Order against Pramod Gadia in the matter of Doctors Biotech Ltd

Under Section 11 (4) (b) and 11B of the Securities and Exchange Board of India Act, 1992

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted investigations into buying, selling and dealings in the shares of Doctor’s Biotech Ltd. (hereinafter referred to as ‘DBL’), for the period of October 09, 2003 to March 09, 2004. During investigations the scrip of DBL was listed at Bombay Stock Exchange (hereinafter referred to as ‘BSE’).

2. Investigation revealed, significant increase in the price and volume of the scrip during the relevant period. At BSE, the price of the scrip increased from Rs.105/- as on October 09, 2003 to Rs.420/- as on March 09, 2004 after touching a high of Rs.423.25/- as on March 09, 2004. The shares of the company were last traded on BSE on June 29, 2005 at Rs.3.98/- and since then trading in the scrip is under suspension.

3. Investigation further revealed that one Mr. Pramod Gadia (hereinafter referred to as ‘noticee’) was the major trader in the scrip and trading done by him constituted 52.61% on gross purchases, 19.83% of the gross sales and 73.66% of net purchases. It is further revealed that he and M/s Venkatesh Shares and Investments had entered into reversal of trades in the scrip during the period of investigation.

4. On completion of the investigations, SEBI inter-alia issued Show Cause Notice dated October 20, 2008 (hereinafter referred to as ‘SCN’) to the noticee herein under Sections 11(4) and 11B of the SEBI Act, 1992 read with Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. The SCN alleged that the noticee had entered transactions which do not appear to be according to sound market practices. The SCN, therefore, alleged that the acts of the noticee were in violation of the Regulations 4 (2) (a), (b) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’). Accordingly, it called upon the noticee to show cause as to why suitable directions under Section 11(4) and 11B of SEBI Act including restraining him from accessing the capital market in securities should not be issued.

5. No reply was received from the noticee despite service. I note that reminders were also issued to the noticee but till date no reply has been received by SEBI, from the noticee. Pursuant to this, in order to proceed with the matter an opportunity of personal hearing was granted to noticee before me on January 21, 2010. However, the noticee failed to appear for the personal hearing. Another opportunity of personal hearing was granted to the noticee on February 22, 2010, in compliance of the principles of natural justice. However, this time again the noticee did not turn up for the personal hearing in spite of due intimation. Further, no request for adjournment has been received from the noticee. I have seen that sufficient opportunities have already been given to noticee to explain his case. In view of this, I am compelled to proceed with the matter ex-parte, on the basis of material available on record, as against the noticee, having complied with the principles of natural justice.

6. I have carefully considered the SCN and material available on record. After having examined the said material on record, the issue that arises for my consideration is: Whether the noticee has indulged in reversal of trades and fictitious trades, which led to artificial increase in the price and volume in the scrip of DBL?

7. Whether the noticee has indulged in reversal of trades and fictitious trades, which led to artificial increase in the price and volume in the scrip of DBL?

a. I note that the noticee at the relevant point of time had traded in the scrip of DBL through two trading members namely Sanchay Fincom Ltd. and MPSE Securities Ltd. through its sub-broker B.K.M Share and Stock Brokers Pvt. Ltd. A summary of his dealings through the aforesaid members is given below: Table A Name of the Member Gross Gross Net Purchases Sales Sanchay Fincom Ltd. (204) 44,265 9,965 34,300 MPSE Securities Ltd. (296) 10,170 10,550 -380 Total 54,435 20,515 33,920 Total traded qty. on exchange 1,03,472 1,03,472 46,050 % Comparison 52.61% 19.83% 73.66% b. During the sub period of investigation i.e. November 21, 2003 to January 12, 2004, out of the total 38 trading days, the scrip of DBL was traded only on 22 days. Out of the said 22 days on 18 days the noticee and M/s Venkatesh Shares and Investments contributed significantly to the market volume in the scrip of DBL. On most of the occasions 100% of the market volume was contributed by the noticee and M/s Venkatesh Shares and Investments as can be seen from the Table B below along with comparison of their trading with day’s traded volumes:

Table B

Date Buying Buy Client Selling Sell Client Qty Rate Day’s % Member Member Code Traded Compar Volum ison es 24/11/03 D0204 Venkatesh D0296 Pramod 1,000 202.50 2,000 D0296 Pramod D0204 Venkatesh 1,000 195.00 100% 27/11/03 D0204 Venkatesh D0296 Pramod 1,000 206.55 2,020 D0296 Pramod D0204 Venkatesh 1,000 206.25 99% 28/11/03 D0204 Venkatesh D0296 Pramod 1,000 210.65 2000 D0296 Pramod D0204 Venkatesh 1,000 210.65 100% 01/12/03 D0204 Venkatesh D0296 Pramod 50 214.85 50 100% 08/12/03 D0204 Venkatesh D0296 Pramod 300 216.00 607 49% 09/12/03 D0296 Pramod D0204 Venkatesh 350 208.00 350 100% 22/12/03 D0204 Venkatesh D0296 Pramod 500 215.00 1,000 D0296 Pramod D0204 Venkatesh 500 213.00 100% 23/12/03 D0204 Venkatesh D0296 Pramod 200 218.50 D0296 Pramod D0204 Venkatesh 200 218.70 400 100% 29/12/03 D0204 Venkatesh D0296 Pramod 2,000 224.65 5,000 100% D0296 Pramod D0204 Venkatesh 2,000 225.45 30/12/03 D0204 Venkatesh D0296 Pramod 500 229.25 2,005 99% D0296 Pramod D0204 Venkatesh 500 227.00 31/12/03 D0204 Venkatesh D0296 Pramod 200 233.00 250 80% 01/01/04 D0296 Pramod D0204 Venkatesh 200 237.50 200 100% 02/01/04 D0204 Venkatesh D0296 Pramod 100 242.00 100 100% 05/01/04 D0204 Venkatesh D0296 Pramod 100 246.50 100 100% 07/01/04 D0204 Venkatesh D0296 Pramod 100 256.00 200 50% 08/01/04 D0296 Pramod D0204 Venkatesh 500 260.50 500 100% 09/01/04 D0204 Venkatesh D0296 Pramod 600 265.50 1,100 100% D0296 Pramod D0204 Venkatesh 500 264.50 12/01/04 D0204 Venkatesh D0296 Pramod 100 270.00 100 100%

From above stated pattern of trades, it is inferred that the trades were reversal in nature. I note that such reversal trading between the noticee and M/s Venkatesh Shares and Investment was spread over several trading days. It is pertinent to mention that the noticee during the relevant point of time had traded through both the brokers as stated above and as stated earlier had constituted almost 74% of total net purchases in the scrip. The time difference between such buy/ sell orders was 29 seconds to 2 hours.

c. In view of this, it is concluded that the aforesaid trading was reversal in nature and the same had influenced the price of the scrip, especially during the sub-period from November 24, 2003 to January 15, 2004 from Rs.195/- to Rs.284.75/-.

d. During the period from January 20, 2004 to March 09, 2004, the noticee also entered into fictitious trades through brokers Sanchay Fincom Ltd. and MPSE Securities Ltd. I note that in these trades, the buying and selling client was the noticee itself. A day-wise summary of such fictitious trades is given below for ready referance: Table C

Date Buy Buy Sell Sell Client Qty. Rate Days % Member Client Member Traded Compari Volume son 12-Feb-04 D0204 Pramod D0296 Pramod 50 339.10 85 58.80 13-Feb-04 D0296 Pramod D0204 Pramod 50 334.00 3,060 1.63 23-Feb-04 D0204 Pramod D0296 Pramod 500 369.13 3,010 33.22 23-Feb-04 D0296 Pramod D0204 Pramod 500 368.10 25-Feb-04 D0204 Pramod D0296 Pramod 500 380.00 7,227 6.92 1-Mar-04 D0204 Pramod D0204 Pramod 50 401.00 605 8.26 8-Mar-04 D0204 Pramod D0296 Pramod 50 420.00 1,074 4.66 1,700

I note that on two days i.e. February 12, 2004 and February 13, 2004 such trades were executed at prices significantly lower than the previous traded price of respective days. Further, from the analysis of first trades on days when the price of the scrip has opened at or near the 2% upper circuit price, it was found that Sanchay Fincom Ltd. appeared as the buying member on 11 trading days and as selling member on 3 trading days out of a total 19 trading days.

8. In view of the above stated facts, I find that the noticee had entered the impugned trades with a view to create misleading appearance of trading which tampers with the price discovery mechanism of stock exchange and is against the concept of transparency. The fictitious and reversal trades entered into by the noticee had facilitated the creation of artificial volumes and false market in scrip of DBL. This is most likely to induce the innocent genuine investors to trade in the scrip. The noticee is therefore guilty of violating the provisions of Regulations 4 (2) (a), (b) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

9. Therefore, taking into consideration the facts and circumstances of the case, I, in exercise of the powers conferred upon me under Sections 19 of the SEBI Act read with Section 11B and 11(4)(b) of SEBI Act, 1992, do hereby restrain the noticee viz. Pramod Gadia (PAN: ADUPG 6871G) from buying, selling or dealing in securities market whatsoever or accessing the securities market, directly or indirectly, for a period of one year from the date of this order.

10. This order shall be served on all recognized stock exchanges and depositories to ensure that the noticee is not allowed to undertake transactions as prohibited in Para 9 above.

11. This order shall come into force with immediate effect.

DATE : 29/APRIL/2010 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA