Order against Mrs. Hetal Patel and Mr. Rajesh Patel in the matter of RTS Power Corporation Limited

For Securities and Exchange Board of India: Mr. A. S. Mithwani, Deputy General Manager Mr. Vijayakrishnan G., Deputy Legal Adviser Mr. Balbir Singh, Manager Mr. T. Vinay Rajneesh, Legal Officer

1. Securities and Exchange Board of India (hereinafter referred to as SEBI), vide an ex-parte ad interim order dated June 5, 2009, in the matter of RTS Power Corporation Limited (hereinafter referred to as the company), for the reasons stated therein, inter alia, restrained Mrs. Hetal Patel and her husband, Mr Rajesh Patel from accessing the securities market and prohibited them from buying, selling or dealing in securities market, directly or indirectly, till further orders. Further, Bombay Stock Exchange Limited (hereinafter referred to as BSE), vide the said order, was directed to withhold the payout of February 11, 2009 of Mrs. Hetal Patel in a separate escrow account, till further orders. Thereafter, Mrs. Hetal Patel vide letter dated June 13, 2009 submitted her objections and inter alia stated that:

a) the ex-parte order is in total disregard to the provisions of Section 11(4) of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the Act) and that she had not violated the provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations). b) all the transactions on February 11, 2009 were done through screen based trading mechanism provided by the stock exchange and that all the orders were placed at the prevalent market prices. She had no connection/link/relation with the buyers as alleged. c) she had not given any phone number in her ‘Know Your Client’ (KYC) forms and that uploading of the details in Unique Client Code (UCC) is in the domain of the stock broker. Mrs. Hetal Patel further contended that she failed to understand that how come a number can be uploaded in UCC when the same was not provided. She claimed that Mr. Yashodeep Bhosale, the employee of the stock broker Way2Wealth, who filled up her KYC form, had inadvertently mentioned the number 99675-77028, instead of her number since she was not well versed in English. The only basis of drawing nexus between her and Mr. Yashodeep Bhosale is that her advocate had represented Mr. Yashodeep Bhosale in SEBI on his request. d) She has no link/connection/relation with Mr. Mukesh Konde, Mr. Ashok Waje and Mr. Nitesh Jadhav or Mr. Chetan Shah. e) As she is a diamond trader, she had purchased diamonds from Om Associates and had transferred Rs. 1.12 crores to Om Associates on September 25, 2008 in lieu of purchase of diamonds. She had sold diamonds worth Rs. 11 lakhs to Bhavani Trading Company and received the payment thereto. She denied any kind of financing from Bhavani Trading Company and Om Associates as the payment received or given was in the course of her business of diamond trading.

2. In view of the above submissions, Mrs. Hetal Patel requested that the ex-parte interim order to the extent it applied to her be reconsidered and the directions against her be withdrawn. She further requested release of the payout of funds to her. Accordingly, an opportunity of hearing was granted to Mrs. Hetal

Patel on July 23, 2009 which was rescheduled to August 25, 2009 on her request. On August 25, 2009, Mr. Zal. Ahdhyarujina, Advocate appeared on behalf of Mrs. Hetal Patel and made submissions on the lines of the objections filed by Mrs. Hetal Patel, vide letter dated June 13, 2009. Mrs. Hetal Patel filed a copy of the Appeal Memorandum (No. 34 of 2009) filed by her before the Hon’ble Securities Appellate Tribunal (hereinafter referred to as the Hon’ble Tribunal). During the course of hearing, the learned counsel inter alia requested for the inspection of documents. The said request was allowed and the party was advised to file written submission within ten days, after the inspection of documents was over. Further, SEBI had also provided copies of required documents and two compact discs containing trade and order log data to Mrs. Hetal Patel, vide letter dated September 2, 2009 and was directed to file the written submissions. However, no written submissions was filed by Mrs. Hetal Patel, so far. Mr. Rajesh Patel, the husband of Mrs. Hetal Patel, covered under the ex-parte order had neither filed objections nor appeared for hearing.

3. I have considered the objections filed by Mrs. Hetal Patel, the oral submissions made by the learned counsel on her behalf and other material available on record. I note that in the appeal (No. 34 of 2009) filed by Mrs. Hetal Patel, the Hon’ble Tribunal, vide an order dated April 6, 2009, was not inclined to pass any interim directions in view of the undertaking made by the counsel for BSE that a sum of Rs.3,44,62,569/-shall be deposited in a fixed deposit with a nationalized bank carrying the maximum rate of interest and this amount would be utilized for making payment to Mrs. Hetal Patel in case, she is found entitled to the same. In the facts and circumstances, the issue for consideration at this juncture is whether, based on the available material on record and after considering the submissions made on behalf of Mrs. Hetal Patel during the course of personal hearing, the directions issued by SEBI, vide ad interim ex-parte order dated June 5, 2009 need to be continued, revoked, or modified in any manner, in so far as it relates to Mrs. Hetal Patel. The case of Mr. Rajesh Patel is considered on the basis of the available material on record.

4. The circumstances which led to the passing of the ex-parte order dated June 5, 2009 against various persons/entities including Mrs. Hetal Patel and Mr. Rajesh Patel and their prima facie role in the alleged market manipulation in the shares of the company on February 11, 2009, have been explained in detail in the said order. It is the case of the complainants (stock brokers) that clients namely, Mr. Mukesh G. Konde, Mr. Ashok Narayan Waje and Mr. Nitesh Ashok Jadhav after buying substantial number of shares of the company on February 11, 2009 failed to fulfill their respective pay-in obligations totaling Rs. 9,14,49,113/-. It goes without saying that such defaults pose serious threat to the functioning of the securities market and SEBI, as a market regulator, has to interfere and take appropriate measures/actions including issuing directions against the persons who were involved in such transactions. As mentioned in the ex-parte order, substantial number of shares of the company were traded in the month of February 2009, particularly on February 11. The same was not supported by any fundamentals of the company. The trades of Mrs. Hetal Patel in the shares of the company on February 11, 2009 are not disputed. Most of the shares (more than 95%) sold by her on the said date were bought by Mr. Mukesh G. Konde and Mr. Nitesh Ashok Jadhav. This is also an undisputed fact. The details of such trades were also provided in the ex-parte order. The preliminary investigation also revealed certain inter-linkages between Mrs. Hetal Patel, Mr. Chetan Shah and Mr. Mukesh G. Konde (one of the defaulters) on the basis of common phone number 9967577028. The pertinent factor here is that Mrs. Hetal Patel was the counter party to Mr. Mukesh G. Konde for his trades executed on February 11, 2009. Prima facie, it was observed that some buyers and sellers had given a common telephone number to their respective stock brokers. The prima facie findings in respect of Mrs. Hetal Patel are explained in detail in the ex-parte order, brief of such findings are as below:

i. As per UCC database of BSE, it was observed that common telephone number (9967577028) was provided by Mrs. Hetal Patel and Mr. Chetan Shah to their respective stock brokers. The said telephone number was subscribed to by the India Infoline (stock broker) for its employee Mr. Mukesh G. Konde during the time of his employment.

ii. Most of Mrs. Hetal Patel’s trades on February 11, 2009 were with Mr. Mukesh G. Konde and Mr. Nitesh Ashok Jadhav. The said trades were structured deals wherein the parties had placed orders in a pre-determined manner.

ii. Some of the buyers and sellers had given common telephone number to their stock brokers and they were in touch with each other as mentioned in the ex-parte order.

iii. There were fund transfers between some common entities including Mrs. Hetal Patel, Mr. Mukesh G. Konde, Mr. Ashok Narayan Waje, Mr. Nitesh Ashok Jadhav, Om Associates and Bhavani Trading Company, as explained in detail in the ex-parte order. Though, summons were issued by SEBI to the aforesaid persons, Om Associates and Bhavani Trading Company have failed to respond to the said summons.

5. Mr. Rajesh Patel appeared before the investigating Authority of SEBI on behalf of Mrs. Hetal Patel and stated that he had placed orders on behalf of his wife, Mrs. Hetal Patel. However, he chose not to file his objections in respect of the ex-parte order.

6. The prima facie findings in respect of the involvement of Mrs. Hetal Patel and Mr. Rajesh Patel are explained in detail in the ex-parte order. The investigation in the matter is not yet concluded and the same is still in progress. The investigation alone could bring out the role of the parties including Mrs. Hetal Patel and Mr. Rajesh Patel in the alleged manipulation. Therefore, it is not appropriate at this stage to give conclusive findings in respect of the contentions raised by Mrs. Hetal Patel. The submissions of Mrs. Hetal Patel including her claim that ‘the telephone number being inadvertently mentioned in the KYC by an employee of Way2Wealth Securities’ would be examined in the investigation which is ongoing. At present, the available material on record justifies the continuation of the directions passed against Mrs. Hetal Patel and Mr. Rajesh Patel vide the ad interim ex-parte order dated June 5, 2009, till the completion of the investigation. Therefore, till the completion of such investigation, I do not consider it fit to interfere with the directions passed by SEBI, vide order dated June 5, 2009. The role or involvement of Mrs. Hetal Patel and Mr. Rajesh Patel in the alleged manipulation would be reviewed after the investigations are completed.

7. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11B and 11(4) thereof, hereby confirm the directions issued vide the ad-interim ex-parte order dated June 5, 2009 in the matter of RTS Power Corporation Limited against Mrs. Hetal Patel and Mr. Rajesh Patel.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

PLACE: MUMBAI DATE: OCTOBER 26, 2009