Order in respect of Har Sai Investments Limited, Alaknanda Capital Services Private Limited and HB Stockholdings Limited,in the matter of Jagsonpal pharmaceuticals Limited

WTM/PS/23/IVD/ID-03/MAY/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER IN THE MATTER OF JAGSONPAL PHARMACEUTICALS LIMITED In respect of Har Sai Investments Limited, Alaknanda Capital Services Private Limited and HB Stockholdings Limited. Date of hearing: April 25, 2011

Appearances:

For Noticees: Mr. Praveen Gupta for Har Sai Investments Limited Mr. Atul Aggarwal, Chartered Accountant for Alaknanda Capital Services Pvt. Limited Ms. Banmala Jha, Vice President (Legal) and Mr. Prashant Mishra, Advocate for HB Stockholdings Limited For SEBI: Mr. G. Ramar, General Manager Mr. Jagannath Das, Assistant General Manager Mr. Pradeep Kumar, Assistant Legal Adviser ORDER Under Sections 11(4)(b) and 11B of the Securities and Exchange Board of India Act, 1992

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted an investigation into the dealings in the scrip of Jagsonpal Pharmaceuticals Limited (hereinafter referred to as ‘Jagsonpal’) for the periods of August, 2000 to December, 2000 (hereinafter referred to as ‘first period’) and July, 2001 to October, 2001 (hereinafter referred to as ‘second period’). During the period of investigation, the scrip of Jagsonpal was listed at National Stock Exchange (hereinafter referred to as ‘NSE’) and Bombay Stock Exchange (hereinafter referred to as ‘BSE’).

2. SEBI analyzed the trading details along with the data of the volumes contributed by the persons who had traded in the scrip of Jagsonpal. During the first period of investigation, the price of the scrip at NSE increased from `599 as on August 18, 2000, touched a high of `700 as on September 11, 2000 to `660 as on November 01, 2000. An irregular pattern in volumes were also observed, wherein the volume varied between 39,200 shares as on October 31, 2000 to only 5 shares as on August 18, 2000. At BSE, the scrip witnessed comparatively lesser trading volume. At both the exchanges, volume in the scrip was observed mainly on those days when select individuals/ entities had traded in the scrip.

3. During the second period of investigation, the price of the scrip at NSE fell down from `319.20 as on July 02, 2001 to `129.50 as on October 31, 2001. The volume in the scrip of Jagsonpal again varied between 1 share as on October 08, 2001 to 18,985 shares as on July 16, 2001 at NSE. At NSE, on 48 days out of total 65 trading days, the volumes are less than 1,000 shares. On 28 days out of total 65 trading days, volumes are less than 100 shares.

4. On completion of the investigation, SEBI inter alia issued a common show cause notice (hereinafter referred to as the ‘SCN’) dated September 02, 2005 under Section 11(4)(b) and 11B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) read with Regulations 11 and 13(3) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 to Har Sai Investments Limited (hereinafter referred to as ‘Har Sai’), Alaknanda Capital Services Private Limited (hereinafter referred to as ‘Alaknanda’) and HB Stockholdings Limited (hereinafter referred to as ‘HB’) (hereinafter collectively referred to as the ‘noticees’ and individually by their respective names). The investigations prima facie found that the noticees had indulged in structured/ synchronized trades in the scrip of Jagsonpal with each other and one Gloria investment Limited (hereinafter referred to as ‘Gloria’) during the period of investigation at NSE and Delhi Stock Exchange (hereinafter referred to as ‘DSE’). The SCN asked the noticees to show cause for the alleged violation of the provisions of Regulation 4 (a), (b), (c) and (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as ‘PFUTP Regulations’).

5. Two among the noticees, HB and Alaknanda vide their separate letters dated September 16, 2005 and September 26, 2005 asked for certain documents. SEBI replied to HB and Alaknanda on November 24, 2005 and it was explained that all the documents relied upon in the instant proceedings have already been provided to HB along with the SCN. Thereafter, HB and Alaknanda replied to the SCNs vide their separate letters dated December 10, 2005 and December 08, 2005 respectively.

Har Sai, the other noticee also replied to the SCN vide its letter dated December 09, 2005.

6. Subsequently, opportunities for personal hearing were given to all three noticees on October 27, 2006. On the date fixed, the authorized representative Mr. U.C. Lakhwani, Advocate appeared for the noticees namely Har Sai and HB. Mr. U.C. Lakhwani vide separate applications, both dated October 27, 2006 requested for supply of certain documents. It is seen that the list of documents as sought by the representative on behalf of these two noticees, i.e., Har Sai and HB is almost identical.

The noticee namely Alaknanda also appeared for the personal hearing through its authorized representative Mr. Suchitta Koley, Company Secretary and filed an application dated October 27, 2006 for the supply of certain documents.

7. Further, Har Sai and HB vide their separate letters both dated October 10, 2006 (sic) received by SEBI on November 20, 2006 raised certain preliminary issues and again requested SEBI for documents that were relied upon. Subsequent to this, these noticees have requested SEBI to read the date of their letters as November 10, 2006 instead of October 10, 2006.

8. Further opportunities were granted to the noticees on April 25, 2011, due to change in the Competent Authority. On the said date, Mr. Praveen Gupta, Director of Har Sai; Ms. Banmala Jha, Vice President (Legal) and Prashant Mishra, Advocate on behalf of HB Stockholdings and Mr. Atul Aggarwal, Chartered Accountant on behalf of Alaknanda appeared and made oral submissions. During the course of personal hearing, the noticees namely Har Sai and HB requested SEBI to provide them with the documents showing order time and quantity of their trades alleged to have been executed in the scrip of Jagsonpal and also sought other documents that were relied upon by SEBI. Considering the request, SEBI provided legible copies of all the documents and the relevant trade details that were relied upon by SEBI.

Thereafter, the copies of all the annexures to the SCN and the statements showing date-wise time, quantity and price of orders were forwarded to Har Sai and HB vide letters dated May 10, 2011. Pursuant to the same, Har Sai and HB filed their additional replies vide their letters dated May 28, 2011 and May 27, 2011 respectively, which were taken on record.

9. I have carefully considered the SCN issued to the noticees, replies of the noticees, written submissions filed by the noticees and the material available on record. The submissions of the noticees are almost similar. They are summarized below: - The transactions were carried out on the screen of the exchange and they gave deliveries and made all payments. The trades were carried out on the market price existing at the time of the trade. - All their trades happened during the period October 25, 2000 to November 21, 2000 i.e., much after the high and low as per the SCN. - Har Sai bought 53,610 equity shares of Jagsonpal and sold 30,100 shares at prevailing market price. The said transaction on gross basis was 20.86% of the trade volume of 4,01,178 shares, 5.86% on the net basis during the relevant period. Har Sai had executed 43 impugned trades. In many settlements, there were order quantity differences of upto 50%. 39 of the said 43 impugned trades were through Fincap Portfolio Limited. There was no reversal of trades and all deliveries were made and payments made/ received in all transactions. - Alaknanda bought 56,821 shares and sold 51,300 shares at prevailing market price.

The said transaction on gross basis was 26.95% of the trade volume of 4,01,178, 1.37% on the net basis during the relevant period. - HB bought 19,200 equity shares of Jagsonpal and sold 39,700 shares at prevailing market price. The said transaction on gross basis was 14.68% of the trade volume of 4,01,178 shares, 5.11% on the net basis during the relevant period. HB has submitted that 58 of the 75 impugned trades have either order quantity difference or order price difference or both and cannot be said to be structured. The balance 17 impugned trades have time difference of about 4 minutes. There was no reversal of trades and all deliveries were given and payments made/ received in all transactions. - The trades of the noticees fall within the first period of investigation. A computation of the average daily volume of five months prior to August, 2000 establishes that there was a decline from the daily average volume subsequently. - They are independent entities and it is unjustifiable to say that the entities are related because they have common director or address. Alaknanda had no relationship with Har Sai.

