100000 shares of the

Company at BSE during investigation period and had indulged in 5 synchronized trades with

other entities of the Vishvas Group for 39958 shares. Out of the total shares bought by it, 98106

shares were involved in circular trading with other entities of the Vishvas Group. Avisha and Vishvas have not disputed their trades and have claimed that their respective trades are not

sufficient to result in the creation of any artificial volume or any price manipulation. In my view,

when seen in isolation, individual transaction may look small. However, when seen holistically -

the non-genuine synchronized and circular trades in the same pattern and in close proximity of

time with the other transacting parties as part of plan of entire group to manipulate the volume

and price of the scrip, such trades also contribute to manipulation. I, therefore, do not agree

with the contentions of Master Finlease, Avisha and Vishvas.

25.

In view of the above discussions, I find that none of the Noticees have filed any plausiblereply/explanation on merits of the case. It is pertinent to mention that there is no scale to

measure fraudulent, deceptive and manipulative device, plan and artifice or its impact and the

findings in that regard always depend on inferences drawn from a mass of factual details.

Findings in this regard can also be gleaned from patterns of transactions/dealings of connected

parties, their conduct/behaviour, proximity of time in placing orders, frequency of trades, etc. In

the instant case, a clear pattern of synchronised and circular trading is evident in the trades

amongst the respective Noticee and counter parties entities of Vishvas Group with same or

different combination of the Noticees and these Vishvas Group entities. Placing of the sell

orders with same counterparties for same quantity of shares at the same price within nil or too

negligible time difference repeatedly over a period of time in bulk of such transactions with

almost the same set of counterparties, as brought out in the SCN and its Annexures are clear

indication that those trades were synchronised as a pre-planned device, artifice and contrivance.

In this regard, the following observations of the Hon’ble SAT in Ketan Parekh Vs. SEBI, Appeal

no. 2/2004 decided on July 14, 2006, are worth mentioning :

“.......... A synchronised transaction will, however, be illegal or violative of the Regulations if it is executed

with a view to manipulate the market or if it results in circular trading or is dubious in nature and is

executed with a view to avoid regulatory detection or does not involve change of beneficial ownership or isexecuted to create false volumes resulting in upsetting the market equilibrium. Any transaction executed with

the intention to defeat the market mechanism whether negotiated or not would be illegal. Whether a

transaction has been executed with the intention to manipulate the market or defeat its mechanism will

depend upon the intention of the parties which could be inferred from the attending circumstances because

direct evidence in such cases may not be available. The nature of the transaction executed, the frequency with

which such transactions are undertaken, the value of the transactions, whether they involve circular trading


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and whether there is real change of beneficial ownership, the conditions then prevailing in the market are some

of the factors which go to show the intention of the parties. This list of factors, in the very nature of things,

cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these

that an inference will have to be drawn.”

26.

In the screen based trading the manipulative or fraudulent intent can be inferred from variousfactors such as conduct of the party, pattern of transactions, etc. Such intention may be

demonstrated from the attending circumstances as observed by the Hon'ble SAT in Ketan Parekh

case in the following words-

"The nature of transactions executed, the frequency with which such transactions are undertaken, the value of

the transactions, ........., the conditions then prevailing in the market are some of the factors which go to show

the intention of the parties. This list of factors, in the very nature of things, cannot be exhaustive. Any one

factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be

drawn."

27. In this regard, I have taken into account the following observations of the Hon'ble SAT in its

order dated December 13, 2010 in Appeal no. 190/2010 - Ajmera Associates Pvt. Ltd. Vs. SEBI :

"... It is not in dispute that the trading system that we have on the stock exchanges is a blind trading system

which maintains complete anonymity of the persons trading. The broker while executing an order (buy or sell)

cannot possibly know at the time of placing the order through the system as to who the counter party is or even

the counter party broker. In other words, the trading system does not permit the buyers and the sellers to have

any interaction between them except through the trading system. A buy order placed on the system matches

with a sell order and a trade comes to be executed and this matching is done by the system on a price time priority basis. Despite the anonymity of the system, we have seen market players and the intermediaries like

the brokers executing manipulative trades by defeating the system and this is usually done by placing the buy

and sell orders simultaneously for the same amount and at the same price. Such matching orders usually

result in trades in comparatively less liquid scrips. This being the system, it sometimes becomes difficult to find

out whether the brokers who execute the trades of their clients and who are expected to carry out their

directions are also a party to the mischief. If the broker knew at the time of executing the trade what the client

was upto, then obviously he is a party to the mischief. Since the trading system maintains complete anonymity,

brokers always plead that they were ignorant about the counter party or his broker. In such a situation one

has to look to the trading pattern and if the trades match too often or if the matching of the trades is noticed

day after day and trade after trade, one can infer that the matching was done not by the system but bymanipulating the same....."

28. As brought in the SCN and its Annexures, substantial number of synchronised transactions and

circular transactions in the scrip were entered into by each of the Noticees with other Noticees

and Vishvas Group entities being counter parties to their trades. In the instant case, the basis of

connection amongst concerned Noticees and their counter parties -Vishvas Group entities have


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not been disputed by them. Even otherwise, considering the frequency and pattern of

transactions, I am of the opinion that the above trades of the Noticees, who are found to be

acting in league with counter parties, are of too much of a coincidence in anonymous screen

based trading system. Such transactions are possible only through coordinated and deliberate

synchronization of orders by the involved parties. I find that such repeated matching of time,rate and quantity in anonymous screen based trading could be possible only with the

involvement of the Noticees under a pre-meditated plan, device and artifice to create non-

genuine and artificial volume.

29. I further note that apart from synchronised and circular transactions as found above, Cosmo had

done 2 self trades for 5672 and Mr. Purshottam Khandelwal had indulged in several number

(711) of self trades for substantially high quantity ( 65025 shares); wherein the same entity was

buying party as well as selling party. Those self-trades clearly did not involve change in beneficial

ownership of traded shares and were, therefore, illegal. It is relevant to mention that with regardto the nature and effect of self-trades the Hon’ble SAT, in the matter of M/s. Jayantilal Khandwala

& Sons Pvt. Ltd. vs. SEBI (Appeal no. 24 of 2011 decided on June 8, 2011), 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 instant case, the nature of transactions, volume of the transactions and the frequency with

which these transactions were undertaken by the Noticees acting in concert with counter parties

connected entities of Vishvas Group cannot but lead to the conclusion that the aforesaid

transactions in the scrip of the Company were undertaken by the Noticees for creation ofartificial volume to give false or misleading appearance of trading in the scrip without intention

of change in beneficial ownership. I find that indulgence in non-genuine synchronized, circular

trades and illegal self-trades, repeatedly, with connected entities without intending to change

beneficial ownership of traded shares clearly establishes creation of artificial volume as alleged in

the SCN.

31.

I further find that entering into such synchronized, circular and self-trades was an attempt to

tamper with the free, fair and transparent price discovery system of the stock exchange. Such

practices where the transactions are put in with a premeditated understanding, have potential todistort the price discovery process at the stock exchange and disturbs the market equilibrium.

This apart, the undisputed overt and covert acts and substantial contribution of the Noticees in

LTP variation and establishing NHP in the scrip during respective Patch of price rise and fall at

BSE and NSE both clearly establish their involvement in price manipulation in the scrip as

described in the SCN.


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32. I, therefore, find that the Noticees have used and employed manipulative and deceptive device

or contrivance in their transactions in shares of the Company in contravention of provisions of

section 12A(a) (b) and (c) of the SEBI Act and regulations 3(a)(b) (c) (d) and regulation 4(1)(2)

(a) and (e) of the PFUTP Regulations as they had indulged in creation of artificial volume and

price manipulation as described in the SCN. Mr. Purshottam Khandelwal and Cosmo have also

contravened provisions of regulation 4(2)(g) of the PFUTP Regulations as they indulged in

illegal self- trades apart from non-genuine synchronised and circular trades as found in this case.

33. It is relevant to mention that in the matter of Sumeet Industries Limited, vide order dated May

21, 2014 Mr. Purshottam Khandelwal has been restrained by SEBI from accessing the securities

market and has been further prohibited from buying, selling or otherwise dealing in securities,

directly or indirectly, or being associated with the securities market in any manner, whatsoever,

for a period of three years. He has also been directed by the said order to disgorge the wrongful

gain made by him from his contraventions, as described in that order, with simple interest @

12% per annum from March 12, 2007 till the date of payment. I further note that in that matter,

in adjudication proceedings varying monetary penalties were imposed against other 5 entities

who are Noticees in the instant matter also. In case of Vital Communications Limited, vide

order dated July 31,2014 SEBI has restrained Cosmo and Master Finlease from accessing the

securities market and has further prohibited them from buying, selling or otherwise dealing in

securities, directly or indirectly, or being associated with the securities market in any manner,

whatsoever, for the period of three years. Vide ex-parte ad interim order dated June 29,2015 Avisha

Credit Capital Ltd. has been restrained from accessing the securities market and from buying,selling or dealing in securities, either directly or indirectly, in any manner, till further directions.

These orders are still in operation.

34. It is, thus, noted that the Noticees have repetitively indulged in manipulations in the securities

market and have manipulated the volumes and prices of other scrips in addition to the instant

one. In my view, repeated fraudulent acts and delinquent behaviour of the erring Noticees does

not bode well for the integrity, orderly development and smooth functioning of the securities

market. It, therefore, becomes incumbent to deal with contraventions, digression and

demeanour of the erring Noticees sternly and take appropriate actions for effective deterrence. While considering appropriate directions in this regard, I further note that there is no allegation

of any unlawful gain or avoidance of loss by the Noticees or loss caused to the investors and

nothing has been brought on record in this respect. However, it is noted that magnitude and

quantum of contribution of each of the Noticees are varying and the same can be a mitigating

factor for the purpose of appropriate direction.


25/25

O d i h f G i T il Li i d P 25 f 25

35. Considering the above facts and circumstances, I, in order to protect the interest of investors

and the integrity of the securities market, in exercise of the powers conferred upon me under

section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11 and

11B thereof and regulation 11 of the Securities and Exchange Board of India (Prohibition of

Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 herebyrestrain the following entities from accessing the securities market and further prohibit them

from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated

with the securities market in any manner, whatsoever, for the period as mentioned in the

following table:

Table 19

Sl. No. Entity PAN Period

1. Mr. Purshottam Khandelwal ADZPK9831B 5 years

2.

Ms. Sunita Gupta AAHPG4700E 3 years

3.

Cosmo Corporate Services Ltd AAACC3529P 5 years

4. Master Finlease Ltd. AAACM6050D 5 years

5. Avisha Credit Capital Ltd. AAACA5715D 1 year

6. Vishvas Projects Ltd. AAACM2047A 1 year

36. With regard to Mr. Purshottam Khandelwal, Cosmo Corporate Services Ltd., Master Finlease

Ltd. and Avisha Credit Capital Ltd. who are debarred/restrained/prohibited pursuant to the

respective orders dated May 21,2104 July 31,2014 and June 29,2015, the directions in the said

orders and the directions in the instant order shall run concurrently.

37. A copy of this order shall be served on all the recognized stock exchanges and the depositories

to ensure that the direction given herein are complied with.

38. This order shall come into force with immediate effect.

Sd/-

DATE: APRIL 13 TH, 2016 RAJEEV KUMAR AGARWAL

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

Documents

Order in the matter of Gangotri Textiles Limited