Order for Dangi entities in the matter of Mr. Sanjay Dangi, his associates and other entities

DIRECTIONS UNDER SECTIONS 11(4), 11B AND 11D OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AGAINST MENTOR CAPITAL LIMITED (EARLIER KNOWN AS PACIFIC CORPORATE SERVICES LIMITED), MR. SANJAY DANGI, MRS. ALPANA DANGI, MR. SUNIL DANGI, ASHOK FINSTOCK LIMITED AND IVORY CONSULTANTS PRIVATE LIMITED IN THE MATTER OF MR. SANJAY DANGI, HIS ASSOCIATES & OTHER ENTITIES IN VARIOUS SCRIPS

1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) vide an ad-interim ex-parte Order dated December 2, 2010 (hereinafter referred to as the Order), had issued certain directions in the matter of Mr. Sanjay Dangi, his associates and other entities in various scrips. The Order had inter alia restrained Mentor Capital Limited (earlier known as Pacific Corporate Services Limited), Amit Business Limited (which had subsequently merged with Pacific Corporate Services Limited), Ashok Finstock Limited, Ivory Consultants Private Limited, Mr. Sanjay Soumitra Singh Dangi (Mr. Sanjay Dangi), Mr. Sunil Soumitra Singh Dangi (Mr. Sunil Dangi) and Mr. Alpana Sanjay Dangi (Mrs. Alpana Dangi) from accessing the securities market and were prohibited from buying, selling or dealing in securities in any manner whatsoever, till further directions. In this Order, all the aforesaid entities/persons shall be collectively referred to as the parties and individually by their respective names.

2. Pursuant to the Order, Mr. Sanjay Dangi and Mrs. Alpana Dangi filed separate replies dated March 21, 2011 and May 4, 2011 respectively. They were also afforded with an opportunity of hearing on May 25, 2011, when Mr. Amit Desai, senior counsel appeared and made submissions. During the hearing, the entities prayed that certain set of documents as sought were not provided to them by SEBI and that they would require another three weeks time to make their submissions after receipt of the said documents from SEBI. Accordingly, hearing was postponed to a later date after the documents are provided to them. The documents were inspected by Mentor Capital Limited, through its authorised representatives M/s Crawford Bayley & Co., Advocates on June 3, 2011 and copies of the documents were also provided as annexures and in a compact disk. Subsequently, further documents, as requested by the said authorised representatives, were also provided vide letter dated June 17, 2011. Thereafter, in a hearing scheduled on June 28, 2011, Mr. Amit Desai, senior counsel appeared and made submissions. Mr. Birendra Saraf (Counsel), Mr. Naville Lashkari (Counsel), Mr. Sanjay Asher (from M/s. Crawford Bayley & Co), Ms. Manik Joshi (from M/s. Crawford Bayley & Co), Ms. Amrita Nandgaonkar, (from M/s. Crawford Bayley & Co) and Mr. Rajiv Vyas, (chief executive officer, MCL) were also present in the said hearing.

3. Mentor Capital Limited (hereinafter referred to as MCL) sought inspection of documents relied upon by SEBI in passing of the Order. Inspection was provided to the authorised representatives of MCL on January 6, 2011. Thereafter, MCL submitted a list of documents to be provided to them for reply. The said list was subsequently modified vide an electronic mail dated May 27,2011 received from M/s. Crawford Bayley & Co., solicitors & advocates for MCL. Meanwhile, MCL filed a reply dated March 31, 2011 and sought for an opportunity of personal hearing. Based on the revised list of documents, another inspection was provided to the authorised representatives of MCL on June 3, 2011 and copies of the documents that were inspected on the said date were also provided. Further, vide letter dated June 6, 2011, certain other documents were also provided to MCL. Subsequently, vide e-mails dated June 8, 2011 & June 13, 2011 (received from M/s Crawford Bayley & Co., Advocates), MCL also sought copies of order logs and other documents, which were not sought earlier. The same were provided vide letter dated June 17, 2011. An opportunity of personal hearing was afforded to MCL on June 25, 2011, when Mr. Pesi Modi (Senior counsel) appeared on behalf of MCL and made submissions. Mr. Birendra Saraf (Counsel), Mr. Naville Lashkari (Counsel), Mr. Sanjay Asher (from M/s. Crawford Bayley & Co), Ms. Manik Joshi (from M/s. Crawford Bayley & Co), Ms. Amrita Nandgaonkar, (from M/s. Crawford Bayley & Co) and Mr. Rajiv Vyas, (chief executive officer, MCL) were also present in the said hearing. During the hearing, MCL was inquired about the transactions executed by it in the shares of Welspun on December 6, 2010, December 10, 2010 and December 27, 2010, after the issuance of the Order (dated December 2, 2010). Pursuant to the hearing, MCL vide letter dated July 4, 2011, inter alia submitted that the said sales were not done by it and that the same were sold by the NBFCs to recover their dues without instruction or knowledge of MCL. Other submissions contained therein were mainly reiteration of certain submissions made by it in its reply dated March 31, 2011.

4. Ivory Consultants Private Limited (hereinafter referred to as ICPL) filed its reply vide letter dated April 7, 2011. Though an opportunity of personal hearing was afforded to the entity on May 25, 2011, the same was not availed.

5. In respect of Ashok Finstock Limited, M/s. Kookada & Associates, Advocates, vide letter dated February 21,2011, sought documents on its behalf and the same were forwarded to Ashok Finstock Limited vide SEBI letter dated June 7,2011. On June 29, 2011, Ms. Soma Singh, Advocate and Mr. Shubro Dey appeared on behalf of Ashok Finstock Limited (hereinafter referred to as AFL) and made submissions before me. Mr. Gajanand Sharma, the director of AFL was also present during the hearing. During the hearing, the counsel sought a copy of an email correspondence dated January 28, 2010 between SEBI and BSE and undertook to make submissions on the same by July 1, 2011. A copy of the said email was provided to her after the hearing. Thereafter, vide an email dated July 1, 2011, Mr. Vivek Sharma, counsel for AFL had submitted that wrong information was given about the directors, address and registered office of AFL but failed to give any explanation in respect of the alleged Dangi group and inclusion of AFL in the said group.

6. Mr. Sunil Dangi vide letter dated December 21, 2010 requested for inspection of documents relied upon by SEBI while passing the order. An opportunity of inspection was afforded on January 6, 2011. Thereafter, he filed his reply vide letter dated January 7, 2011 and sought an opportunity of personal representation. An opportunity of personal hearing was provided to him on February 10, 2011, when Mr. Sunil Dangi, Mr. Aditya Bhansali & Ms. Pragati Shetty of M/s. Mindspright Consultants appeared and made submissions before me. During the hearing, Mr. Sunil Dangi also filed written submissions dated February 7, 2011.

7. I have considered the written as well as the oral submissions made by the respective parties. The issue for consideration in this Order would be to decide whether the ad-interim ex-parte directions issued vide the said Order against the need to be continued, modified or revoked in the light of their submissions and the facts and circumstances of the matter. I would consider the case of the entities/persons in sequence.

8. As stated in the Order, SEBI had initiated an investigation, on the basis of a reference and documents (as mentioned in the Order) received from the Income Tax Department (the IT Department), to find out whether there was any concentration of shareholding of the company, Murli Industries Ltd. (hereinafter referred to as MIL) among the ten entities mentioned therein and whether there was any attempt to manipulate the shares of MIL before the FCCB issue. The said reference had informed SEBI of the manipulation in the shares of MIL and the profit sharing arrangement between MIL and one Mr. Sanjay Dangi. Based on the preliminary findings of the aforesaid investigation, it appeared to SEBI that the Dangi group entities (as defined in the Order) have influenced the price rise in the various scrips during the ‘pricing period’ of FCCBs and thereafter, exited the scrips at a profit, as per the alleged agreement made with the promoters of the company. The Order had discussed the manner of trading inter alia by the Dangi Group entities (as defined therein) in five scrips, namely, MIL, Ackruti City Limited (hereinafter referred to as Ackruti), Welspun Gujarat Stahl Rohern Limited (hereinafter referred to as “Welspun”), Brushman India Limited (hereinafter referred to as Brushman) and RPG Transmission Limited (hereinafter referred to as RPG). SEBI observed noticeable trading by the Dangi group entities in the shares of the aforesaid companies, which were prima facie responsible for the increase in the share price as well as spurt in trading volume. It is mentioned in the Order as to how the share price was inflated through the trading by the Dangi group entities. The manner of establishment of new higher price and variation in the last traded price because of the trades of the Dangi group entities during the relevant period had been explained in detail in the Order.

9. I note that in the SEBI order, the trading activity of the Dangi group entities had been discussed in various pages. The trade details included the trades of MCL and AFL. It is alleged in the Order that MCL whose directors and shareholders are

Mr. Sanjay Dangi and Mrs. Alpana Dangi, traded actively in the securities market with other Dangi group entities. The purpose of active trading in the market in the said scrips was prima facie alleged to assist the promoters of the companies, in determining the price of FCCB/QIP issue etc. by artificial raising and maintaining the share price prior to the FCCB/QIP issue. After the successful completion of the allotment in such corporate actions, exit opportunity was provided to the Dangi entities by the promoter entities in the matter of MIL. Thus, it was alleged that Dangi group entities and the others (whose prima facie role had been mentioned in the Order) have time and again acted together in a co-ordinated and collusive manner for execution of fraudulent schemes in the securities market. At the relevant point of time, prior to the pricing of a forthcoming issue of securities, they were found dealing in shares of companies concerned in order to artificially increase volumes and price or even to maintain the prices and favour the promoters in the desired manner.

10. MCL replied that certain documents were not provided to them till the time of hearing on May 25, 2011. Pursuant to my directions given during the hearing, inspection of documents was provided to M/s Crawford Bayley & Co., authorised representatives of MCL, Mr. Sanjay Dangi and Mrs. Alpana Dangi on June 3, 2011 and copies of the documents were also provided. Subsequently, vide letters dated June 6, 2011 and June 17, 2011, some more documents including the order logs of the five scrips was also provided. After receiving those documents, all the three entities appeared before me on the dates of hearing (June 25, 2011 (to MCL) and June 28, 2011 (to Mr. Sanjay Dangi & Mrs. Alpana Dangi)) and made submissions. Similarly, AFL having confirmed the receipt of documents forwarded by SEBI vide letter dated June 7, 2011 and made submissions on June 29, 2011. The submissions of the parties are mentioned herein below and thereafter I proceed to record my observations.

11. It is stated by MCL that there was no emergent situation or circumstance warranting issuing of the Order and that the reference from the Income Tax Department was dated November 27, 2009 and Order was passed by SEBI on December 2, 2010, after a period of one year. MCL also submitted that the period of examination of the various scrips is also far off from the date of SEBI order and ranges from 8 months (Welpsun) to 38 months (RPG). According to MCL, it is a non-deposit raising NBFC registered with the Reserve Bank of India since 2007 and its main business is to make investment in securities and advisory services including equity capital markets, private equity investments and real estate investments. The trading in the market was mainly done through the stock brokers, JM Financials Limited, Edelweiss Securities Limited and HSBC Investdirect. It has not traded through Sanchay Fincom Limited/Sanchay Finvest Limited and Systematix Shares & Stocks India Limited/Systematix Shares & Stock Brokers Limited, Anand Rathi Financial Services Limited/Anand Rathi Shares & Stock Brokers Limited.

It has also traded through Ashika Stock Broking Limited, but the trades through the said stock broker were negligible when compared to transactions done through other stock brokers. According to the entity, no adverse orders have been issued against it except the present order. It was mentioned that out of the ten Dangi entities, three entities i.e. AFL, ICPL and Mr. Sunil Dangi have been erroneously clubbed with MCL and remaining six entities. Based on such clubbing of unrelated entities, SEBI has drawn adverse inference and issued directions of debarment against them. MCL submitted that except for few off market transfers with AFL, there is no relation whatsoever between itself and AFL. It was submitted that the off-market transactions were done in the normal course of business and was with consideration. It further submitted that ICPL is its shareholder since March 31, 2008 and holds 14.12% shares of the capital of MCL. As regards the induction of Mr. Sanjay Dangi and Mrs. Alpana Dangi as directors in ICPL, it was submitted that MCL and ICPL were interacting for the purpose of merging ICPL with MCL as both are investment companies and having good net worth and therefore, Mr. Sanjay Dangi and Mrs. Alpana Dangi were appointed as additional directors in ICPL on July 24, 2008. Since the merger did not work out, Mr. Sanjay Dangi and Mrs. Alpana Dangi had resigned on September 09, 2008. With respect to Mr. Sunil Dangi, it was submitted that Mr. Sunil Dangi is the real brother of Mr. Sanjay Dangi and is one of the shareholders of MCL since September 23, 2005. As on March 31, 2010, it was submitted that Mr. Sunil Dangi held 4000 shares of MCL.

Mr. Sunil Dangi subscribed to 100 shares as one of the seven subscribers of MCL and was subsequently allotted 3900 shares as bonus. It was also submitted that Top City Mercantile Company Private Limited, Supersun Trading Company Private Limited and GoldFlag Trading Company Private Limited were 100% subsidiaries of MCL and the first of the aforesaid two companies merged with MCL on December 14, 2007 and the third company merged with MCL on February 26, 2010 respectively. It was also submitted that Mr. Sanjay Dangi and Mrs. Alpana Sanjay Dangi are the promoter-directors of MCL holding 8.58% and 59.44% of the capital respectively and that Amit Business Limited was its shareholder holding 12.25% and had merged with it on February 26, 2010. MCL has submitted that it has traded in the aforesaid five scrips in the ordinary course of business based on its commercial wisdom, the fundamentals of the company as disclosed in the Annual reports of such companies, information reported in the media, various corporate announcements made by the company and the research reports of certain stock broking firms.

MCL also submitted that it had received shares in preferential allotment or in pre-IPO, in the ordinary course of business, in various companies like Arrow Textile Limited, Delta Corp. Limited, Brabourne Enterprises Limited, Micro Technologies (India) Limited and Resurger Mines and Minerals India Limited. The said investments were made on the basis of investment proposals from investment bankers like YES Bank, Motilal Oswal etc. It was also submitted that, though Mr. Sanjay Dangi and Mrs. Alpana Sanjay Dangi (promoter-directors of MCL) are also the promoter-shareholders in Sanchay Fincom Limited and Sanchay Finvest Limited, they had not attended any meeting of those companies and they are like any other shareholders of the said entities. It was also submitted that Sanchay Finvest Limited was using the premises of MCL on a request made to Mr. Sanjay Dangi. The scrip-wise submissions of MCL are as under:

A. In respect of trading in the shares of Murli Industries Limited (MIL), it is submitted that Mr. Sanjay Dangi, Mrs. Alpana Sanjay Dangi and Amit Business Limited have never traded in the said company. MCL further submitted that it started trading in MIL since February 01, 2006 and continued to trade till July 03, 2007. According to it, during the said period, it has purchased and sold 3,76,221 shares and the price range was from `272.14 to `1028.59. It was also submitted that prior to examination period (February 01, 2006 to August 31, 2006), it had a net buy position of 86,203 shares and during the examination period, it has bought 2,89,208 shares and sold 3,75,411 shares. It submitted that its last purchase was on May 17, 2007 at `600.63 and subsequently, the price had gone up to `1230 on July 23, 2007. MCL submitted that its buying and selling were scattered over a period of 18 months and its trading was mainly delivery based. The majority of its selling started from May 2007 and the average selling price was `587/-. It was contended that the price of MIL spurted in July 2007 and by that time, MCL has sold its entire holding in MIL.

It was also contended that in case, MCL was part of the manipulative activity, it would have sold the shares at the levels of around `1200 and not at the levels of around `600. MCL also submitted that Supersun Trading Company Private Limited had purchased and sold 21,900 shares during March 7, 2007 and July 6, 2007 (on 6 days during the said period) in the price range of `502.75 to `1125.70. Similarly, Top City Mercantile Company Private Limited had purchased and sold 13,557 shares during June 6, 2007 to June 19, 2007 (on 3 days during the said period) in the price range of `610/- to `849.53/-. MCL denied having any relation with the ten dummy entities as alleged in the Order. MCL also submitted that it was alleged in the Order that there was a sharing of funds between the Dangi group entities and the promoters of MIL, but the income tax returns of MCL and its directors for the financial years - 2006-07, 2007-08, 2008-09 and 2009-10 do not reflect any sharing of funds and all the transactions have been duly accounted. It also contended that no reference was made against it by the Income Tax Department (IT Department).

It submitted that SEBI had ignored an important corporate announcement dated November 24, 2006 wherein MIL had informed of the ensuing Extra-Ordinary General Meeting (EGM) on December 15, 2006 for raising further capital and that by ignoring the said announcement, impression is given that the announcement made on December 15, 2006 was result of the alleged Page 7 dated December 12, 2006 received from the IT department. Further, the pricing period was November 1-14, 2006, as per SEBI order whereas the said Page 7 & 8 of IT Department reference has the dates - December 12, 2006 & January 31, 2007 which are after the pricing period. According to MCL, the company MIL has prematurely redeemed FCCBs valuing USD 9 million (40% of the FCCB i.e. USD 23 million) and that as per Regulation 85 read with 81(c)(iii) of the Securities and Exchange Board of India (Issue of capital and Disclosure Requirements) Regulations, 2009 (the ICDR Regulations), the minimum price has to be decided by the formula specified therein and the maximum price is left open to the issuer company. It has been submitted that in the case of MIL, FCCBs were issued at `565/- much higher than the price arrived by the aforesaid formula and investors in such FCCBs conduct due diligence of their own while subscribing to such issues and do not just rely on the market data but meet the management, visit plants, carry out financial & technical feasibility report and then decide whether to invest or otherwise.

MCL also submitted that SEBI has mentioned that FCCB investors look at the market data i.e. price & volume and the average volumes between December 15, 2006 (the date of EGM) and February 15, 2007 is 7887 shares only. It has been contended that subsequently also, the average volume was invariably consistent. It is the submission that MCL has not subscribed to the FCCB issue of MIL. During April 2006 to July 2007, MCL has traded in more than 150 scrips including MIL and therefore contended that the allegation of concentration in MIL is incorrect. It has been submitted that prior to November 24, 2006, MCL was not aware that MIL was going to come out with fund raising exercise and on November 14, 2006, MIL made a corporate announcement regarding its fund raising exercise. It is the contention that at the time of trading during November 1-14, 2006, MCL was not aware that the said period would be reckoned for the purpose of calculating the FCCB price. It was also submitted that during November 1-14, 2006, MCL has traded on 4 days i.e. November 3, 2006, November 6, 2006, November 7, 2006 and November 8, 2006 - buying 29000 shares only, whereas the allegation of establishing of new price is on 5 days i.e. November 1, 2006, November 2, 2006, November 3, 2006, November 6, 2008 & November 7, 2006. Therefore, it has been contended that MCL had traded only on three days when new price was created.

It was also submitted that MCL has placed buy orders at higher price than the last traded price to purchase the required quantum for delivery (short sell) and not for establishing the high price. It was also submitted that the IT department has not observed any discrepancy while scrutinizing its books of account for the financial year - 2007-08.

B. In respect of trading in the shares of Ackruti City Limited (ACL), it is submitted that the Order at page 21 (paragraph 34) states the linkage between ICPL and the other entities related with ACL. It is the contention that since MCL is not connected with ICPL, it is therefore not connected with any entity linked with it, as mentioned in the Order. It was also submitted that Mr. Pankaj Rathod and Mr. Pradeep Rathod were allotted one share each for the purpose of availing loan since as an NBFC, MCL can raise loan only from corporate or shareholders. It was submitted that during the period, April 1, 2007 to November 30, 2010, MCL has continuously traded in the shares of ACL and since SEBI has considered two patches in the Order [June 2007 to February 2008 (first patch) and January 2009 to March 2009 (second patch)], the gross buy volume was 54,06,933 shares (average daily purchase of 28309 shares) and 14,66,543 shares (average daily purchase of 31881 shares). The market wise contribution (both BSE & NSE) in both the patches was 9.10% & 3.13%.respectively. MCL also stated that in the interim period i.e. March 2008 to December 2008, the gross buy volume was 28,57,441 shares (average purchase 20557 shares).

It was contended that there was no ulterior motive to increase volume or price and otherwise the QIP issue would have been done at `1200 instead of `500. It was stated that in Table 13 (with respect to trades at BSE) of the Order, it is alleged that the Dangi group has contributed to creation of new price in 77 trades which are 0.19% of the total trades (39,939) done by Dangi group & 0.008% of the total trades (949205) in the market and therefore contended that in more than 99% of the cases other entities have established new price. It was also submitted that in 4.87% trades were at LTP by Dangi entities whereas 95% trades at LTP were done by other entities and similarly, for LTP+ trades, more than 97% trades were done by other entities. It was also submitted that there were 7171 trades which were below LTP also. MCL has also submitted that in Table 13 (for trades at NSE) of the Order, it was mentioned that the Dangi group has contributed to creation of new price in 90 trades which are 0.19% of the total trades (46,866) done by Dangi group and 0.0006% of the total trades (14,59,471) in the market.

It is contended that in more than 99.99% of the cases, other entities have established new price. Further, it was submitted that in 3.59% trades at LTP by Dangi entities, there were 96% trades at LTP were done by other entities. It has also submitted that for LTP+ trades, more than 97% trades were done by other entities and that there were 7506 trades which were below LTP also. During the second patch, there were more than 5 pledge transactions and only one revocation. Further, it has done Vyaj Badla as cost of carry in F&O is less as compared to straight lending rate from NBFC. MCL has submitted that in the second patch, it has traded in many scrips like Welpsun, Satyam, DLF, Sterlite etc and that since the QIP of ACL has come in the month of September 2009 i.e. much after second patch, contended that there is no correlation between the second patch period and the QIP issue. It was also stated that during the second patch, the price was around `2000/- and the QIP was issued at `500/- and contended that if the promoters want to increase their price for QIP issue, the same would have been maintained after second patch period also.

MCL also stated that it had transferred 1,10,000 shares of ACL on March 24, 2009 and 40,000 shares on March 25, 2009 to Mr. Pradeep G Rathod for obtaining loan of `16 Crores and that after repayment of loan, the said shares were received back on September 17, 2009. MCL also submitted that it had a trading and demat account with Systemtix Share & Stock Brokers Limited and that for obtaining margin facility, a tripartite agreement was signed between the said stock broker, Systematix Fincorp Limited (an NBFC) and MCL and a power of attorney was in favour of Systematix Fincorp Limited for operating the said demat account. It was also submitted that the transfer of 1,15,000 shares (90000 shares on March 5, 2009 and 25000 shares on March 9, 2009) was wrongly done by Systematix Fincorp Limited without its consent and subsequently the shares were transferred back to its account on March 12, 2009.

C. In respect of trading in the shares of Brushman India Limted (BIL), it was submitted that during May 5, 2008 to November 19, 2008, MCL had purchased 16,12,342 shares and sold 6,02,158 shares in the price range of `48.32/- to `154.01/-. It was also submitted that apart from MCL, Top City Mercantile Company Private Limited (Top City) has also purchased and sold 55,000 shares during December 27, 2007 to March 19, 2008 (on 8 days) in the price range of `71.15/- to `108.18/-. The entity submitted the details of its trades for the examination period stated in the Order as follows:

Entity Buy Sell Total Mentor Capital Limited 1455342 119100 1574442 Top city Mercantile Pvt. Ltd. Nil 55000 55000 Total 1455342 174100 1629442 Market volume - 15189195 10.37%

It was submitted that the investment in the scrip of BIL was made on the basis of a presentation made by the investment banker, Global Astute on May 5, 2008 and since that date, MCL had started purchasing shares of BIL. It was further submitted that presently, it still holds 10,10,184 shares which were purchased at an average price of `119 whereas current market price is `5 and that it has incurred a loss of around `16 Crore. As regards Table 14 of the Order, it was stated that the Order mentioned that the Dangi group has contributed to creation of new price in 84 trades which are 1.77% of the total trades (4753) done by Dangi group and 0.34% of the total trades (24480) in the market. Thus, according to it, in more than 61% of the cases, other entities have established new price. Further 19.61% trades were at LTP by Dangi entities whereas 80% trades at LTP were done by other entities. Similarly, for LTP+ trades, more than 73% trades were done by other entities. There were 617 trades which were below LTP also. The FCCB pricing period in this case was two weeks prior to June 29,2007 i.e. the date of the board meeting deciding the fund raising through GDR/GDS/FCCB etc. and that MCL has not traded during that period. It was submitted that its trading activity started only from May 5, 2008 onwards and that BIL has completed its FCCB issue by June 12, 2008. Further, more than 80% of the trading of MCL was after the closure of FCCB unlike the case of MIL, where the maximum shares were brought before FCCB issue.

D. In respect of trading in the shares of Welspun Corp Limited (Welspun), it was submitted by MCL that during January 1,2009 to March 25,2010, it had purchased 1,54,63,547 shares and sold 86,59,541 shares in the price range of `76.25 to `294.44/-. According to it, it had started trading in the shares of Welspun since 2006 onwards. It stated that during May 2009 to November 2009, it has purchased 1,21,43,799 shares (5.35% of the trading volume) and sold 59,35,583 shares (2.61% of the trading volume). MCL contended that, in view of the trading volume, it cannot be said that it was trading actively in the shares of Welpsun during May 2009 to November 2009. It submitted that the price rise in the shares of Welpsun was in tandem with the price movement of other companies in the peer group. It also submitted that like in ACL, it has done Vyaj Badla also in Welpsun (F&O) to reduce the cost of holding as cost of carry is much lesser as compared to buying in cash. According to it, in the F&O segment, its one side turnover was 20260200 (1.14% of the total turnover). The entity submitted that in Table 17, the Dangi group has contributed to the creation of new price in 39 trades which are 0.20% of the total trades (19935) done by Dangi group and 0.0023% of the total trades (1689887) in the market and therefore contended that in more than 99.8 % of the cases, other entities have established new price.

It also submitted that 0.84% trades were at LTP by Dangi entities whereas 99% trades at LTP were done by other entities and for LTP+ trades, more than 99% trades were done by other entities. It submitted that there were 3938 trades which were below LTP also. MCL also submitted that when it had acquired more than 5% of the capital of Welspun, it has made relevant disclosures under Regulation 7 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Takeover Regulations). It submitted that its transaction with LIC was in the normal course of business and LIC being an institutional investor was holding stock of Welpsun in the past prior to the transaction with MCL and had recently subscribed to the NCDs worth `700 Crore of Welspun. It further submitted that apart from LIC, there are other institutional shareholders also. MCL stated that Welpsun Trading Limited holds 590769 shares (2.67% of the capital) of MCL and prior to the merger of Amit Business Limited with it, Welspun Trading was holding 1,50,000 shares i.e. 0.68% of its capital.

It also submitted that GRG Cosmetics Limited, was a shareholder of Amit Business Limited and because of the merger of Amit Business Limited with MCL, it became a shareholder in MCL. It was also submitted that Amit Business Limited had allotted shares to Splendor Vanijya Private Limited much before August 24, 2007 i.e. the date when Mr. Sanjay Dangi was inducted as an additional director of Amit Business Limited. As regards the off-market transactions, it was submitted that the off market transfers between Micro Management Private Limited and Splendor Vanijya Private Limited and Amit Business Limited pertained to the period prior to their merger with MCL.

E. With respect to the trading in the shares of RPG Transmission Limited (RPG), MCL had given the following details:

2006-07 2007-08 Entity Buy Sell Buy Sell Mentor Capital Limited 24,19,662 22,08,263 4,03,390 2,43,952 Supersun Trading Company Pvt. Ltd.* Nil 8,00,000 42,400 42,400 Top city Mercantile Pvt. Ltd. ** 1,56,160 5,75,287 76,000 1,56,160 * it has received 7,10,000 shares under preferential allotment on 30.07.05 with lock in ending on 04.08.06 ** it has received 8,00,000 shares under preferential allotment on 30.07.05 with lock in ending on 04.08.06

MCL has submitted that its Investment in the scrip of RPG was made on the basis of the presentation made by an investment banking division of M/s. Parbhudas Liladhar around May 2005. As regards Table 18 of the Order, it was submitted that the Order had mentioned that the Dangi group has contributed to creation of new price in 142 trades which are 0.69% of the total trades (20697) done by Dangi group and 0.071% of the total trades (2,01,044) in the market ad therefore contended that in more than 99% of the cases, other entities have established new price. Further, 13% trades were at LTP by Dangi entities and that 87% trades at LTP were done by other entities. Similarly, it was submitted that for LTP+ trades, more than 91% trades were done by other entities and that there were 2656 trades which were below LTP also. It is the contention of MCL that it had contributed 11.82% in MIL, 5.70% in ACL, 10.37% in BIL, 2.02% in Welspun and 18.17% in that of RPG, to the market volumes in the said scrips.

12. Mr. Sanjay Dangi had submitted that the Income Tax reference dated November 27, 2009 does not mention about any of the Dangi entities mentioned in the SEBI Order and that there has been no Income Tax enquiry or survey against any of the entities described in the Order as “Dangi Group Entities” till the time of passing of the Order. According to him, the communication from the IT Department only mentions that the pages are “duly signed by one of the Directors Mr. Lalchand Maloo” and that nowhere does the said communication even remotely suggest that the document has been signed by Mr. Sanjay Dangi. It was therefore contended that the Income Tax Department did not have any information in its possession to suggest that the pages were also signed by Mr. Sanjay Dangi. Further, it was submitted that during proceedings before IT department, Mr. Lalchand Maloo had denied that he is the signatory of the said document. It is the submission that SEBI has not ascertained whether the various entities described as “Dangi Group Entities” were companies/persons with whom he was associated as Director/Shareholder or Family Member or that he has effective management control or shareholder control over those entities.

Mr. Sanjay Dangi also contended that the period selected for examining the trades was also selected arbitrarily without any basis of co-relation to the matter under enquiry/investigations and submitted that he did not trade at all in any scrip in personal name including the aforesaid five scrips. He further submitted that he had no shareholding, directorship or any control in Ashok Finstock Limited or in ICPL. He submitted that he has been clubbed with his brother Mr. Sunil Dangi and also with Ashok Finstock Limited because of the past association of Mr. Sunil Dangi with Ashok Finstock Limited. It has been submitted that he had no professional, business or commercial relationship with his brother, who is wholly independent professional. It was also submitted that as per the Order, Mr. Sunil Dangi has been connected to Ashok Finstock Limited on the basis that he was a director in it whereas Mr. Sunil Dangi had resigned as a director from Ashok Finstock Limited in the year 2005. He submitted that it was alleged in the Order that there was a perceptible fall in the price of the shares after the exit of Dangi Group and average daily traded volumes also halved in the post examination period and contended that after the exit of entities allegedly connected to him on July 3, 2007, the price has actually increased further to `1230/- (double the average of exit price by Dangi entities) and thereafter remained stable for several months.

In December 2007, it was around `800/-, which was far above the average selling price of ` 603/- of the Dangi entities. The volumes in the scrip of MIL, post the exit of Dangi entities, have increased or remained stable. He has denied any relation with ten entities, its promoters, directors, as mentioned in the order and in no way concerned with the affairs of the said ten entities in any manner. It was submitted that there was no sharing of funds with Mr. Lalchand Maloo or MIL, as alleged in the Order and denied being part of or aware of any alleged strategy planned by the promoters of MIL allegedly to manipulate the share price of MIL before the issuance of the Foreign Currency Convertible Bonds (FCCB). It is the contention that in case, the IT Department came to finding that he had manipulated the share price or received any share of funds out of the manipulation, as alleged in the Order, the IT Department would have also issued notice to him for providing details regarding these transactions and that there has been no notice/ inquiry from the IT Department during his assessment of MIL or the said ten entities.

The FCCB was issued at `565/-, which was around 40% premium to the closing price of `383.85/- on December 12, 2006. It was also submitted that after December 12, 2006 the buying of Dangi entities was below 20% of their gross buy and therefore, it was incorrect to state that FCCB happened due to trading activities of Dangi entities. Mr. Sanjay Dangi also submitted that he had resigned from the board of Sanchay Fincom Limited and Sanchay Finvest Limited, with effect from February 14, 2011.

Mrs. Alpana Dangi has submitted that she is a housewife and had traded in the normal course in the securities market. Her trading turnover was `4,47,225.40/-(for 2006-07) and `1,35,041.50/- (for 2009-10) and that she has not traded during 2007- 08 and 2008-09. She submitted that during 2006-07, she has traded in 9 scrips including RPG (purchased and sold 100 shares) and Welpsun (purchased 500 shares) and during 2009-10, she has traded in 7 scrips including ACL (purchased & sold 50 shares) and Welpsun (purchased 100 shares). Mrs. Alpana Dangi further submitted that she is a promoter director of MCL holding 59.44% of the company and that she does not run the business and day to day affairs. According to her, the functioning of the company is taken care of by the other directors of the company. She further submitted that she holds 5300 shares in Sanchay Finvest Limited (0.17% of the capital) and is not involved in the decision making process of the said entity, directly or indirectly.

13. Ashok Finstock Limited (AFL) filed its reply vide letter dated January 11, 2011 and submitted that it is not a part of Dangi group and has no relationship with any of the companies stated in the Order. According to it, most of its trading was day trading and transactions were squared up on the day of trading. It has also reiterated that Mr. Sunil Dangi has resigned from the board of AFL on May 1, 2005 much before the period of examination mentioned for five scrips. As regards the off-market transactions with MCL, it submitted that those were commercial in nature, done at prevailing market price and all payments were made and received as done with any other transactions with any other company. It submitted that most of its trading was in cash segment since they are short of margin and limits are available from stock brokers in cash segment. During September 1, 2006 to July 31,2007, it has purchased 3,93,513 shares and sold 3,90,110 shares of MIL and taken delivery of only 3403 shares. AFL contended that with such trades, there cannot be any manipulation in the price and volume of MIL. It also contended that whenever the shares were sold, counterparties were unknown. It submitted that since the scrip of ACL was very liquid at the relevant time, its trading was confined to ACL due to restriction of limits by the broker whereas in F&O segment, there is almost nil trading. AFL submitted that during February 2008 to November 2008, with respect to its trades in BIL, its net purchase was 64,730 shares which is just 3% of its gross purchase. In Welpsun, its trading activity was 17% of total trading volume and average daily turnover is around `1 Crore which is not much as compared to the liquidity in the scrip of Welpsun during January 2009 to March 2010. Similarly in RPG, it has taken delivery of 47 shares after doing trading for almost 33 Lakhs shares. It was doing day trading and major net purchasers were large institutional investors. During the hearing, the following trading details of AFL were furnished for the period 2005-06 to 2009-10:

Year Scrip Buy Sell 2005-06(No. of scrips Traded – 46) Murli 11978 3346 RPG 69663 69628 Welspun 924 527 2006-07(No. of scrips Traded – 69) ACL 128 128 Murli 52764 59695 RPG 99316 87825 Welspun 10013 9279 2007-08(No. of scrips Traded – 69) ACL 25516 25516 Brushman 3920 3860 Murli 6931 6237 RPG 38657 50183 Welpsun 185012 184597 2008-09(No. of scrips Traded – 47) ACL 102804 102804 Brushman 306731 235614 RPG (new name Nil 2085 “KEC”) Murli Nil 2304 Welspun 31193 29829 2009-10(No. of scrips Traded – 53) ACL 12518 12540 Brushman 72946 144663 Murli Nil 91 Welpsun 136596 117054

14. Mr. Sunil Dangi has submitted that he is a practicing Chartered Accountant since 1991 rendering professional services in taxation and auditing. It is his submission that apart from being the elder brother of Mr. Sanjay Dangi, he has no common interest and business relationship at all with him. All the investments made by him were out of his savings and based on his own decision and study. He has never been involved in any activities including decision making or day to day activities of alleged Dangi Group. He has denied being Director of AFL during September 2006 – February 2010, as alleged in the Order. He admitted that he became Director of AFL on May 20, 2003 as professional director being Chartered Accountant but ceased to be its director w.e.f. May 1, 2005. A copy of Form 32 filed with Registrar of Companies on May 19, 2005 was also enclosed by the noticee in support of the same. When he resigned from the AFL, the company was managed by Mr. Gajanand Sharma and his family members. He further submitted that he had become a shareholder in Sanchay Finvest Limited (hereinafter referred to as SFL) but was never part of the management of the company.

The number of shares held by him in SFL was 1,00,000 equity shares only i.e. 3.17% of the capital. Apart from this shareholding, he has neither purchased nor sold shares of SFL. He has not done any transaction including financial transaction with SFL either directly or indirectly. Regarding the allegation of active trading in the market, it is submitted that the transactions executed by him in the securities market were very small in number and were selectively done based on his sole judgment about the performance of the scrips. He has not traded in just the scrip of Welpsun but 60 other scrips and his trading in Welspun for the year 2006-07,2007-08, 2008-09,2009-10 accounts to 0%, 0.028%, 0.038% & 0.165% respectively of the total trading volume of Welspun in the market. He has also claimed to have suffered loss of ` 30.73 lakh in the trades of Welspun. Further, he has traded in the shares of Welpsun before the investigation period and after the investigation period stated in the Order. He is not associated with the promoter or management of the five companies. He has also provided his annual trading details in five scrips, mentioned elsewhere in this Order, and submitted that his trading volume is negligible as compared to trading volume in the market.

He has also stated his holding in Pacific Corporate Services Limited (MCL), that he was allotted 100 shares initially and subsequently received 3900 shares as bonus.

15. Ivory Consultants Private Limited (ICPL), vide reply dated April 7, 2011, submitted that it is a registered NBFC with the Reserve Bank of India (RBI) and carries on the business of providing financial assistance in accordance with the provisions of the NBFC Act. It submitted that since December 22, 2003, Mr. Brajesh Choudhary and Mr. Suresh Kumar Jain are its directors. According to it, during 2006 to 2010, it has traded in more than 60 scrips through Ashika Stock Broking Limited, Destiny Securities Limited, Manu Stock Broking Private Limited and Systematix Shares & Stocks (India) Limited. It denied having any connection with the Dangi group, Ashika Group, Ackruti Group and Welspun Group. The entity has made the same submissions with respect to the association of Mr. Sanjay Dangi and Mrs. Alpana Dangi with it. According to it, Ackruti City Knowledge Private Limited (88000 shares), City Gold Farming Private Limited (80000 shares), Zeus Infrastructure Private Limited (80000 shares), Chaitra Reality Limited (88000 shares) and Welpsun Trading Limited (20000 shares) were the only ordinary shareholders of it. ICPL submitted that it is operating business from the address 27, Brabourne Road, 3rd

Floor, Room No. 305, Kolkata 700001 since December 22, 2003 which is the same address as that of Sarswati Vincom Limited, an alleged Ashika Group entity. It submitted that the two companies are not connected to each other. It further stated that it is an ordinary shareholder in MCL holding 32,42,800 shares. According to it, it has acquired 98320 shares of Ashika Global Finance Limited from Ashika Global Securities Limited on March 23, 2006 at `32/- per share and sold the same on July 10, 2009. It also submitted that 20000 shares of Lotus Capital Financial Services Limited were allotted on March 31, 2008 and the same were sold on May 28, 2008. According to it, those transactions were commercial in nature. Regarding off market transfer of shares of ACL, it stated that it had entered into a loan agreement dated January 12, 2009 with Mahipatray V Shah (HUF) through its Karta Mr. Hemant Shah and the agreement was to extend a loan of `3 Crores with interest at the rate of 18% by ICPL to Mahipatray V Shah (HUF) and in return, 3 lakh shares of ACL would be transferred to it and accordingly, shares were transferred on January 14, 2009. According to the entity, the agreement also stipulated that payment of loan by ICPL would be as follows:

a. ` 20 lakhs on execution of loan agreement b. ` 80 lakhs vide cheque no. 803426 dated 16.03.09 c. ` 1 Crore vide cheque no. 803427 dated 23.03.09 d. ` 1 Crore vide cheque no. 803428 dated 30.03.09.

It was also submitted that before the first installment (on March 16, 2009), Mahipatray V Shah (HUF) repaid `20 lakhs to ICPL on March 9, 2009 and the shares was transferred back to Mahipatray V Shah (HUF) on March 13, 2009. It submitted that it has not traded in the shares of MIL and RPG during the period mentioned in the Order and that in ACL, it has not traded in the first patch i.e. June 2007 to February 2008. ICPL submitted that during the second patch i.e. January 1, 2009 to March 25, 2009 (on 11 days), it has purchased 7,91,026 shares and sold 6,87,347 shares in cash segment, whereas in F&O segment, its purchase and sale quantity was 2,76,900 shares. It submitted that in the shares of BIL, during February 2008 to November 2008, it has traded in cash segment only and purchased 6,22,050 shares and sold 4,66,050 shares in 12 days. In Welpsun, during January 2009 to March 2010, it has traded in F&O segment only and purchased 4,40,800 shares & sold 4,40,800 shares in 3 days.

16. I have considered the submissions made by the parties. In its submissions, MCL had disassociated itself from three entities, namely, AFL, ICPL and Mr. Sunil Dangi. In the Order, Mr. Sunil Dangi is mentioned as a Dangi entity since he is brother of Mr. Sanjay Dangi; holds shares in MCL and in Sanchay Finvest Limited; and his trading in the shares especially in Welspun. It is an admitted fact that Mr. Sunil Dangi and Mr. Sanjay Dangi are real brothers and that Mr. Sunil Dangi holds 4000 shares in MCL and 1,00,000 shares in Sanchay Finvest Limited, wherein Mr. Sanjay Dangi is a promoter shareholder and director. Further, Mr. Sunil Dangi has traded in various scrips during the period mentioned in the Order and had substantial trades in Welpsun. It is stated by Mr. Sunil Dangi that he has acquired shares of MCL and Sanchay Finvest Limited on the pretext of his brother Mr. Sanjay Dangi being associated with the said entities. Thus, it is clear that the two brothers are connected to each other in business dealings as well. It is to be examined during investigation whether the trades of Mr. Sunil Dangi were influenced by the decision of Mr. Sanjay Dangi and their fund flow has to be seen to ascertain the sharing of funds, if any.

Further, Mr. Sunil Dangi was alleged to be the director in AFL which has actively traded in all the five scrips and had been clubbed as a Dangi entity. A copy of Form 32 dated May 13, 2005 was submitted before me to submit that Mr. Sunil Dangi has resigned as a director in AFL with effect from May 1, 2005, whereas the period of examination mentioned in the Order for five scrips is between September 2006 (in the case of MIL) to March 2010 (in the case of Welspun). Presently, the company has the following Directors - Mr. Gajanand Sharma, his brother Mr. Mahendra Kumar Jangir and their father Mr. Mool Chand Jangir. From the aforesaid facts, it can be seen that Mr. Sunil Dangi is no longer associated with AFL as its director. However, it is noted from the Annual Reports of AFL for the financial years - 2008-09 and 2009-10 that Mr. Sunil Dangi has been its statutory auditor. Therefore, he continues to be associated with AFL in one way or the other. Further, the directors (Mr. Sanjay K. Patel and Mr. Manoj Pamecha) who resigned from Ashok Finstock Limited along with Mr. Sunil Dangi on May 1, 2005 are presently the directors on the board of MCL.

17. In the case of ICPL, from the documents, it is noted that Mr. Sanjay Dangi and Mrs. Alpana Dangi were the directors of ICPL during the period – July 24, 2008 to September 9, 2008, i.e. for 45 days. During June-July 2008, as submitted by the entities, MCL and ICPL were interacting for the purpose of merging ICPL with MCL as both are investment companies and having good net worth. Therefore, Mr. Sanjay Dangi and Mrs. Alpana Dangi were appointed as directors of ICPL. However, since the merger did not work out, they had resigned on September 9, 2008. I also note that ICPL is a shareholder in MCL since March 31, 2008 and holds 14.12% shares of the capital. The directors of MCL, Mr. Sanjay Dangi, Mrs. Alpana Dangi and Mr. Manoj Pamecha were inducted on the board of ICPL due to the possible merger around June – July 2008. However, no documents were submitted either by Mr. Sanjay Dangi, MCL or by ICPL discussing the modalities of merger like share ratio, valuation etc. For any merger and amalgamation activity, the process takes months to culminate in the dissolution of one entity and merging the same into another entity and in the process, there are communications between two entities, meetings etc. It is to be marked that there is no document to support the decision of inducting the directors of MCL as well as their cessation as directors of ICPL.

Therefore, in the absence of documents, at this stage, it cannot be settled whether the aforesaid submissions are correct or otherwise. I find that ICPL still continues to be a shareholder of MCL holding 14.12% of the capital, which is as per the Annual Return for 2009-10. Further, with respect to the loan agreement and the transfer of shares, I find it difficult to accept that a person in need of `3 crore would meet his requirement by accepting mere `20 lakhs and at the same time, transfer 3 Lakh shares worth `3 crore based on face value whereas market value for such shares was `18.30 crore (closing price of ACL at BSE on January 14, 2009 was `610.30). The agreement submitted by ICPL states about the payment to be made in instalments and first instalment of `80 Lakhs was after almost two months from the date of transfer of shares i.e. January 14, 2009. The said submissions are difficult to be accepted at this stage. Thus, the role of ICPL in the schema of manipulation needs to be examined in detail and to verify whether there was transfer of funds of ICPL with other entities mentioned in the Order amongst other issues.

18. Mrs. Alpana Dangi holds 1,36,91,546 shares in MCL, as per the Annual Return for 2009-10. The face value of these shares is `10 and thus the total value of her holding is `13,69,15,460 (Rupees Thirteen Crores Sixty Nine Lakhs ninety One Thousand Four Hundred and sixty only). She has submitted that she is a housewife and therefore it is difficult to comprehend as to how she could have built such an huge investment. It is noted that she has not actively traded in the market, as per the details submitted in her reply. Further, she has mentioned that she is not running the daily affairs of MCL and that the day to day affairs and functioning of MCL are taken care of by other directors. It therefore leads that the remaining directors i.e. Mr. Sanjay Dangi, Mr. Manoj Pamecha and Mr. Sanjay Patel are running the business of MCL. Mrs. Alpana Dangi became the director in MCL from April 5, 2006 much after the appointment of aforesaid three directors. I also note that she holds 5300 shares of Sanchay Finvest Limited.

19. Mr. Sanjay Dangi has submitted that he has not traded as an individual in any of the five scrips mentioned in the order. As stated above, he is a promoter-shareholder and also a director of MCL that had actively traded with other connected entities to assist the promoter of the companies in getting better price for their FCCB/QIP issue. A promoter/director of a corporate entity may not trade as an individual but the trades of the corporate entity are based on the collective decision of the board headed or the participation in such decisions by such promoter/director. As per the reference forwarded by the IT Department, Mr. Sanjay Dangi has allegedly signed certain documents enclosed therein. On perusal of the KYC documents of MCL wherein Mr. Sanjay Dangi is the contact person and the copies of his permanent account number (PAN) card and his passport, the signature therein appear to be the same as appearing on Pages 7-8 enclosed in the IT reference. There is no denial from him as far as his association with other Dangi group entities, Mrs. Alpana Sanjay Dangi, Amit Business Limited (after the appointment of Mr. Sanjay Dangi and Mrs. Alpana Dangi as directors in it in 2007), Goldflag Trading company Private Limited, Supersun Trading Company Private Limited and Top City. After the passing of the Order, Mr. Sanjay Dangi had resigned from the boards of Sanchay Fincom Limited and Sanchay Finvest Limited, with effect from February 14, 2011.

20. MCL had been alleged to have played its role in the entire ploy orchestrated by Mr. Sanjay Dangi, which was allegedly for the benefit of the promoter entities of the aforesaid companies had successfully managed to raise funds in the securities market, as discussed in the Order as well as outlined in this Order. MCL has stated that there was no urgency of issuing the Order as there was a gap of one year between the IT reference and the Order and that the examination period considered for various scrips is also for a distant period. A perusal of the Order would show that the IT reference had triggered the initiation of the preliminary examination and the entire analysis in various scrips, as detailed in the Order, is done subsequently. The Order discusses the role of more than 60 entities, covering over a period of almost four years and prima facie establishes the linkages among the persons/entities. The said exercise would require time. Therefore, I find this submission to be of little merit. While examining the aforesaid five scrips, it was noticed that the Dangi group entities were active in various other scrips, mentioned in page 36 of the Order.

To obviate the recurrence of manipulation and to protect the interest of misguided investors, it was felt imperative to issue interim directions against all the entities including Dangi entities who were observed to be prima facie violating the laws governing the securities market. MCL has started trading in the shares of MIL since February 1, 2006 and was continuously buying, amid few sell transactions, till the pricing period of FCCB in November 2006. After the completion of the FCCB issue, it has reaped the benefits of assisting the promoters of MIL and subsequently exited at profit. MCL has submitted that it has exited at price level of `603/- whereas the price went upto `1200/- immediately after their exit. The same could be to avert any detection of the cohesive relationship of Dangi entities with the promoters of MIL and their alleged agreement. Thus, at this stage, it is prima facie observed that MCL has exited from the scrip of MIL as per the understanding between the colluding parties. It has been the submission of MCL that it had traded in the scrip of MIL based on the fundamentals of the company.

Those fundamentals seem to be sound only till the exit of MCL, as after their exit, the performance of the company though it continues to sustain, surprisingly MCL has preferred not to trade in the same till the date of the Order.

21. One of the arguments strenuously put forward by the learned counsel during the hearing was that the entities were responsible only for a small fraction of the new price establishment trades, positive LTP and at LTP trades. Further there are certain trades at below LTP also, attributed to these clients. Since a significant fraction of the trades meeting these criteria belongs to other clients, it was argued that these clients were not solely responsible for such trades and events and that it should also be analysed as to who are these other clients and whether they are scattered. In the Order, there are tables showing the contribution made by the Dangi group entities in maintaining the price of various scrips as well as establishing the new price. Table 10 of the Order discusses new price establishment and LTP analysis for the period November 1, 2006 to November 14, 2006 in the scrip of MIL. The said period was the relevant period for fixing the FCCB price. Table 10 is reproduced below for the purpose of reiterating the role of Dangi entities in this period:

Remarks Instances of gross buy volume Trades New LTP +LTP At LTP or (quantity) price above LTP Total trades 1507 88 697 454 1151 252608 % to total 5.84 46.25 30.13 76.38 Trades of Dangi 537 57 297 167 464 104454 group Entities as buyers Mentor Capital 65 2 44 18 62 29000 Ltd. Ashok Finstock 472 55 253 149 402 75454 Ltd. Other buyers 970 31 (19 400 (133 287 (121 687 (184 clients) clients) clients) clients) % to total 35.6 64.77 42.6 36.78 40.3 41 % to Dangi group 10.61 55.3 31.09 86.4 entities trades

During the aforesaid period, the Dangi entities (MCL and AFL) have established new price in 57 trades out of 88 trades (64.77%). The analysis of balance 31 trades reveals contribution from 19 clients. For LTP & LTP+ trades, only two Dangi entities have contributed to 40.3% of the total trades whereas the remaining 59.7% was the contribution by 184 clients. Thus, the analysis shows that apart from the trades of the Dangi entities, there was wider market participation and does not appear to be concentrated among few entities. Further, Table 11 of the Order discusses new price establishment and LTP analysis for the period September 2006 to July 31, 2007 in the shares of MIL. The said period was the examination period wherein the influence of the Dangi group on the share price was observed.

Remarks Instances of gross buy volume (quantity) Entity Name Trades New LTP +LTP At LTP or high above LTP BSE Total trades 22,878 476 10,482 6,401 16,883 2,192,906 % to total trades 2.08 45.82 27.98 73.8 Trades of Sanjay 3,735 164 1,903 1,207 3,110 710,977 Dangi Entities as buyers Mentor 614 3 331 211 542 284,208 Capital Ltd. Supersun 7 0 3 3 6 20,600 Trading Co. Pvt. Ltd. Top city 21 0 8 13 21 12,656 Mercantile Co. Pvt. Ltd. Ashok 3,093 161 1,561 980 2,541 393,513 Finstock Ltd. Other buyers 19785 312 8579 5194 (1276 13773 (1815 (154 (1375 entities) clients) clients) clients) % of total trades 16.33 34.45 18.15 18.86 18.42 32.42 % to Sanjay 4.39 50.95 32.32 83.27 Dangi trades

During the examination period, four Dangi group entities (MCL, AFL, Supersun Trading and Top City) were instrumental in establishing new price in 164 trades out of 476 trades (i.e. 64.77%). The analysis of the remaining 312 trades reveals contribution from 154 clients. For LTP & LTP+ trades, only four Dangi entities have contributed to 18.42% of the total trades whereas the balance 83.27% was the contribution of 1815 clients. Thus, the ratio of Dangi group entities vis a vis other clients in either establishing new price or raising the price by placing orders at LTP or LTP+ is well beyond comparison. Table 13 of the Order mentions about new price establishment and LTP analysis for the period June 2007 to February 2008 in the scrip of Ackruti City Limited (ACL). The said period was the examination period wherein there was continuous rise in share price of ACL from `400/- to `1200/- and Dangi group was alleged to maintain the share price and giving an appearance of high volume of trading.

Remarks Instances of gross buy Volume Entity Name Trades New price LTP +LTP At LTP or (quantity) above LTP BSE Total 949,205 4127 559,093 200,651 759,744 56,604,869 % to total 100 0.43 58.9 21.14 80.04 Dangi 39,939 77 27,269 5,499 32,768 7,858,388 group as buyers Mentor Capital 2,317 12 1,368 694 2,062 2,317,823 Ltd. Supersun Trading 515 0 351 94 445 418,943 Co. Pvt. Ltd. Top city 821 0 565 166 731 521,201 Mercantile Co. Pvt. Ltd. Ashok Finstock 36,286 65 24,985 4,545 29,530 4,600,421 Ltd. Other buyers 909266 4050(715c 531824 195152 726976 lients (42653 (33369 (50007 clients) clients) clients) % to Dangi 100 1.86 68.28 13.77 82.05 group trades NSE Total 1,459,471 3612 946,409 262,066 1,208,475 55,681,658 % to total 100 0.25 64.85 17.96 82.8 Dangi 46,866 90 34,064 5296 39,360 5,228,119 group as buyers Mentor Capital 1509 0 1,049 341 1,390 965,713 Ltd. Supersun Trading 911 0 726 119 845 399,336 Co. Pvt. Ltd. Top city 913 0 707 136 843 305,218 Mercantile Co. Pvt. Ltd. Ashok Finstock 43533 90 31,582 4700 36,282 3,557,852 Ltd. Other buyers 1412605 7522 912351 256770 1169121 (768 (50314 (38425 (58326 clients) clients) clients) clients) % to Dangi 100 0.19 72.68 11.30 83.98 group trades

With respect to the trading in ACL also, four Dangi entities (MCL, AFL, Supersun Trading and Top City) were establishing new price in 77 trades out of 4127 trades (1.86%). The analysis of balance 4050 trades reveals contribution from 715 clients. For LTP & LTP+ trades, the aforesaid four Dangi entities have contributed to 4.31 % of the total trades whereas the balance 95.69% was the contribution of 50,007 clients. Similar scattered client trading pattern was observed at NSE also, as stated in above Table. I note that the trading contribution of Dangi entities is not as high in ACL as in the case of MIL presumably because the scrip was highly liquid and price was consistently increasing. Table 14 of the Order mentions about new price establishment and LTP analysis for the period February 2008 to November 2008 in the scrip of Brushman India Limited (BIL). The said period was the examination period wherein BIL came out with FCCB issue in June 2008 and the Dangi group entities were actively trading and creating artificial volumes by trading among themselves.

Remarks Instances of gross buy volume Entity Trades New price LTP +LTP At LTP or (quantity) Name above LTP BSE Total 24,480 218 11,909 6,727 18,636 15,189,195 % to total 100 0.89 48.65 27.48 76.13 Dangi group 4,753 84 2,335 1,801 4,136 3,039,682 Entities as buyers Mentor 393 7 195 177 372 930,342 Capital Ltd. Ashok 4,332 77 2,132 1,607 3,739 2033709 Finstock Ltd. Amit 28 0 8 17 25 75631 Business Ltd. Other 19727 132 (49 9574 4926 (1123 14500 buyers clients) (1484 clients) (1848 clients) clients) % to total 19.42 38.53 19.61 26.77 22.19 20.01 % to Dangi 100 1.77 49.13 37.89 87.02 group trades

In the scrip of BIL, three Dangi entities (MCL, AFL and Amit Business Limitd) were establishing new price in 84 trades out of the 218 trades (38.53%). The analysis of the remaining 132 trades reveals contribution from 49 clients. For LTP & LTP+ trades, these three Dangi entities have contributed to 22.19% of the total trades whereas the balance 77.81% was the contribution of 1848 clients. Table 17 of the Order mentions about new price establishment and LTP analysis for the period May 2009 to November 2009 in the scrip of Welpsun. The said period was the examination period wherein there was price rise in Welpsun from `75 to `275 accompanied by spurt in volume of the scrip and the Dangi group entities were actively trading and creating artificial volumes by trading among themselves.

Remarks Instances of gross buy volume Entity Name Trades New LTP +LTP At LTP or (quantity) Price above LTP BSE Total 1,689,887 2042 1,001,332 348,001 1,349,333 226,782,626 % to total 0.12 59.25 20.59 79.85 Dangi 19,935 39 14,292 1,685 15,977 10,427,664 Entities as buyers Mentor Capital 1,567 1 1,136 260 1,396 29,82,660 Ltd. Amit Business 568 0 452 35 487 1,72,898 Ltd. Alpana Sanjay 1 0 1 0 1 100 Dangi Ashok 17,799 38 12,703 1390 14,093 72,72,006 Finstock Ltd. Other entities 16,69,952 2003 9,87,040 3,46,316 13,33,356 (774 (92,070 (68,215 (1,09,411 clients) clients) clients) clients) % to 0.20 71.69 8.45 80.15 Dangi group trades

In the scrip of Welpsun, four Dangi entities (MCL, AFL, Mrs. Alpana Dangi and Amit Business Limited) were establishing new price in 39 trades out of 2042 trades (1.91 %). The analysis of balance 2003 trades reveals contribution from 774 clients. For LTP & LTP+ trades, these three Dangi entities have contributed to 1.19 % of the total trades whereas the balance 98.81% was the contribution of 1,09,411 clients. As in ACL, the scrip of Welspun was also highly liquid and price was consistently increasing and thus, there was large investor interest including the Dangi group. Table 18 of the Order mentions about new price establishment and LTP analysis for the period September 2007 to September 2008 in the scrip of RPG Transmission Limited (RPG). The said period was the examination period wherein there was announcement of merger of RPG Transmission Limited with KEC International Limited and the Dangi group entities were actively trading and creating artificial volumes by trading among themselves.

Remarks Instances of gross buy Volume Entity Trades New price LTP +LTP At LTP or (Quantity) Name above LTP

BSE Total 201,044 887 105,603 47484 153,087 20,777,642 % to total 100 0.44 52.53 23.62 76.15 Dangi 20,697 142 13,731 4310 18,041 5,073,289 Entities as buyers Ashok 18736 129 12591 3652 16,243 3,295,532 Finstock Ltd. Mentor 1796 13 1076 568 1644 1,550,757 Capital Ltd. Top city 85 0 40 38 78 161,000 Mercantile Co. Pvt. Ltd. Supersun 80 0 24 52 76 66,000 Trading Co. Pvt. Ltd. Other 1,80,347 745 (307 91872 43173 135045 entities clients) (13146 (10513 (16379 clients) clients) clients) % to total 10.29 16.01 13 9.08 11.78 24.42 % to 100 0.69 66.34 20.82 87.17 Dangi group trades

In the scrip of RPG, four Dangi entities (MCL, AFL, Top City and Supersun Trading) were establishing new price in 142 trades out of 887 trades (16.01%). The analysis of balance 745 trades reveals contribution from 307 clients. For LTP & LTP+ trades, these four Dangi entities have contributed to 11.78 % of the total trades whereas the balance 89.22% was the contribution of 16379 clients. Like in the trading of ACL and Welspun, the scrip of RPG was also highly liquid and there was large investor interest including the Dangi group.

22. As regards Mr. Sunil Dangi, I find that Mr. Sunil Dangi was alleged to be connected to Mr. Sanjay Dangi due to the fact that he is the elder brother of Mr. Sanjay Dangi and holds shares in Sanchay Finvest Limited (SFL) as well as in MCL where Mr. Sanjay Dangi is also a shareholder and director. Mr. Sunil Dangi is a co-promoter in SFL. From the information available on BSE website, it is noted that Mr. Sunil Dangi holds 1,00,000 shares of SFL since March 2001 and the same amounts to 3.17% of the capital of SFL. But he is not observed to be holding any management position/directorship in SFL which may allow him to influence decision making. Similarly, as per details from MCA website, he holds 4000 shares in MCL since April 2005. It is also observed that his wife also holds 4000 shares in MCL. It appears from the above facts that the entity was a shareholder in PCSL & SFL and might have acquired these shares on the pretext of Mr. Sanjay Dangi, as claimed by him in reply. The SEBI order alleges the entity to be director of AFL during September 2006-February 2010 and thus, AFL was also shown as Dangi group entity.

However, the copy of Form 32 submitted by the entity states that the entity was director of AFL during May 20, 2003 – May 1, 2005 and the same is in line with the records available on MCA website. Since his resignation, AFL is being managed by one Mr. Gajanand Sharma and his family members. Thus, the association of the entity with AFL as Director was continuing till May 1, 2005. Further, as stated above in this Order, Mr. Sunil Dangi continues be the statutory director in AFL. A perusal of the KYC documents of AFL dated May 14, 2009 maintained by stock broker Indianivesh Securities Private Limited shows that the residential address of Mr. Sunil Dangi i.e. “101, Green Garden Apartment, near Maheshwari Bhavan, Parle Point, Surat,” is stated as address of AFL. This address is stated as residential address of Mr. Sunil Dangi in various documents enclosed by him in his reply dated February 7, 2011. Further the entity is alleged to have traded significantly in the shares of Welpsun during January 1, 2009 – March 25,2010. The entity is alleged to have traded in 61 scrips including Welspun and value of his transactions was ` 15.96 Crores.

From the available records, it is noted that the total trading volume in the scrip of Welspun Gujarat Stahl Rohern Limited (now known as Welspun Corp. Ltd.) during the aforesaid period at NSE was 82,46,07,569 shares and he has bought 4,62,224 shares (0.06% of the total volume) & sold 4,66,997 shares (0..06% of the total volume). The trading of Mr. Sunil Dangi is spread thought out the period i.e. January 1, 2009 – March 25,2010. Mr. Sunil Dangi has provided his annual trading details in various scrips since 2005-06 including the four scrips as under:

Year Scrip Buy Sell 2005-06(No. of scrips Traded – 53) RPG 46837 46837 Welspun Nil 2000 2006-07(No. of scrips Traded – 32) ACL 10 10 RPG 7800 7800 2007-08(No. of scrips Traded – 44) ACL 15112 15087 RPG 2602 2602 Welpsun 19036 19036 MIL 500 500 2008-09(No. of scrips Traded – 38) ACL 2600 2625* RPG (new name 20 20 “KEC”) Welspun 41800 18800 2009-10(No. of scrips Traded – 59) ACL 9480 9480 Welpsun 178658 201658* * holding 25 shares & 23000 shares in the beginning of the year

The said trading details depicts that, since 2005-06, the entity has traded in various scrips including the scrips discussed in Order. Further, as stated in the Order, the Dangi group entities were observed to be involved in executing trades at LTP (Last Traded Price) & LTP+ and establishing new price.

23. During the hearing, it was submitted before me on behalf of MCL that the entity holds large numbers of shares of various companies and the value of such shares which were frozen had eroded in their value. It was submitted that the entity had loans to the tune of `94 crores and that the cost of servicing the loans are approximately `75 lakhs to `80 lakhs per month. In view of the said reasons, it was requested that MCL should be permitted to sell the shares to satisfy the dues. I have noted the request. In this regard, I find that the role played by Mr. Sanjay Dangi, Mrs. Alpana Dangi, MCL and Mr. Sunil Dangi on one hand and that of AFL and ICPL on the other hand cannot be seen from the prism of mutual exclusivity. It is an admitted fact that Mr. Sanjay Dangi and Mrs, Alpana Dangi are promoters of MCL, holding substantial shares of MCL, amounting to more than 68% and are also on its board. Thus, there can not be any denying of the fact that MCL is nothing but the corporate image of Mr. Sanjay Dangi and Mrs. Alpana Dangi and therefore for all practical purposes, there is no mutual separation of these entities from the perspective of securities market transactions carried out by one or the other.

Further, on perusal of the annual accounts as well as annual returns of MCL for the financial years - 2006- 07, 2007-08, 2008-09 and 2009-10, I note that they were signed by Mr. Sanjay Dangi and Mrs. Alpana Dangi, despite other directors on the board of MCL. This shows that these two individuals are running the affairs of MCL since 2006-07 till date and as directors of MCL they are responsible for the acts of MCL. The Order also seeks to establish the connection between MCL, AFL and ICPL. Such association, seen in line with a very discernible trading pattern of these entities in the face of trading pattern of other investors in the same scrips does drives home the fact that their trading pattern is prima facie collusive, in coordination with each other and meant to increase the volume and increase/maintain the price, having an adverse impact on the interests of unsuspecting investors. It is also to be noted such connection, even though it may seem tenuous at the first glance, is important in the context of larger perspective of establishing culpability of the securities laws violators in modern times where entities tend to spread their orders and trades with a view to evade the regulatory scrutiny and radar.

Intention of entities in such cases is manifest from the trading pattern itself. In this connection, it is relevant to note the observation of the Administrative Law Judge of US Securities Exchange Commission in the case of Carole. L. Haynes, that manipulative intent may be inferred from circumstantial evidence. The learned judge observed that “Proof of a manipulation almost always depends on inferences drawn from a mass of factual data. Findings must be gleaned from patterns of behaviour, from apparent irregularities and from trading data. When all of these are considered together, they can emerge as ingredients in a manipulative scheme designed to tamper with free market forces.” Needless to say that in case such as this, where immediate regulatory intervention is required, the mass of data and patterns of behavior are required to be further examined to conclude the findings. The initial pattern of behavior of all these entities does indicate towards their extensive role in the manipulation of the scrips. The Order sought to remedy this kind of abnormal and manipulative trading behaviour.

Considering the totality of the facts, circumstances and the findings of the investigation done so far, I am of the view that the preponderance of probability, at this stage in the proceeding, is too high to take another view than the one taken in the Order. In a fraud allegedly committed by a group of persons, at the preliminary stage, it would not be possible to have concrete evidence as to the involvement of the parties in the manipulation. It is only the preponderance of probability based on the facts that have been unearthed and the attendant circumstances that would lead one to decide whether the parties could have or not be involved in the alleged acts. Relation between the parties and the modus operandi would have to be proved in the manner possible. At this stage, the preponderance of possibility of the involvement of the parties concerned is too high for me to ignore the same. In a fraud committed through various persons, the individual role or participation could to be less or even negligible but when the role or activities of the entire alleged group are taken together, the same attains mammoth proportions.

The nature of relationship among the parties, the manner of trades that were executed, the impact such trades had on the scrips, as discussed herein above, various off market transfers entering between different entities including Dangi Group entities as well as crossholding of shares, etc, at this stage, persuades me in the confirm the interim ex-parte directions issued against them vide the Order. Therefore, the request of MCL to be permitted to sell shares cannot be considered at this stage. Since the investigation is in progress, it would consider the submissions/contentions and the documents furnished by the parties to arrive at conclusions as to the involvement or otherwise of any entity in the manipulation. The case against an entity or person would be reviewed on completion of the investigation and appropriate course of proceedings would be taken, as deemed fit, in accordance with law.

24. Considering the interest of the parties who are alleged in the matter to have committed irregularities, I would in the fairness of things, direct SEBI to conclude the investigation and initiate appropriate action against them, in accordance with law, at the earliest.

25. 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 11(4), 11B and 11D thereof, hereby confirm the interim ex-parte directions issued vide the Order dated December 02, 2010 against Mentor Capital Limited, Ivory Consultants Private Limited, Ashok Finstock Limited, Mr. Sanjay Dangi, Mrs. Alpana Dangi and Mr. Sunil Dangi.

26. Though Amit Business Limited, Goldflag Trading Company Private Limited, Supersun Trading Company Private Limited and Top City Mercantile Company Private Limited have merged with Pacific Corporate Services Limited (now known as Mentor Capital Limited), active demat accounts standing in their names, shall continue to be frozen.

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

PLACE: MUMBAI DATE: JULY 19, 2011