M/S. Ashika Stock Broking Ltd. vs Sebi

Janak Chimanlal Dave 140/L, Cavel Cross Lane No. 7, 4th Floor, Kalbadevi Road, Mumbai - 400 002. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Nirman Sharma, Advocate i/b Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

WITH Appeal No. 207 of 2019

Jigar Praful Ghogari Room No. 6, 3rd Floor, House No. 140K, Madhavi Thakarsi Building, Cavel Cross Lane No. 7, Kalbadevi Road, Mumbai - 400 002. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

3

WITH Appeal No. 208 of 2019

Kiran Bhiku Bhanaes Flat No. 16/A, New Bhatia Mahajan Wadi, Ground Floor, Dr. M.B. Velkar Street, Kalbadevi Road, Mumbai - 400 002. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

WITH Appeal No. 209 of 2019

Kishan Balaram Shigvan 159/6, Manik House, Room No. 5, Dr. Vigas Street, Mumbai - 400 002. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

4

WITH Appeal No. 210 of 2019

Kiran Madhusudan Sheth 113/115, 3rd Floor, Above Ratanlal Barfiwala Shop, Bhuleshwar Road, Mumbai - 400 002. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

WITH Appeal No. 211 of 2019 Jatin Shah 295/A, Sumitra Building, Bhimani Street, C.R. Matunga, Mumbai - 400 019. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

5

WITH Appeal No. 212 of 2019 Jinal Apurval Rawal, Room No. 201, 2nd Floor, Rajyog Building, 1st Carpenter Street, Nenu Bhai Desai Road, Mumbai - 400 004. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Harsh Kesharia, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

WITH Appeal No. 305 of 2019

Bhupesh Harischandra Rathod Flat No. 1, First Floor, "A" Wing, Labh Niwas, 4th Khetwadi, Nanubhai Desai Road, Mumbai - 400 004. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

6

WITH Appeal No. 346 of 2019 Dilipkumar Pukhraj Jain Flat No. 13, 4th Floor, Prem Sagar Building, Nesbit Road, Mazgaon, Mumbai - 400 010. ...Appellant

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

WITH Appeal No. 356 of 2019 M/s. Ashika Stock Broking Ltd.

Trinity, 7th Floor, 226/1 AJC Bose Road Kolkata - 700 020. ...Appellant

Versus

1. Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.

2. Jigar Praful Ghoghari 140 K Cavel Cross Lane No. 7, 3rd Floor, Room No. 6, Gai Wady, Kalbadevi Road, Mumbai - 400 002. ...Respondents 7

Mr. Pulkit Sharma, Advocate with Mr. Anant Upadhyay, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for Respondent No. 2.

Mr. Vikas Bengani, Advocate for Respondent No. 2.

WITH Appeal No. 438 of 2019

Bhavesh Pabari 196/A Tara House, First Floor, Flat No. 16, Dr. Viegas Street, Cavel Cross Lane No. 8, ...Appellant Chira Bazar, Mumbai - 400 002.

Versus Securities and Exchange Board of India. SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Vikas Bengani, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Chirag Bhavsar and Ms. Eram Quraishi, Advocates i/b MDP & Partners for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Dr. C.K.G. Nair, Member

1. These 12 appeals have been filed to challenge the order of

the Whole Time Member ('WTM' for short) of the Securities and 8

Exchange Board of India ('SEBI' for short) dated January 31,

2019. By the said order 5 entities have been restrained from

accessing or dealing in the securities market directly or indirectly

for a period of 5 - 7 years. Further 11 entities, who have already

undergone a debarment of more than 5 years from the date of the

interim order dated May 10, 2013, have been directed to disgorge

an amount of Rs. 3,05,99,174/- jointly and severally along with

the 5 entities who have now been restrained vide the impugned

order, along with interest @ 12% p.a. from December 17, 2012 till

the date of payment.

2. Appeal No. 205 of 2019 is filed by four appellants, namely,

Hemant Sheth, Prem Parikh, Ankit Sanchaniya and Shree Shagun

Financial Services. Remaining 11 appeals, except Appeal No. 356

of 2019 by Ashika Stock Broking Ltd., are also filed by different

entities covered by the impugned order. Appeal No. 356 of 2019

is filed by a broker who claims to be prejudiced by the impugned

order though directly not a party to the matter. Two of the entities

against whom directions have been passed in the impugned order,

namely, Oliwonders Financial Services Pvt. Ltd. ('Oliwonders'

for short) and Neevan Capital Markets Pvt. Ltd. ('Neevan' for

short) are no more 'alive' since their names have been struck off

from the list of companies by the Registrar of Companies (RoC) 9

In short, 11 appeals are filed by 14 of the entities against whom

the impugned order is passed and one appeal is filed by an entity

which is not directly impacted by the order. Since the impugned

order is common all these appeals are heard together and decided

by this common decision.

3. Common facts relating to these appeals are the following:

SEBI conducted an examination relating to trading in the

scrips of Polytex India Limited ('Polytex' for short), for the period

13.04.2012 - 17.12.2012; KGN Enterprises Limited ('KGN' for

short) for the period 27.12.2011 to 17.12.2012 and Gemstone

Investments Limited ('Gemstone' for short) for the period

18.04.2012 to 17.12.2012, all companies listed with the BSE

Limited ('BSE' for short). Pursuant to the said examination an

ad-interim ex-parte order was passed by SEBI on May 10, 2013

whereby 11 entities were restrained from accessing and dealing in

the securities market directly or indirectly till further directions for

alleged violations of provisions of section 12A(a),(b) and (c) of

the Securities and Exchange Board of India Act, 1992 ('SEBI Act'

for short) and regulations 3(a),(b),(c) and (d) and 4(1),

4(2)(a),(b),(e) and (g) of the SEBI (Prohibition of Fraudulent and

Unfair Trade Practices relating to Securities Market) Regulations,

2003 ('PFUTP Regulations' for short).

10

4. On January 7, 2014 SEBI confirmed the ad-interim ex-parte

order and thereby the interim directions passed against the 11

entities. On March 30, 2015 an investigation report on the matter

was submitted by the Investigating Officer. On August 20, 2015

an impounding order was passed by SEBI against 16 entities

including the 11 against whom interim and confirmatory orders

were issued. On August 26, 2016 an addendum to the

investigation report was also submitted.

5. On December 30, 2016 a common Show Cause Notice

(SCN) was issued to all these 16 entities under Section 11B read

with Section 11(4)(b) of the SEBI Act for violations relating to

trading in the scrips of Polytex, KGN and Gemstone. The said

SCN divided the noticees into two categories, namely, 'trading

noticees' and 'financing noticees'. It was also alleged in the SCN,

based on the bank statements of the noticees, that the trading

noticees have received funds from financing noticees which were

directly transferred to the stock brokers against the pay-in

obligations of the trading noticees. It was further alleged that the

suspected entities executed synchronized trades, reversal trades

and self trades amongst themselves which resulted in creation of

artificial volumes and contributed to positive Last Traded Price 11

(LTP) in the three scrips and made unlawful gain while dealing in

the scrips of Polytex which is liable to be disgorged.

6. Thereafter, after providing an opportunity of hearing, replies

and written submissions, etc. on various dates to various

appellants / noticees the impugned order was passed on January

31, 2019. Aggrieved by the same these 12 appeals have been filed.

Appeal No. 205 of 2019:-

7. Appellants No. 1, 2 and 3 in this appeal were investors and

Appellant No. 4 is a partnership firm where Appellant No. 1,

Hemant Sheth and Bhavesh Pabari (Appellant in Appeal No. 438

of 2019) are the partners. The ad-interim ex-parte order passed by

SEBI on May 10, 2013 against 11 entities included Appellant No.

4, namely, Shree Shagun Financial Services thereby preventing

Appellant No. 4 from accessing securities market directly or

indirectly.

8. It is the contention of the learned Authorised Representative

Dr. S.K. Jain appearing on behalf of the these appellants that SEBI

did not provide the complete documents while issuing the SCN;

data provided as annexure to SCN as KYC documents were either

not legible nor having the same details as stated in the SCN.

Accordingly, it was contended that by not providing all the 12

documents the appellants were prejudiced and natural justice

suffered.

9. It was further contended by the Authorized Representative

that two of the entities against whom directions have been passed

in the impugned order, namely, Oliwonders and Neevan are

extinct as they have been deleted from the list of companies by the

RoC. As such, no order could have been passed against extinct

entities, particularly, when a joint and several liability of

disgorgement has been fastened on the appellants along with such

extinct entities. Further, since Appellant Nos. 1, 2 and 3 did not

trade nor made any profits a joint and several liabilities for

disgorgement against them is untenable.

10. Further, it was contended by the learned representative for

the appellants that when the ad-interim ex-parte order did not find

any violations by the appellants herein, except Appellant No. 4,

a direction of 7 years debarment against Appellants Nos. 1, 2 and

3 should not have been ordered that too after such a long period of

the alleged violations and after all the 11 entities who were

debarred by the ad-interim ex-parte order have been let off from

any further restraint, though subject to payment of the disgorged

amount. It is also contended by the Authorized Representative

that the impugned order travels beyond the SCN by adding sub- 13

regulation 4(2)(b) in the alleged list of violations when the show

cause notice did not contain any such allegations.

11. It was further contended by the learned Authorized

Representative of the appellants that appellants have never traded

in the scrips but only financed some of the investors who traded in

the scrip and the said financing was in the normal course of

business and there was no illegality on the same. There was no co-

relation between financing and trading and no such co-relation has

been established in the impugned order. Moreover, there is

considerable variation in the data provided and detailed data in

respect of calculations of profit and loss were not provided,

particularly, in respect of two entities despite requesting for the

same. Hence, how the illegal gain has been calculated and an

amount for Rs. 3,05,99,174/- has been arrived at is not clear.

12. Further it was contended that though in the scrip of KGN

investigation was made no further action was taken and

accordingly the impugned order is selective in its approach in

finally taking only the scrip in which the entities have allegedly

made profits. Such an approach, it was contended, would lead to

over estimation of profits as in the scrips other than that of Polytex

the noticees have made losses as given in a table at Page 281 of

the appeal memo which shows that 9 of the trading entities made a 14

combined losses of Rs. 66 lakh (approximately). The appellants

also claim that these figures have been worked out from the trade

and order logs data provided by SEBI. It was further contended

that the appellants brokers had won arbitral awards against them

because of non-payment of dues which also show that losses had

been incurred in the course of trading by the trading noticees.

Further it was contended that the promoters of the companies

whose shares were alleged to be manipulated for increasing its

price did not sell their holding and hence for whose benefit or

what is the motive behind such alleged manipulation is not proved

in the impugned order.

13. Appellant No. 1, 2 and 3 were not part of the ad-interim

ex-parte / confirmatory order or the investigation report. Their

names got added, based on an internal note approved by the WTM

which is but not provided to the appellants. Moreover, the

appellants request to merge two parallel proceedings in the scrip

of Polytex was not given any consideration and if the same was

merged into one investigation it would be clearly shown that the

price and volumes in the scrips were high even otherwise than

during the alleged period of manipulation. It was also contended

that several of the appellants are still holding part of the scrips. 15

Appeal No. 438 of 2019:-

14. We have heard Shri Vikas Bengani, the learned counsel for

the appellants. He contended that the appellant Bhavesh Pabari is

also a financing noticee being partner of Shree Shagun Financial

Services along Hemant Sheth which allegedly funded Rs. 157.14

crore to the trading noticees. The income of the appellant

disclosed through the KYC documents with the broker DDAV

Securities Pvt. Ltd. was in the range of Rs. 1 - 5 lakh. The learned

counsel submits that appellant here also takes the same stand

taken by the appellant in Appeal No. 205 of 2019.

Appeal No. 206 of 2019, 207 of 2019, 208 of 2019, 209 of 2019,

210 of 2019, 211 of 2019, 212 of 2019, 305 of 2019 and 346 of

2019:-

15. We have heard the learned counsel for the appellants Shri

Nirman Sharma, Shri Vikas Bengani and Shri Harsh Kesharia.

They contended that all these 9 appeals have been filed by entities

who are classified as trading noticees, all of whom traded in the

scrip of Polytex. All of them were involved in reversal trade while

excepting Janak Chimanlal Dave (Appellant in Appeal No. 206 of

2019) Jatin Shah (Appellant in Appeal No. 211 of 2019) and

Bhupesh Harischandra Rathod (Appellant in Appeal No. 305 of 16

2019) others were involved in synchronized trading as well.

Further, Kishan Balaram Shigvan (Appellant in Appeal No. 209 of

2019) and Jinal Apurval Rawal (Appellant in Appeal No. 212 of

2019) engaged in self trades as well. Therefore, by indulging in

reversal trade / synchronized trade / self trade they have

contributed to positive LTP in the scrip of Polytex during the

investigation period.

16. It is the submission of the learned counsel for the appellants

that the individual replies filed by the appellants were not

considered; they suffered considerable loss (for instance, Rs. 1.67

crore in the case of Appeal No. 211 of 2019). Though some of the

entities made positive profit, the net position is a loss of Rs. 66

lakh and a calculation to this effect has been handed over to the

Bench during the course of hearing stating that the same is

compiled from the trade logs given by SEBI to the appellant but

subsequent to the proceedings. The said table also states that in

respect of 7 out of 9 entities the net LTP contribution is negative.

17. In Appeal No. 206 of 2019 filed by Janak Dave, the learned

counsel for the appellant contended that the appellant is charged

with only reversal trades but the same charge is absurd since the

reversal trade has been calculated for the entire investigation

period in terms of total buys and sells which is not how reversal 17

trade is defined. For a trade to be considered as reversal trade, the

learned counsel for the appellants contended, both the buy and sell

part of the trade have to take place within a few minutes or atleast

within the same trading day itself which is not the case in the

instant matter. The appellant traded on a number of days during

the investigation period, some of them were buy trades and some

of them were sell trades and at the end of the period the total

quantity purchased was 591428 and the total quantity sold was

560947 which SEBI is considering as reversal trade which is

absolutely not correct according to standard interpretation of

reversal trade. It is over a period of 8 months that the appellant

traded. Further, it was contended that detailed calculation

regarding disgorgement is not given; even the calculation given

after the hearing was only in respect of 7 out of 9 entities. These

appellants also contended that if the two investigations periods in

the scrip of Polytex were merged the fact that the appellant made

considerable losses and the fact that the appellants contribution to

LTP was negative would have emerged.

18. In order to canvas his submission that charge of reversal

trade will be attracted only when an entity reverses its buy or sell

positions with a subsequent sell or buy positions with the same

counter party during the same day, the learned counsel for the 18

appellant relied on an order of SEBI in respect of Shree Waris

Piya Steel Company Private Ltd. dated June 18, 2019

19. On the other hand, in contrast, the learned counsel for SEBI

Shri Kumar Desai relied on two decisions of this Tribunal on the

same issue in the matter of Anita Dalal vs Securities and

Exchange Board of India (Appeal No. 211 of 2012 decided on

December 3, 2012) and in the matter of M/s. Master Finlease Ltd.

vs Securities and Exchange Board of India (Appeal No. 334 of

2014 decided on October 21, 2016) and contended that matching /

reversal trades over a period of time is sufficient to prove PFUTP

Regulations.

Appeal No. 356 of 2019:-

20. We have heard Shri Pulkit Sharma, the learned counsel for

the appellant. This appeal is filed by Ashika Stock Broking Ltd., a

broking entity. There is no order passed against this entity and

hence the learned counsel for the respondent Shri Kumar Desai

has contended that the appeal is not maintainable. Learned counsel

appearing for the appellant Shri Pulkit Sharma submitted that the

appellant has been prejudiced by the impugned order. For

instance, Jigar Ghogari (Appellant in Appeal No. 207 of 2019)

was a client of the appellant and consequent to the restraint 19

imposed on the said client the appellant could not dispose of the

shares belonging to Ghogari which was given as part of security

deposits for the trading of Ghogari. Therefore, on September 15,

2014 the appellant wrote to the WTM of SEBI seeking permission

to sell shares belonging to Ghogari which is till date not granted.

This letter is produced on record at pages 69 to 73 of the appeal

memo. Subsequently, on different dates the appellant had

persuaded SEBI to give them permission to liquidate the shares in

the margin account with correspondence on record of upto

February 1, 2019. It was further contended that only when Jigar

Ghogari gave an application on May 29, 2018 SEBI sought details

from the appellant about the value of securities maintained in the

account of Ghogari and the outstanding amount due. The appellant

replied on July 6, 2018 stating that the (then) current value of the

holding of the client was Rs. 29,79,845/- and the ledger balance

due from the client including levy of delayed payment charges

comes to Rs. 37,00,210/-. Still todate SEBI has not given

permission to the appellant to sell the said shares maintained in

the margin account of Ghogari.

21. We have been told by the learned counsel for SEBI that no

such permission was needed for the appellant to dispose of the

shares of Ghogari lying in the margin account upto the amount of 20

the debit on account of that client and in respect of several other

appellants (trading members) are concerned their brokers had in

fact sold the shares in the respective margin accounts and

recouped the money due to the respective brokers.

22. Given the facts of the case we are of the considered view

that the appellant is an affected party though indirectly and

therefore prejudiced and therefore the appeal is maintainable.

Moreover, we are constrained to observe that the attitude of SEBI

in not responding to the appellant who is a regulated entity, when

it sought SEBI's permission as a matter of abundant caution, is

that of apathy.

23. Learned counsel appearing for SEBI Shri Kumar Desai

vehemently contended that the impugned orders passed against the

entities is perfectly in order as the relationship between the entities

have been well established through multiple sources which

include common telephone number (land line and mobile),

common e-mail id, partnership connections, common directorship

etc. as explained in table 2 at pages 8 - 9 of the impugned order

and through financial dealings / fund flows given in table 3 at

page 10 of the impugned order and through KYC documents of

the trading noticees as detailed in para 16 at pages 11 - 12 of the

impugned order. It is on record that funds to the tune of 157.14 21

crore has been given to trading noticees who themselves were low

net worth individuals having income disclosed to the tune of Rs. 1

to 5 lakh. It is a matter of concern as well as of strong evidence

value that such large amount of money was given to trading

noticees as explained in paragraph 17 to 19 of the impugned order

at pages 12 - 13.

24. On the argument of reversal trade where the appellant in

Appeal No. 206 of 2019 contended that there was no reversal

trade as the impugned order takes into account a period of 8

months buy - sell position to calculate reversal trades and the

same is not reversal trade as it is normally understood, the learned

counsel for respondent SEBI contended that reversal of trade or

position over a period of time also fall in the similar category of

violation. In order to press home this argument he relied on Shree

Waris Piya Steel Company Private Ltd. (supra) and stating that

para 29 and table 9 there under at page 20 of the impugned order

show that the number of trades were large in number and the

reversal quantity more or less matches perfectly in most of the

cases. In addition, he stated that there are a number of self trades

as well by some appellants. On the submission of not supplying all

the documents the learned counsel for the respondent SEBI fairly

submits that some of the documents were given after the closing 22

arguments and details regarding disgorgement in respect of two

entities were not given to the parties though full inspection of all

the documents were given. It was also contended by the learned

counsel that incurring losses by some of the appellants does not

mean no manipulation as held in the case of M/s. Master finlease

Ltd. (supra) and the buy - sell position may not be always

matching while trading in the market as held in Anita Dalal

(supra).

25. Having heard the learned counsel for the parties in great

detail and after perusing the various documents produced before

us we are of the view that the appellants in 11 of the 12 appeals

(except Appeal No. 356 of 2019) have violated the provisions of

SEBI Act and PFUTP Regulations.

26. In respect of these 11 appeals we are of the considered view

that violations have been established through connection, fund

transfers, the nature and magnitude of trading, contribution to LTP

etc. However, it is an admitted fact that document relating to two

entities regarding the detailed calculation of the disgorgement

amount were not provided to the appellants and even other

documents were provided through multiple tranches and some

after the proceedings.

23

27. We also note that the interpretation of reversal trade is

different from its standard /normal interpretation. Even if the

contention (and the ratio of those two judgments relied upon by

SEBI M/s. Master finlease Ltd. (supra) and Anita Dalal (supra)

are taken on board more details regarding the date-wise trading

pattern of the appellants atleast on sample days is needed. Just

aggregates over a period of 8 months are insufficient to prove the

same.

28. We do not find any merits in the contentions of the

appellants in Appeal No. 205 of 2019 and 438 of 2019 that they

were only financiers and not traded in the scrip during the relevant

time and hence not committed any violations. The impugned

order clearly explains the connection between these appellants and

trading entities (appellants in other appeals) and the amount of

money transferred by the financing appellants to the trading

appellants. Shree Shagun Financial Services have funded

Rs. 157.14 crore to the trading noticees. Therefore, the finding in

the impugned order that these financing appellants have adopted

the scheme of funding other trading entities to indirectly access

the securities market because of the restrained imposed on them

vide the interim order dated February 2, 2011 cannot be faulted.

Moreover, the amount of funds transferred to the trading entities 24

who have very low income as per their own statements is so

glaring and conclusive in proving the creation of a manipulative

and fraudulent scheme of trading in the scrips concerned.

29. The submissions that orders could not have been passed

against two entities, namely, Oliwonders and Neevan, which are

struck off from the register particularly when a joint and several

liability has been imposed on the appellants has no merit as it is an

established fact that the trading entities have received considerable

amount of money from these two entities also [Rs. 5.16 crore

from Oliwonders and Rs. 0.63 crore from Neevan) and there have

been evidence of return fund flow as well. Moreover, Prem Parikh

and Ankit Sanchaniya (two of the appellants in Appeal No. 205 of

2019) are the directors of Oliwonders and Prem Parikh and

Bhavesh Pabari (Appellant in Appeal No. 205 of 2019 and Appeal

No. 438 of 2019 respectively) are the directors of Neevan.

Striking down of the names of these two companies by the

Registrar for non-compliance of the provisions of the Companies

Act, 2013 does not alleviate the statutory liabilities of these two

entities.

30. The submission of the appellants regarding merger of the

two investigation period in respect of Polytex rather than parallel

proceedings does not have any merit in view of the fact that the 25

number of entities and number of scrips involved in one period is

distinct from the number of entities and number of scrips in the

other. While the impugned order herein deals with three scrips and

16 entities, the proceedings vide show cause notice dated

February 26, 2016 is in respect of only one scrip (Polytex) and 10

entities. Therefore, we do not find any deficiency in SEBI

proceedings with another investigation in one of the scrips

involved in this impugned order for another distinct period.

31. The contention of the appellant that the losses dealing in the

scrip of Gemstone / KGN should have been set off with the profits

made while dealing in the scrip of Polytex does not have any merit

as unlike tax rules where such set off is allowed for normal

business profits and losses this is a case of manipulative trade and

dealings and manipulations and that too in the nature of fraudulent

and unfair trade practices does not deserve such treatment which

normal business transactions are entitled to. Further, the nature

and magnitude of the violation is such that the prices and volumes

particularly in the scrip of Gemstone and Polytex had assumed

such proportions as explained in the impugned order. For

example, the price of Gemstone increased by 127%; the noticees

had bought about 60% the market volume and sold about 46% of

the market volume. Tables 4 and 5 of the impugned order explain 26

the synchronized trades of above 21% of the traded quantity

among themselves which was 6.32% of the total market volume.

32. Similarly, in the scrip of Polytex during the investigation

period the top 10 clients bought 72% of the total volume and sold

73.74% out of which about 70% and 72% were contributed by the

noticees. Price in the scrip of Polytex increased from Rs. 136.50 to

Rs. 281 clearly attributable to the manipulative trading done by

the noticees. Further, the submission that self trades are very

insignificant percentage of the total market volume to prove

charges is not in tune with the SEBI's own policy that small

quantity of self trades happens sometimes automatically has no

meaning in the larger context where it is clear that the appellants

were trying to manipulate the trade through various means

including synchronized and reversed trades. The submissions that

some of the appellants did not indulge in all violations [self trade

in the scrip of Polytex was done only by Kishan Balaram Shigvan

(Appellant in Appeal No. 209 of 2019) and Jinal Apurval Rawal

(Appellant in Appeal No. 212 of 2019) while Bhupesh Rathod

(Appellant in Appeal No. 305 of 2019) and Janak Dave were

(Appellant in Appeal No. 206 of 2019) involved only in reversal

trade] also do not have merit in the given context that all these

entities were found to be connected and manipulating the market 27

by various means. In a scheme of manipulative and unfair trading

it is not necessary that every participant should be indulging in

every type of trading violation or even in the same / similar

magnitude. Once they are found to be part of a group trying to

manipulate the volume or price of the scrip they became party to

the violation. Hair splitting arguments that some traded more than

others or on more days or some indulged in synchronized reversal

and self trade while others did only one of those types do not cast

away their violations. However, we agree with the contention of

Dave that more disaggregated details are needed to prove reversal

trade and in the impugned order only aggregates are given though

we do not agree with their submission that reversal trade done on

the same trading day only can be treated as reversal trades.

33. It is an admitted fact and borne out from SEBI's record that

detailed calculations regarding profits made by the trading entities

in respect of two entities were not given to the appellants (Page

176 to 178 - the e-mail message on Page 176 of the appeal memo

states that gain calculation shows in respect of 7 entities have been

attached while the attachment at Page 177 gives 9 names and the

attachment at Page 178 gives 8 names. Hence, the inconsistency).

We also note that there is considerable discrepancy between the

profits as calculated by the appellants themselves as well as SEBI 28

as given in the impugned order though the appellants claim that

those calculations are based on the trade logs given by SEBI. In

order to harmonize the appellants deserve to be given details of

calculations made by SEBI in respect of all noticees which

admittedly is not done in the instant matter.

34. In the result we pass the following directions:-

(a) Appeal No. 356 of 2019 is allowed and we permit the

appellant to liquidate the shares lying in the margin

account of Ghogari (Appellant in Appeal No. 207 of

2019) to the extent of the legally permissible debit

amount.

(b) In respect of other 11 appeals while upholding the

finding in the impugned order that the appellants have

violated provisions of SEBI Act and PFUTP

Regulations and therefore upholding the direction

relating to the restraint imposed on the appellants we

remit the matter to SEBI with the following directions:-

(i) Bring out date-wise details of reversal trades in

respect of the trading noticees.

29

(ii) Bring out details of calculation of profits in

respect of all the trading noticees.

(iii) SEBI shall provide (i) and (ii) above to all the

appellants and thereafter recalculate the amount

of disgorgement against the appellants and pass

an order within three months from the date of

this order after giving an opportunity of hearing.

35. All appeals are disposed off with the aforesaid directions.

No orders on costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 04.03.2020 Prepared and compared by:msb