Alaknanda was appearing in the list of promoters of HB. Merely by showing interconnection without demonstrating any collusion or common objective for manipulating or fraudulent intent in market is of no avail. - The trades by HB were carried over a period of only 3 days and 6 days in the case of Har Sai during the entire investigation period and hence cannot be termed as manipulative under Section 11(4) and 11B of SEBI Act, 1992. - SCN is grossly time barred and the proceedings cannot commence after repeal of the law. The law under which the SCN was issued was not in force at the time of alleged commission of offences. Further, without saving any proceedings under the PFUTP Regulations, no proceedings under the new SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 can be carried. - Regulation 7 of the PFUTP Regulation empowers the SEBI Board alone to order investigation. The order of investigation is bad and inconsistent with the spirit of the PFUTP Regulations. Further, the mandatory requirement of giving notice before issuing order of investigation not complied with. - There was neither any intention nor the position of the noticee to inflate, depress or cause fluctuations in the prices of the scrip.

The scrip was irregularly traded even before and after the period under investigation. - The SCN has failed to disclose the cause, facts, circumstances, source and reason of investigation. The SCN has not brought out correlation between the nature of the transactions and the price movement. The contents and figures given are misleading. - The copies of various documents have not been supplied to them and the details provided are not complete but only an extract. - It has also been submitted that as per the provisions of Section 11B of the SEBI Act, SEBI’s power to issue directions is limited to a certain class of persons. - No action has been taken against the counterparties.

10. At the outset, I note the submission of the noticees that they have not been supplied with necessary data and various documents. However, I have seen that all the documents relied upon by SEBI have already been provided to the noticees. However, I note that no document, which has not been provided to the noticees, is being relied upon in the present proceedings. As regards the submission of the noticee regarding delay in the proceedings, I note that neither there any time line fixed for such cases nor can the delay justify exoneration. Further, it is not necessary that SEBI initiates an investigation, only upon receipt of a complaint. SEBI is obliged to act when it is cognizant about any kind of irregularity in the securities market.

11. Before proceeding further, it is necessary to consider the preliminary objections raised by the noticees in their respective replies. I note that the PFUTP Regulations were repealed and replaced by the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 with effect from July 17, 2003. Regulation 13 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 reads as under: “Repeal and savings 13. (1) The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 is hereby repealed. (2) Notwithstanding repeal of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, any violation of regulations 3, 4, 5 and 6 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 shall be investigated and proceeded against in accordance with the procedure laid down in these regulations. (3) Notwithstanding repeal of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, any investigation pending, at the commencement of these regulations shall be continued and disposed of in accordance with the procedure laid down in these regulations.”

A reading of the above regulation makes it clear that the procedure for conducting the investigation shall be in accordance with SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. Hence, I find no infirmity about the procedure adopted in the present proceedings. Further, as regards the requirement of notice before the order of investigation, I note that the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 has dispensed with the requirement of notice.

I note that none of the noticees has denied their trading in the scrip of Jagsonpal. Their only objection on this count seems to be that all of them had traded only during the first period of investigation. Therefore, I note that all the noticees are persons associated with the securities market and within the scope of Sections 11B and 11(4) of the SEBI Act. In this regard, I place my reliance on the judgment of the Hon’ble High Court of Gujarat in the matter of Karnavati Fincap vs. SEBI (1996) 10 SCL 5 (GUJ) which has held - “….. In ordinary meaning, the persons associated with the securities market would include all and sundry who have something to do with the securities market. …… The words “persons associated with the securities market” are of much wider import than intermediaries. ……It is inconceivable to think that a buyer or seller of a scrip is not a person associated with securities market, where or through which he transacts his business, whether as trader or as investor, of selling or buying the required scrip.” The words “all and sundry” above would include the noticees who has traded in the scrip during the period of investigation. After correlating the facts of the case with the above judgment, it is very clear that the noticees are persons associated with the securities market, within the scope of Section 11B of the SEBI Act.

12. After having addressed the preliminary objections raised by the noticees, I proceed to the core issue: Whether the noticees had acted in collusion and created artificial liquidity/ false market in the scrip of Jagsonpal?

13. Whether the noticees had acted in collusion and created artificial liquidity/ false market in the scrip of Jagsonpal? a. I note that the noticees had traded in the scrip of Jagsonpal only during the first period of investigation. I have seen the allegations leveled in the SCN that the noticees had executed structured/ synchronized trades in the scrip of Jagsonpal with each other and one Gloria Investment Limited. I note that Gloria Investment Limited had traded through broker HB Securities Limited in the scrip of Jagsonpal.

b. I note that allegation that the noticees were related to each other and to the broker, HB Securities Limited. The basis for this relationship is the list of group entities that was submitted by the noticees namely HB and Har Sai to SEBI during the investigations. Further, I note that the name of the noticee namely Alaknanda appears in the list of the promoters of HB. The noticees in their respective replies have denied the allegation and submitted that they all are independent entities. The noticees have also submitted that merely by showing interconnection and without demonstration of any collusion for manipulation no case can be made out as against them.

I have considered the argument of the noticees and note that the noticee namely Har Sai had the same address as the head office of HB Securities Limited. Further, one Mr. Sanjeev Kumar is the common link between HB and Harsai. Considering this and the trading pattern of the noticees wherein the orders of one noticee matched with another in a syncronized manner and repeated nature of such trades reveals a definite nexus amongst the noticees. However, to arrive at a conclusion, it is important to see the trading pattern of the noticees. For the same, trades of the noticees have been discussed below:

c. I note that HB was trading in the scrip of Jagsonapl through two brokers namely HB Securities Limited and UTI Securities Limited. The summary of the trading of HB is given below: Table A Traded through Settlemen Buy Sell Gross Market % to Market Net broker t No. Gross Gross Buy or (Sell) HB Securities 2000044 19,200 0 19,200 85,420 22.48% 19,200 UTI Securities 2000045 0 19,700 19,700 93,558 21.06% (19,700) UTI Securities 2000047 0 20,000 20,000 1,14,856 17.41% (20,000) Total 19,200 39,700 58,900 2,93,834 20.05% (20,500) The noticee namely Har Sai had traded in the scrip of Jagsonapl through brokers namely HB Securities Limited and Fincap Portfolio Limited. The summary of the trading of Har Sai through these brokers is as under: Table B Traded throughSettlementB uy Sell Gross Market. % to MarketNet Buy broker No. Gross Gross or (Sell)

HB Securities 2000044 10 10,000 10,010 85,420 11.72% (9,990) Fincap Portfolio 2000044 20,000 0 20,000 85,240 23.46% 20,000 Fincap Portfolio 2000045 0 20,000 20,000 93,558 21.38% (20,000) Fincap Portfolio 2000046 20,346 0 20,346 44,972 45.24% 20,346 Fincap Portfolio 2000047 12,480 0 12,480 1,14,856 10.87% 12,480 Total 52,836 30,000 82,836 4,24,046 19.53% 22,836

Alaknanda had traded in the scrip of Jagsonpal through broker namely HB Securities Limited. The summary of the trading of Alaknanda is given below: Table C Traded throughSettlementB uy Sell Gross Market. % to MarketNet Buy broker No. Gross Gross or (Sell) HB Securities 2000044 0 10,000 10,000 85,420 11.71% (10,000) HB Securities 2000045 40,634 0 40,634 93,558 43.43% 40,634 HB Securities 2000046 70 19,800 19,870 44,972 44.18% (19,730) HB Securities 2000047 16,072 21,500 37,572 1,14,857 32.71% (5,428) Total 56,776 51,300 1,08,0763,38,807 31.90% 5,476 d. An analysis of the table A above, shows that the noticee namely HB had traded for 58,900 shares on gross basis and made net sale of 20,500 shares. HB in total bought 19,200 shares and sold 39,700 shares on 4 trading days in settlement numbers 44, 45 and 47. This quantity was 14.68% of the traded volume of 4,01,178 shares and 5.11 % of net trading volume during the investigation period.

The analysis of table B above, shows that HB had traded for 82,836 shares on gross basis and made net purchase of 22,836 shares. Har Sai in total bought 52,836 and sold 30,000 on 6 trading days in settlement numbers 44, 45, 46 and 47. This quantity was 20.86% of the traded volume of 4,01,178 shares and 5.86% of the net trading volume, during the investigation period.

It is seen from the table C above, the noticee namely Alaknanda had traded for 1,08,076 shares on gross basis and made net purchase of 5,476 shares. Har Sai in total bought 56,776 and sold 51,300 on 7 trading days in settlement numbers 44, 45, 46 and 47. This quantity was 26.95% of the traded volume of 4,01,178 shares and 1.37% of the net trading volume, during the investigation period.

e. It has been alleged in the SCN that the trades of the noticee were synchronized in nature with the related entities. - The details of such synchronized trades executed by HB have been brought out below for reference: Table D Sell Client Total Gloria Investments HB Buy Client Synchronized No. of Synchronized No. of Synchronized No. of Qty. trades qty. trades trade qty. trades Alkananda 0 0 34,570 63 34,570 63 Harsai 0 0 4,844 8 4,844 8 HB 19,200 4 0 0 19,200 4 Total 19,200 4 39,414 71 58,614 75 From table above, I note that HB executed 75 trades in all, which were of synchronized nature, for a quantity of 58,614 shares with the related entities. I do not agree with the submission of HB that there were 17 trades where the time difference is more than 4 minutes. I observe that there are only 5 trades out of total 75 trades, where the time difference is more than 4 minutes and the total trading quantity of these 5 trades was very miniscule, which altogether accounted for 30 shares out of total synchronized trades for 58,614 shares.

- The details of synchronized trades executed by Har Sai have been brought out below for reference: Table E Sell Client Alkananda Harsai HB Total Buy Client SyncronizedNo. of SyncronizedNo. of SyncronizedNo. of SyncronizedNo. of Qty. trades Qty. trades Qty. trades Qty trades Alkananda 0 0 20,000 4 0 0 20,000 4 Harsai 32,300 22 10,000 4 3,755 5 46,055 31 Total 32,300 22 30,000 8 3,755 5 66,055 35 I note that Har Sai executed 35 trades of synchronized nature in all, for a quantity of 66,055 shares with the related entities. It is seen that Har Sai had also executed self trades in the scrip of Jagsonpal during the period of investigation.

- The details of synchronized trades executed by Alaknanda have been brought out below of reference: Table F Sell Client Alkananda Harsai HB Stockholdings Ltd. Total Buy Client SyncronizedNo. of SyncronizedNo. of SyncronizedNo. of SyncronizedNo. of Qty. trades Qty. trades Qty. trades Qty trades Alkananda 0 0 20,000 4 34,570 63 54,570 67 Gloria 14,000 71 0 0 0 0 14,000 71 Harsai 37,300 27 0 0 0 0 37,300 27 Total 51,300 98 20,000 4 34,570 63 1,05,870 165 I note that Alaknanda executed 165 trades of synchronized nature in all, for a quantity of 1,05,870 shares with the related entities.

f. Having seen the trading details of the noticees in the scrip of Jagsonpal, it is now relevant to see the trading pattern of these. The same has been brought out below on sample basis: Table G Trade Buy Sell Difference between Date Sett No Time Qty. Price Member Client Price Vol. Time Member Client Price Vol. Time Time Price Qty. 31-Oct-00 2000044 11:41:34 5000 649 HB Securities HB 649 5000 11:41:34HB Securities Gloria 649 5000 11:41:25 0:00:09 0 0 31-Oct-00 2000044 11:42:01 5000 649 HB Securities HB 649 5000 11:42:01HB Securities Gloria 649 5000 11:41:53 0:00:08 0 0 31-Oct-00 2000044 11:42:57 5000 649 HB Securities HB 649 5000 11:42:57HB Securities Gloria 649 5000 11:42:48 0:00:09 0 0 31-Oct-00 2000044 11:44:08 4200 649 HB Securities HB 649 4200 11:44:08HB Securities Gloria 649 4200 11:44:00 0:00:08 0 0 31-Oct-00 200004414:22:47 2500 640 Fincap Har Sai 640 2500 14:22:47 HB Securities Har Sai 640 2500 14:22:41 0:00:06 0 0 31-Oct-00 200004414:22:56 2500 640 Fincap Har Sai 640 2500 14:22:56 HB Securities Har Sai 640 2500 14:22:55 0:00:01 0 0 31-Oct-00 200004414:23:04 2500 640 Fincap Har Sai 640 2500 14:23:04 HB Securities Har Sai 640 2500 14:23:04 0:00:00 0 0 31-Oct-00 200004414:23:15 2500 642 Fincap Har Sai 642 2500 14:23:10 HB Securities Har Sai 642 2500 14:23:15 0:00:05 0 0 31-Oct-00 200004414:23:37 2500 640 Fincap Har Sai 640 2500 14:23:37 HB Securities Alkananda 640 2500 14:23:34 0:00:03 0 0 31-Oct-00 200004414:23:48 2500 641 Fincap Har Sai 641 2500 14:23:48 HB Securities Alkananda 641 2500 14:23:47 0:00:01 0 0 31-Oct-00 200004414:24:00 2500 641 Fincap Har Sai 641 2500 14:24:00 HB Securities Alkananda 641 2500 14:23:57 0:00:03 0 0 31-Oct-00 200004414:24:10 2500 640 Fincap Har Sai 640 2500 14:24:10 HB Securities Alkananda 640 2500 14:24:10 0:00:00 0 0 1-Nov-00 2000045 12:56:47 4857 689 HB Securities Alkananda 689 5116 12:56:47UTI Securities HB 689 5000 12:56:46 0:00:01 0 116 1-Nov-00 2000045 12:57:11 143 689 HB SecuritiesAlkananda 689 143 12:57:11UTI Securities HB 689 5000 12:56:46 0:00:25 0 4857 1-Nov-00 2000045 12:57:38 5000 689 HB SecuritiesAlkananda 689 5000 12:57:38UTI Securities HB 689 5000 12:57:38 0:00:00 0 0 1-Nov-00 2000045 12:57:55 5000 689 HB Securities Alkananda 689 5000 12:57:55UTI Securities HB 689 5000 12:57:54 0:00:01 0 0 1-Nov-00 2000045 12:58:15 4700 689.00 HB Securities Alkananda 689 4700 12:58:15UTI Securities HB 689 4700 12:58:14 0:00:01 0 0 21-Nov-00 2000047 10:22:16 500 680 Fincap Har Sai 680 500 10:22:16 HB Securities Alkananda 680 500 10:22:16 0:00:00 0 0 21-Nov-00 2000047 10:26:23 500 690 Fincap Har Sai 690 500 10:26:23 HB Securities Alkananda 690 500 10:25:49 0:00:34 0 0 21-Nov-00 2000047 11:02:16 500 680 Fincap Har Sai 680 500 11:02:15 HB Securities Alkananda 680 500 11:02:16 0:00:01 0 0 21-Nov-00 2000047 11:30:151000 680 Fincap Har Sai 680 1000 11:30:15 HB Securities Alkananda 680 1000 11:30:12 0:00:03 0 0

The trade details as reproduced above show that the orders for the trades were entered simultaneously. A perusal of these trades shows that these were in the nature of synchronization.

g. I note that unknown persons can not trade continuously by putting orders in the above pattern and contribute to the total volumes in the market. The trades of the noticees appear to be executed with a pre-determined plan to match with a specific counterparty. I note that even though the screen based trading system is faceless in nature and it maintains anonymity of the counterparty broker/ client; it is also an established fact that two parties with prior intent can match their trades with each other by placing orders simultaneously at the same price. The Hon’ble SAT in the matter of Ketan Parekh Vs. Securities and Exchange Board of India vide its Order dated July 14, 2006 inter alia observed as follows: “Whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of the parties which could be inferred from the attending circumstances because direct evidence in such cases may not be available. The nature of the transaction executed, the frequency with which such transactions are undertaken, the value of the transactions, whether they involve circular trading and whether there is real change of beneficial ownership, the conditions then prevailing in the market are some of the factors which go to show the intention of the parties. This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn.”

h. At this stage, I note that in the present case there was an existing direct connection between the noticees namely HB, Har Sai and Alaknanda. I observe the argument of the noticees that all these are independent entities. In this regard, the following observation of Hon’ble Supreme Court in the matter of Delhi Development Authority Vs Skipper Construction Co. Pvt. Limited (AIR 1996 SC 2005) is relied upon: “The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The fact that an individual and members of his family have created several corporate bodies would not prevent the court from treating all of them as one entity belonging to and controlled by that individual and family. If it is found that these corporate bodies are merely cloaks behind which lurks the individual and /or members of his family and that the device of incorporation was really a ploy adopted for committing illegalities and/ or to defraud people” (underlining supplied).

In view of the above, I do not find any merits in the argument of the noticees and note that they had acted in collusion with each other to match the trades in the scrip of Jagsonpal. As regards, the entity namely Gloria Investments, I note that the material available on record falls short of making out any connection with the noticees except for synchronized trading.

i. I note the submission of the noticees that they had taken delivery and made payments for the trades executed by them. From the available records, I note that in few instances the transactions by Har Sai and Alaknanda were squared off. It is seen that the noticee namely Har Sai had executed self trades on October 31, 2000 while trading through two brokers as discussed above. The details of these trades shows that the orders were matched within a few seconds of each other. I note that Har Sai in its reply has not explained the objective of such trading pattern. This pattern of trading of Har Sai is explicitly manipulative in nature. j. The SCN has alleged that the orders for the trades were entered at consistently higher price than the previous day’s close price. I have seen the data on record and find no major variation in the price of the scrip of Jagsonpal. Further, it is not clear from the data on record that these trades had impacted the price of the scrip in some way.

k. As discussed above, the increase in the volume in the scrip can be attributed to the trades executed by the noticees. Thus, from the aforesaid acts of noticees, I am of the view that the charge of violation of provisions of Regulations 4(a) and (b) of the PFUTP Regulation stands established.

14. Therefore, taking into consideration the facts and circumstances of the case, I, in exercise of the powers conferred upon me under Section 19 read with Sections 11B and 11(4)(b) of the Securities and Exchange Board of India Act, 1992, do hereby restrain the noticees, Har Sai Investments Limited [PAN: AABCH 2348L], Alaknanda Capital Services Private Limited [PAN: AAACA 7499Q] and HB Stockholdings Limited [PAN: AAACH 0637F] from buying, selling or dealing in the securities market whatsoever or accessing the securities market, directly or indirectly, for a period of two years from the date of this order.

15. The stock exchanges are hereby directed to permit the respective members to square off their existing open positions, if any, at the earliest in Futures and Options segment.

16. This order shall be served on all recognized stock exchanges and depositories to ensure that the noticees are not allowed to undertake transactions as prohibited in para 14 above.

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

Date: May 9th, 2012 PRASHANT SARAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA