Order in respect of Mr. Imtiyaz Hanif Khanda And Mr. Vali Mamad Habib Ghaniwala

WTM/RKA/ISD /58 /2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN RESPECT OF MR. IMTIYAZ HANIF KHANDA AND MR. VALI MAMAD HABIB GHANIWALA Appearances: For Noticees: Mr. Jitesh Alva, Advocate for Sr. No. Name PAN 1. Mr. Imtiyaz Hanif Khanda (proprietor of M/s Right Trade and AVQPK5639L M/s Sai Traders) 2. Mr. Vali Mamad Habib Ghaniwala (proprietor of M/s Bull BGHPG6861M Trader and M/s Laxmi Traders)

For SEBI: Mr. Santosh Shukla, Joint Legal Adviser, Mr. Debashis Bandyopadhyay, Deputy General Manager, Mr. Parag Kumar Sinha, Assistant Legal Adviser, Mr. Ankur Bishnoi, Manager 1. Vide an ad interim ex-parte order dated August 20, 2013 (hereinafter referred to as the 'interim order') SEBI inter alia restrained the above mentioned two entities (hereinafter referred to as the 'noticees' or by their respective names) from accessing the securities market and further prohibited them from buying, selling or dealing in securities, in any manner whatsoever, till further directions. The above entities were further directed to:– (a) to cease and desist from acting as an investment advisors and portfolio managers and not to solicit or undertake such activities or any other unregistered activity in the securities market, directly or indirectly, in any manner whatsoever; (b) immediately withdraw and remove all advertisements, representations, literatures, brochures, materials, publications, documents, websites, etc. in relation to their investment advisory and portfolio management activities or any unregistered activity in the securities market.

2. The interim order was passed on the basis of prima facie findings that the said noticees were connected with each other and they have acted in fraudulent and deceitful manner and also contravened the provisions of the Securities and Exchange Board of India Act, 1992 (the SEBI Act), the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (the PFUTP Regulations), the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 (the Investment Advisers Regulations) and the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993 (the Portfolio Managers Regulations). 3. Pursuant to the interim order, the noticees filed their written representations vide letter dated September 5, 2013 and also availed opportunity of personal hearing and made inter alia the following submissions: (a). SEBI has passed orders without issuing any show cause notice to the noticees, which is a prerequisite and the interim order has been passed in violation of the principles of natural justice.

(b). The defect of failure of natural justice cannot be cured later by the same body or higher body. (c). The statements of the noticees were taken under threat and coercion, and were not voluntary. (d). Except for one mobile number, none of the mobile numbers belong to the noticees and they have not sent any SMS violating the SEBI Act. (e). Any mobile number can be cloned by using technology.

4. I have carefully considered the allegations/charges against the noticees, their replies and relevant material available on record. In the instant case, it is observed that the directions issued vide ad interim ex-parte order against the noticees were interim in nature and were issued on the basis of prima facie findings. Therefore, the limited issue to be considered at this stage is whether the ad-interim ex-parte directions issued against the noticees vide the interim order need to be confirmed, vacated or modified in any manner. 5. The facts and circumstances that are basis of the interim order and also admitted or not disputed by the noticees are summarized as under :- (a). Mr. Imtiyaz Hanif Khanda is the proprietor of M/s Right Trade having its website at www.righttrade.in; (b). M/s Right Trade claims to provide portfolio management services to investors on payment of fees. (c). M/s Right Trade through its website solicits clients to join its portfolio management and investment advisory activities. (d). Neither M/s Right Trade nor its proprietor, Mr. Imtiyaz Hanif Khanda is registered with SEBI as portfolio manager as defined in SEBI (Portfolio Managers) Regulations, 1993. (e). Mr. Vali Mamad Habib Ghaniwala is the proprietor of M/s Bull Trader and M/s Laxmi Traders. (f). Mr. Vali Mamad Habib Ghaniwala has acted on the instructions of Mr. Imtiyaz Hanif Khanda who also operated and managed M/s Bull Trader and M/s Laxmi Traders.

(g). Mr. Vali Mamad Habib Ghaniwala is the maternal uncle of Mr. Imtiyaz Hanif Khanda.

6. I note that the noticees have contended that no show cause notice was issued to them and the directions issued by way of the interim order was in violation of the principles of natural justice. In this regard, the noticees have placed reliance on various judgments including Golak Patel Volkart Ltd. vs CCE (1987 (28) ELT 53 (S.C.)), Municipal Board Pushkar vs State transport Authority (AIR 1965 SC 458: 1963 Supp (2) SCR 373) and East India Commercial Company vs Collector of Customs (AIR 1962 SC 1893:(1963) 3, SCR). I note that in the matter of Anand Rathi vs SEBI (2002 (2) BomCR 403, (2002) 1 BOMLR 150), the Hon’ble Bombay High Court has held as under: “...SEBI as a regulator of securities market is empowered to take all necessary measures to protect the interests of the investors and the capital market. The SEBI is fully competent and is empowered by Sections 11 and 11B to pass interim order in aid of the final orders. The SEBI is charged with duty to protect the public and the integrity of the capital markets and as a regulator, it is certainly empowered to order suspension as an interim measure pending investigation into serious allegations of manipulations and insider trading...

It is thus clearly seen that pre decisional natural justice is not always necessary when ad-interim orders are made pending investigation or enquiry, unless so provided by the statute and rules of natural justice would be satisfied if the affected party is given post decisional hearing. It is not that natural justice is not attracted when the orders of suspension or like orders of interim nature are made. The distinction is that it is not always necessary to grant prior opportunity of hearing when ad-interim orders are made and principles of natural justice will be satisfied if post decisional hearing is given if demanded. Thus, it is a settled position that while ex parte interim orders may always be made without a pre decisional opportunity or without the order itself providing for a post decisional opportunity, the principles of natural justice which are never excluded will be satisfied if a post decisional opportunity is given, if demanded.” 7. I find that in the instant case, summons dated July 31, 2013 were issued to the noticee Mr. Imtiyaz Hanif Khanda to appear before the Investigating Authority and proceedings have been based on submissions and statements made by the noticees under oath on August 01, 2013 and August 05, 2013. I also note that the noticees have also availed opportunity of personal hearing in this matter through their authorised representative and have made their representation before SEBI.

In view of the above, I do not agree with their contention that the principles of natural justice have not been complied with by SEBI. 8. I note that the noticees have denied the submissions made by them, stating that the statements were taken under threat and coercion, and were not voluntary. I note that statements of the noticees, namely, Mr. Vali Mamad Habib Ghaniwala and Mr. Imtiyaz Hanif Khanda, were taken on August 01, 2013 and August 05, 2013 respectively under oath. I further note that there is nothing on record to prove the contention of the noticees that their statements were recorded by the Investigating Authority under threat or coercion. I, therefore, do not agree with the contention of the noticees in this regard. I further find that the statements of the noticees under oath before the Investigative Authority only corroborate the facts and circumstances of the instant case that are in themselves sufficient to find prima facie violations as found in the interim order. 9. I note that in their submissions before the Investigating Authority, the noticees have admitted that the Mobile Numbers viz. ‘9974454277’, ‘9601528972, ‘7405343602’, ‘7405251290’, ‘7275763256’ and ‘9638912434’ belonged to them/their employees.

However, in their written submission dated September 05, 2013, the noticees have contradicted their earlier submissions and stated that any mobile number can be cloned by using technology. I find that in the instant case, the noticees have merely denied the allegations and have not produced any documents or advance any arguments to refute the allegations. Further, the noticees have not stated which mobile number belongs to them and which mobile numbers do not belong to them. I find the contention of the noticee as vague and general which appear to be an afterthought. I, therefore, am not inclined to agree with these contention of the noticees.

10. I find that the noticees have not been able to show sufficient and plausible cause to draw any inference other than those drawn in the interim order with regard to their activities in the securities market. Further, the continuance of the noticees in the stock market will adversely affect the interest of the investors and will have long term impact on the integrity of the securities market. In the light of above facts and circumstances, I, therefore, am of the considered view that no intervention is called for, at this stage, in either vacating the interim directions or modifying it. 11. I, therefore, 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(1), 11(4) and 11B thereof, hereby confirm the directions issued in respect of Mr. Imtiyaz Hanif Khanda (proprietor of M/s Right Trade and M/s Sai Traders) (PAN: AVQPK5639L) and Mr. Vali Mamad Habib Ghaniwala (proprietor of M/s Bull Trader and M/s Laxmi Traders) (PAN: BGHPG6861M) vide ad-interim ex-parte order dated August 20, 2013. 12. This order is without prejudice to any enforcement action that SEBI may deem necessary against the aforesaid noticees in the matter, on completion of the investigation. This Order shall continue to be in force till further directions.

DATE: December 30th, 2013 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA