Order in respect of Hemaliben Bimalkumar Mehta, Charuben Jitendrarai Mehta & Bhavana Gautambhai Vaghasiya in the matter of Bodal Chemicals Ltd.

DIRECTIONS UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SEBI ACT, 1992 IN THE MATTER OF BODAL CHEMICALS LTD.

In respect of Hemaliben Bimalkumar Mehta, Charuben Jitendrarai Mehta & Bhavana Gautambhai Vaghasiya

ORDER

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), on analysis of the information available with it, prima facie found that fraudulent announcements regarding positive developments in the company Bodal Chemicals Ltd. (hereinafter referred to as ‘Bodal’/ ‘the company’) had been made, vide a fax sent on August 20, 2011, to the Bombay Stock Exchange (hereinafter referred to as ‘BSE’) with a view to mislead investors. These announcements or disclosures were disseminated by the BSE through its website on Aug 29, 2011, at 8:13 hrs and 8:18 hrs. However, by 13:41 hrs, the company denied any of these developments or sending any such fax message to BSE. Based on the same, BSE, on the same day, during market hours, at 14:24 hrs, disseminated a clarification to that effect. No such fax message was received by the the National Stock Exchange (hereinafter referred to as ‘NSE’).

2. The analysis of the information available with SEBI prima facie revealed that the following three entities were identified to be among the top sellers during the pre-denial period of trading on Aug 29, 2011 and had high concentration in this scrip in terms of their trading during the last 5 trading days.

i. Hemaliben Bimalkumar Mehta ii. Charuben Jitendrarai Mehta iii. Bhavana Gautambhai Vaghasiya

3. In view of the above, SEBI issued an interim order dated August 30, 2011 (hereinafter referred to the ‘interim order’) pending investigation and passing of final order with the following directions:

i. Directing BSE and NSE to withhold the pay-out of securities and funds for the trading done on their respective Exchanges on August 29, 2011.

ii. Prohibiting the three persons viz., Hemaliben Bimalkumar Mehta, Charuben Jitendrarai Mehta and Bhavana Gautambhai Vaghasiya, from buying, selling or dealing in the securities market in any manner whatsoever, till further directions.

4. The abovenamed entities were granted the opportunity to file objections, if any, within 15 days of the date of the interim order. Hemaliben Bimalkumar Mehta and Charuben Jitendrarai Mehta stated their objections vide their letters dated September 10, 2011. Bhavana Gautambhai Vaghasiya submitted her objections vide letter dated September 14, 2011. Pursuant to the said order, summonses were issued on September 9, 2011 to the aforesaid entities for production of certain documents. However, all the documents that were sought for vide summonses were not provided by the entities and summonses were issued again on October 24, 2011.

5. An opportunity of personal hearing was granted on October 13, 2011 wherein Ms. Vandana Khatuwala, Practicing Company Secretary had appeared on behalf of Hemaliben Bimalkumar Mehta and Charuben Jitendrarai Mehta and made submissions. Hemaliben Bimalkumar Mehta and Charuben Jitendrarai Mehta also filed separate replies vide letters dated October 31, 2011 and November 3, 2011 respectively. Their submissions, inter alia, are as under:

a) Hemaliben Bimalkumar Mehta is the daughter in law of Charuben Jitendrarai Mehta. However, their trading is independent of each other.

b) That the two clients had almost no holdings as they sold their entire holdings.

c) They had sold huge number of shares of Bodal Chemicals Ltd since July 2011 and not just on August 29, 2011.

d) Hemaliben Bimalkumar Mehta and Charuben Jitendrarai Mehta are individual shareholders, trading in various scrips, not just Bodal. On August 29, 2011, their decision to sell shares had nothing to do with the announcements and subsequent clarification. They had sold shares both pre and post clarification. e) There is no evidence of their connection with the impugned fax /announcement /press release. f) Out of the list of top 10 traders at NSE and BSE, SEBI has picked only two traders and let off the others. g) They are not connected with the Bhavesh Pabari group. h) They sold shares even in the post denial period.

6. Bhavana Gautambhai Vaghasiya did not appear for the hearing on the scheduled date, ie, October 13, 2011. However, she has replied, vide a letter dated January 17, 2012 to the allegations made against her. Her submission, inter alia, are:

a) She is not connected with the management of Bodal or its directors or any person in this matter.

7. I note that the three abovenamed entities were the top sellers during the crucial period of trading, which is pre-denial period when the investors were taking decisions on the basis of incorrect positive news about the company.

8. I also note that Hemaliben Bimalkumar Mehta and Charuben Jitendrarai Mehta, though admittedly related to each other have submitted that their trades were independent of one anothers. I note that these two entities together sold 1,03,839 shares at BSE on August 29, 2011, out of which 71,683 were sold prior to the denial from the company. At NSE, Charuben Jitendrarai Mehta sold 31,000 shares and Hemaliben Bimalkumar Mehta sold 15,304 shares between 9:00 hrs and 10:05. Bodal being an illiquid scrip, it is difficult to accept the contention that these two entities dealt in this fashion in an independent manner.

9. I further note that Bhavana Gautambhai Vaghasiya, on August 29, 2011 sold 53,055 shares of the company (net) in the pre-denial period. At NSE, she sold 57,000 shares of Bodal before 14:25 hrs.

10. I note that Hemaliben Mehta and Charuben Mehta, two amongst the noticees, have submitted that they were liquidating their holdings in various scrips to meet the medical expenses of their family member, who is suffering from cancer. However, I observe that though it is correct that the aforenamed noticees have sold some shares in other scrip(s), they were purchasing much larger numbers in the scrip of Bodal in the month of August ’11, up until a few days before the fax making fraudulent announcements was sent to the BSE. The details of their purchases as seen from the Exchange trade logs, contradict their submission that they were only disposing off their holdings to raise funds.

11. I also note that the noticees have submitted that they are not part of the Bhavesh Pabari group, as found in the interim order. However, I do not think it is necessary to go into this question at this stage, and the same can be addressed ascertained once the investigation is completed.

12. Having considered the submissions of the three entities and in view of the large trades undertaken by them on the day of the fraudulent announcements, I am not convinced that at this stage there is any need to revoke or modify the directions issued in the matter to Bhavana Gautambhai Vaghasiya, Hemaliben Bimalkumar Mehta and Charuben Jitendrarai Mehta.

13. Therefore, in exercise of the powers delegated to me by the SEBI Board in terms of Section 19 of the Securities and Exchange Board of India Act 1992 read with Section 11B and 11(4)(b), I hereby confirm the interim order dated 30/08/2011, with all the directions against all the persons mentioned therein, in the interest of investors and safety and integrity of the securities market.

Place: Mumbai PRASHANT SARAN Date: 4/April/2012 WHOLE-TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA