Confirmatory Order in the matter of Kelvin Fincap Ltd[SAT Appeal No.112/2017][SAT Appeal No.:218 /2015]

IN RESPECT OF KELVIN FINCAP LIMITED AND OTHERS. Appearances: 1) Mr. J. J. Bhatt, Advocate for Kelvin Fincap Limited, Mr. Mahesh Ramanlal Shah, Mr. Bhavik Satish Badani, Mr. Bipin Bhikhabhai Patel, Ms. Sushma Vimalkumar Raval 2) Mr. N. K. Rita for Inventure Finance Private Limited 3) Mr. Pratham V. Masurekar, Advocate for Mr. Mukesh Nanubhai Desai 4) Mr. Narendra Shah for Ms. Geeta Narendra Shah 5) Ms. Rinku Valanju, Advocate for Mr. Rajesh Moradia, Ms. Shobhanaben N. Moradia, Mr. Bharat N. Moradiya, Mr. Mukesh N. Moradia, Ms. Shehul V. Moradia, Mr. Hiren Tulsibhai Moradia, Mr. Rajesh Moradia, Mr. Dharmesh Tulsibhai Moradia, Ms. Kavita Sunish Behl, Mr. Hasmukhlal Ramanlal Shah 6) Mr. Dharmesh Joshi, Advocate for Mr. Vallabhbhai D. Sachapra and Mr. Bhimjibhai D. Chanchapara 7) Mr. Jayesh R. Vyas, Advocate for Mr. Dhanjibhai S. Donda and Ms. Vasantben Dhanjibhai Donda 1. Securities and Exchange Board of India ("SEBI") examined the dealings in the scrip of Kelvin Fincap Limited {formerly known as "Dahyabhai Sons Limited" and hereinafter referred to as "Kelvin "} on the Bombay Stock Exchange Limited ("BSE") based on the sharp rise in price/volume in the scrip.

It was observed that during the period from June 18, 2013 to July 23, 2013 (hereinafter referred to as "Patch 1"), the price of the scrip of Kelvin rose from ₹151.55/- to ₹225/, i.e. an increase of 48% in 26 trading days. On July 24, 2013, the shares of Kelvin were split in the ratio of 1:1 and from July 24, 2013 to May 29, 2014 (hereinafter referred to as "Patch 2"), the price of the scrip increased from ₹118/- to ₹535/- i.e. an increase of 353% in 205 trading days. 2. In this backdrop, SEBI, vide an ad interim ex-parte order dated August 14, 2014, restrained the below mentioned 44 entities (hereinafter collectively referred to as "Noticees" and Confirmatory order in the matter of Kelvin Fincap Limited individually by their respective names) from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions:- Table 1: Entities against whom SEBI issued directions vide the interim order. S. PAN Name of the entity Referred as No. 1 AAACD1881H Kelvin Fincap Limited Kelvin 2 AAHPS4084K Keyur M Shah Promoters 3 AAAHK5034L Keyur M Shah (HUF) 4 AAYPS3458E Kavita K Shah 5 AAACD1880G Dahyabhai Shares And Stock Brokers Limited 6 BBPPE7839K Sushma Vimalkumar Raval Directors 7 AYBPS0534J Vishal Kumar Shah 8 ABJPS8618E Mansukh Sanghvi 9 ALRPB9295L Bhavik Satish Badani 10 AIDPP3653M Bipin Bhikhabhai Patel 11 AJMPS0962J Mahendrabhai Sakalchand Shah 12 BORPS0804Q Surekhaben K Shah 13 AAACM0623J Inventure Finance Private Limited Preferential 14 AATPD0728R Mukesh Nanubhai Desai Allottees 15 AAJPB7775N Kavita Sunish Behl 16 AADPS8752L Hasmukhlal Ramanlal Shah 17 AIKPM4674N Shobhanaben N. Moradia 18 AMTPM0749H Bharat N. Moradiya 19 AIVPM3622K Mukesh N. Moradia 20 AIVPM3623J Shehul V. Moradia 21 AMTPM8714C Hiren Tulsibhai Moradia 22 ACRPM4534E Rajesh Moradia 23 ALEPM6311R Dharmesh Tulsibhai Moradia 24 AEGPD4889J Vasantben Dhanjibhai Donda 25 AEIPD5332A Dhanjibhai S. Donda 26 ACXPP9049B Bhimjibhai D. Chanchapara 27 ACXPP9026C Vallabhbhai D. Sachapra 28 AAOPS2033H Geeta N. Shah Other Group

29 AAECC0841Q Cromakem Limited Entities 30 AACCD7020L Do Max Steel Limited 31 AAFCS2725Q Sapan Chemicals Limited 32 AAACF7961Q Fast Track Entertainment Limited 33 AACCS1185R Sonal International Ltd 34 AMVPJ5720H Jalpa Jani 35 AFMPB0449P Jayshree Shankar Bhosle 36 AKSPM3939N Kirti Mehta 37 AAHCS1332H Stardom Trading Company Pvt Ltd 38 AACCC0591P Cornhill Trading Company Pvt Ltd 39 AAACO2454R Nova Gold Petro Resources Limited 40 AABCA7788F Acil Cotton Industries Limited 41 AAACZ6848C Zimig Trading Company Private Limited 42 ALZPB9604R Rupesh Balkrishna Bhoir 43 AAACR9384B RFL International Limited. 44 ARYPS5993F Naresh Nagindas Shah

3. Pursuant to the aforesaid interim order, 30 entities i.e. Kelvin and entities at S. No. 8 to 36 in Table 1) filed their replies. Vide letter dated September 03, 2014, Kelvin, requested for an inspection of documents relied upon by SEBI while passing the aforesaid interim order. The request of Kelvin was acceded to and an inspection of all the documents, relied upon by SEBI befoe passing the interim order, was provided to Kelvin on October 11, 2014 when Advocate J. J. Bhatt and Mr. Abhishek N Shah (authorised representatives on behalf of Kelvin) inspected the said documents. The authorized representatives on behalf of Kelvin also sought copies of certain documents which were provided to them on November 07, 2014. 4. With respect to Mr. Mansukh Sanghvi (entity at S. No. 8 in Table 1), vide letter dated September 1, 2014, his nephew (Mr. Kaushik Sanghvi) informed that Mr. Mansukh Sanghvi had passed away on July 05, 2014. He also enclosed a copy of the death certificate issued by the Municipal Corporation of Greater Mumbai. 5. Inventure Finance Private Limited ("IFPL") (entity at S. No. 13 in Table 1) requested for an opportunity of urgent hearing which was provided to it on September 24, 2014. However, it failed to appear on the said date and requested for another date of hearing.

Thereafter, an opportunity of hearing was granted to all the entities in the matter including IFPL (except Kelvin and Mr. Mansukh Sanghvi) on October 29, 2014, which was rescheduled to November 05, 2014. On the said date, authorized representatives on behalf of 20 entities, i.e. serial nos. 9 to 28 mentioned in table 1 above appeared and made their submissions. 6. Since the letters for hearing issued to 3 entities, viz. Mr. Vishal Shah, Novagold Petro Resources Limited and Mr. Kirti Mehta were returned undelivered they were given another opportunity of hearing along with Kelvin on January 08, 2015. On the said date only the authorized representative on behalf of Kelvin appeared and made submissions on its behalf. 7. The submissions on behalf of Kelvin and other entities are, inter alia, as under: Submissions on behalf of Kelvin: a) With respect to fund transfer mentioned in the interim order, Kelvin submitted that SEBI has no jurisdiction to sit into judgment of commercial / financial decisions of the company b) Without prejudice to the above, Kelvin submitted that it had paid monies to certain entities by cheques only, accounted in its books of accounts which were duly audited at the relevant time only. c) With respect to purported preferential allotment, Kelvin submitted that it had issued shares under preferential allotment to only 49 entities in only 49 folios upfront on March 20, 2012 and so was accepted by BSE.

The same was mentioned in the disclosure made on BSE website on March 21, 2012. Kelvin also submitted that it did not submit false information to BSE as alleged in the interim order. Kelvin also explained that it had allotted the shares in joint names in respect of 8 cases. After 7 months from the time of preferential allotment, Kelvin received requests from 6 joint holders to split the names of joint holders and to issue shares in individual names. The consequential splitting of share certificates neither increased the number of shares nor any new names of allottees were added. The subsequent increase in number of folios was on account of splitting of existing Issued share certificates between the joint-holders only. Further at the time of splitting the then existing share certificates in individual holder's name the company did not receive any additional allotment money or any money. Hence, Kelvin did not allot shares to 56 entities at the time of allotment on March 20, 2012 and therefore the said preference issue cannot be termed as a public issue. d) Kelvin also submitted that its Registrar and Transfer Agent ("R&TA)", Purva Share Registry (India) Pvt. Limited, in its communication to SEBI may not have properly explained the sequence of activities - pre, at the time and post preferential allotment -and consequently there is some misunderstanding in the matter.

Further, the communication sent by R&TA to SEBI contained some errors. Kelvin submitted a copy of the letter filed by it before BSE which as per Kelvin contained the correct details regarding the allotment. e) Kelvin submitted that the judgment and order dated August 31, 2012 passed by the Hon'ble Supreme Court in the matter of Sahara India Real Estate Corporation Limited & Ors. V. SEBI & Anr. did not apply to it f) With respect to transfer of shares while under compulsory lock-in, Kelvin submitted that Jitendra Tejmal Dugar and Dhiraj Parasmal Dugar submitted one transfer deed each dated September 26, 2012 with 10 share certificates each i.e. 1,00,000 shares each duly signed by the transferor on September 25, 2012. with Kelvin for transfer in their respective names. Since the transfer deeds were in order, the transfer committee approved the transfer on September 29, 2012 in favour of Jitendra Tejmal Dugar (1,00,000 shares) and Dhiraj Parasmal Dugar (1,00,000 shares). It appears that since lock-in period was an abnormal feature, the R&TA overlooked it and consequently relying upon the documents processed and the best judgment of it, the said transfer of shares got approved.

This therefore was a genuine mistake and the committee verily believed that the R&TA must have ensured proper verification of transfer documents. g) Kelvin has also submitted that the aforesaid shares did not go into the market and both Dhiraj Dugar and Jitendra Dugar held shares and completed the prescribed Lock-in period up to March 19, 2013. They dematerialized their shares on October 20, 2012 in their demat accounts. h) The error in transferring of aforesaid shares was unintentional, minor and technical in nature. No loss, harm or injury was caused to anyone. Further, Ravi Sancheti HUF thereafter never acquired any share of Kelvin and did not become its shareholder thereafter. i) With regard to the mismatch in the list of directors on BSE and MCA website, Kelvin admitted that resignation by its directors was not communicated to BSE at the relevant time on account of genuine omission. Kelvin also stated that it has now communicated the present list of board of directors to BSE. j) With respect to trading in the scrip of Kelvin, Kelvin submitted that it has no control over demand and supply forces in market mechanism, i.e. liquidity and perception about the company by different investors.

It also stated that it has not published any false and misleading information about itself. Submissions made by Preferential Allottees (entities at S. Nos. 14 to 27 in table 1 above): a) The ad interim ex-parte order is vitiated by gross violation of principles of natural justice in as much as no opportunity was given to them to explain their version.

b) They are not the part of Kelvin Fincap Group as alleged in the aforesaid order. c) They started selling the shares only after completion of the lock-in period. d) Apart from investment and delivery based sales they did not play any role nor were involved in any activity of (alleged) group parties. They were merely preferential allottees of the company and they are in no way connected with Kelvin. Submissions on behalf of IFPL: a) IFPL is a NBFC registered with RBI and carries out the business of financing and investing in securities market. It had invested in the shares of Kelvin through preferential allotment as its investment strategy and it has held on to these shares for more than 2 years, b) IFPL has been wrongly included in Kelvin Fincap Group as there is nothing on record to substantiate that it had a nexus with the directors / promoters of Kelvin. c) The transactions with Cromakem Limited were purely commercial in nature and not related with Kelvin. d) IFPL started trading in the scrip of Kelvin only after May 06, 2014 and did not participate in creation of artificial volume and price in the scrip of Kelvin. e) IFPL did not execute any off market transaction nor transferred any physical shares, Submissions on behalf of directors of Kelvin (entities at S. Nos. 9 to 12 in table 1 above): a) SEBI did not seek any clarifications from the directors before passing the aforesaid interim order. b) None of the directors are holding shares of Kelvin nor have they traded in the shares of Kelvin at any point of time. c) None of the directors have indulged into off market transactions in the scrip of Kelvin with anyone. d) All of the directors have submitted that they are no way connected with Kelvin (other than being a director of Kelvin) and Kelvin Fincap Group. e) Mr. Bhavik Badani further submitted that he became the director of Kelvin and Cromakem Limited on February 20, 2012 and November 11, 2011 respectively. f) Mr. Bipin Patel submitted that he became director of Kelvin on December 15, 2011. He admitted that he is the brother of Mr. Jitendra Patel, who is one of the directors of RFL International Limited and Fast Track Entertainment Limited, and is staying with him.

However, he has no connection with RFL International Limited and Fast Track Entertainment Limited. g) Mr. Mahindra Shah submitted that he is a director of Kelvin from February 01, 2014, Heema Infocom Limited from September 15, 2013 and of GFL Financials India

Limited from February 01, 2014. He further submitted that holding directorship does not mean that the companies are interconnected. All these companies have different line of business. Hence treating them as interconnected is erroneous. The connection sought to be established is therefore farfetched. Moreover, he was not a director of Kelvin when Kelvin issued shares on a preferential basis. h) Mrs. Surekhaben K Shah submitted that she has already resigned from the directorship of Kelvin with effect from January 30, 2013 and after resigning from Kelvin she is no way connected with it. Further, as per the order, the investigation period is from June 18, 2013 to May 29, 2014. Since she resigned from directorship w.e.f. January 30, 2013. she is in no way covered in the investigation period. Submissions made by Other Entities: a) With respect to relationship established on the basis of common directorship, Cromakem Limited, Do-Max Steel Limited and Sonal International Limited submitted that the fact that one person is a director of more than one company does not mean that these companies are connected to one another.

This inference is totally wrong as an eligible person can become a director in twenty companies under section 165(i) of the Companies Act 2013. Hence, according to law, Mr. Bhavik Satish Badani, Mr. Vishal Kumar Shah and Ms. Pallavi Pandit have not violated the provisions of Companies Act 2013 by being the director of more than one company. b) With respect to common e-mail IDs 'novagold2007@yahoo.co.in' and 'novagold2011@gmail.com' shared by several entities, Cromakem Limited, Do-Max Steel Limited, Sapan Chemicals Limited, Sonal International Limited, Fast Track Entertainment Limited, Geeta Narendra Shah, Mr. Jaishree Shankar Bhosle and Ms.Jalpa Jani submitted that they are not aware of such e-mail IDs. They neither have the password of the said e-mail IDs nor they have mentioned the same while opening the KYC form with their respective brokers. c) With respect to sharing of common address with other entities, Cromakem Limited submitted that the premises, viz. 24, Jalaram Nagar, Borivali (w), Mumbai 400092, is divided into different cubicles, and Cromakem Limited and Mr. Narendra Shah have taken one each on rent.

Hence, the address appears to be same for both of them but actually it is different. The same argument has been shared Fast Track Entertainment Limited, Sapan Chemicals Limited, Sonal Entertainment Limited for their respective addresses. d) With respect to relationship established on the basis of banking transactions, Cromakem Limited submitted that its transactions with SDFC Finance Limited and Kosha Cubidor Containers Limited are purely commercial in nature. The same argument has been provided by Sapan Chemicals Limited for its transactions with Cromakem Limited, and by Mr. Kirti Mehta for his transactions with Kelvin Fincap Ltd, Cromakem Ltd, Stardom Trading Company Pvt. Ltd, Fast Track Entertainment Ltd, Earth Exim Ltd, Cornhill Trading Company Pvt. Ltd, IFSL Ltd, GFL Finance Ltd, Inventure Finance Pvt Ltd, etc. e) Ms. Geeta Narendra Shah, vide her reply, admitted that she had bought 1,50,000 shares of Kelvin from its promoters in physical form, which she sold to other entities after few weeks. Since then she has traded in the scrip of Kelvin in demat form only from the market. With respect to sharing of common address with Mr. Narendra Shah, Mr. Abhishek Shah and Mr. Mahesh Shah, she informed that Mr. Narendra R. Shah is her husband and Mr. Abhishek N. Shah is her son.

Mr. Mahesh R. shah is her brother-in-law. She also submitted that she is singly owning the commercial premises at 23, Jalaram Nagar, Nr. Chamunda Circle Gujuwada Lane, Borivali (W), Mumbai 400092 and has divided the said office in cubicles. She has provided one cubicle each to Earth Exim Limitd, Sapan Chemicals Ltd and Narendra R. Shah on rent. f) Cromakem Limited further replied that Mr. Bhavik Badani has not traded in the shares of Kelvin. Hence the relation sought to be established on the basis of common directorship of Mr. Bhavik Badani in Kelvin and Cromakem Limited is irrelevant. g) Sapan Chemicals Limited and Ms. Jalpa Jani submitted that Mrs. Sushma Raval, Mr. Vimalkumar Raval, Mrs. Padmaben Jani, Mrs. Jalpa Jani, Mr. Jagdish Jani have common address - 23 at Shri Ram Vihar, Rokadia Lane, Borivali (West), Mumbai 400092 because Mr. Jagdish Jani is the head of the family and Ms. Sushma Raval is his daughter, Padmaben Jani is his wife, Jalpa Jani is her daughter in law and they reside together at the same place. h) All the entities also stated that they have no relationship with other Kelvin Fincap Group entities.

8. I have carefully considered the allegations against the Noticees, their replies and the material 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. Detailed investigation in the matter is still in progress. 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. 9. I note from the records that the letter issued to Mr. Vishal Shah, director of Kelvin, intimating the date and place of hearing was returned undelivered on two occasions from the same address on which the interim order dated August 14, 2014 was served to him. It is pertinent to note that despite the receipt of the interim order, Mr. Vishal Shah did not file any reply thereto nor did he send any communication seeking an opportunity of hearing. Further, he also did not send any communication regarding change of his address.

In these, circumstances, it can reasonably be inferred that he does not have anything to submit in response to the findings against him in the interim order. I also note from the record that a copy of the interim order was served on all the entities against whom it was passed and the notices communicating them about the opportunity of personal hearing were also served upon them. Thus, in respect of all those entities who have not submitted any reply in response to the interim order nor have availed the opportunity of personal hearing granted to them, it can reasonably be inferred that they do not have any submissions to make in the matter. I, therefore, proceed to deal with the allegations against the entities, who have not submitted any reply, on the basis of the material available on record. 10. I note that in respect of Mr. Mansukh Sanghvi, his nephew, Mr. Kaushik Sanghvi has informed that Mr. Mansukh Sanghvi had passed away on July 05, 2014. He has also submitted a copy of the death certificate issued by the Municipal Corporation of Greater Mumbai. As Mr. Mansukh Sanghvi had passed away on July 05, 2014, these proceedings against him shall abate and the directions issued against him vide the interim order dated August 14, 2014 shall accordingly cease to have effect.

11. I note that a common contention made by the Noticees in the matter is that the interim order has been passed in complete disregard of the principles of natural justice in as much as no opportunity of hearing was provided to them. In this regard, I note that the power of SEBI to pass interim orders flows from sections 11 and 11B of the SEBI Act which empower SEBI to pass appropriate directions in the interests of investors or securities market, pending investigation or inquiry or on completion of such investigation or inquiry. While passing such directions, it is not always necessary for SEBI to provide the entity with an opportunity of pre-decisional hearing. The law with regard to doing away with the requirement of pre-decisional hearing in certain situations is also well settled. The following findings of the Hon'ble Supreme Court of India in the matter of Liberty Oil Mills & Others Vs Union Of India & Other (1984) 3 SCC 465 are noteworthy:- "It may not even be necessary in some situations to issue such notices but it would be sufficient but obligatory to consider any representation that may be made by the aggrieved person and that would satisfy the requirements of procedural fairness and natural justice.

There can be no tape-measure of the extent of natural justice. It may and indeed it must vary from statute to statute, situation to situation and case to case. Again, it is necessary to say that pre-decisional natural justice is not usually contemplated when the decisions taken are of an interim nature pending investigation or enquiry. Ad-interim orders may always be made ex-parte and such orders may themselves provide for an opportunity to the aggrieved party to be heard at a later stage. Even if the interim orders do not make provision for such an opportunity, an aggrieved party has, nevertheless, always the right to make appropriate representation seeking a review of the order and asking the authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given an opportunity at the request. " 12. Thus, considering the facts and circumstances of a particular case, an ad-interim ex-parte order may be passed by SEBI in the interests of investors or the securities market. It is pertinent to note that the interim order in the present case was passed under the provisions of sections 11(1), 11(4) and 11B of the SEBI Act read with section 12A of the Securities Contracts (Regulation) Act, 1956. The second proviso to section 11(4), in fact, clearly provides that "Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned".

Further, various Courts, while considering the aforesaid sections of the SEBI Act have also held that principles of natural justice will not be violated if an interim order is passed and a post-decisional hearing is provided to the affected entity. In this regard, the Hon'ble Bombay High Court in the matter of Anand Rathi & Others Vs. SEBI (2002) 2 Bom CR 403, has held as under: "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. 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."

13. Further, the Hon'ble High Court of Judicature of Rajasthan at Jaipur in the matter of 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…" 14. In view of the above, I find that the interim order passed by SEBI was not in disregard of the principles of natural justice since, in accordance with the settled law, the Noticees were afforded an opportunity to file their reply and avail the opportunity of personal hearing.

I, therefore, reject the contention of the Noticees in this regard. 15. I note that in paragraph 7 of the interim order, the fund transfers amongst Kelvin and other Kelvin Fincap Group entities have been mentioned. Referring to these transactions, Kelvin has contended that SEBI does not have the jurisdiction to sit into judgment of commercial / financial decisions of the company. In this regard, I note that the fund transfer details amongst Kelvin and the Kelvin Fincap Group entities have been mentioned for the purpose of highlighting the connection between Kelvin and the group of entities who traded heavily in the scrip of Kelvin during the examination period when the price and volume in the scrip rose sharply. The same does not in any manner reflect the judgment of SEBI with regard to the commercial or financial decisions of Kelvin. I, therefore, find that the contention of Kelvin in this regard is without any basis. 16. Kelvin has further contended that the preferential allotment of shares dated March 20, 2012 was not a public issue as it was originally made only in 49 folios and certain folios within these 49 folios were held jointly by 2 or more persons.

Further, when the joint holders of folios applied to Kelvin for splitting and allotting the shares in individual names, the number of shareholders increased to 56 without any change in the number of shares allotted. Kelvin also submitted that the information submitted by Kelvin's R&TA might have contained certain errors. In this regard, I note from the record that the information regarding 49 allottees was provided by Kelvin to BSE and the same was not objected by BSE at that point of time. In view of the details provided by Kelvin regarding the original allotment and the subsequent splitting of shares in the hands of the joint holders individually, the contention of Kelvin that the preferential allotment was not a public issue in terms of section 67 of the Companies Act, 1956 prima facie appears to be satisfactory. However, the same shall remain a subject matter of investigation and if it is revealed in the investigation that the preferential allotment of shares by Kelvin was made to more than 49 allottees, it will be subject to appropriate action in accordance with law. 17. I note that paragraph 28 of the interim order refers to the violation of regulation 78(2) of the ICDR Regulations by Kelvin and its three directors on account of approving the transfer of shares which were subject to compulsory lock-in.

Responding to the same, Kelvin has submitted that the approval of such transfers by the transfer committee was a genuine mistake as the committee verily believed that the R&TA must have ensured proper verification of transfer documents. Kelvin further submitted that these shares did not go into the market and no harm or loss was caused to anyone as a result of the said transfers. In this regard, I note that the transfer of shares in physical form is in itself an exception to the normal mode of transfer i.e. demat from. Moreover, the Shareholders' Grievance and Share Transfer Committee of Kelvin which was primarily responsible for approving such transfers of shares cannot shift its responsibility to the R&TA. The fact that the transferees did not transfer the shares further till the completion of the lock-in period has no relevance to the violation of regulation 78(2) of the ICDR Regulations which was committed by Kelvin and its directors comprising the Shareholders' Grievance and Share Transfer Committee. I, therefore do not find any merit in the explanation provided by Kelvin in this regard and reject the same.

18. Mr. Mahendrabhai Sakalchand Shah submitted in his reply that he was not a director of Kelvin at the time of the preferential allotment under consideration and became a director of Kelvin on February 01, 2014 only. Further., he became a director of Heema Infocom Limited from September 15, 2013 and of GFL Financials India Limited from February 01, 2014. In this regard, I note that the prima facie basis of issuance of directions against Mr. Mahindra Shah in the interim order was the fact that he was shown as a director of Kelvin, Heema Infocom Limited and GFL Financials India Limited. Given the fact that he became a director of Kelvin in February 2014 and in Heema Infocom Limited and of GFL Financials India Limited from September 15, 2013 and February 01, 2014, respectively, the material on record does not appear to be adequate to attribute his role in the acts and omissions of Kelvin. 19. Another director of Kelvin as per the records, Mrs. Surekhaben K Shah submitted that she resigned from the directorship of Kelvin with effect from January 30, 2013 and thereafter she is no way connected with it.

In this regard, I note that the acts of the Kelvin

Fincap Group which have been prima facie found to be fraudulent in the interim order include the issuance of new shares by Kelvin through preferential allotment, the transfer of these shares by the allottees in off-market in physical to other entities belonging to the Kelvin Fincap Group and the subsequent creation of artificial volume and manipulation of price by the Kelvin Fincap Group entities by indulging in non-genuine trading amongst themselves through repeated and continuous matched transactions in the illiquid scrip of Kelvin. Although these acts may appear to have been done in separate stages but all these stages are prima facie interlinked and together reveal the fraudulent plan devised by Kelvin and other Kelvin Fincap Group entities. I note that Mrs. Surekhaben K Shah was undisputedly a director of Kelvin at the time when Kelvin made the preferential allotment of shares. Although she might have resigned from Kelvin after the preferential allotment and before the Kelvin Fincap Group entities started trading actively in the scrip of Kelvin, it is important to mention that when the entire matter including the preferential allotment is under investigation, her role cannot be conclusively ruled out at this stage.

20. The directors of Kelvin have raised a common contention that apart from holding the directorship of Kelvin, they did not have any relationship with Kelvin or Kelvin Fincap Group. They have further contended that common directorship cannot be a basis for determining relationship. In this regard, I note that it is an undisputed fact that the directors of Kelvin were also the directors or were directly related to the directors in other companies which had actively traded in the scrip of Kelvin on-market or/and off-market during the examination period. There is also no dispute as to the fact that the scrip of Kelvin was illiquid and the fundamentals of Kelvin were also very poor. In my view, it cannot be a mere coincidence that all the companies in which a director of Kelvin was on board or was related to a director on board, actively traded in the illiquid and fundamentals-less scrip of Kelvin. The basis of relationship of the directors of Kelvin with other Kelvin Fincap Group entities have also been detailed in the interim order and no documentary evidence has been submitted by any of the directors (except Mr. Mahendrabhai Sakalchand Shah) to dispute the said basis of relationship.

In these circumstances, there appears to be a prima facie role of the directors of Kelvin (except Mr. Mahendrabhai Sakalchand Shah) behind the sale/purchase of shares of Kevin by those companies. Thus, the above contention of the directors cannot be accepted. 21. In addition to the above, the interim order also points out the failure of the directors of Kelvin in respect of the transfer of shares which were under compulsory lock-in and non cooperation by Kelvin in SEBI's inquiry. I note that though a company is a separate legal entity, it cannot act by itself, but only through its directors who are expected to exercise their powers on behalf of the company with utmost care, skill and diligence. Hon'ble

Supreme Court, while describing what is the duty of a director of a company, held in Official Liquidator v. P.A. Tendolkar (1973) 1 SCC 602 as under: "A Director may be shown to be so placed and to have been so closely and so long associated personally with the management of the Company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of a Company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the Company even superficially. If he does so he could be held liable for dereliction of duties undertaken by him and compelled to make good the losses incurred by the Company due to his neglect even if he is not shown to be guilty of participating in the commission of fraud. It is enough if his negligence is of such a character as to enable frauds to be committed and losses thereby incurred by the Company. " 22. The facts in the instant case clearly reveal that the directors of Kelvin had failed in their duty to exercise due care and diligence and allowed Kelvin to fabricate the figures and making false disclosures, the details of which are mentioned in the interim order.

As noted from the MCA website, Mr. Bhavik Satish Badani, Mr. Bipin Bhikhabhai Patel and Mr. Mansukh Sanghvi were the directors of Kelvin when it made the preferential allotment to entities connected/related to it who subsequently transferred these shares to other connected/ related entities. Further, Mr. Bhavik Satish Badani, Mr. Bipin Bhikhabhai Patel and Mr. Mansukh Sanghvi were the members of Shareholders Grievance and Share Transfer Committee which approved the transfer of equity shares of Mr. Ravi Sanchati and GFL Financial India Limited, which were in compulsory lock-in for one year. Mr. Bhavik Satish Badani and Mr. Bipin Bhikhabhai Patel are still the directors of Kelvin along with Ms. Sushma Vimalkumar Raval. Furthermore, the directors of Kelvin did not co-operate with SEBI in its examination by not replying to the queries raised by SEBI vide letter dated May 27, 2014. In view of the above, I prima facie find that the directors of Kelvin were either directly or indirectly involved in the acts and omissions of Kelvin and in creation of artificial volume and price rise in the scrip of Kelvin during the examination period.

23. The preferential allottees including IFPL have contended that their investment in Kelvin was a part of their investment strategy and they sold their shares in Kelvin after expiry of the lock-in period through delivery based sales. They further contended that other than being the preferential allottees of Kelvin, they were not in any manner connected with Kelvin and merely on the basis of their investment in Kelvin it cannot be inferred that they had any nexus/relationship with Management/Promoters of Kelvin. In this regard, I note that the interim order categorically points out that in spite of poor fundamentals and in the absence of any positive corporate announcement by Kelvin, the preferential allottees made huge investments in Kelvin by way of subscribing to its shares in the preferential allotment. It is important to mention that none of the preferential allottees have provided any justification for such irrational investment behaviour. Moreover, investment in a company by way of preferential allotment itself signifies that the investor must have been directly approached by the company or its representatives.

In addition thereto, none of the preferential allottees have provided any documentary evidence or plausible reason for disputing the basis of relationship between them and other entities belonging to the Kelvin Fincap Group mentioned in the interim order. In these circumstances and in view of the selling pattern of the preferential allottees explained in the interim order, their contentions noted above cannot be accepted. 24. I note that Cromakem Limited, Do-Max Steel Limited and Sonal International Limited have submitted that the fact that one person is a director of more than one company does not mean that these companies are connected to one another. In this regard, I note that in the present case, the relationship amongst various entities has been sought to be established on the basis of a multiplicity of factors such as common address, fund transfers, securities transactions, common directors, etc. Although a person under the Companies Act, 2013 is permitted to hold directorship in more than one company, the possibility of there being a relationship or sharing of information amongst those companies cannot be ruled out especially in a situation when both the companies trade in the shares of an illiquid and fundamentals-less company like Kelvin in a concerted manner.

I, therefore, do not find any merit in the above contention of Cromakem Limited, Do-Max Steel Limited and Sonal International Limited. 25. Entities at S. Nos. 28 to 35, in Table 1 above have contended that the e-mail ID 'novagold2007@yahoo.co.in' and 'novagold2011@gmail.com' mentioned in the interim order do not belong to them. They have further submitted that they are not aware as to who provided the said e-mail for their KYC requirements to the broker. In this regard, I note that the e-mail ID 'novagold2007@yahoo.co.in' is registered against 17 entities with 19 different brokers. Similarly, the e-mail ID 'novagold2011@gmail.com' is registered against 6 entities with 5 brokers. It cannot be a mere coincidence that the same e-mail IDs were used by different brokers while opening the accounts. In ordinary course, it would happen only when the entities themselves have provided the said e-mail IDs to their brokers while opening the account. It is also pertinent to note that these entities have also signed their respective KYCs. I, therefore, do not find any merit in the above contention and reject the same.

26. Entities at Serial Nos. 29, 31 and 36, mentioned in the Table 1 above have contended that their banking transactions with other entities mentioned in the interim order were purely commercial in nature. I note that these entities have not submitted any documentary evidence in support of the said contention. They have also not provided any satisfactory explanation to depute the basis of their relationship with other Kelvin Fincap Group entities. I, therefore, find that the above contentions are unfounded and reject the same. 27. Further, with respect to sharing common address with other Kelvin Fincap Group entities, the entities at S. Nos. 29, 31, 32 and 33 mentioned at Table 1 above have contended that the premises, which are considered for establishing relationship between the entities while passing the interim order, actually have different cubicles and these cubicles are taken on rent by these entities for their business activities. Hence, the addresses appear to be the same for them but actually they are different. In this regard, I note that even if this argument is accepted, there is a very remote possibility of the fact that different people residing on the same address trade in the same scrip, which is illiquid and has poor fundamentals, at the same time without any prior understanding between them.

Further, I note that these entities have not disputed other factors that have been considered as the basis of connection/ relation viz. transfer of funds and shares inter-se amongst them, off market transactions with other Kelvin Fincap Group entities, etc. I, therefore do not find any merit in the above submissions and reject the same. 28. The allegation against the Noticees in the interim order is that they had acted as a group, traded amongst themselves and placed orders at a price higher than the last traded price (LTP) in the scrip of Kelvin, I note that the Noticees have not disputed their transactions as alleged but have contended that their trades are independent in nature. I find that trading at LTP variation and trading amongst themselves is not per se illegal, but considering the relationship between the entities of the Kelvin Fincap Group, the activities of the Noticees need to be viewed in totality which has been duly done in the interim order. 29. I note that, at this stage, the Noticees (except Mr. Mahendrabhai Sakalchand Shah) have failed to give any plausible reasoning/ explanation for their acts as dealt in the interim order and have not been able to make out a prima facie case for revocation or modification of the interim order.

I also note that investigation in the matter is in progress and appropriate decision, in accordance with law, would be taken after completion thereof. In this case, it has been, inter alia, found that the Kelvin Fincap Group acting in concert, indulged in fraudulent and manipulative trading by way of trading amongst themselves, trading at prices above LTP, etc. thereby creating abnormal and artificial volumes in the scrip of Kelvin and manipulated its price. Their fraudulent and manipulative trading contributed to 96.99% of the gross market volume in the scrip of Kelvin. Further, their actions have also resulted in increase of the price of scrip of Kelvin from ₹ 151.55/- to almost ₹ 1070/- (adjusted)/ ₹ 535/- (unadjusted). As prima facie found in the interim order, the concerted trading of the connected entities under a premeditated plan or strategy not only erode the market integrity but are also 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 trend. In my view, the facts and circumstances of the case justify the continuation of the directions passed against the Noticees under the interim order dated August 14, 2014 and no intervention is called for, at this stage, in either vacating the interim directions or modifying them.

30. As noted above, the material on record does not appear to be adequate to attribute the role of Mr. Mahendrabhai Sakalchand Shah in the acts and omissions of Kelvin mentioned in the interim order. In view thereof, the directions issued against him vide the interim order shall stand vacated. Further, since Mr. Mansukh Sanghvi had passed away on July 05, 2014, these proceedings against him shall abate and the directions issued against him vide the interim order dated August 14, 2014 shall accordingly cease to have effect. 31. Considering the above, I, in exercise of the powers conferred upon me under section 19 read with sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 and section 12A of the Securities Contracts (Regulation) Act, 1956, hereby confirm the directions issued vide the ad interim ex-parte order dated August 14, 2014 against the following entities:

Sl. No. PAN Name of the entity 1 AAACD1881H Kelvin Fincap Limited 2 AAHPS4084K Keyur M Shah 3 AAAHK5034L Keyur M Shah (Huf) 4 AAYPS3458E Kavita K Shah 5 AAACD1880G Dahyabhai Shares And Stock Brokers Limitd 6 BBPPE7839K Sushma Vimalkumar Raval 7 AYBPS0534J Vishal Kumar Shah 8 ALRPB9295L Bhavik Satish Badani 9 BORPS0804Q Surekhaben K Shah 10 AIDPP3653M Bipin Bhikhabhai Patel 11 AAACM0623J Inventure Finance Private Limited 12 AATPD0728R Mukesh Nanubhai Desai 13 AAJPB7775N Kavita Sunish Behl 14 AADPS8752L Hasmukhlal Ramanlal Shah 15 AIKPM4674N Shobhanaben N. Moradia 16 AMTPM0749H Bharat N. Moradiya 17 AIVPM3622K Mukesh N. Moradia

18 AIVPM3623J Shehul V. Moradia 19 AMTPM8714C Hiren Tulsibhai Moradia 20 ACRPM4534E Rajesh Moradia 21 ALEPM6311R Dharmesh Tulsibhai Moradia 22 AEGPD4889J Vasantben Dhanjibhai Donda 23 AEIPD5332A Dhanjibhai S. Donda 24 ACXPP9049B Bhimjibhai D. Chanchapara 25 ACXPP9026C Vallabhbhai D. Sachapra 26 AAECC0841Q Cromakem Limited 27 AACCD7020L Do Max Steel Limited 28 AAFCS2725Q Sapan Chemicals Limited 29 AAACF7961Q Fast Track Entertainment Limited 30 AACCS1185R Sonal International Ltd 31 AMVPJ5720H Jalpa Jani 32 AAOPS2033H Geeta Narendra Shah 33 AFMPB0449P Jayshree Shankar Bhosle 34 AKSPM3939N Kirti Mehta 35 AAHCS1332H Stardom Trading Company Pvt Ltd 36 AACCC0591P Cornhill Trading Company Pvt Ltd 37 AAACO2454R Nova Gold Petro Resources Limited 38 AABCA7788F Acil Cotton Industries Limited 39 AAACZ6848C Zimig Trading Company Private Limited 40 ALZPB9604R Rupesh Balkrishna Bhoir 41 AAACR9384B RFL International Limited 42 ARYPS5993F Naresh Nagindas Shah

32. Accordingly, the directions issued vide the interim order dated August 14, 2014 against the entities mentioned in the table above shall remain in force till further directions. 33. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure compliance with above directions.

Sd/- DATE: March 31st, 2015 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA