Order against Mr. Jivraj Bachubhai Zala in the matter of IPO of Tijaria Polypipes Limited.

WTM/SR/IVD/ID – 2/32/11/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: S. RAMAN, WHOLE TIME MEMBER ORDER Under sections 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulation 11(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, against Mr. Jivraj Bachubhai Zala (PAN No.: AAEPZ5077G) in the matter of IPO of Tijaria Polypipes Limited. Appearances – For Mr. Jivraj Bachubhai Zala: (i) Ms. Prachi Pandya, Advocate. For SEBI: (i) Mr. Biju S, Joint Legal Adviser; (ii) Ms. Jeny John, Deputy General Manager; (iii) Ms. Deena Sarangadharan, Assistant General Manager; (iv) Mr. Alvine Ethan Lyngwa, Assistant Legal Adviser.

1. Tijaria Polypipes Limited (hereinafter referred to as “TPL”), a company incorporated under the Companies Act, 1956, came out with an Initial Public Offering (“IPO”) of 1,00,00,000 equity shares of a face value of 10 each, issued at a premium of 50 per equity share, wherein it raised 60 Crores to fund its proposed expansion and diversification plans. The aforesaid fixed price IPO which opened on September 27, 2011 and closed on September 29, 2011, was reportedly over-subscribed by 1.2 times. TPL allotted 71,64,406 shares in the retail individual investors category (constituting 71.64% of the total IPO shares) and 28,36,001 shares to the Qualified Institutional Buyers (hereinafter referred to as “QIBs”) (constituting 28.36% of the total IPO shares). The shares of TPL were listed on the Bombay Stock Exchange Limited (hereinafter referred to as “BSE”) and the National Stock Exchange of India Limited (hereinafter referred to as “NSE”).

2. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted a preliminary investigation in respect of trading in the scrip of TPL, upon observing a steep fall in the share price on the first day of listing i.e. October 14, 2011. The preliminary investigation prima facie revealed that on October 14, 2011, the share price of TPL in NSE, fell from the highest price of 67.75 per share to 16.50 per share while in BSE, it fell from the highest price of 67.80 per share to 16.05 per share. The preliminary investigation prima facie revealed that TPL, through layered transactions, diverted a substantial part of its IPO proceeds in order to offset losses sustained by certain entities/individuals, who allegedly purchased shares from retail allottees/QIBs in the IPO, at a premium to the issue price. The preliminary investigation prima facie also revealed that Jivraj Bachubhai Zala (hereinafter referred to as “Noticee”), was one of those entities who allegedly purchased shares from retail allottees and the huge losses sustained by him in doing so, were allegedly found to be partly borne by TPL through layered fund transactions. Further, the preliminary investigation prima facie revealed that the Noticee's broker, M/s Grishma Securities Pvt. Ltd. (hereinafter individually referred to as “Grishma”) had facilitated the Noticee's trading inter alia through non-collection of margin, etc.

3. In view of the prima facie observations made in the preliminary investigation, SEBI vide an ad–interim ex–parte Order dated December 28, 2011 (hereinafter referred to as “Interim Order”) inter alia prohibited the Noticee from buying, selling or dealing in securities, in any manner whatsoever, till further orders for the prima facie violation of the provisions of the SEBI Act, 1992 (hereinafter referred to as “SEBI Act”) read with the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations, 2003”).

4. Pursuant to the abovementioned Interim Order, SEBI conducted a detailed investigation regarding trading in TPL's IPO in order to examine the role of certain entities/individuals who traded subsequent to the IPO. On the basis of findings made in the aforesaid investigation, a Show Cause Notice dated November 30, 2012 (hereinafter referred to as “SCN”), was issued to the Noticee under sections 11(4) and 11B of the SEBI Act, calling upon him to show cause as to why suitable directions including directions restraining him from buying, selling or dealing in securities for a specified period should not be issued, for the violations alleged in the SCN.

5.1 As per the SCN, the Noticee was alleged – i. To have acted as a front entity for its broker, Grishma. ii. To have been partly funded by TPL (through layered transactions to the extent of approximately 3.80 Crores) towards trading in its scrip on the first day of listing at BSE and NSE. iii. To have made a purchase and sale of 33,67,032 shares on BSE and a purchase of 39,95,274 shares and sale of 41,20,837 shares of TPL respectively on NSE, on the first day of listing. The Noticee had purchased shares allotted in TPL’s IPO from retail allottees of such shares, at a premium to the issue price i.e. at a price of 63 and then subsequently sold the same at a lower price on the aforementioned stock exchanges, as a result of which, the Noticee had incurred a loss of approximately 9,95,07,852. iv. Entered into synchronised/structured trades on BSE and NSE with certain entities/individuals (who were alleged to have been partly funded by TPL for their trades in such scrip and also purchased shares from certain allottees in TPL’s IPO), for creating artificial volumes.

5.2 Pursuant to issuance of the SCN dated November 30, 2012, an opportunity for personal hearing was granted to the Noticee on March 21, 2013; the Noticee did not attend the same despite service of hearing notice to him. Subsequently, an opportunity for personal hearing was granted to the Noticee on May 2, 2013 and June 28, 2013; however, the hearing notices were returned as "Undelivered". Thereafter, an opportunity for personal hearing was granted to the Noticee on July 18, 2013 and July 26, 2013, wherein the Noticee was represented by its authorised representative, Advocate Ms. Prachi Pandya.

5.3 During the course of the personal hearing held on July 26, 2013, the Noticee (through its authorised representative) informed that he had filed a consent application in terms of the SEBI Circular No. CIR/EFD/1/2012 dated May 25, 2012. However, as such application was deficient on account of incomplete details and documents, the same was returned by SEBI to the Noticee without assigning a registration number, vide letter dated August 1, 2013 and wherein the Noticee was also granted another opportunity to resubmit the rectified application within a period of fifteen days from the date of service of such letter by SEBI. The Noticee, however, failed to submit such application within the stipulated period. In view of the aforesaid, I shall now proceed to pass the final order in the matter.

6. In his reply date July 26, 2013 and during the course of the personal hearings held on July 18, 2013 and July 26, 2013, the Noticee (through its authorised representative) inter alia made the following submissions – i. Noticee has traded on the first day of listing in various other scrips and not just in the case of TPL. ii. As a day trader, he had bought and sold shares at the slightest price movement and had not taken any delivery of the scrip of TPL. Further, the order time difference between the Noticee and the QIBs are in the range of 20-30 minutes and the shares sold by QIBs were purchased by several other entities and not just him. iii. With respect to the allegation in the SCN against the Noticee for being counter-buyer to trades of 322 allottees, Noticee contends that as a day trader he was merely reversing his trades that were made earlier in the scrip of TPL. iv. No relation has been established between Noticee and the entities with whom Noticee executed structured and circular trades. The trades were placed as per the market mechanism process and the orders culminated into trades on the basis of time and price matching mechanism. v. Noticee did not know any of the clients with whom he had executed synchronized trades as the same were executed on the anonymous screen based trading system of the exchange where it is not possible to know the counterparty to the trades. vi. For the trades that he executed in the case of TPL, the Noticee has made payments to Grishma subsequently. vii. The Noticee denied being a front of Grishma as he was present during the trades and placed the orders himself. As a day trader, the Noticee squared off his positions in the demat account. In case of TPL, the Noticee short sold the scrip to the extent of 1,25,563 shares which were subsequently auctioned. This implies that the trades were as per the Noticee's independent trading strategy. The Noticee further states that all his payment and settlement obligations (including margin obligations) qua his trades with Grishma in the scrip of TPL have been met by him. viii. All the Noticee's trades, and not only the TPL trades and losses arising there from, have been from borrowed funds. ix. No adverse findings have been found against entities for lending monies to Noticee for trades through Grishma. Bellisima Impex gave the Noticee only 1.45 Crores and not

3.80 Crores as alleged in the SCN. This money is not paid from the Bank account of Bellisima which received 10.36 Crores from TPL. None of the payments received by the Noticee from Bellisima have any connection to TPL and are independent transactions. Noticee further states that the cheques towards margin were received, deposited, realized and accounted prior to the settlement of Noticee’s trades in compliance with the norms applicable to collection and accounting of margins. x. The Noticee denies that opening of account with Grishma around the second week of September, 2011, was linked to the listing of TPL one month later. The Noticee argued that having traded in other scrips apart from TPL is evidence of him having no co-relation with IPO of TPL.

xi. The Noticee received 1.93 Crores from Mr. Vanraj Kahor (hereinafter referred to as “Kahor”), which he had paid in full out of the sale proceeds of the shares purchased by him and out of the profits earned by him whilst trading in securities. Similarly, he received 4.63 Crores from Mr. Vimal Patel (hereinafter referred to as “Patel”) of which he has paid back 2.11 Crores and the balance remains outstanding. xii. The transactions referred to by SEBI as evidence of use of funds of third parties by Grishma has no nexus to the trades of the Noticee. xiii. No adverse inference can be drawn if Zala was a walk-in client.

7. I have considered the SCN and the reply made by the Noticee to the same alongwith its submissions during the personal hearings before me and all other relevant material available on record. In light of the aforesaid, I shall now proceed to deal with the charges levelled in the SCN against the Noticee.

Consideration of Issues and Findings –

8.1.1 As per the SCN, the Noticee is alleged to have acted as a front entity for its broker, Grishma. The Noticee has, however, denied the aforesaid charge. In this regard, I note that – i. From the SCN, it is observed that the Noticee was a walk-in client of Grishma with an income in the bracket of below 5 Lakhs (as per the KYC documents provided by Grishma to SEBI). The Noticee's trading account with Grishma was opened on September 17, 2011 i.e. only 10 days prior to the IPO of TPL. Prior to October 14, 2011, the Noticee had not traded in any other scrip through Grishma. The Noticee started trading with Grishma only from October 14, 2011, in the IPO of TPL and on that day, he had traded in no other scrip except TPL.

ii. The Noticee, trading through Grishma, in the scrip of TPL on the first day of its listing i.e. October 14, 2011, incurred a loss of 9,95,07,582 (comprising of 3,20,38,993 on BSE and 6,74,68,589 on NSE).

iii. As per the NSE client ledger of the Noticee (maintained by Grishma), 1,78,55,000 was received by Grishma on October 13, 2011. However, as per Grishma's bank statement (NSE Client Account, YES Bank Ltd, Cadel Road Branch), the amount was actually received on subsequent dates i.e. 8,55,000 was received on October 15, 2011 and the balance amount of 1,70,00,000 was received on October 17, 2011.

iv. As per the BSE client ledger of the Noticee (maintained by Grishma), 1,87,00,000 was received by Grishma on October 13, 2011. However, as per Grishma's bank statement (BSE Client Account, YES Bank, Cadel Road Branch), the amount of 1,87,00,000 was actually received on October 17, 2011.

v. Vide letter dated August 21, 2012, Grishma submitted to SEBI copies of cheques given by the Noticee towards margin requirement for his trades in the scrip of TPL on October 14, 2011. However, it was observed that such cheques were post-dated cheques (dated October 15, 2011; October 17, 2011; October 19, 2011, etc.) as on the date they were claimed to have been handed over to Grishma i.e. October 13, 2011. Grishma, admittedly, entered the date of the receipt of such post-dated cheques i.e. October 13, 2011, in the client ledger of the Noticee and not the date of actual receipt of funds for the said client. Details of the cheques submitted by Grishma to SEBI are provided as under:

Sr. No. No. of cheques Date of cheque Total value 1 3 15/10/2011 1,17,55,000 2 9 17/10/2011 6,07,00,000 3 6 19/10/2011 and after 4,12,10,000 Total 18 - 11,36,65,000 vi. I note that Grishma was required to pay margin amount viz. VAR & Extreme Loss Margin and Mark to Market (MTM) Margin towards the loss incurred by the Noticee in the scrip of TPL, on the first day of its listing. As noted from the preceding paragraph, Grishma had not collected any upfront margin amount from the Noticee (only post-dated cheques were taken). Only a book entry was made in the ledger account by Grishma without the actual receipt of necessary funds from the Noticee. In reality there were no funds available in the account of the Noticee for his trades. In the event of default by the Noticee in honoring his trade obligations, Grishma would not have been able to mitigate the consequences of such default. It is indeed surprising that a walk-in client with an income of below 5 Lakhs, trading through Grishma only from October 14, 2011, was allowed to take such a huge gross exposure in the securities market to the tune of 32,72,57,123.70 on BSE and 34,72,73,566.10 on NSE. Such exposure was allowed by Grishma through acceptance of post-dated cheques from the Noticee and incorrectly reflecting receipt of funds in his client ledger on October 13, 2011 i.e. before the actual date of receipt of funds in Grishma's bank account, thereby deliberately creating an impression that funds were readily available on the day the Noticee traded.

8.1.2 The Noticee has submitted that the transactions referred to by SEBI as evidence of use of funds of third parties by Grishma has no nexus to his trades. In this regard, I note that – i. The Noticee was required to make substantial pay-outs for his trades in the shares of TPL on October 14, 2011. Since the trades happened on October 14, 2011, the settlement had to be done on T+2 i.e. October 18, 2011 (excluding intervening holidays of Saturday and Sunday in between such days). The source of funds used by Grishma for depositing the margin amount with NSE and BSE towards trading done on behalf of its clients on October 14, 2011, was investigated. For the same, information was sought from NSE, BSE and the respective Clearing Corporations, viz. National Securities Clearing Corporation Ltd. (hereinafter referred to as "NSCCL") and Indian Clearing Corporation Ltd. (hereinafter referred to as "ICCL").

NSE: As per the information provided by NSE, it is noted that – a. On October 14, 2011, the client level margin requirement of Grishma for the trading done on behalf of its clients in the cash segment of NSE was as follows:

Client name VAR & Extreme Loss Mark to Market Total Margin Margin ( ) Margin ( ) requirement ( ) Shri Chetan 0.00 40,05,681.70 40,05,681.70 Dave Shri Jivraj Zala 2,87,44,575.20 6,07,00,091.50 8,94,44,666.50 Total 9,34,50,348.20 b. The total margin requirement of Grishma for trades on behalf of its clients on NSE on October 14, 2011, was 9,34,50,348.20. As on October 13, 2011, in addition to the base minimum capital of 1 Crore in cash and 25 Lakhs as Bank Guarantee,

7,63,000 was available with NSE towards margin deposit in the form of cash given by Grishma. The additional margin deposits brought in by Grishma as on October 14, 2011, during market hours was as follows:

Sr. No. Particulars Amount in (₹) 1 Cash Deposits 2,77,63,000.00 2 Bank Guarantee 75,00,000.00 3 Securities 2,53,97,639.59 Total 6,06,60,639.59 c. Till the end of trading day of October 14, 2011, total margin provided by Grishma (excluding the base minimum capital of 10 Lakhs, which is required to be maintained at all times) was 7,21,60,639.59. The break-up of the same is given below:

Sr. No. Particulars Amount in ( ) 1 Cash Deposits 2,77,63,000 2 Bank Guarantee 1,00,00,000 3 Base Minimum Capital 90,00,000 4 Securities 2,53,97,639.59 Total 7,21,60,639.59 d. At the end of the trading day on October 14, 2011, Grishma had a margin shortfall of 2,12,89,708.81. NSE received 1.2 Crores at 06:01 p.m. and 7.24 Lakhs at 6:31 p.m. from Grishma, after market hours on October 14, 2011. There was a shortfall of margin by 85,64,757.17, due to the trading done by Grishma on October 14, 2011 (Settlement No. N 2011196), which was required to be brought in prior to the start of trading on October 17, 2011 (Settlement No. N 2011197), to prevent deactivation of the trading terminals of Grishma.

e. NSE informed that 2 Crores was received by NSCCL from Grishma before the start of the market hours on October 17, 2011. Also, another 4.5 Crores was received by NSCCL from Grishma at 04:05 p.m. i.e. after the start of trading on October 17, 2011, but before the close of trading on October 17, 2011. The funds of 2 Crores received by NSCCL before the start of the market hours on October 17, 2011, were utilised by NSCCL towards clearing the outstanding margin of Grishma with respect to the trading done by the Noticee in Settlement No. N 2011196. Thereafter, Grishma was allowed to continue trading.

f. The following table shows the funds transferred to NSCCL by Grishma – Current Account (Axis Bank) and the ultimate source of these funds that were earmarked by NSCCL as margin towards Settlement No. N2011196 were from:

Date Amount transferred to Ultimate source of funds for amount the Clearing corporation transferred to Clearing Corporation by the broker towards Amount (₹) Name of the Client margin (₹) Account from where funds were transferred 14/10/2011 2,70,00,000 85,00,000 Vimal P Patel 25,00,000 Vimal P Patel 1,41,00,000 Grishma F&O A/c and around ₹1.14 Crore was from the trades of Shri Vimal Patel in F&O segment 1,00,00,000 Grishma Securities Pvt. Ltd. 14/10/2011 7,24,951.64 20,00,000 Mihir Ghelani 14/10/2011 1,20,00,000 2,00,00,000 Mihir Ghelani 17/10/2011 2,00,00,000 50,00,000 Vimal P Patel 76,00,000 Vimal P Patel 74,00,000 Vimal P Patel 5,97,24,951.64 g. The funds amounting to 5,97,24,951.64 (provided by Grishma towards margin requirement of the Noticee for his trading in the scrip of TPL on the first day of listing i.e. October 14, 2011), were primarily sourced from the client account of Patel (client of Grishma) and also partly from Mihir Ghelani, the CEO/Compliance

Officer of Grishma. Further, the primary source for the 4.5 Crores transferred from Grishma's NSE Settlement Account to NSCCL's account on October 17, 2011, were as follows:

Date Amount transferred to the Ultimate source of funds Clearing corporation by the Amount (₹) Name of the Client broker towards margin (₹) Account from where funds were transferred 17/10/2011 4,50,00,000 8,60,000 Jivraj Zala 44,00,000 Jivraj Zala 70,00,000 Jivraj Zala 50,00,000 Jivraj Zala 50,00,000 Jivraj Zala 1,00,00,000 Jivraj Zala 1,00,00,000 Jivraj Zala h. The amount of 4,50,00,000 that was transferred on October 17, 2011 to NSCCL by Grishma after the start of market hours, were the funds largely transferred from the bank account of the Noticee to the Client Account of Grishma on October 17, 2011. A perusal of the bank account of the Noticee with Yes Bank revealed that as on October 14, 2011, the balance in his bank account throughout the day was 30000, and it was only on October 15, 2011 that funds of 1,17,55,000 was received in his Yes Bank account.

i. The bank account of the Noticee was with Yes Bank whereas the NSE clearing account of Grishma was in Axis Bank. Besides, the bank account of Grishma's other clients viz. Patel and Kahor, were with Axis Bank itself. It is pertinent to note that Kahor transferred 77.50 Lakhs, 75 Lakhs and 47.50 Lakhs from his bank account to the bank account of Patel on October 15, 2011 and Patel, in turn, transferred 76 Lakhs, 74 Lakhs and 50 Lakhs to the NSE Client Account of Patel on the same date. These funds, in turn, inter alia formed part of the 2 Crores that were transferred on October 17, 2011 by Grishma to the Clearing Corporation, to tide over the shortfall in margin before the opening of trading hours on October 17, 2011.

j. Further, 2,53,97,640 was brought by Grishma towards margin deposit on October 14, 2011, in NSE, in the form of securities pledged in favour of NSCCL. The break-up of the margin brought by Grishma in the form of securities is as follows:

SYMBOL Quantity Net Value* (₹) BHARTIARTL 500 1,71,078.8 GTOFFSHORE 500 52,604.2 KWALITY 150000 2,46,84,543 PRESTIGE 2500 2,33,690.2 RELIANCE 190 1,45,946.3 TVSMOTOR 2000 1,09,777.2 TOTAL 2,53,97,640 k. From the above, out of 2.53 Crores margin deposited by Grishma with NSCCL in the form of securities, 2.46 Crores was in the form of 1.5 Lakhs shares of Kwality Dairy Ltd. It was observed that the said shares had come from the demat account of Grishma (A/c no. IN30133020879906 held with NSDL). A perusal of the said demat account of Grishma revealed that on October 13, 2011, 1.5 Lakhs shares of Kwality Dairy Ltd. were pledged towards margin requirement. On the same day, the said account of Grishma had received the same 1.5 Lakhs shares of Kwality Dairy Ltd. from demat A/c no. 1202910000002459 with CDSL, which was also found to be in the name of Grishma. A perusal of the said demat account of Grishma with CDSL revealed that Grishma had received the said 1.5 Lakhs shares of Kwality Dairy Ltd. from Patel in the form of off-market credit.

l. In view of the above, I find that funds of Patel were used by Grishma to tide over the margin shortfall for trading done by the Noticee on October 14, 2011. I find that Grishma also used shares worth 2.46 Crores of Patel for meeting the margin shortfall of the Noticee in the scrip of TPL on October 14, 2011 i.e. the first day of listing.

BSE: As per the information provided by BSE, it is noted that – a. The client level margin requirement of Grishma for the trading done by it on October 14, 2011, in cash segment of BSE, is given below:

Client name VAR & Extreme Loss Mark to Market Total Margin Margin ( ) Margin ( ) requirement ( ) Shri Chetan 8,93,670 36,64,242 4557912 Dave Shri Jivraj Zala 0 3,20,38,992 3,20,38,992 G001 12816 0 12816 Vimal Patel 3020464 8580 30,29,044 b. Therefore, the total margin requirement of Grishma for its trades on October 14,

2011 was 3.96 Crores, out of which the MTM margin was 3.57 Crores. The margin requirement for the trades of the Noticee was 3.2 Crores, which was for the trades in the scrip of TPL. The margin deposits brought in by Grishma as on October 13, 2011, during market hours as given by BSE is provided below:

Sr. No. Particulars Amount in (₹) 1 Cash Deposits 1,25,000 2 Bank Guarantee 2,15,00,000 3 Securities 1,27,48,297 Total 3,43,73,297 c. There was a margin requirement of 1,40,86,814 for MTM losses on October 14,

2011. Grishma had deposited an amount of 1,10,00,000 on October 14, 2011 towards margin. A perusal of the amounts paid by Grishma to ICCL on October 14, 2011 reveals the following:

Date Amount transferred to the Ultimate source of funds for amounts transferred Clearing corporation by to the Clearing Corporation the broker towards margin Amount (₹) Name of the Client (₹) Account from where funds were transferred 14/10/2011 50,00,000 1,41,00,000 Grishma Securities Pvt. Ltd. – NSE F&O Settlement A/c No. 004010200405027 Axis Bank Ltd.

14/10/2011 50,00,000 1,00,00,000 Grishma Securities Pvt. Ltd A/c no. 2321600000064 with DCB 14/10/2011 10,00,000 4,52,956 Pay out received 5,34,307 14/10/2011 35,86,814 2,00,00,000 Mihir Ghelani

1,45,86,814 d. For the margin of 1,45,86,814 brought in on October 14, 2011, Grishma provided the funds from its own F&O A/c, current account and also the funds received from Ghelani. From the above table, it is seen that for the 50 Lakhs transferred to ICCL, the credit was received from the Grishma – NSE F&O Settlement A/c. A perusal of the NSE F&O Settlement A/c of Grishma (A/c no. 004010200405027 with Axis

Bank Ltd.) revealed that prior to the transfer of 1,41,00,000 from the said account which was used for meeting the settlement obligation on BSE and NSE, the said account received the following credits:

Sr. Particulars Amount in (₹) Description No. 1 11/10/2011 81,14,149.70 IL&FS Securities Services Ltd.-NSE Derivatives CL 2 12/10/2011 1,61,662.00 IL&FS Securities Services Ltd.-NSE Derivatives CL 3 13/10/2011 58,41,037.35 IL&FS Securities Services Ltd.-NSE Derivatives CL 1,41,16,849.05 e. During the course of the investigation, NSE was advised to provide the trading details of Grishma in the F&O segment for the said trades. As per the details provided by NSE, the trades by Grishma in the NSE F&O segment was in its own account as well for Patel. The break-up of the client wise pay out was obtained from IL&FS Securities Services Ltd. and the same revealed that the pay outs were primarily for the trades of Patel in the F&O segment as detailed below: Sr. Particulars Amount of pay out MTM pay out of Shri Vimal Date of trade No. ( ) Patel ( ) 1 11/10/2011 81,14,149.70 69,81,015.00 10/10/2011 2 12/10/2011 1,61,662.00 6,31,776.25 11/10/2011 3 13/10/2011 58,41,037.35 51,25,147.50 12/10/2011 1,41,16,849.05 12737938.75 f. From the above, it is observed that out of 1.41 Crores used for the meeting the margin requirement of the Noticee, around 1.14 Crores was for the trades of Patel in the F&O segment on NSE.

g. With regard to the securities worth 1,27,48,297 provided as margin (with hair cut), as per the details provided by BSE, the following shares were pledged for the margin on October 13, 2011: Sr. No. Name of the securities No. of shares pledged 1 DB Realty Ltd. 1,37,459 2 Elgi Equipments Ltd. 40,000 3 Shasun Pharmaceuticals Ltd. 50,000 h. As per the details provided by BSE, the shares were pledged from the demat A/c no. 1202910000002459 of Grishma. The following table shows the receipt of the said shares in the aforesaid account of Grishma:

Sr. Particulars Name of the scrip No. of shares Name of the entity No. from whom received 1 07/10/2011 DB REALTY 66,697 Pramod K. Goenka LIMITED-EQ 2 13/10/2011 DB REALTY 70,462 IL&FS Securities Services LIMITED-EQ Ltd 3 13/10/2011 SHASUN PHARMA 50,000 IL&FS Securities Services Ltd 4 13/10/2011 ELGI EQUIPMENTS 40,000 IL&FS Securities Services Ltd i. IL&FS Securities Services Ltd., the clearing member of Grishma in the F&O segment, informed SEBI that the abovementioned shares were returned to Grishma as it had made a request vide letter dated October 12, 2011, for IL&FS Securities Services Ltd. to withdraw the abovementioned shares placed by it, as collateral on the Derivatives segment of NSE. The shares so withdrawn were pledged with the clearing corporation of BSE on October 13, 2011. The timing of withdrawal of shares pledged with IL&FS is very important as it shows pre-planning on the part of Grishma in respect of trading by the Noticee in the scrip of TPL on the listing day. Knowing very well that the trading will result in losses, which will require additional margins to be provided to the clearing corporations, Grishma withdrew the shares pledged by it with its Clearing member in the F&O segment and pledged the said shares with BSE for additional margins.

j. It was noted that the 50,000 shares of Shasun Pharmaceuticals returned by IL&FS Securities Services Ltd. to Grishma on October 13, 2011, were earlier given by Grishma to IL&FS Securities Services Ltd. on September 08, 2011 as margin for its trades in the F&O segment. Out of the said 50,000 shares, 28,000 shares had come from the demat account of Patel and 22,000 shares had come from the demat account of one Shri Priyesh Arvind Bhatt (hereinafter referred to as "Bhatt"). The closing price of Shasun Pharmaceuticals on October 12, 2011 was 61.50 per share.

Thus, Grishma had used the shares of Shasun Pharmaceuticals worth around 17.22

Lakhs and 13.53 Lakhs of its clients Patel and Bhatt respectively as margin (totaling to 30.75 Lakhs). Also, Grishma used 66,697 shares of DB Realty Ltd. received from one Shri Pramod K. Goenka (hereinafter referred to as "Goenka") whose value was 35,91,633.45 taking into consideration closing price of the scrip on October

12, 2011, which was 53.85 per share.

k. In view of the above, I find that Grishma inter alia used the funds and securities of its 3 clients viz. Patel, Bhatt and Goenka, for meeting the margin requirement of The Noticee.

8.1.3 I note that Ghelani had made payments of 2 Crores and 20 Lakhs to Grishma Intermediaries Pvt. Ltd. (hereinafter referred to as "Grishma Intermediaries"). The aforesaid amount was transferred from the account of Grishma Intermediaries to the account of Grishma which was ultimately used for meeting the margin requirements for the losses incurred by the Noticee in the scrip of TPL on October 14, 2011.

8.1.4 Upon a consideration of the aforementioned paragraphs 8.1.1 – 8.1.3, I find that the huge gross exposure to the Noticee, a walk-in client, who as per KYC documents did not have the financial means, indicates that there was indeed a larger design behind permitting such exposure. I find that Grishma had arranged funds and securities for the Noticee's trades through its clients i.e. Patel, Bhatt and Goenka and its Compliance Officer/CEO, Mihir Ghelani. I find that if such funds and securities had not been used, there would definitely have been a margin shortfall due to the huge loss-making trades executed by the Noticee. The aforesaid facts lead to the inescapable conclusion that Grishma, by arranging the margin requirements of the Noticee, was keen on executing substantial trades in the scrip of TPL on the day of listing and for that reason, had used the trading account of the Noticee. Therefore, despite the fact that there was no credit balance in the account of the Noticee, Grishma executed large volume trades amounting to several tens of Crores of rupees on his behalf, which resulted in a loss of 9,95,07,852 for the Noticee, in respect of trades executed on that single day i.e. October 14, 2011. In view of the aforesaid, I find that the charge against the Noticee of acting as a front entity for its broker, Grishma stands established.

8.2 As per the SCN, the Noticee is alleged to have been funded by TPL for trading in its scrip. The Noticee has inter alia contented that none of the payments received by him have any connection to TPL. In this regard, I note that – i. TPL transferred approximately 10.36 Crores from the IPO funds to Bellisima Impex on October 13, 2011. From the bank statements, it is observed that the Noticee received

3.8 Crores from Bellisima Impex directly and through layered transactions from Patel, Kahor and Jiya Traders during the period October 15, 2011 to October 18, 2011. Bellisima Impex also transferred funds to two other clients who had traded on the first day of listing, viz. Ms Lopa Bhavanagari (hereinafter referred to as "Lopa") and M/s Pinac Stock Brokers P Ltd. (hereinafter referred to as "Pinac"), by routing it through layered transactions.

ii. The funds used by the Noticee (as per YES Bank Cadel Road bank statement) for trading in the scrip of TPL on first day of its listing, were received from the following entities –

Entity/individual Name Date of transaction Amount Bellisima Impex 15-Oct-11 27,00,000 Jay Corporation 15-Oct-11 82,00,000 Nisha Enterprise 15-Oct-11 8,55,000 Vimal Punjiram Patel 17-Oct-11 53,00,000 Vimal Punjiram Patel 17-Oct-11 90,00,000 Arpan Enterprise 17-Oct-11 44,00,000 Vimal Punjiram Patel 17-Oct-11 1,00,00,000 Jay Corporation 17-Oct-11 1,00,00,000 Vimal Punjiram Patel 17-Oct-11 1,00,00,000 Vimal Punjiram Patel 17-Oct-11 70,00,000 Vimal Punjiram Patel 17-Oct-11 50,00,000 Vanraj Dadbhai Kahor 19-Oct-11 50,00,000 Vanraj Dadbhai Kahor 20-Oct-11 43,60,000 Vanraj Dadbhai Kahor 20-Oct-11 1,00,00,000 Jay Corporation 21-Oct-11 1,00,00,000 Bellisima Impex 22-Oct-11 1,18,50,000 iii. The bank account of Patel (as per Axis Bank, Lamington Road Branch) before transferring the funds to the Noticee on October 17, 2011, is reproduced below:

Opening Entity/Individual Name Date of Debit Credit Closing Balance 2011 transaction Amount Amount Balance 2011 14,866.92 15-Oct-11 Bellisima Impex 15-Oct-11 31,33,492 Vanraj Dadbhai Kahor 15-Oct-11 47,50,000 Vanraj Dadbhai Kahor 15-Oct-11 75,00,000 Vanraj Dadbhai Kahor 15-Oct-11 77,50,000 Shamukh Trading Co. 15-Oct-11 3,06,731 Vidhata Enterprises 15-Oct-11 22,60,777 Shamuk Trading Co. 15-Oct-11 2,99,250 Grishma Securities NSE Client 50,00,000 A/c. 15-Oct-11 Grishma Securities NSE Client 76,00,000 A/c. 15-Oct-11 Grishma Securities NSE Client 74,00,000 A/c. 15-Oct-11 15-Oct-11 1,43,15,116.92 1,43,15,116.92 17-Oct-11 Jivraj Zala 17-Oct-11 53,00,000 Jivraj Zala 17-Oct-11 90,00,000 Grishma Securities NSE Client A/c. 17-Oct-11 2,00,00,000 Royal Traders 17-Oct-11 9,00,000 Kameshwar Trading Co. 17-Oct-11 40,00,000 Bellisima Impex 17-Oct-11 18,50,000 United Trading Co. 17-Oct-11 5,65,000 Jivraj Zala 17-Oct-11 1,00,00,000 Jivraj Zala 17-Oct-11 1,00,00,000 Jay Corporation 17-Oct-11 57,00,000 Jivraj Zala 17-Oct-11 70,00,000 Jivraj Zala 17-Oct-11 50,00,000 10,29,786.02 Vanraj Dadbhai Kahor 17-Oct-11 3,25,000 Grishma Securities NSE Client 13,40,000 A/c. Closing Balance 14,786.02 iv. The bank account of Kahor before transferring the funds to the Noticee on October 19 and 20, 2011, is reproduced below –

Opening Entity/Individual Name Date of Debit Credit Closing Balance transaction Amount Amount Balance 2011 2011 7827.57 Arpan Enterprise 15-Oct-11 2725000 Excel Corporation 15-Oct-11 3000000 Excel Corporation 15-Oct-11 4000000 Arpan Enterprise 15-Oct-11 2525000 Jiya Traders 15-Oct-11 7750000 Vimal Patel 15-Oct-11 7750000 Vimal Patel 15-Oct-11 7500000 Vimal Patel 15-Oct-11 4750000 7827.57 7827.57 Power Tech Trading Co 17-Oct-11 325000 Vimal Patel 17-Oct-11 325000 7827.57 7,827.57 18-Oct-11 Bellisima Impex 18-Oct-11 50,00,000 Jivraj Zala 19-Oct-2011 50,00,000 Bellisima Impex 19-Oct-2011 43,65,000 Jivraj Zala 20-Oct-2011 43,60,000 Bellisima Impex 20-Oct-2011 1,00,00,000 Jivraj Zala 20-Oct-2011 1,00,00,000 20-Oct-2011 12,662.12 v. From the bank account of Kahor (Axis Bank, Lamington Road branch) it is observed that the opening balance as on October 15, 2011, was 7827.57. Kahor received

2,00,00,000 from Arpan Enterprise, Excel Corporation and Jiya Traders, which was transferred to Patel on the same day. On October 17, 2011, Kahor received 3,25,000 from Power Tech Trading Co., which was transferred to Patel. On October 18, 2011,

Kahor received 1,93,65,000 and 1,93,60,000 from Bellisima Impex, which was transferred to the Noticee.

vi. From the bank account of Patel (Axis Bank, Lamington Road Branch), it is observed that the opening balance as on October 15, 2011 was 14,866.92. Patel has received

2,00,00,000 from Kahor (which was in turn passed by Arpan Enterprise, Excel Corporation and Jiya Traders) and the same was transferred to the account of Grishma– NSE Client Account (Axis Bank, Fort Branch) which was in turn transferred to Grishma– Current Account (Axis Bank Fort Branch) and further transferred to Grishma–NSE

Settlement Account. Also, on October 15, 2011, Patel had received 60,00,250 from Bellisima Impex, Shamuk Trading Co. and Vidhata Enterprises on October 17, 2011. From the bank account of the Noticee (Yes Bank, Cadel Road Branch), it is seen that the opening balance as on September 29, 2011 was 30000. On October 15, 2011,

1,17,55,000 was transferred to the account of the Noticee from Bellisima Impex, Nisha Enterprises and Jay Corporation. On October 17, 2011, Patel had transferred

4,63,00,000 to the account of the Noticee. On October 17, 2011, 1,93,60,000 was transferred to the account of the Noticee from Kahor and 2,18,50,000 was transferred to the account of the Noticee from Bellisima Impex and Jay Corporation. Jiya Traders had received 8950168 from Bellisima Impex ( 2600056 on October 12, 2012,

4900056 on October 13, 2012 and 1450056 on October 14, 2011) and in turn transferred 7750000 on October 15, 2012 to Kahor which was later transferred to the account of Grishma–NSE Settlement Account.

vii. In view of the aforementioned paragraphs, I find that the Noticee was indirectly funded by TPL to the extent of approximately 3.80 Crores, which routed it through layered transactions from the bank account of Bellisima Impex, Patel and Kahor. This consisted of 1,45,50,000 directly received in the account of the Noticee from Bellisima Impex and 2,43,48,492 received from Bellisima Impex in the accounts of Patel and Kahor. I cannot consider the aforesaid transfer of funds to the Noticee as mere coincidence since the Noticee required such funds to cover the loss of 9,95,07,581, incurred by him while trading on the first day of listing, in the scrip of TPL. I find that the aforesaid funds also appear to have facilitated the purchase of shares of TPL at a premium to the Issue (which amounted to approximately 33% of the Public Issue Size), by the Noticee from retail allottees/QIBS who were allotted such shares on the first day of listing.

8.3.1 As per the SCN, the Noticee had purchased shares allotted in TPL’s IPO from retail allottees of such shares inter alia at a premium to the issue price i.e. at a price of 63 and then subsequently sold the same at a lower price on the aforementioned stock exchanges, as a result of which, the Noticee had incurred a loss of 9,95,07,852. The Noticee has inter alia contended that as a day trader, he was merely reversing his trades that were made earlier in the scrip of TPL. In this regard, I note that –

Noticee's trades in BSE – i. The Noticee is alleged to have made a purchase and sale of 33,67,032 shares on BSE, on the first day of listing.

ii. From 9:55:48 to 10:03:33, the Noticee was placing buy orders in the range of 1,00,000 to 5,00,000 shares at price of 63 so as to purchase shares from retail allottees. The Noticee was the counterparty buyer to the trades of 322 retail allottees who were allotted shares in the IPO and had sold on the first day of listing on BSE.

iii. From 11:04:56 to 11:45:22, the Noticee was placing the buy orders in the range of 1,00,000 shares to 4,00,000 shares at prices ranging from 61 to 62 so as to purchase shares from the three QIBs. The Noticee had purchased 2,94,517 shares from Sparrow Asia Diversified Opportunities Fund, 2,35,555 shares from IPRO Funds Ltd and 4,53,215 shares from Credo India Thematic Fund Limited.

iv. From 9:15:55 to 9:26:07, the sell order quantity of the Noticee was in the range of 10,000 to 50,000 shares. The prices during this period fell from 66 to 61.50;

v. From 9:30:01 to 10:57:57, the sell order quantity of the Noticee was placed in the range of 15,000 to 1,50,000. Some of these orders were executed and the non executed orders and the partially unexecuted orders were later deleted at around 12:08:25 to 12:09:14. Prices ranged from 63.75 to 61.35;

vi. No sell orders were placed during the period from 10:57:58 to 11:25:23. This was around the time where the three QIBs were placing sell orders and the Noticee was a major buyer;

vii. At 11:25:24, the Noticee placed a sell order for 5,00,000 shares at 61.60;

viii. From 11:59:44 to 12:01:44, the Noticee placed sell orders in the range of 15,000 to 25,000 shares. During this period, prices fell from 60.55 to 53.95;

ix. At 12:02:46, the Noticee placed a sell order for 1,00,000 shares at 57.50;

x. From 12:03:12 to 12:07:01, the Noticee had placed 3 sell orders for 5,000 shares at prices ranging from 53.95 to 56.95;

xi. From 12:07:27 to 13:09:35, a majority of the orders were placed by the Noticee in the range of 100 to 650 shares. The Noticee had, however, placed orders ranging from 10,000 to 1,00,000 shares occasionally. Prices fell from 53.35 to 46.30;

xii. From 13:08:14 to 15:27:51, most of the sell orders placed by the Noticee were in the range of 50,000 shares to 5,00,000 shares.

8.3.2 The Noticee is alleged to have made a purchase of 39,95,274 shares and a sale of 41,20,837 shares of TPL respectively on NSE, on the first day of listing.

Noticee's trades in NSE – i. The Noticee bought the shares at an average price of 50.76 per share and sold 41,20,837 shares at an average price of 35.05 per share. It is observed from the NSE client ledger of the Noticee that 1,25,563 shares were auctioned. The Noticee had incurred a loss of 6,74,68,589 (including the loss on shares auctioned and closed out) by trading in the scrip of TPL.

ii. It is observed from the order log and trade log of NSE that the Noticee had placed buy orders from 9:15:13 to 15:29:35. The major counterparty sellers to the said buy orders of the Noticee on NSE is illustrated below –

Major Quantity Price Buy order Sell Order Trade Time counterparty Traded ```` Time Time Sellers to Jivraj Zala Pinac 7,83,304 28.12 14:13:25 14:33:16 14:33:25 14:39:08 14:39:00 14:39:08 Salasar Stock 4,48,248 50.45 12:11:36 12:11:33 12:11:33 Broking Limited 13:27:57 13:27:55 13:27:57 Lopa 2,00,000 25.75 14:39:08 14:39:00 14:39:08

Divya Drishti 1,50,000 45.45 12:42:49 12:42:45 12:42:49 Merchants Pvt. Ltd. Wheelers 1,49,572 48.50 12:26:30 12:26:28 12:26:30 Developers Pvt. Ltd. IPRO Funds 65,641 62 11:44:59 11:21:53 11:44:59 Limited 11:45:04 11:21:53 11:44:13 11:45:31 11:25:34 11:45:31 11:45:38 11:25:34 11:45:38 11:45:45 11:25:34 11:45:45 11:45:52 11:25:34 11:45:52

8.3.3 From the above, it is observed that the Noticee had purchased shares at a premium to the Issue (which amounted to approximately 33% of the Public Issue Size), from retail allottees/QIBS who were allotted such shares on the first day of listing, at a premium to the issue price on the day of listing of TPL. In addition, it is observed that the Noticee had also purchased shares from certain entities/individuals (who were alleged to have been partly funded by TPL for their trades in such scrip and also purchased shares from certain allottees in TPL’s IPO).

8.4 As per the SCN, the Noticee is alleged to have entered into synchronised/structured trades on BSE and NSE with certain entities/individuals (who had allegedly also purchased shares from certain allottees in TPL’s IPO), for creating artificial volumes. In this regard, I note that – i. The details of the structured trades carried out by the Noticee on both BSE and NSE with entities/individuals (who had allegedly also purchased shares from certain allottees in TPL’s IPO) are given below:

BUY ORDERS - BSE BUY ORDER SELL TRADED BUY SELL BUY SELL DIFFERENCE SELLER QUANTITY ORDER QUANTITY ORDER ORDER ORDER ORDER BETWEEN BUY QUANTITY PRICE PRICE TIME TIME AND SELL ORDER 50000 100000 91603 52 52 12:10:56 12:10:52 0:00:04 Salasar Stock Broking Ltd. 200000 282000 192384 50 50 13:28:20 13:28:13 0:00:07 Salasar Stock Broking Ltd. 100000 50000 37462 47.25 47.25 12:25:38 12:25:43 0:00:05 Divyadrishti Merchants Pvt. Ltd. 100000 50000 41681 47.25 47.25 12:25:38 12:25:37 0:00:01 Divyadrishti Merchants Pvt. Ltd. 50000 29,888 19.50 19.50 15:03:47 15:03:41 0:00:06 Pinac 500000 350000 350000 19.50 19.50 15:03:47 15:03:41 0:00:06 Lopa 100000 100000 19.50 19.50 15:03:47 15:03:40 0:00:07 Volga International Limited SELL ORDERS - BSE BUY ORDER SELL TRADED BUY SELL BUY SELL DIFFERENCE BUYER QUANTITY ORDER QUANTITY ORDER ORDER ORDER ORDER BETWEEN BUY QUANTITY PRICE PRICE TIME TIME AND SELL ORDER 500000 500000 499785 61.60 61.60 11:25:24 11:25:25 0:00:01 Lopa

BUY ORDERS - NSE BUY SELL TRADED BUY SELL BUY SELL DIFFERENCE SELLER ORDER ORDER QUANTITY ORDER ORDER ORDER ORDER BETWEEN QUANTITY QUANTITY PRICE PRICE TIME TIME BUY AND SELL ORDER 300000 300000 273794 48 48 12:11:36 12:11:33 0:00:03 Salasar Stock Broking Ltd. 150000 150000 149572 48.50 48.50 12:26:30 12:26:28 0:00:03 Wheelers Developers Pvt. Ltd. 200000 188000 174454 51 51 13:27:57 13:27:55 0:00:02 Salasar Stock Broking Ltd. 500000 500000 493423 30.50 30.50 14:33:25 14:33:16 0:00:09 Pinac 500000 500000 493423 25.75 25.75 14:39:08 14:39:00 0:00:08 Pinac 500000 200000 200000 25.75 25.75 14:39:08 14:39:00 0:00:08 Lopa SELL ORDERS - NSE BUY SELL TRADED BUY SELL BUY SELL DIFFERENCE BUYER ORDER ORDER QUANTITY ORDER ORDER ORDER ORDER BETWEEN QUANTITY QUANTITY PRICE PRICE TIME TIME BUY AND SELL ORDER 200000 200000 199964 61.70 61.70 11:25:03 11:25:02 0:00:01 Lopa ii. From the abovementioned details, I note that there was an almost exact matching in the quantity, rate and also proximity in the time of entering buy/sell orders by the Noticee and the related entities/individuals (who had purchased shares from retail allottees/QIBs in TPL’s IPO) i.e. Lopa, Pinac, Salasar Stock Broking Ltd., Wheelers Developers Pvt. Ltd., Volga International Limited, Divyadrishti Merchants Pvt. Ltd. Further, I note that the structured reversal trades of the Noticee with Lopa were of an extremely high percentage match i.e. 71% and 100% respectively, and this cannot be described as a mere coincidence. The aforesaid facts show that the Noticee’s orders were structured and entered with prior understanding to match with the orders entered by such related entities/individuals. I note that placing of orders in this manner cannot be termed as regular and normal, because on the one hand a person is taking the buy position and at the same time the related entity/individual is taking the sell position. This also holds true when the person is taking the sell position and at the same time the related entity/individual is taking the buy position. I note that no bonafide investor would indulge in this kind of trading in the normal course of business. Based on the aforementioned discussion, I am of the view that the Noticee was aware about the orders of the related entities/individuals.

iii. I note that in the screen based trading, the manipulative or fraudulent intent can be inferred from various factors such as conduct of the party, pattern of transactions, etc. Such intention may be demonstrated from the attending circumstances as observed by Hon'ble SAT in Ketan Parekh vs. SEBI, Appeal no. 2/2004, decided on July 14, 2006, wherein it was inter alia held: "The nature of transactions executed, the frequency with which such transactions are undertaken, the value of the transactions, … the conditions then prevailing in the market are some of the factors which go to show the intention of the parties. This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn." Further, the Hon'ble SAT in Mr. Bhavesh Pabari vs. SEBI, Appeal no. 104/2012, decided on July 3, 2012, had inter alia observed: "When a large number of entities are involved and allegation is of fraud and manipulating the securities market, case of each entity is to be viewed with reference to its role in manipulating the trades and its role in executing synchronized/circular/reversal trades."

iv. Having regard to the abovementioned observations, it can be inferred from the Noticee's trading patterns in the instant case that the same were done with the concealed intention of creating artificial volumes in the securities market. Therefore, it is concluded that the trades in the scrip of TPL which resulted in the synchronised/structured deals were not genuine sale and purchase transactions but rather had the effect of creating artificial volumes. Further, such artificial trades generate interest of genuine investors, who in turn trade in such scrip on seeing the increased trading activity. I, therefore, find that such conduct of the Noticee constitutes a serious irregularity in the market and also disturbs the market equilibrium.

9. In view of the aforementioned paragraphs 8.1–8.4, I find that:

i. The Noticee was allowed to trade on the first day of listing in the scrip of TPL by Grishma despite being a walk-in client with inadequate risk taking capacity and whose account was opened just ten days prior to the date of TPL's IPO. This was made possible through non-collection of funds by Grishma from the Noticee towards the margin amount payable to stock exchanges. Grishma permitted such a huge exposure to the Noticee, who did not have any track record of trading with Grishma, as it was aware that funds would subsequently be received in the Noticee’s account through layered transactions. Grishma used the funds and securities of its other clients, viz. Patel, Bhatt and Goenka to meet the margin obligation arising out of the huge loss incurred by the Noticee on the first day of trading in the scrip of TPL on both BSE and NSE. Grishma also used the funds of its CEO/Compliance Officer, Ghelani to meet the margin obligation arising out of the abovementioned loss incurred by the Noticee. Therefore, the allegation that the Noticee was a front entity of Grishma stands established.

ii. The Noticee incurred a loss of 9,95,07,852 by trading in the scrip of TPL. The Noticee was indirectly funded by TPL to the extent of approximately 3.80 Crores, which routed it through layered transactions from the bank account of Bellisima Impex, Patel and Kahor. This consisted of 1,45,50,000 directly received in the account of the Noticee from Bellisima Impex and 2,43,48,492 received from Bellisima Impex through the accounts of Patel and Kahor in the manner described at para 8.2. The Noticee required such funds to cover the aforementioned loss incurred by him while trading on the first day of listing, in the scrip of TPL. The aforesaid funds also appear to have facilitated the purchase of shares of TPL at a premium to the Issue (which amounted to approximately 33% of the Public Issue Size), by the Noticee from retail allottees/QIBS who were allotted such shares on the first day of listing. The Noticee was the major counterparty client, who had purchased shares from retail allottees/QIBs at a premium to the issue price on the day of listing of TPL. iii. The Noticee by acting as a front entity of Grishma assisted TPL to divert the proceeds from its IPO. Further, the Noticee tried to circumvent the policies laid down by way of the SEBI Act, Regulations and Circulars, to play a fraud on genuine investors, who traded in the scrip of TPL on the first day of trading. iv. The Noticee indulged in synchronised/structured trades with certain entities/individuals (who had allegedly also purchased shares from certain allottees in TPL’s IPO) in the scrip of TPL, which had the effect of creating artificial volumes in such scrip.

10. I note that the provisions of section 12A(a)–(c) of the SEBI Act read with regulations 3(a)–(d) of the PFUTP Regulations, 2003, inter alia prohibit buying, selling or dealing in securities in a fraudulent manner; employment of any manipulative/deceptive device, scheme or artifice to defraud in connection with dealing in securities; engaging in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with dealing in securities. Further, regulations 4(1) and 4(2)(a)–(b) and 4(2)(e) of the PFUTP Regulations, 2003, inter alia prohibit indulgence in fraudulent and unfair trade practices in securities either through an act which creates false or misleading appearance of trading in securities; dealing in a security intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss; or any act or omission amounting to manipulation of the price of a security. In my view, any fraudulent or deceptive device, scheme, act, omission, etc. which has the potential to inter alia induce sale/purchase of securities of any company; influence investment decisions of investors in such company; or result in wrongful gain, etc. would be covered within the prohibition contained under section 12A(a)–(c) of the SEBI Act read with regulations 3(a)–(d), 4(1) and 4(2)(a)–(b) and 4(2)(e) of the PFUTP Regulations, 2003.

11. Upon a consideration of the discussions at paras 8.1.1 – 9, I find that the Noticee has violated the provisions of Section 12A (a), (b) and (c) of the SEBI Act read with Regulations 3(a)–(d), Regulations 4(1) and 4(2)(a)–(b) and 4(2)(e) of the PFUTP Regulations, 2003.

12. I find that the fraudulent, manipulative and illegal activities committed by the Noticee were part of a larger scheme which affected the integrity of the securities market and resulted in the execution of trades in the scrip of TPL to the detriment of genuine investors. In view of the same, I find that the Noticee, if allowed to continue further, will pose a serious threat to the safety and integrity of the securities market. Therefore, stringent measures have to be taken to deal with such illegal activities committed by the Noticee.

Order –

13. In view of the foregoing, I, therefore, in exercise of the powers conferred upon me by virtue of section 19 read with sections 11(4) and 11B of the SEBI Act and regulation 11(1) of the PFUTP Regulations, 2003, hereby restrain the Noticee from accessing the securities market and prohibit him from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of seven years.

14. I note that vide the Interim Order dated December 28, 2011, the Noticee was restrained from accessing the securities market and prohibited from buying, selling or dealing in the securities market till further orders. In this context, I note that the Noticee has already undergone the restraint for a period of approximately one year and ten months. In view of this factual situation, it is clarified that the restraint already undergone by the Noticee, pursuant to the aforementioned SEBI Order, shall be reduced while computing the period of restraint being imposed vide this order.

15. This Order shall come into force with immediate effect.

Place: Mumbai S. RAMAN Date: November 19, 2013 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA