Confirmatory Order in the matter of Dhyana Finstock Ltd.94/2017]40/2017]39/2017]38/2017]37/2017]36/2017]

WTM/RKA/ISD/ 106 /2016 SECURITIES AND EXCHANGE BOARD OF INDIA CONFIRMATORY ORDER UNDER SECTION 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN THE MATTER OF DHYANA FINSTOCK LIMITED IN RESPECT OF: Sl. No. NAME OF THE ENTITY PAN CATEGORY 1 Pinakin Dahyabhai Makwana APJPM5729E Non Executive Director 2 Sanjay Nandlalbhai Parelia HUF AATHS5168J Preferential Allottee 3 Suresh Chinde Gowda AHVPG4424G Preferential Allottee 4 Baldevbhai Shankerlal Patel ACIPP5953F Dhyana Group 5 Naranbhai Panchal AMQPP0054P Dhyana Group 6 Ramilaben Baladevbhai Patel AUHPP8735C Dhyana Group 7 Kiritbhai Shah AWRPS2401E Dhyana Group 8 Jayshreeben Shah BQMPS6009Q Dhyana Group 9 Chandrikaben Panchal BXQPP2080R Dhyana Group 10 Rinkeshkumar Panchal BYCPP1543E Dhyana Group 11 Parin Infrastructure Pvt Ltd AAGCP6796D Dhyana Group

1. SEBI, vide an ad interim ex-parte order dated June 01, 2016 (hereinafter referred to as “interim order”) in the matter of Dhyana Finstock Limited (hereinafter referred to as "Dhyana" or "the company"), restrained 76 entities, including the aforesaid 11 entities (hereinafter referred to as "Noticees"), from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. 2. At paragraph 66 of the interim order, the Noticees have been advised that they may file their objections, if any, within twenty one days from the date of this interim order and, if they so desire, may avail themselves of an opportunity of personal hearing before SEBI, on a date and time to be fixed on a specific request, received from them. I note that though a copy of the interim order was served on all the abovementioned Noticees, they have failed to submit their reply till date and they have also failed to avail the opportunity of personal hearing. In view of these facts and circumstances, I am of the view that the Noticees are deliberately keeping away from these proceedings and are not willing to cooperate.

I, therefore, proceed to decide the matter at this stage on the basis of the material available on record. 3. I have considered the allegations levelled against the Noticees and have perused the documents available on record. I note that in the instant case, the directions issued against the Noticees are interim in nature and have been issued on the basis of prima facie findings. SEBI had issued directions vide the interim order in the matter in order to protect the interests of Order in the matter of Dhyana Finstock Limited investors in the securities market. I note that investigation in the matter is in progress and appropriate decision, in accordance with law, would be taken after completion thereof. Thus, the issue for consideration at this stage is whether the interim directions, issued against the Noticees vide the interim order, need to be confirmed, vacated or modified in any manner, during pendency of investigation in the matter. 4. The facts and circumstances leading to the passing of the said interim order have been discussed therein and I do not deem it necessary to repeat the same and burden this order with repetition.

The modus operandi as described in the said interim order was that Dhyana, its directors/promoters, preferential allottees, and Dhyana Group employed a device wherein the company in nexus with the preferential allottees made a facade of preferential allotment. After the expiry of the lock-in period, the Dhyana Group purchased shares from preferential allottees at artificially increased prices. In the whole process, entities of the Dhyana Group provided a hugely profitable exit to the preferential allottees. 5. It was observed that during the Examination Period (as defined in the interim order), Dhyana Group entities were primarily involved in pushing the price up during Patch 1 (when the volume in the scrip was very low) by contributing to positive LTP and thereafter acting as buyer in Patch 2 in order to provide exit to preferential allottees/Company related entities and in the process creating artificial volume. In the process, beneficiaries made a collective profit of ₹ 107.43 crore on a collective investment of ₹ 5.22 Crore, a whopping return of approximately 2060 % on their investment in a period of 20 months (including the lock in period of the shares allotted in the preferential allotment) and thereon claimed the exemption of Long Term Capital Gains (LTCG) on such profit as brought out in the interim order.

Hence, the preferential allottees with the aid of the entities of the Dhyana Group misused the stock exchange mechanism to exit at a high price in order to book illegitimate gains with no payment of taxes as LTCG is tax exempt. 6. The facts and circumstances discussed in the interim order further indicate a scheme, device and artifice to dump shares on July 27, 2015 in a pre-planned manner i.e. by employing a scheme of sending fake SMS inducing investors to buy in the scrip. This event completed the chain of events which started with the preferential allotment in Dhyana followed by listing at BSE and alleged price manipulation by Dhyana Group. Thus, apart from misusing stock exchange mechanism for bogus LTCG investors were also lured to buy shares of Dhyana at an unjustified price with the bait of stupendous profits and the shares were dumped on these investors. Considering that the pay-out for trades of July 27, 2015 amounting to ₹ 13,38,27,975/- was withheld by BSE, while the whole scheme involving these transactions is under examination/investigation, SEBI vide the said interim order, as a protective measure and in order to prevent the use of such sale proceeds in any manner by the sellers in such trades, directed that the said sale proceeds should continue to be withheld by BSE till further orders.

7. The interim order has also brought out the connection / relationship of the exit providers with the company and other entities involved in the entire scheme illustrated therein. As regards the preferential allottees, it is noted that it is a settled position of law that preferential allotment of shares is an issue of shares by an issuer to select person or group of persons on a private placement basis unlike a public issue where funds are raised by inviting subscriptions from public in general. It is also a matter of common knowledge that a preferential allotment is made to the persons/entities on a one-to-one basis who are acquainted/familiar with the company and/or its promoters/directors. A company will, in no case, make a preferential allotment to a stranger who just approaches it for allotment of its shares. A preferential allotment is always for the purposes of meeting fund requirements of the concerned company and involves a covert, manifested and planned actions by the concerned parties, i.e.- (a) the company to identify select persons/group of persons who are known to it or its promoters/directors for investing in its share capital, (b) select persons/ group of persons (preferential allottees) exercise due diligence and then finance the fund requirements of the company and subscribe to its shares issued on preferential basis; (c) the company allots shares to the preferential allottees.

8. It is a well-accepted position that a preferential allotment signifies that the allottees agree with the issuer on one-to-one basis to finance its fund requirements and is not an open to all investment opportunity. Such financing pre-supposes nexus and prior understanding amongst the issuer, its promoters/directors and the allottees. A stranger cannot just make investment in a preferential allotment merely on the basis of an advice without having nexus, directly or indirectly, and prior understanding with the company. 9. I note that investigation in the matter is in progress and appropriate decision, in accordance with law, would be taken after completion thereof. As prima facie found in the interim order, Dhyana, its promoters, its directors, preferential allottees and Dhyana Group / exit providers have acted in connivance for implementation of dubious plan, device and artifice that has led to the misuse of stock exchange mechanism to artificially increase price and volume of the scrip to provide illegitimate gains to the preferential allottees in order to claim LTCG benefits that has not only eroded the market integrity but has also been detrimental to the interests of investors who might have been lured to invest in the scrip due to such manipulative and fraudulent trading in the scrip and price movement.

I, therefore, do not find any reason to revoke or modify the directions of the interim order dated June 01, 2016 in the matter of Dhyana Finstock Limited against the Noticees. 10. In view of the foregoing, I, in exercise of the powers conferred upon me under sections 11(1), 11(4) and 11B of the Securities and Exchange board of India Act, 1992 read with section 19 thereof, hereby confirm the directions issued vide the ad interim ex-parte order dated June 01, 2016 against the following entities:

Sl. No. NAME OF THE ENTITY PAN CATEGORY 1 Pinakin Dahyabhai Makwana APJPM5729E Non Executive Director 2 Sanjay Nandlalbhai Parelia HUF AATHS5168J Preferential Allottee 3 Suresh Chinde Gowda AHVPG4424G Preferential Allottee 4 Baldevbhai Shankerlal Patel ACIPP5953F Dhyana Group 5 Naranbhai Panchal AMQPP0054P Dhyana Group 6 Ramilaben Baladevbhai Patel AUHPP8735C Dhyana Group 7 Kiritbhai Shah AWRPS2401E Dhyana Group 8 Jayshreeben Shah BQMPS6009Q Dhyana Group 9 Chandrikaben Panchal BXQPP2080R Dhyana Group 10 Rinkeshkumar Panchal BYCPP1543E Dhyana Group 11 Parin Infrastructure Pvt Ltd AAGCP6796D Dhyana Group

11. Accordingly, the directions issued in respect of the aforesaid entities vide paragraph 64 of the interim order dated June 01, 2016 shall remain in force till further directions.

12. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.

Sd/-

DATE: August 24th, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA