Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of Sterling Biotech Limited

WTM/MPB/EFD-1-DRA-2/ 78 /2017 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of trading in the shares of Sterling Biotech Limited. In respect of - S.No. Entity PAN 1. Faith Finstock Private Limited AAACF7046E 2. Snowgold Impex Private Limited AAHCS9296A 3. Emerald Finstock Private Limited AABCE1483F 4. Orteck Infrastructure Private Limited AAACO7972J 5. Citypoint Trading Company Private Limited AACCC3193M 6. Francisca Investment Private Limited AAACF5670Q 7. Fotosoft Multimedia Private Limited AAACF1497M 8. Jitlal Financial Services Private Limited AAACJ3758R

BACKGROUND 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) upon receipt of complaints and alerts generated into the trading in scrip of Sterling Biotech Limited (hereinafter referred as ‘SBL’) initiated investigation to ascertain whether there was any violation of the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) and the Rules and Regulations made thereunder and possible violation of provision of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. The period of investigation was from May 01, 2008 to September 30, 2009 (hereinafter referred to as ‘Investigation Period’ / ‘IP’). During the investigation period the scrip was traded on the BSE Ltd. (hereinafter referred to as ‘BSE’) and National Stock Exchange of India Limited (hereafter referred to as ‘NSE’)

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

2. The investigation revealed that entities, Faith Finstock Private Limited (Faith), Snowgold Impex Private Limited (Snowgold), Emerald Finstock Private Limited (Emerald), Orteck Infrastructure Private Limited (Orteck), Citypoint Trading Company Private Limited (Citypoint), Francisca Investment Private Limited (Francisca), Fotosoft Multimedia Private Limited (Fotosoft) and Jitlal Financial Services Private Limited (Jitlal) [hereinafter collectively referred to as ‘Noticees’] had artificially manipulated trading in the cash market for establishing the settlement price in order to gain in the futures held by them in the futures market.

SHOW CAUSE NOTICE 3. A common Show Cause Notice (hereinafter referred to as ‘SCN’) dated December 22, 2015 was issued to the Noticees to show cause as to why suitable directions including disgorgement in terms of Section 11B of the SEBI Act, 1992 should not be initiated against them for the violations of provisions of regulations 3 (a), (b), (c), (d), and 4(2) (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (“hereinafter referred to as ‘PFUTP Regulations’).

ALLEGATIONS IN BRIEF:

4. The Noticees were connected persons. These connected Noticees together were holding net long positions of SBL futures equivalent to 47.925 lakh shares of SBL as on July 31, 2008 in NSE. The expiry of the futures was on July 31, 2008. The connected entities in the month of June 2008 have bought SBL futures equivalent to 38.175 lakh shares of SBL and sold futures equivalent to 1.6 lakh shares. They further till July 30, 2008 bought and sold 24.875 lakh and 13.325 lakh shares of SBL. Thereby the Noticees were holding net SBL futures equivalents to 48.125 lakh shares as on July 30, 2008. The Noticees further bought (1.375 lakh) and sold (1.575 lakh) futures on July 31, 2008 thereby reducing their net long position to 47.925 lakh shares of SBL.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

5. The Noticees in the cash market had bought 9,36,889 shares and sold 10,34,172 shares till July 30 2008. On July 31, 2008 the Noticees bought 6,74,367 shares and sold 1,65,640 shares of SBL till 3.00 pm.

6. The settlement price for the future is based on the weighted average price of the particular share in the exchange in the closing session of the trading in the cash market i.e. between 3:00 P.M. and 3:30 P.M. The price of the SBL scrip on July 31, 2008 in cash segment at NSE rose marginally to Rs. 263.05 (at 10:03:20 hours) and fell thereafter to reach Rs. 240.10 at 15:00:00 hours.

7. The scrip was in downward trend since morning on July 31, 2008. During last half an hour, the price continued to fall and reached Rs. 203.05 at the end of the half hour. The Noticees were holding significant long positions in futures market and would have made losses or made lesser profits, had the price fall continued throughout the day and particularly in the last 30 minutes of trading. However, the Noticees had vested interest to arrest the price fall in the scrip to get a better settlement price in the futures market.

8. Therefore, in order to influence the settlement price fraudulently the Noticees traded heavily on July 31, 2008 during the closing session in the cash market and started placing their buy orders mostly at LTP in order that these orders be matched with the available sell orders in the market resulting in trades for maintaining the price of the scrip without contributing heavily to the LTP.

9. The Noticees bought 27,50,788 shares without selling any share in the closing session (03:00 P.M. to 03:30 P.M.) on July 31, 2008. The value of shares so bought in the last half an hour was Rs. 63,99,22,415. The buy volumes of the Noticees were concentrated to the last 30 minutes of trading hours on July 31, 2008. The Noticees buy volume in the last 30 minutes of trading hours on July 31, 2008 was 63% and 80.3 % (inadvertently mentioned in SCN as 0.803%) of the Noticees total buy volume for the month of July 2008 and July 31, 2008 respectively.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

10. In the last half an hour trade the Noticees contributed a net LTP of Rs. 29.35 in 3049 trades, positive LTP of Rs. 75.35 in 247 trades and negative LTP of Rs. 46 in 106 trades. During the last half hour when the Noticees were trading, the average traded price was Rs. 224.65. However the average trading price of the scrip after the trades of the Noticees (after 15:28:50) was Rs. 203.38.

11. Thereby the settlement price of SBL futures on July 31, 2008 was established as Rs.223.95 which is an increase of 10.29% from the price at the end of the last half hour.

12. If the trades of the Noticee are excluded for the calculation of the settlement price, the settlement price would be Rs. 216.47/-. Thereby, Noticees have increased the settlement price of the scrip by Rs. 7.48 per share (i.e.,223.95 – 216.47).

13. Noticees by inflating the settlement price of the futures contract by Rs. 7.48/- per share had gained/ loss avoided Rs. 3,58,37,900/- on net long positions in futures of the scrip.

14. The act of connected Noticees artificially manipulating the settlement price and making unlawful gains from the long positions held by them in the futures of the scrip is in alleged violation of the provisions of regulations 3 (a), (b), (c), (d), and 4(2) (e) of PFUTP Regulations.

REPLY AND HEARING

15. Noticees vide letter dated January 20, 2016 sought for the inspection of documents and copies of certain documents. Inspection was granted to the Noticees on February 18, 2016. Vide letter dated March 21, 2016, SEBI had provided the copies of documents sought by the Noticees in their letter dated January 20, 2016. Thereafter, Noticees vide email dated April 04, 2016 sought 8 weeks’ time to file their reply to the SCN.

16. Faith vide letter dated June 11, 2016, Citypoint vide letter dated June 13, 2016, Emerald vide letter June 13, 2016, Snowgold vide letter dated June 10, 2016, Jitlal vide letter June 10, 2016, Fotosoft vide letter dated June 10, 2016, Orteck vide letter dated June 11, 2016

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited and Francisca vide letter dated June 14, 2016 submitted their reply to the SCN dated December 22, 2015. The said replies of the Noticees are homogenous in nature and their brief is as under:

(a) Noticees have denied the alleged violation of any provisions of PFUTP Regulations, while dealing in the shares of Sterling during investigation period. (b) The period of alleged violations pertains to the year 2008 and the SCN was issued after a lapse of more than seven (7) years. Therefore, the proceedings are liable to be quashed on the grounds of long and unexplained delay. Further, because of the inordinate and unwarranted delay in issuing of SCN, Noticees are at disadvantage as they are not in position to trace the records. (c) Noticees have denied the allegation of connection among themselves. Noticees stated that their office was situated at a business centre which was let out by its owner to several companies. The mere fact that they share common address and common Director with few other Noticees as alleged does not establish the fact that they are connected to the other Noticees in such a way that they together effected increase in price to their advantage. (d) The price movement in the scrip is matter of fact and record. The price movement of any scrip is based on numerous market factors of demand and supply, investor perception, investor sentiments, open position, deliveries, company results and outlook, industry trends, etc and to attribute their trades were purportedly executed to benefit from their net long positions is unwarranted.

(e) The SCN fails to establish any connection/relation between their trades in the scrip of Sterling during the investigation period which facilitated alleged violations. They being distinct legal entities have traded as per their market perceptions. (f) Noticees state that their investments/ trades were based on their assessment of the market and had no relevance to market volumes. (g) Noticees were concerned with their individual trades only and have nothing to do nor have means to verify the details of contribution to gross purchases or gross sales of each other in the scrip of Sterling during the investigation period. (h) Noticees stated that out of the total 63,23,136 trades in NSE cash market from 15:00:00 to 15:30:00 on July 31, 2008 the buy trades of the suspected entities (as mentioned in the SCN) were 28,69,076 whereas trades of entities other than suspected entities were much higher i.e 34,54,060. This clearly indicates that the general market trend was to trade in the scrip of SBL in the last half hour of trading on July 31, 2008. (i) Noticees stated that the price of SBL fell despite buying by them, reflects that their purchases in the cash market were to average out their holding price in the cash market and had nothing to do with the alleged benefits from their long position.

(j) Faith holds 41,90,579 shares in its demat account as investment/ stock in trade and purchases of 1,65,000 shares during the last half an hour were for the purpose of averaging out its acquisition price. Further, the sum LTP attributable to all of its trade was Rs. (-) 0.35. Thus, there was no impact on LTP because of its trades.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited (k) Snowgold holds 8,03,925 shares in its demat account as investment/ stock in trade and purchases of 1,25,000 shares during the last half an hour were for the purpose of averaging out its acquisition price. (l) Emerald holds 25,95,861 shares in its demat account as investment/ stock in trade and purchasesof 14,00,000 shares during the last half an hour were for the purpose of averaging out its acquisition price. Further, the sum LTP attributable to all of its trade was Rs. (-) 1.5. Thus, there was no impact on LTP because of its trades. (m) Orteck holds 4,95,148 shares in its demat account as investment/ stock in trade and purchases of 2,41,288 shares during the last half an hour were for the purpose of averaging out its acquisition price. (n) Citypoint holds 1,06,58,183 shares in its demat account as investment/ stock in trade and purchases of 3,25,000 shares during the last half an hour were for the purpose of averaging out its acquisition price. (o) Francisca holds 42,68,847 shares in its demat account as investment/ stock in trade and purchases of 1,26,500 shares during the last half an hour were for the purpose of averaging out its acquisition price. Further, the sum LTP attributable to all of its trade was Rs. (-) 0.4. Thus, there was no impact on LTP because of its trades. (p) Fotosoft holds 7,35,384 shares in its demat account as investment/ stock in trade and purchases of 1,50,000 shares during the last half an hour were for the purpose of averaging out its acquisition price. (q) Jitlal holds 34,99,865 shares in its demat account as investment/ stock in trade and our purchases of 2,18,000 shares during the last half an hour were for the purpose of averaging out its acquisition price. Further, the sum LTP attributable to all of its trade was Rs. (-) 0.3. Thus, there was no impact on LTP because of its trades.

17. In the interest of natural justice, an opportunity of personal hearing was granted to the Noticees by the erstwhile Whole Time Member (WTM) of SEBI on September 20, 2016. Ms. Poonam Gadkari, Advocate, Authorized Representative (AR) appeared on September 20, 2016 on behalf of all the Noticees. Noticees were granted one week’s time to file their written submissions in the matter.

18. Noticees vide letters dated September 26, 2016 submitted the written submissions in the matter, which are as under: (a) Faith was holding 41,90,579 shares on the beginning of the day on July 31, 2008 and they had purchased 2,60,000 shares in cash market on July 31, 2008 resulting its total holding of 44,50,579 share as on the end of the day of July 31, 2008. Further, as per accounting practice constantly adopted by them, for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis. Since, they

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited were trading constantly in SBL, they are not in position to submit exactly when they had sold their holdings of shares purchased on July 31, 2008. (b) Snowgold was holding 8,03,925 shares on the beginning of the day on 31.07.2008 and they had purchased 1,25,000 shares in cash market on 31.07.2008 resulting the total holding of 9,28,925 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them, for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis. Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008. (c) Emerald was holding 25,95861 shares on the beginning of the day on 31.07.2008 and they had purchased 15,00,000 shares in cash market on 31.07.2008 resulting the total holding of 40,95861 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them, for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis.

Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008. (d) Orteck was holding 4,95,148 shares on the beginning of the day on 31.07.2008 and they had purchased 3,22,510 shares in cash market on 31.07.2008 resulting the total holding of 8,17,658 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them, for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis. Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008. (e) Citypoint was holding 1,06,58,183 shares on the beginning of the day on 31.07.2008 and they had purchased 3,25,000 shares in cash market on 31.07.2008 resulting the total holding of 1,09,83,183 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them, for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis.

Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008. (f) Francisca was holding 42,68,847 shares on the beginning of the day on 31.07.2008 and they had purchased 2,11,155 shares in cash market on 31.07.2008 resulting the total holding of 44,80,002 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them, for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis. Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008. (g) Fotosoft was holding 7,35,384 shares on the beginning of the day on 31.07.2008 and they had purchased 1,50,000 shares in cash market on 31.07.2008 resulting the total holding of 8,85,384 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them for accounting of stock in trade

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited inventories, they account for deliveries on First in First out (FIFO) basis. Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008. (h) Jitlal was holding 34,99,865 shares on the beginning of the day on 31.07.2008 and they had purchased 3,50,000 shares in cash market on 31.07.2008 resulting the total holding of 38,49865 share as on the end of the day of 31.07.2008. Further, as per accounting practice constantly adopted by them for accounting of stock in trade inventories, they account for deliveries on First in First out (FIFO) basis. Since, they were trading constantly in SBL, they are not in position to submit exactly when they sold their holdings of shares purchased on 31.07.2008.

19. Further, in the interest of natural justice an opportunity of personal hearing was granted before the undersigned to the Noticees on May 31, 2017. AR of the Noticees vide email dated May 23, 2017 informed that Noticees do not wish to avail the opportunity of fresh personal hearing as earlier hearing was concluded on September 20, 2016.

FINDINGS

20. I have perused the SCN, replies, written submissions and other materials on the record. I record my findings as under:

21. I find from Investigation Report (hereinafter referred to as ‘IR’) that SBL was incorporated on March 23, 1985 as Pluto Exports & Consultants Ltd. and began its operations as a trading company. Later on, it changed its operation to manufacturing of tea and its name was changed to Sterling Tea and Industries Ltd. in the year 1991. Again on March 29, 2001, its name was changed to Sterling Biotech Ltd. The company is presently engaged in manufacture of pharmaceutical products. The scrip is listed on BSE and NSE.

22. The SCN dated December 22, 2015 alleged that Noticees are connected to each other. However, Noticees contented that they are not connected to each other. On perusal of Investigation Report I find that Investigation has identified 36 entities as suspected entities including Noticees. These 36 entities were connected to each other on the basis following parameters:

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited (a) Similarities in the particulars/details in the KYC documents/ annual report in MCA21 such as name of directors, common telephone number, addresses, and electronic mail (e-mail) addresses, etc. (b) Trading activity in terms of buy/sell.

23. The details of connections among these 36 entities as annexed to the SCN are as under:

Table No. 1 Sr. Suspected Entity Name PAN Connections amongst suspected entities No. Adore Mercantile 1. AAFCA5699H  Common director: Ashok Pilke (Entity nos. 1, 7, 9, 10, 11, 14) Company Pvt. Ltd.  Common address: AnandibaiGosavi, YashietPada, Kurar 2. Faith Finstock Pvt. Ltd. AAACF7046E Village, Malad (E), Mumbai – 400097 (Entity nos. 1, 14) Good Deal Trading Pvt. 3. AACCG8664K  Common mobile no.: 9224170687 (Entity nos. 1, 2, 4, 36) Ltd.  Common mobile no.: 9821012921 (Entity nos. 1, 3, 5, 6, 10, Kingfisher Trading 4. AACCK3056H 14, 34) Company Pvt. Ltd.  Common address: APJ Market, Room No. 305, Dr. C H S 5. Maxline Trading Pvt. Ltd. AAECM5117F Lane, Dhobi Talav, Mumbai 400002 (Entity nos. 1, 8, 9, 10, Respite Mercantile 6. Company Pvt. Ltd. AADCR2412D 12, 13) Riteline Mercantile  Common director: YogendraBangera (Entity nos. 1, 9, 10, 14) 7. AACCR9864Q Company Pvt. Ltd.  Common address: No. 8, Mezzanine floor, Andheri Industrial 8. SnowgoldImpex Pvt. Ltd. AAHCS9296A Estate, Off-Veera Desai Road, New Link Road, Andheri (W), Sterjet Infrastructure Co. Mumbai – 400053 (Entity nos. 2, 3, 15, 16) 9. AAJCS5511L Pvt. Ltd.  Common address: 240/1915, Motilal Nagar, Near Post Office, Sterjet Trading Co. Pvt. 10. AAJCS5512K Goregaon (W), Mumbai – 400104 (2, 16) Ltd.  Common email-id: yogibangera@gmail.com (Entity nos. 3, 6) 11. Trau b Automatics Pvt. Ltd. AABCT7833L  Common director: Dinesh Vajar (Entity nos. 4, 13, 17) Ved Investment and 12. AAACV5293M  Common address: 1-16, Lalita Bhavan, Jawahar Nagar, Trading Co. Pvt. Ltd. Goregaon (W), Mumbai – 400062 (Entity nos. 4, 17, 18) Ved-Surind Securities Pvt. 13. Ltd. AAACV4510H  Common director: SangeetaVajar (Entity nos. 4, 17) Viel Insurance Services  Common mobile no.: 9820140990 (Entity nos. 5, 16, 24, 25) 14. AABCV6286D Pvt. Ltd.  Common address: 214, Linkway Estate, New Link Road, 15. Emer ald Finstock Pvt. Ltd. AABCE1483F Malad (W), Mumbai – 400064 (Entity nos. 5, 19, 20) Waterbase Mercantile Co.  Common director: Nitin Bhosle (Entity nos. 5, 19, 20, 21, 22) 16. AAACW5073A Pvt. Ltd.  Common director: RakeshSawant (Entity nos. 5, 19, 20, 21, 22, Dollex Capital and Finance 23) 17. AABCD4543R Pvt. Ltd.  Common mobile no.: 9833949771 (Entity nos. 5, 19, 20, 21) Soft Star Mercantile 18. AAHCS9383E  Common mobile no.: 9833949770 (Entity nos. 6, 7) Company Pvt. Ltd.  Common director: JitendraPilke (Entity nos. 6, 7, 11, 26, 28) Jitlal Financial Services 19. AAACJ3758R  Common address: B/9, Sangata CHS, ChincholiBunder Road, Pvt. Ltd. Topflag Mercantile Malad (W), Mumbai – 400064 (Entity nos. 6, 11, 17, 26, 27, 20. Com pany Pvt. Ltd. AACCT2346P 28) 21. KPH Metals Pvt. Ltd. AAACK1789R  Common director: Satyendrakumar Pandey (Entity nos. 6, 16)

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

Sr. Suspected Entity Name PAN Connections amongst suspected entities No. Toporder Properties Pvt.  Common director: Anilkumar Ray (Entity nos. 7, 8, 29) 22. AACCT3081H Ltd.  Common mobile no.: 9833949773 (Entity nos. 7, 30) 23. Rake shSawant ASCPS0740H  Common director: Chandrakant Amin (Entity nos. 10, 12, 31) 24. Ortec k Infrastructure Ltd. AAACO7972J  Common director: Rakesh Modi (Entity nos. 12, 13, 32, 33) 25. Venk at Subramanian AACPI9876J  Common address: SeetaNiwas, Pratap Nagar Marg, Farid Jagadishen Nagar, Bhandup (W), Mumbai – 400078 (Entity nos. 13, 32) Inkpot Infrastructure Pvt. 26. AABCI4227K  Common director: Prakash Dalvi (Entity nos. 14, 22) Ltd.  Common address: 134/B-4, GoraiSamruddhi CHS, Gorai-II, 27. Jaysh reeJitendraPilke ALYPP5773E Borivali (W), Mumbai – 400091 (Entity nos. 16, 22) 28. Jiten draHariPilke AHHPP8115B  Common address: Block No. B/4 2/3, KasamChawl, Francis Wellmark Trading 29. AAACW5167B Wadi, Jogeshwari (E), Mumbai – 400060 (Entity nos. 19, 20, Company Pvt. Ltd. 21, 22, 23) Citypoint Trading 30. Com pany Pvt. Ltd. AACCC3193M  Common mobile no.: 9833949772 (Entity nos. 19, 21) Amin Technology Services  Common address: 360/2888, Motilal Nagar, Goregaon (W), 31. AADCA8127C Pvt. Ltd. Mumbai – 400090 (Entity nos. 24, 30) Francisca Investment Pvt.  Common address: B/6, Rishikesh CHS, Evershine Nagar, 32. AAACF5670Q Ltd. Malad (W), Mumbai – 400064 (Entity nos. 24, 35) 33. Rake sh Modi ABPPM6028G  Spouses: JayshreePilke and JitendraPilke (Entity nos. 27, 28) 34. Jaysh reeBangera AOBPB5512M Fotosoft Multimedia Pvt. 35. AAACF1497M Ltd. 36. Hard ik Dave AHLPD7410K

24. From the Table no. 1 above, I find that Noticees, namely, Faith, Snowgold, Emerald, Orteck, Citypoint, Francisca, Fotosoft, and Jitlal are connected to each other through common address, common directors, common telephone number, and e-mail addresses, etc. The above table establishes that the Noticees are connected to each other. Thus, I do not find any merit in the said submissions of the Noticees.

25. On perusal of the replies of the Noticees, I observe that the Noticees denied the allegation of influencing the settlement price. The influencing of settlement price becomes relevant only in cases where the Noticees are holding positions in the futures market.

26. I find from the investigation report, the trading of the Noticees in the futures segment and the buildup of their long position for July 31, 2008 expiry as shown in the following table.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

Table No. - 2 Trading on July 31, 2008 in futures segment at NSE:

Quantity in lakhs Rs. in lakhs Price per July 2008 upto Jun-08 July 31st, 2008 Net share of 30th Net Long Sl. Client Long on the Total net Shares (as on No Name July 31 futures buy Value date) Buy Sell Buy Sell Buy Sell 2008 contract (Rs.) 1 Faith 7.95 0.45 6.925 3.15 11.275(July 15) 0 0 11.275 187.89 2118.46 2 Citypoint 11.05 0 0.225 0 11.275(July 15) 0 0 11.275 189.60 2137.74 3 Emerald 10.55 0 0 4 6.55(July 16) 0 0 6.55 196.49 1287.01 4 Orteck 6.05 0 5.175 4.275 6.95(July 25) 0 1.575 5.375 168.13 903.6988 5 Snowgold 1.3 0 2.7 0 4(July 15) 0.375 0 4.375 188.95 826.6563 6 Francisca 1.2 1.15 3.825 0.05 3.825(July 22) 0 0 3.825 187.63 717.6848 7 Fotosoft 0 0 2.25 0 2.25(July 11) 1 0 3.25 200.27 650.8775 8 Jitlal 0.075 0 3.775 1.85 2(July 25) 0 0 2 185.13 370.26 Total 38.18 1.6 24.875 13.33 48.125 1.375 1.575 47.925 9012.387

27. From the Table No. 2, I find that these Noticees together were holding net long positions of SBL futures equivalent to 47.925 lakh shares of SBL as on July 31, 2008 in NSE. The expiry of the futures was on July 31, 2008. The Noticee in the month of June 2008 have bought SBL futures equivalent to 38.175 lakh shares of SBL and sold futures equivalent to 1.6 lakh shares. They further till July 30, 2008 bought and sold 24.875 lakh and 13.325 lakh shares of SBL. Thereby the Noticees were holding net SBL futures equivalents to 48.125 lakh shares as on July 30, 2008. The notices further bought (1.375 lakh) and sold (1.575 lakh) futures on July 31, 2008 thereby reducing their net long position to 47.925 lakh shares of SBL. The Noticees had bought 47.925 lakh shares of SBL in Futures for approximately Rs. 90.12 Crores.

28. The Noticees have not disputed facts narrated in the paragraph 26 or Table No.2. The facts mentioned in the above paragraph in view of the evidence in the Investigation Report and non-denial stands established.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

29. It is alleged in the SCN dated December 22, 2015 that Noticees on July 31, 2008 (expiry date of SBL Futures) from 03:00 P.M. to 03:30 P.M. had traded heavily in cash market (bought 27,50,788 shares) in the scrip of SBL to arrest the price fall in order to get the better settlement price of Rs. 223.95 instead to Rs. 216.47 (i.e. manipulated the price by Rs. 7.48) in the futures market. Thereby the Noticees have gained/avoided loss of Rs. 358.479 lakhs (Rs. 7.48 * 47.925 lakh shares) through their positions in futures market as a result of influencing the price in the cash market on July 31, 2008.

30. Now the question arises that whether the Noticees had fraudulently traded (i.e. bought during the last half an hour on July 31, 2008) in the cash market to get the benefit of settlement price in Futures of SBL. In order to address the said question, following is observed from the document available on records:

(a) As submitted by the Noticees, I find that Noticees were holding a considerable number of shares before July 31, 2008 in cash market. The shareholding of the Noticees at the beginning of July 31, 2008, acquisition on July 31, 2008 between 10:00 A.M. to 03:00 P.M. and acquisition on July 31, 2008 between 03:00 P.M. to 03:30 P.M. are as under:

Table No. - 3 Acquisition on Acquisition on July 31, 2008 Shareholding at July 31, 2008 between 03:00 P.M. to 03:30 P.M. Sr. No. Noticees the beginning of between 10:00 July 31, 2008 A.M. to 03:00 Quantity Buy Value P.M. 1 Faith 4190579 95000 165000 3,96,00,000 2 Citypoint 10658183 0 325000 7,22,53,271 3 Emerald 2595861 100000 1400000 32,79,41,736 4 Orteck 495148 97072 241288 5,75,04,368 5 Snowgold 803925 0 125000 2,74,23,402 6 Francisa 4268847 84655 126500 3,03,60,000 7 Fotosoft 735384 0 150000 3,25,19,638 8 Jitlal 3499865 132000 218000 5,23,20,000 Total 2,72,47,792 5,08,727 27,50,788 63,99,22,415

From the above, it is observed that in Cash Market shareholding of Noticees in SBL prior to 03:00 P.M. July 31, 2008 was 2,77,56,519 shares and during last 03:00 P.M.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited to 03:30 P.M. Noticees had acquired 27,50,788 i.e. just under 10% of their holdings (at a price range of Rs. 240.30 to Rs 203.05) shares at total consideration of approximate amount Rs. 64 Crores.

(b) The details of Noticees long position in futures of SBL as on expiry date July 31, 2008 i.e. buying price, holding and total buy value are as under:

Table No. - 4 Net Long on Buy price per share Total Value Sl.No Noticees July 31 2008 of the futures (Rs in Lakhs) (Lakhs) contract (Rs.) 1 Faith 11.275 187.89 2118.45975 2 Citypoint 11.275 189.6 2137.74 3 Emerald 6.55 196.49 1287.0095 4 Orteck 5.375 168.13 903.69875 5 Snowgold 4.375 188.95 826.65625 6 Francisca 3.825 187.63 717.68475 7 Fotosoft 3.25 200.27 650.8775 8 Jitlal 2 185.13 370.26 Total 47.925 9012.3865

From the above, it is observed that Noticees had bought futures equivalent to 47.925 lakhs of shares of SBL in future market at total consideration of approximate amount Rs. 90.12 Crores.

(c) No instance of synchronized trading, self-trades, reversal trades or circular trades were found among the Noticees in the Investigation Report either during last 03:00 P.M. to 03:30 P.M on July 31, 2008 or during the entire period of investigation report. During the entire investigation period, no significant contribution of Noticees were found in New High Price (NHP) & New Low Price (NLP) determination and Last Traded Price (LTP) Contributions.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited (d) I am of the view that, persons by trading only at the last half an hour in cash market on the date of expiry of futures contract (duration of fixing the settlement price) and not trading prior or after the expiry date or on any other dates, lends evidence on the question of genuineness of their trading. However, from the investigation report it is observed that during the investigation period (May 01, 2008 to September 30, 2009) in cash market at BSE, 4 Noticees namely, Faith, Francisca, Orteck and Citypoint appeared in top 10 buy clients with an aggregate gross buy volume of 11.97% of market volume and 4 Noticees namely, Citypoint, Fotosoft, Orteck and Faith appeared in top 10 sell clients with an aggregate gross sell volume of 10.1% of market volume. In the same way, during the investigation period (May 01, 2008 to September 30, 2009) in cash market at NSE, 5 Noticees namely, Faith, Francisca, Orteck, Fotosoft and Citypoint appeared in top 10 buy clients with an aggregate gross buy volume of 9.9% of market volume and 3 Noticees namely, Citypoint, Fotosoft and Orteck appeared in top 10 sell clients with an aggregate gross sell volume of 4.92% of market volume.

(e) From the trade and order log, I find that Noticees were continuously trading in the scrip of SBL in cash market prior to July 31, 2008, on July 31, 2008 (expiry date of futures) and after July 31, 2008. The trading details of all the Noticees for period from August 01, 2008 to October 31, 2008 are as under:

Table No. - 5 Period From 01/08/2008 to 31/10/2008 Sr. No. Noticees Total Buy Total sell Net buy 1 Faith 2614929 597362 2017567 2 City point 1034069 743715 290354 3 Emerald 0 1052749 -1052749 4 Orteck 1057957 991339 66618 5 Snowgold 214450 260810 -46360 6 Francisa 1673101 793460 879641 7 Fotosoft 593830 664960 -71130 8 Jitlal 1226692 998327 228365 Total 84,15,028 61,02,722 23,12,306

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited (f) From the price-volume data, I find that from 01/08/2008 to 31/10/2008, the weighted average price ranges from Rs. 194.29 to Rs. 172.04. The average of weighted average price for the period 01/08/2008 to 31/10/2008 was Rs. 174.73. Thus, the price of SBL was continuously falling and Noticees were also buying and selling the shares of SBL.

31. During the course of hearing, Noticees were asked when they had sold shares which were bought by them on July 31, 2008. Noticees vide their written submission stated that they have adopted accounting of stock in trade inventories for deliveries on First In First Out basis, therefore they are not in a position to submit when they sold their shares which were purchased on July 31, 2008. I find that Noticees were continuously trading i.e. buying & selling after July 31, 2008 as well.

32. From the above I find that this is not a case where persons have traded only or predominantly on the date of expiry of futures contract and not traded prior or after the date of expiry of futures contract. Given the consistent trading by the Noticees in this scrip over a long period of time, there is not enough evidence to establish the fraudulent trading behavior of the Noticees on July 31, 2008.

33. Thus, viewed in the light of above facts, the allegation that the Noticees sought to avoid the loss of Rs. 3.58 Crore by arresting the settlement price in future through heavy buying (to extent of Rs. 64 crore) in the last half an hour on July 31, 2008 in cash market is not borne out in view of their overall trading behavior including before, on and after July 31, 2008.

34. Therefore, I give the benefit of doubt to the Noticees. In view of this, on the basis of materials available on record, I find that the allegation that Noticees had fraudulently traded (i.e. bought during the last half an hour on July 31, 2008) in the cash market to get the benefit of settlement price in Futures of SBL is not established.

35. In view of the findings above, I am of the considered view that the Noticees are entitled for a benefit of doubt in respect of an alleged violation of the provisions of regulations 3 (a), (b), (c), (d) and 4 (2) (e) of the PFUTP Regulations.

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited

ORDER

36. In the facts and circumstances of the case, I, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992, hereby dispose of the show cause notice dated December 22, 2015 issued to Noticees, namely, Faith Finstock Private Limited, Snowgold Impex Private Limited, Emerald Finstock Private Limited, Orteck Infrastructure Private Limited, Citypoint Trading Company Private Limited, Francisca Investment Private Limited, Fotosoft Multimedia Private Limited and Jitlal Financial Services Private Limited without any directions.

37. The order shall come into force with immediate effect.

-Sd- DATE: NOVEMBER 03, 2017 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in respect of Faith Finstock Pvt. Ltd. and Others in the matter of M/s Sterling Biotech Limited