Confirmatory Order in the matter of Kailash Auto Finance Limited.

Sl. No. Name PAN 1 Build Con Finance Ltd. AAACB4475D 2 Arnab Properties Pvt. Ltd. AAHCA6172H 3 Panchmadhu Projects Pvt. Ltd. AAHCP0443J 4 Roselife Residency Pvt. Ltd. AAGCR4027D 5 Optimistic Mercantile Pvt. Ltd. AABCO3684Q 6 Dhanaseth Properties Pvt. Ltd. AAECD6471H 7 Dhanaasha Developers Pvt. Ltd. AAECD6470G 8 Fairlink Realtors Consultants Pvt. Ltd. AABCF6890P 9 Huk Wealth Consultants Pvt. Ltd. AADCH1933R 10 Proficient Managerial Solutions Pvt. Ltd. AAHCP1962C 11 Casuarina Projects Pvt. Ltd. AAFCC2180B 12 Safeline Developers Advisory Pvt. Ltd. AAPCS1176D 13 Overflow Mercandise Pvt. Ltd./Ecstatic Merchandise Pvt. Ltd. AABCO4034C 14 Stepan Commotrade Pvt. Ltd. AADCS9460Q 15 Saktimata Marketing Pvt. Ltd. AARCS1549Q 16 Keshavah Dealtrade Pvt. Ltd. AAECK7236R 17 Dhandevi Merchandise Pvt. Ltd. AADCD6493J 18 Dhankuber dealcomm Pvt. Ltd. AADCD6491L 19 Malakar & Das Broking Services Pvt. Ltd. AAICM6326L 20 Fortright Consultants Pvt. Ltd. AACCF2203K 21 Sarda Solutions Pvt. Ltd. AATCS2316K 22 Needful Vincom Pvt. Ltd. AADCN3984C 23 Confident Vanijya Private limited AADCC5930D 24 Sudhir Jain ALKPJ3343G

Order in the matter of Kailash Auto finance Limited.

25 Pushpdhara Dealer Pvt. Ltd. AAFCP7061C 26 Pushapmala Vinimay Pvt. Ltd. AAFCP7062B 27 Intecity Complex Consultants Pvt. Ltd. AACCI4596G 28 Rohit Agarwal AONPA7646B 29 Ranpriya Tradevin Pvt. Ltd. AAECR6282Q 30 Saptrishi Agencies Pvt. Ltd. AAPCS0805H 31 Manikaran Dealtrade Pvt. Ltd. AAHCM0524B 32 Tremendous Commodeal Pvt. Ltd. AAJCA0881H 33 Keshavah Mercantile Pvt. Ltd. AAECK7235N 34 Seguro Construction Ltd. AASCS9516J 35 Luckydhan Dealtrade Pvt. Ltd. AABCL9100E 36 Sanket Merchandise Pvt. Ltd. AARCS3191G The aforesaid 36 entities are hereinafter collectively referred to as "Noticees"

1. SEBI, vide an ad interim ex-parte order dated March 29, 2016 (hereinafter referred to as “interim order”), restrained 246 entities from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. The persons/entities against whom the interim order was passed were advised to file their objections, if any, within twenty one days from the date of the order and, if they so desire, to avail themselves of an opportunity of personal hearing before SEBI. 2. The facts and circumstances leading to the passing of the 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 interim order was that the market platform was grossly misutilized and scheme of reduction of share capital and amalgamation were the mechanisms adopted by Kailash Auto Finance Limited (Kailash Auto) to dubiously increase its value of market capital significantly. Careful Projects Advisory Limited (CPAL) and Panchshul Marketing Limited (PML), the promoters of Kailash Auto prior to their amalgamation, were incorporated with a dubious plan and premeditated arrangement and artifice to increase number of equity shares therein through sham and non-genuine transactions with regard to issuance of their shares which resulted in fetching exorbitant and unrealistic consideration in the said scheme of amalgamation.

Pursuant to amalgamation 2058 shareholders of PML and 1,972 shareholders of CPAL (listed as “beneficiaries” in the interim order) received 58,59,10,800 shares of Kailash Auto in the form of consideration. 3. Trading in the scrip of Kailash Auto was manipulated by the connected parties who traded under pre-meditated plan and rigged the price of the scrip by 230% in 36 trading days during Patch-1 as described in the interim order. Further during Patch-2 as described in the interim order, the average trading volume in the scrip was increased by 5,577 times and it was noted that during this period, the beneficiaries were net sellers and connected/related entities were net buyers, providing exit to these beneficiaries. In the process, beneficiaries made huge profit of approximately 3,400% amounting to approximately `1,600 Crores on their investment in a period of 12 months or more and thereon claimed the exemption of long term capital gains (LTCG) on such profit as brought out in the interim order. 4. Apart from market manipulation and misuse of stock exchange system in the scrip of Kailash Auto, the entire plan, device and artifice of private placement, fabrication of share premium, issuance of bonus shares, subsequent transfers and retransfers of shares and funds to connected/related entities was designed and structured to beguile the same as transactions with commercial sense to generate bogus LTCG which is exempt from tax under the provisions of the Income Tax Act, 1961. 5. SEBI, in paragraph 34 of the interim order, advised the Noticees that they may file their objections, if any, within twenty one days from the date of the 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.

6. I note that copies of the interim order were sent to these 36 Noticees through “Speed Post Acknowledgement Due” at their respective last known addresses. However, the copies of the interim orders returned undelivered with remarks, such as “addressee unavailable”, “addresses could not be located” or “letters unclaimed". As per practice, copy of the interim order was also published on the SEBI website in the portable document format (pdf format) on the date of the interim order so that the concerned entities have easy access to it. In addition to the above, the service of the interim order was attempted through the registered e-mail addresses of the Noticees and also through their registered brokers. However, the copies of the interim order could not be served upon the Noticees. In view of the same, advertisements were published in newspapers, viz., The Times of India, Nav Bharat Times, Asomiya Pratidin, The Assam Tribune, Kannada Prabha, The Hindu, Thanthi and Anand Bazar Patrika on July 14, 2016 intimating the said 36 Noticees about the interim order with the advise that they can collect the copies of the interim order by hand from SEBI either themselves or through their authorized representative.

They were also informed that if they do not respond to SEBI within 15 days from the date of publication of the said notice, it will be presumed that they have no submission to make in the matter and the matter shall be further proceeded with on the basis of the material available on record. 7. Pursuant to the advertisement published on July 14, 2016, these Noticees have filed their respective replies/submissions to SEBI on several dates. The submission made by Noticees are common and similar in nature and, inter alia, are as following:- (a) The interim order is vitiated by gross violation of principles of natural justice as no opportunity was provided to them to explain their views. (b) They were/are never part of any scheme, plan, device and/or artifice employed in this matter, not carried out any manipulative transactions in securities or misused the system of securities market. (c) They may be removed from the defaulter list of SEBI/suspension list of SEBI. 8. In addition to the above submissions, the Noticees have prayed that they may be permitted to buy/sell or trade in securities market and also they have sought exemptions from attending the personal hearing.

9. I have perused the submissions made by the Noticess along with the material available on record and noted that the interim order has been passed on the basis of prima facie findings observed during the preliminary examination/inquiry undertaken by SEBI. The facts and circumstances necessitating issuance of directions by the interim order have been examined and dealt with in the interim order. The interim order has also been issued in the nature of show cause notice affording the noticees a post decisional opportunity of hearing. This position has been upheld in various judgments of the Hon'ble SAT, the Hon'ble High Courts and the Hon'ble Supreme Court. Relevant portions of few such judgments are referred to hereinafter:- (a) Hon'ble Bombay High Court in Anand Rathi & Others Vs. SEBI (2002 (2) BomCR 403) upheld the procedure of post decisional hearing in such matters and observed as under: "31. It is thus clearly seen that pre decisional natural justice is not always necessary when ad-interim orders are made pending investigation or enquiry, unless so provided by the statute and rules of natural justice would be satisfied if the affected party is given post decisional hearing.

It is not that natural justice is not attracted when the orders of suspension or like orders of interim nature are made. The distinction is that it is not always necessary to grant prior opportunity of hearing when ad-interim orders are made and principles of natural justice will be satisfied if post decisional hearing is given if demanded. 32. Thus, it is a settled position that while ex parte interim orders may always be made without a pre decisional opportunity or without the order itself providing for a post decisional opportunity, the principles of natural justice which are never excluded will be satisfied if a post decisional opportunity is given, if demanded." (b) Hon'ble High Court of Judicature for Rajasthan at Jaipur in the matter M/s. Avon Realcon Pvt. Ltd. & Ors Vs. Union of India &Ors (D.B. Civil WP No. 5135/2010 Raj HC) has held that: “…Perusal of the provisions of Sections 11(4) & 11(B) shows that the Board is given powers to take few measures either pending investigation or enquiry or on its completion. The Second Proviso to Section 11, however, makes it clear that either before or after passing of the orders, intermediaries or persons concerned would be given opportunity of hearing.

In the light of aforesaid, it cannot be said that there is absolute elimination of the principles of natural justice. Even if, the facts of this case are looked into, after passing the impugned order, petitioners were called upon to submit their objections within a period of 21 days. This is to provide opportunity of hearing to the petitioners before final decision is taken. Hence, in this case itself absolute elimination of principles of natural justice does not exist. The fact, however, remains as to whether post-decisional hearing can be a substitute for pre-decisional hearing. It is a settled law that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, the requirement of giving reasonable opportunity exists before an order is made. The case herein is that by statutory provision, principles of natural justice are adhered to after orders are passed. This is to achieve the object of SEBI Act. Interim orders are passed by the Court, Tribunal and Quasi Judicial Authority in given facts and circumstances of the case showing urgency or emergent situation.

This cannot be said to be elimination of the principles of natural justice or if ex-parte orders are passed, then to say that objections thereupon would amount to post-decisional hearing. Second Proviso to Section 11 of the SEBI Act provides adequate safeguards for adhering to the principles of natural justice, which otherwise is a case herein also…" 10. I, therefore, do not find any violation of principles of natural justice while passing the interim order as has been contended by the Noticees. In this case, as discussed hereinabove, the purpose of the interim order is to achieve the objectives of investor protection and safeguarding the market integrity by enforcing the provisions of the SEBI Act. In my view, section 11(1) of the SEBI Act casts the duty on SEBI to protect the interests of the investors, promote development of and regulate the securities market, “by such measures as it thinks fit”. Apart from this plenary power, section 11(2) of the SEBI Act enumerates illustrative list of measures that may be provided for by SEBI in order to achieve its objective. One of the measures enumerated in section 11(2)(e) is "prohibiting fraudulent and unfair trade practices relating to securities markets".

The word 'measure' has not been defined or explained under the SEBI Act. It is well settled position that this word has to be understood in the sense in which it is generally understood in the context of the powers conferred upon the concerned authority. From the provisions of section 11, it is clear that the purpose of section 11(2)(e) of the SEBI Act is to prohibit all fraudulent and unfair trade practices relating to the securities market and the Board may take any 'measures' in order to achieve this purpose. 11. With respect to the contention of the Noticees that they were/are never part of any scheme, plan, device and/or artifice employed in this matter, not carried out any manipulative transactions in securities or misused the system of securities market, it may be noted that the role and connection of Noticees has been well explained in the ad interim ex-parte order dated March 29, 2016. When all the facts and circumstances alongwith the involvements and connection of Noticees in this case are considered holistically they prima facie emerge as ingredients in a fraudulent, deceptive and manipulative device, plan and artifice designed to tamper with free market forces and to damage the integrity of the securities markets.

Further, these Noticees have not been able to offer any plausible explanation for the series of transactions executed through layers of connected/related entities, excepting for the ipse dixit of a mere denial of the commission of fraud on the investors and general public and that their transactions were bona fide. In view of these facts, I reject the contention of the Noticees in this regard. 12. I, thus find that the following 36 Noticees have failed to give any plausible reasoning/ explanation for their acts and omissions as described in the interim order and have not been able to make out a prima facie case for revocation of the interim order. I, therefore, reject the prayers of such Noticees for setting aside the interim order or for complete removal of restraint imposed by it. I, therefore, do not have any reasons to change or revoke the ad interim findings as against them. The list of these Noticees is as under: Sl. No. Name PAN 1 Build Con Finance Ltd. AAACB4475D 2 Arnab Properties Pvt. Ltd. AAHCA6172H 3 Panchmadhu Projects Pvt. Ltd. AAHCP0443J 4 Roselife Residency Pvt. Ltd. AAGCR4027D 5 Optimistic Mercantile Pvt. Ltd. AABCO3684Q 6 Dhanaseth Properties Pvt. Ltd. AAECD6471H 7 Dhanaasha Developers Pvt. Ltd. AAECD6470G 8 Fairlink Realtors Consultants Pvt. Ltd. AABCF6890P 9 Huk Wealth Consultants Pvt. Ltd. AADCH1933R 10 Proficient Managerial Solutions Pvt. Ltd. AAHCP1962C

11 Casuarina Projects Pvt. Ltd. AAFCC2180B 12 Safeline Developers Advisory Pvt. Ltd. AAPCS1176D 13 Overflow Mercandise Pvt. Ltd./Ecstatic Merchandise Pvt. Ltd. AABCO4034C 14 Stepan Commotrade Pvt. Ltd. AADCS9460Q 15 Saktimata Marketing Pvt. Ltd. AARCS1549Q 16 Keshavah Dealtrade Pvt. Ltd. AAECK7236R 17 Dhandevi Merchandise Pvt. Ltd. AADCD6493J 18 Dhankuber dealcomm Pvt. Ltd. AADCD6491L 19 Malakar & Das Broking Services Pvt. Ltd. AAICM6326L 20 Fortright Consultants Pvt. Ltd. AACCF2203K 21 Sarda Solutions Pvt. Ltd. AATCS2316K 22 Needful Vincom Pvt. Ltd. AADCN3984C 23 Confident Vanijya Private limited AADCC5930D 24 Sudhir Jain ALKPJ3343G 25 Pushpdhara Dealer Pvt. Ltd. AAFCP7061C 26 Pushapmala Vinimay Pvt. Ltd. AAFCP7062B 27 Intecity Complex Consultants Pvt. Ltd. AACCI4596G 28 Rohit Agarwal AONPA7646B 29 Ranpriya Tradevin Pvt. Ltd. AAECR6282Q 30 Saptrishi Agencies Pvt. Ltd. AAPCS0805H 31 Manikaran Dealtrade Pvt. Ltd. AAHCM0524B 32 Tremendous Commodeal Pvt. Ltd. AAJCA0881H 33 Keshavah Mercantile Pvt. Ltd. AAECK7235N 34 Seguro Construction Ltd. AASCS9516J 35 Luckydhan Dealtrade Pvt. Ltd. AABCL9100E 36 Sanket Merchandise Pvt. Ltd. AARCS3191G

13. Having dealt with the contentions of the Noticees as aforesaid, I note that the majority of these have raised concern over challenges in running their activities on account of ban and consequent freezing of their demat accounts. Many of these entities have pleaded for removal of the restraint imposed vide the interim order or at least allow them partial relief of permitting trading in securities other than those involved in this case. It is worth mentioning that the case in hand is peculiar as large number of entities has been restrained and the ongoing investigation in the matter may take time in completion. I have been conscious that the restraint order should not cause disproportionate hardship or avoidable loss to the portfolio of the Noticees. Now at this stage, considering the facts and circumstances of this case and submissions/ oral arguments made before me, I deem it appropriate to provide relaxations so as to address the issues of the personal and business exigencies or other liquidity problems. 14. Considering the above, I, in exercise of the powers conferred upon me under section 19 of the SEBI Act, read with sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued vide the ad interim ex parte order dated March 29, 2016 as against the aforesaid 36 Noticees except that they can:- (a) enter into delivery based transactions in cash segment in the securities covered in NSE Nifty 500 Index scrips and/ or S&P BSE 500 scrips; (b) subscribe to units of the mutual funds including through SIP and redeem the units of the mutual funds so subscribed; (c) deal in Debt/ Government Securities; (d) invest in ETF; (e) avail the benefits of corporate actions like rights issue, bonus issue, stock split, dividend, etc.; (f) tender the shares lying in their demat account in any open offer/delisting offer under the relevant regulations of SEBI.

15. Further, considering the business and personal exigencies and liquidity problems submitted by the these Noticees, I allow them further relaxations/reliefs as under:- (a) They are permitted to sell the securities held in the demat account as on the date of the interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange, in orderly manner under the supervision of the stock exchanges so as not to disturb the market equilibrium and deposit the sale proceeds in an interest bearing escrow account with a nationalized bank. (b) They may deal with or utilize the sale proceeds lying in the aforesaid escrow account under the supervision of the concerned stock exchange as provided under:- a. the sale proceeds may be utilised for investments permitted in para 15; b. upto 25% of the value of the portfolio as on the date of the interim order or the amount* in excess of the profit made /loss incurred or value of shares purchased to give exit, whichever is higher, may be utilized for business purposes and/or for meeting any other exigencies or address liquidity problems etc.

* The amount will include the value of portfolio in the demat account

Explanation: For the purposes of determining the portfolio value of the entities, the value of portfolio of securities lying in the demat account/s (individual and joint both) on the date of the interim order after excluding the value of shares that have been suspended from trading as on the date of the communication shall be considered. For NBFCs and stock brokers the value of portfolio shall exclude the value of clients’ securities lying in their demat accounts. (c) The aforesaid reliefs shall be subject to the supervision of exchanges and depositories. The stock exchanges may use the existing mechanism available for implementing the similar interim relief earlier granted to some of the entities in other similar matters. 16. This order is without prejudice to any enforcement action that SEBI may deem necessary against the aforesaid Noticees on completion of the investigation in the matter. 17. The directions issued vide paragraph 31 of the ad interim ex-parte order dated March 29, 2016 shall remain in force qua the abovementioned Noticees till further directions. 18. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.

Sd/-

DATE: OCTOBER 21, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA