Order in respect of Rajesh Pravin Bhanushali in the matter of trading in the shares of Gemstone Investment Limited

WTM/MPB/EFD-1-DRA-2/123/2018 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 respect of Rajesh Pravin Bhanushali (PAN: AABPB2744H) in the matter of trading in the shares of Gemstone Investment Limited

BACKGROUND 1. Gemstone Investments Ltd. (hereinafter referred to as ‘GIL’/ ‘Company’) is a company listed on Bombay Stock Exchange Limited (hereinafter referred to as ‘BSE’). Pursuant to the detection of a huge rise in the traded volumes and/or price of the shares of certain companies including GIL during the years 2008, 2009 and 2010, Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) initiated investigation relating to buying, selling or dealing in the shares of certain scrips including GIL 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(“hereinafter referred to as ‘PFUTP Regulations’).

2. Upon analysis of the trading activity in the scrip GIL during the investigation period i.e. January 06, 2009 to December 30, 2009 (hereinafter referred to as ‘Investigation Period’), Investigation revealed that certain entities including Mr. Rajesh Pravin Bhanushali (hereinafter referred to as ‘Rajesh’ / ‘Noticee’)had indulged in creating artificial volume by trading among themselves, in a synchronized manner and also carrying out off-market transfers among themselves for the purpose of meeting settlement obligations of another, thus contributing also to the price rise in the scrip.

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited

SHOW CAUSE NOTICE

3. A Common Show Cause Notice (hereinafter referred to as ‘SCN’) dated September 19, 2014 was issued to 18 persons/entities including Noticee in the matter of GIL to show cause as to why action in terms of Sections11(4) and 11B of the SEBI Act should not be initiated against them for the alleged violation of the provisions of Regulations 3(a), (b), (c) & (d) and 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of the PFUTP Regulations.

4. Investigation inter alia revealed that: – (a) Certain connected/related entities had traded significantly in the scrip of GIL during the year 2008, 2009 and 2010. The relationship/connection between the entities was determined based on at least one of the following parameters: (i) Similarities in the particulars/details in the KYC documents such as common telephone number, addresses, e-mail addresses, etc., (ii) Trading activity in terms of buy/sell among the group and the frequency and off-market transfers between them, (iii) Fund transfers between the members of the group.

(b) On the basis of the said criteria, one group was identified as the “Pabari-Parikh” group (hereinafter referred to as ‘PP group’). The members of the PP group and the basis of relationship/connection amongst them are as follows

Table 1: Relationship among the PP group entities

Sl. No. Client Name KYC Relation Fund Share Movement movement through off market 1. Ra jesh Pravin Entity at sl. nos.1, 16 & - - Bhanushali Narendra Ganatra have common office address.

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited

2. Bh upesh Rathod Introduced entities at sl. With entity at -nos.22, 19, 16, 9 for trading sl. No. 30 a/c and knows entity at sl. No. 28 3. Sp ectrum Common address as that of - - Chemicals Pvt. Khodiyar Industry (Ramniklal Ltd Patel) who has same address as that of entity at sl.no. 15 who has share and fund movement with entity at sl. no. 16. 4. A mar Premchand - With entities at With entities at Walmiki sl. Nos. 12, 17, sl. Nos. 16, 7, 16, 11, 18, 26, 11, 12, 24, 27 25, 5. Bh arat Shantilal Entity at sl. no. 16 is his With entities at With entities at Thakkar nephew. sl. nos. 16, 19, sl. nos. 16, 12. Same address with entity at sl. 30. no.16. Entity at sl. no. 16 is his nominee. Joint a/c with entity at sl. no. 16. Business relations with entities at sl. nos. 6, 8, 9, 19, 22, 30, 31. 6. Bi pin Jayant Same Tel. no. with entity at With entity at With entities at Thaker sl. no. 16. sl. no. 16. sl. nos. 8, 16, Business relations with 19, 22. entities at sl. nos. 5, 8, 9, 16, 19, 22, 30, 31. 7. N avneetlal Entity at sl. no. 26 introduced - With entities at Jeevanlal Gandhi him for trading a/c. sl. nos. 4, 11, 20, 21, 24 8. Ch irag Rajnikant Same Tel. no. with entity at With entities at With entity at Jariwala sl.no.16. Sl. no. 16 is his sl. nos. 16, 22. sl. no. 6 uncle. Business relations with sl.

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited nos. 5, 6, 9, 16, 22, 30, 31. 9. K ishore Chauhan Join a/c with entity at sl. no. With entities at With entities at 16. sl. nos. 16, 19, sl. nos. 16, 19, Entity at sl. no. 16 & 22 are 22. 22, 31. witness for demat a/c. Business relations with entities at sl. nos. 5, 6, 8, 16, 19, 22, 30. 10. M anish Suresh - - - Joshi 11. Sa mir Entity at sl. No. 7 is his father. - With Entities at Sureshbhai Shah Entities at sl. nos. 6, 13, 14, sl. nos. 4, 7, 14, 21, 23, 25, 24 are his clients. 21, 23, 24, 25, Entities at sl. Nos. 4, 12, 15, 26, 27 26, 17, are Paras Chaplot's friend. Entity at sl. no 11 came in touch with Paras Chaplot as a stock broker. 12. M anoj Bhandari - With entities With entities at sl. nos. 4, 11, sl. nos. 4, 5, 16, 26. 30, 9 13. Jig nesh C. Shah Entity at sl. no. 26 introduced - -him for trading a/c. Entity at sl. No. 26 has off market transactions with entities at sl. No. 16 & 22. 14. Sh alin Entity at sl. no. 11 introduced - With entity at Kiritkumar him for trading a/c and sl. No. sl. no. 11 Parikh 11 entered into off market transactions with sl. No. 4 & sl. No. 4 has off market transactions with sl. No. 16.

15. Bi pinkumar - - With entity at Gandhi sl. no. 16. 16. Bh avesh Pabari Entity at sl. no. 5 is his uncle - With entities at & entity at sl. no. 31 is his sl. nos. 4, 12, brother in law. 25, 19, 22, 5, 6,

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited

Entity at sl. no. 19 is cousin of 30, 31, 15. entity at sl. no.16. Entities at sl. no. 16 & 22 both directors of Rajnandi Yarns Pvt. Ltd. Share common Tel. no. with entities at sl. nos. 30, 31, 6. Entity at sl. no. 2 introduced him for trading a/c. Business relations with entities at sl. nos. 6, 8, 9, 19, 22, 28, 30. 17. A nand Kalu Entity at sl. no. 4 is witness in With entities at - Marathe nomination form. sl. No. 19, 26, 4. 18. Re kha Bhandari Common contact no. as that With entities at With Entity at of Sunil Bhandari. Sl. Nos. 26, 4. sl. No. 4 Entity at sl. no. 18 is the wife of Sunil Bhandari. 19. Pr em Mohanlal Entity at sl. no. 19 is cousin of With entities at With entities at Parikh entity at sl. no.16. sl. nos. 16, 22, sl. nos. 16, 22, Common email with sl. 30, 19 9. 9, 5, 6, 22, 30, & 31. 31. Entity at sl. no. 22 is nominee of sl. no.19. Business relations with entities at sl. nos. 5, 6, 8, 9, 16, 22, 30, 31. 20. D evendra Suresh Has traded with entities at sl. - - Gupta no. 2, 5, 19 & 30, who all have off market share and fund movement with entity at sl. no. 16. 21. N areshbhai Entity at sl. no. 21 is the client - - Devabhai Patel of Samir Shah, who has off market transfer with Amar Premchand Walmiki and who in turn has off market transfer

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited with entity at sl. no. 16. 22. H emant Entity at sl. nos. 16 & 22 both With entities at With entities at Madhusudan directors of Rajnandi Yarns sl. nos. 16, 19, sl. nos. 16, 19, Sheth Pvt. Ltd. 9. 9, 28, 30, 31, 6, Same email with entity at sl. 26. no. 31. Business relations with entities at 2, 5, 19, 30, 31, 6, 8, 9, &entity at sl. no. 28 is his wife & entity at sl. no. 29 is his nephew. 23. A shokkumar Entity at sl. no. 11 introduced With entities at With entities at Bhikhalal Parmar him for trading a/c. sl. nos. 26, 11, sl. nos. 11, 25, He knows entity at sl.no. 11 26, who is a stock broker.

24. M anisha Entity at sl. No. 4 entered into - With entities at Navneetlal off market transactions with sl. nos. 4, 11, 7, Gandhi entity at sl. No. 16 & has fund movement with entity at sl. No. 26. 25. Pa ndya Same address with entity at sl. With entities at With entities at Yaminiben M No. 26. sl. nos. 26, 11, sl. nos. 11, 23, Knows entity at sl. No. 11 & 31, 26, entity at sl. No. 26 is his relative. 26. Pa ndya Hardik Having common Tel. no. with With entities at With entities at M entity at sl. no. 11. sl. nos. 12, 18, sl. nos. 11, 23, Entity at sl. No. 11 is the 4, 11, 17, 25, 25, 16, 22. promoter of Samir Shah & Co. and sl. No. 26 is one of its employees. Knows entity at sl. No. 11 & entity at sl. No. 25 is his relative. 27. Bh aratkumar Having common Tel. no. with - With entities at Baldevbhai Rameshbhai Parmar. sl. nos. 4, 11. Parmar

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited

28. M ala Hemant Entity at sl. no. 28 is the wife With entities at With Entity at Sheth of entity at sl. no. 22 and sl. nos. 16, 19. sl. no. 22. entity at sl. no. 29 is the nephew.

29. G aurang Ajit Has common address & Tel. - - Seth no. with entity at sl. no. 22. & entities at sl. no. 22 and 16 both directors of Rajnandi Yarns Pvt. Ltd. 30. A nkit Shares Tel. no. with entity at With entities at With entities at Sanchaniya sl. no. 19 and also shares Tel. sl. nos. 16, 19. sl. nos. 16, 19, no. with entity at sl. no. 16 22, 8, 31. who is the nominee for his a/c. Business relations with entities at sl. nos.5, 6, 8, 9, 16, 19, 22, 31. 31. V ivek Kishanpal Entity at sl. no. 16 is the With entity at With entities at Samant brother in law & shares sl. no. 22. sl. nos. 16, 22, common Tel. no. & entity at 8, 9, 19, 30. sl.no. 16 is the nominee of entity at sl. no. 31 for trading a/c & bank a/c. Shares email with entity at sl. no. 22. Shares email with entity at sl. no. 19.

5. From the above table, investigation revealed that Noticee is connected to Mr. Narendra Ganatra and Mr. Bhavesh Pabari through common office address.

6. On BSE, the PP group entities including Mr. Rajesh Pravin Bhanushali traded in 49,60,252 shares of GIL, out of which these entities had bought 19,67,956 shares accounting for 39.67% of the total market volume and sold 34,24,824 shares accounting

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited for 69.05% of the total market volume in the scrip traded during the period under investigation.

7. It is observed that during the investigation period Noticee had transaction with the members of PP Group namely, Mr. Manoj Bhandari and Mr. Bhavesh Prakash Pabari. From the ‘Annexure D’ attached to the SCN it is noted that during investigation period Noticee had sold 30,100 shares of GIL to Mr. Manoj Bhandari and also sold 453 shares of GIL to Mr. Bhavesh Prakash Pabari.

8. During the investigation period, several trades were synchronised amongst 18 entities (to whom SCN was issued) in the scrip of GIL. It was also observed that out of the total trading of 12,41,518 shares within these entities, the buy and sell orders with respect to 2,56,661 shares accounting for 5.17% of the market volume were placed within a span of one minute. These 2,56,661 shares constituted 13.04% of the total purchases and 7.49% of the total sales of 18 entities (to whom SCN was issued). Out of these 2,56,661 shares, the buy and sell orders with respect to 84,749 shares accounting for 1.71% of the total market volume, were placed in such a manner that the difference between placement of orders by buyer and seller was within one minute with the order rate as well as order quantity of buy side and sell side was the same. These 84,749 shares constitute 4.31% of the total purchases and 2.47% of the total sales of 18 entities (to whom SCN was issued).

9. The price volume data analysis revealed that the shares of GIL were traded for 226 trading days during the investigation period on BSE. Out of 226 trading days, the PP group entities, including the Noticee, traded among themselves on 90 days. It was observed that the volume of trades undertaken by the PP group entities contributed significantly to the daily market volume in the scrip on BSE during the investigation period. PP group entities contributed to 100% of the daily market volume on January 06, 2009 and February 12, 2009. Out of 90 trading days on which the PP group entities

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited traded among themselves, on 44 trading days the trades executed by the PP group entities contributed to more than 50% of the total market volume in the scrip.

10. Further, it was observed that out of 90 trading days in which the PP group entities traded amongst themselves, on 40 trading days the PP group entities including the Noticee had executed synchronised trades i.e., trades in which both buy and sell orders were placed within a time difference of one minute. The contribution of the PP group entities to the daily market volume in the scrip by executing synchronised trades ranged from 0.06% on February 26, 2009 to 94.89% on April 23, 2009. Out of 40 trading days, on 7 trading days PP group entities contributed more than 50% of the total market volume by placing both buy and sale order within one minute time difference. Further, it was observed that out of 40 trading days, on 13 trading days the trades executed by the PP group entities were of such a manner that the difference between placement of order by buyer and seller was within one minute with order rate as well as order quantity of buy side and sale side being the same. It was also observed that by executing such trades amongst the group entities, PP group entities contributed significantly to the total market volume in the scrip of GIL ranging from 1.90% on April 02, 2009 to 82.84% on May 27, 2009. It was also observed that on 4 trading days such trades by PP group entities contributed more than 50% of the market volume.

11. It is noted that during the period under investigation, the price of the scrip of GIL opened at Rs. 21.20 and touched a high of Rs. 78.35, i.e. an increase of Rs. 57.15.Out of 5,453 trades during the period under investigation period, 1,364 trades took place at a price less than the Last Traded Price (LTP), 2,875 trades took place at a price equal to LTP and 1,213 trades at a price greater than LTP. Further, it was observed that out of these 5,453 trades, the 31 PP group entities dealing through multiple brokers entered into 1,690 buy transactions. Out of 1,690 trades 273 trades took place at a price less than LTP (contributing a gross fall in price by Rs. 93.65), 875 trades took place at a price equal to LTP and 541 trades at a price greater than LTP (contributing a gross increasing

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited in price by Rs. 325.75). The Noticee’s LTP contribution to change in the price of the scrip by entering into buy transaction was nil.

12. The PP group entities had indulged in off-market transfer of 23,37,086 shares of GIL amongst themselves during the investigation period. However, it is noted that during the investigation period there was no off-market transaction of the Noticee with other members of PP Group.

13. Thus, it was alleged in the SCN that trades among the Noticee and 17 other entities mentioned in the SCN, were synchronized in nature and also resulted in no change in ownership and created an artificial demand in the scrip of GIL leading to price rise which was misleading and disadvantageous to the genuine investors in the securities market.

14. The afore discussed actions on part of the Noticee and 17 entities mentioned in the SCN i.e. execution of synchronized trades and creation of artificial volume and price manipulation distorted the market equilibrium and were observed to be fraudulent in nature. Thus, it was alleged that Noticee had violated the provisions of regulations 3 (a), (b), (c), (d), 4(1), 4(2) (a),(b) (e) and (g) of the PFUTP Regulations.

15. The SCN dated September 19, 2014 was sent to the Noticee at “S/13, Hazari Bagh, Station Road, Vikhroli West – Mumbai, Maharashtra India 400079” through registered post with acknowledgement due (RPAD)and the same was returned undelivered with remark ‘Left’. Thereafter, the said SCN dated September 19, 2014 was affixed at the aforesaid address on January 02, 2015.The Noticee did not filed any reply to the SCN.

16. In the interest of natural justice, vide notice of hearing dated April 27, 2015 an opportunity of personal hearing was granted before SEBI to the Noticee on May 13, 2015. The said notice of hearing was sent to the Noticee at the aforesaid address through

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited hand delivery. It is noted that Noticee neither appeared for hearing nor submitted any reply in the matter.

17. Thereafter, SEBI had passed restraint order dated January 04, 2016 against Noticee and 17 entities to whom SCN was issued. Vide said order dated January 04, 2016, SEBI had restrained Noticee from accessing the securities market and further prohibited him from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for the period of 5 years.

18. Aggrieved with the SEBI order dated January 04, 2016, Noticee filed an appeal No. 283 of 2016 before Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”). Hon’ble SAT vide order dated June 12, 2017 had stated the following: “…… 1. ………… 2. Grievance of the appellant is that the appellant is stationed outside India since 2011 and he had neither received the show cause notice nor the notice of personal hearing issued by SEBI…………in the facts of the present case since ti is not seriously disputed that the appellant is residing outside India, we quash and set aside the ex-parte order dated January 04, 2016 qua the appellant and restore the matter to the file of the WTM of SEBI for fresh decision on merits and in accordance with law. 3. Counsel for the appellant stated the appellant shall not access the securities market till a fresh order is passed by the WTM of SEBI. The said statement is accepted. 4. WTM of SEBI is directed to pass fresh order on merits and in accordance with law as expeditiously preferably within a period 6 months from today. 5. Counsel for the appellant states that all communications to the appellant may be addressed to the address which reads thus:- Dr. S.K. Jain, 13/16 Kapadia Chamber, Gr. Floor, 599 JSS Road, Mumbai – 400 002.….”

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited

REPLY AND HEARING

19. In the interest of natural justice, vide notice of hearing dated July 19, 2017 an opportunity of personal hearing was granted before SEBI to the Noticee on August 08, 2017. The said notice of hearing was sent to Noticee at ‘403, Mihir Co-op. Housing Society, Plot No. 18, Sector 06, Airoli, New Mumbai – 400 708’ through Speed Post with Acknowledgment Due (SPAD). Further, vide said notice of hearing dated July 19, 2017, SEBI also forwarded the copy of SCN dated September 19, 2014 along with all annexures to the Noticee. The said notice of hearing was delivered. The notice of hearing alongwith the copy of SCN dated September 19, 2014 with all annexures was also sent to the Noticee at the address mentioned in Hon’ble SAT order dated June 12, 2017 i.e. at ‘Dr. S.K. Jain, 13/16 Kapadia Chamber, Gr. Floor, 599 JSS Road, Mumbai – 400 002’. However, the same was returned undelivered with remark ‘consignee shifted’.

20. Noticee and Mr. Vikas Bengani Advocate, Authorized Representative (hereinafter referred to as ‘AR’) appeared for hearing on August 08, 2017. AR denied all the allegations levelled against Noticee in the Show Cause Notice (SCN) dated September 19, 2014 and submits the reply dated August 07, 2017. In addition to it, AR and Noticee made following submissions:

(a) “Noticee had not opened any account with Broker, Comfort Securities Private Limited. Therefore, the Noticee is not at all aware about the trading details mentioned in the SCN. The said trades were not done by the Noticee. Noticee had only two trading account with M/s Bakshu Securites & Brokers Private Limited and M/s Bonanza Portfolio. Noticee had only one demat account with M/s Stock Holding Corporation of India Limited from last 12 years (demat statement from January 01, 2008 to December 31, 2010 is submitted).

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited (b) The Noticee’s HDFC bank account no. is 0118100013596. The bank statement of Noticee with HDFC Bank of said account number for period January 01, 2008 to December 31, 2010 is submitted. (c) The signature in the client registration application form with Comfort Securities Private Limited is not signed by the Noticee. The signature in the said form was forged. AR is willing to submit the signature comparison report. (d) The address mentioned in the client registration application form is not the office/residence address of the Noticee. The correct address of the Noticee is mentioned in the Driving license attached with the registration form. The addresses of the Noticee mentioned in the client registration form and driving license attached to it are different. (e) There is no common address among the Noticee and Bhavesh Pabari. Further, Noticee did not have the address of Mr. Narendra Ganatra for comparison. (f) The HDFC bank account statement attached with the Client registration form is not owned by the Noticee. The said account was never opened by the Noticee.”

21. At the time of hearing, Noticee vide letter dated August 07, 2017 had submitted its reply to the SCN which are as under: “…………… (a) I deny and refute whatever alleges in the Show Cause Notice dated 19-09- 2014. I submit that I have not executed any trade in the scrip of GIL before/after and/or during the Investigation Period. (b) I further refute and deny that I have any common office address as of Mr. Narendra Ganatra and Noticee no. 16 i.e. Bhavesh Pabari. I further deny and refute that I have ever used the office address S/13 Hazai Bagh, Station Road, Vikhroli (West), Mumbai-400079. I have no connection or relation with the above said address. I was using only one address i.e. 225/3157/1, Tagore Nagar, Vikhroli (East), Mumbai 400083. The said address was also declared in the Noticee's passport and other documents (Copies enclosed).

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited (c) It is pertinent to mention that the Mr. Narendra Ganatra was not a party to the above said matter. On perusal of the Trade Data it is revealed that he had not executed any transaction in the said scrip. No address of Mr. Narendra Ganatra has been provided to me. It is further pertinent to mention that the address of the Noticee No. 16 i.e. Bhavesh Pabari was mentioned in the above referred Show Cause Notice i.e. 196/A Tara House, 1St Floor, Flat No. 16, Dr. Viegas Street, Cavel X Lane No. 8, Chira Bazar, Mumbai-400 002 was different from my purported address S/13 Hazai Bagh, Station Road, Vikhroli (West), Mumbai-400079. Beside the above admitted fact still it is arbitrarily and capriciously alleged that I have common address as of Mr. Narendra Ganatra and Noticee No. 16 i.e Bhavesh Pabari. It clearly shows that the allegation levied in the Show Cause Notice are vague (d) It is further submitted that I have only two shares trading accounts i.e. with M/s Bakshu Securities & Brokers Pvt. Limited (Account No. OR2) and M/s Bonanza Portfolio (Account No. MM630R9). I had not executed any trade in the scrip of GIL through the above said Brokers. (e) I came to know for the first time that someone without my knowledge and consent had executed trades in my name through the Member Broker Comfort Securities Private Limited in the scrip of GIL when I was served separate Show Cause Notice dated 01- 11-2013 received on 29-04-2015 in the Adjudication Proceeding in the matter of GIL issued by the Ld. Adjudicating Officer, SEBI. I have the listen the name of the said Broker for the first time when I have received the Show Cause Notice dated 01-11- 2013 issued by the Ld. Adjudicating Officer, SEBI. I vehemently refute and deny that I have any trading account with the Member Broker Comfort Securities Private Limited, (f) I am holding only one demat account with M/s Stock Holding Corporation of India Limited account number 13108135 from last 12 years. I had bank accounts with HDFC Bank Ltd opened in the year 2000 account number 0118100013596, Saraswat Co-op Bank opened in the year 1988 account number 5886 (not active) and Axis Bank account opened in the year 2002 & 2009 (salary account and now not active) don't remember the account numbers.

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited (g) It is further submitted that someone had fraudulently misused my documents to open shares trading and demat accounts. I was never involved in any manipulative trading. My volume of transactions in the securities market are very low. (h) I further submit that I am staying in UAE since 2011. (copy of the Passport enclosed) (i) It is further submitted that it is a matter of Investigation that who had opened shares trading account in my name with the said Member Broker and who were executing transactions in the said account. It is to be probed that who had opened demat account in my name and executed transactions. (j) Without prejudice to whatever stated above I found glaring discrepancies in the data's provided in the CDs. I clarify that the alleged transactions containing in the CDs are not mine and I have never executed any transaction in the said scrip of GIL till date. (k) I further submit that I have no connection/relation of any kind with the Noticees whose name mentioned in the said Show Cause Notice. (l) I hope I try to make my case before you. Beside the above facts I hereby enclose copies of my bank account, demat account, passport for your records which reveal my transactions executed in the securities market, my bank transactions and proof of my address. I reserve my right to file additional submissions, if any new documents/data are provided to me. ……….” 22. During the course of hearing, AR of the Noticee stated that the signature in the client registration application form with Comfort Securities Private Limited is not signed by the Noticee. The signature in the said form was forged and AR was ready to submit the signature comparison report. Acceding to the request of AR, SEBI vide email dated September 04, 2017 had advised the AR of the Noticee to submit the signature verification report from Central Forensic Science Laboratory, Directorate of Forensic Science Services, Hyderabad. Noticee vide email dated September 14, 2017 and October 12, 2017 had stated that Central Forensic Science Laboratory, Directorate of Forensic Science Services, Hyderabad has not replied to his email regarding signature

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited verification report, therefore, SEBI is requested to obtain signature verification report by itself and he is ready to pay the signature verification charges in advance.

23. In the interest of justice, SEBI had acceded the request of the Noticee and decided to get the signature verification done from International Forensic Services (hereinafter referred to as “IFS”), Pune, registered with Government of India and Government of Maharashtra. IFS vide email dated October 30, 2017 had stated that it provides signature verification services under section 45 of Indian Evidence Act. SEBI vide letter dated November 15, 2017 submitted the relevant documents required for the signature verification to IFS. IFS in its acknowledgement receipt stated that the signature verification report pursuant to signature verification could be made available to SEBI by December 22, 2017.

24. Hon’ble SAT vide order dated June 12, 2017 had directed SEBI to pass fresh order on merits within a period of 6 months from June 12, 2017 i.e. by December 11, 2017. As IFS stated that signature verification report pursuant to signature verification could be made available to SEBI by December 22, 2017. Therefore, SEBI filed a miscellaneous application before Hon’ble SAT for extension of time to pass a fresh order on merits. Hon’ble SAT vide order dated December 06, 2017 extended time by period of 8 weeks from December 06, 2017 to pass an order.

25. IFS forwarded the signature verification report dated December 08, 2017 which is received by SEBI on December 11, 2017. FINDINGS

26. I have perused the SCN, reply and other materials on the record. On perusal of the same, the following issues arise for consideration. Each issue is dealt with separately under different headings.

(i) Whether the alleged trades executed by the Noticee was from his own trading

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited account? (ii) If issue No. 1 is determined in affirmative, then whether the Noticee had violated the provisions of regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of PFUTP Regulations?

27. Before moving forward, it will be appropriate to refer to the relevant provisions of PFUTP Regulations, which read as under:

Regulation 3. Prohibition of certain dealings in securities “No person shall directly or indirectly (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

Regulation 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:— (a) indulging in an act which creates false or misleading appearance of trading in the securities market;

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited (b) dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss; (c) ……….. (d) ………… (e) any act or omission amounting to manipulation of the price of a security; (f) …………. (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security;”

ISSUE No. 1- Whether the alleged trades executed by the Noticee was from his own trading account?

28. From the submission of the Noticee, I noted that he has raised following contention: (a) He had only two trading accounts with M/s Bakshu Securities & Brokers Private Limited and M/s Bonanza Portfolia and he had not executed trades in the scrip of GIL through said two brokers. (b) He had not executed any trades in the scrip of GIL before/after and/or during the investigation period. (c) Since last 12 years he was holding only one demat account with M/s Stock Holding Corporation of India Limited. (d) He had opened bank account with HDFC bank limited in the year 2000. The account number is 0118100013596. (e) Someone had fraudulently misused his documents to open share trading and demat accounts. He had not opened any account with broker, Comfort Securities Private Limited and the trades were not executed by him. (f) The signature in the client registration application form with Comfort Securities Private Limited is not signed by him. The HDFC bank account statement attached with the Client registration form is not owned by him and he had never opened the said bank account.

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited (g) The address mentioned in the client registration application form with broker, Comfort Securities Private Limited is not his office/residence address. His correct address is mentioned in the Driving license attached with the registration form. The addresses mentioned in the client registration form and driving license attached to it are different.

29. The allegation against the Noticee is on the basis of the findings in the investigation that:-

I. Noticee had opened a trading account with broker Comfort Securities Private Limited. The said finding was arrived at by the investigating authority on the basis of the copy of the client registration of the Noticee with the broker Comfort Securities Private Limited (which is contented) and the annexures to the said copy of the client registration form. The said annexures include:- a. Copy of the clients master list of NSDL-DP Adroit Financial services Pvt Ltd provided by Comfort Securities wherein the demat account of the Noticee is shown to be with Adroit Financial Services Pvt. Ltd. b. Copy of the Cheque and the copy of the clients master list of NSDL-DP Adroit Financial services Pvt Ltd. provided by Comfort Securities wherein the Noticee’s bank accounts are shown as HDFC Bank accounts with the accounts numbers 09981000001828 and 4061000008666. c. Copy of PAN Card

II. The said trades in the scrip of GIL were executed from the trading account of Noticee opened with broker Comfort Securities Private Limited.

30. In view of the contention of the Noticee that he has no trading account with Comfort Securities Private Limited the question arises whether the Noticee had opened the trading account with broker Comfort Securities Private Limited. In order to determine the said question, it is necessary to confirm the authenticity of the client registration

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited form of the Noticee with broker Comfort Securities Private Limited wherein the details of the demat account and bank account of the Noticee is shown.

31. In order to determine the authenticity of client registration form of the Noticee, during the course of this proceeding, SEBI took the expert opinion of IFS for signature verification. For signature verification, SEBI identified 7 questionable signature of Noticee from Noticee’s client registration form and other documents attached with it and 2 specimen signature of the Noticee obtained from him. The places of identified 7 questionable signature are as under:

Questionable Place of Noticee’s Questionable Signature Signature 1 Page 3 of copy of client registration form near Noticee's photograph 2 Page 13 of copy of client registration form near address area 3 Page 15 of copy of client registration form near address area 4 Page 16 of copy of client registration form near constituent signature area 5 Copy of PAN Card attached to the copy of client registration form 6 Copy of Cheque of HDFC Bank account number 09981000001828 7 Copy of Client Master list of NSDL, DP - Adroit Financial Services Pvt. Ltd. which contain the communication address of the Noticee as mentioned in the client registration form and HDFC Bank account number 4061000008666.

32. IFS in its signature verification report dated December 08, 2017 mentioned that it had done the detailed examination/verification of the 7 questionable signatures with 2 specimen signatures and opined that it seems that 7 questionable signatures have not been written by the same writer whose signatures are admitted as 2 specimen signatures or vice versa. Thus, in view of the expert’s opinion on the signature, though it cannot be positively found that 7 questionable signatures of noticee and 2 specimen signatures of the noticee have not been written by the same writer, the preponderance of probability of Noticee’s signature being forged in the 7 questionable signatures cannot

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited be ruled out. Therefore, the preponderance of probability as discussed above points to that 7 questionable signatures on client registration form, Copy of PAN Card, Copy of Cheque of HDFC Bank account number 09981000001828, Copy of Client Master list of NSDL and 2 specimen signatures were written by different persons. This further points to existence of reasonable circumstance of offence of the forgery, creation of false and fabricated documents and any other related provisions of law under Indian Penal Code, 1860. However, who has indulged in such offence can only be found out through Investigation by police authorities.

33. In view of the above, the preponderance of probability indicates that there is no evidence that the trading account stated to have been opened in the name of Noticee with broker Comfort Securities Private Limited, as evidenced by the client registration form, belongs to the Noticee. Therefore, it follows that there is no evidence that the alleged trades in the scrip of GIL which were executed from the said trading account were done by the Noticee. In view of this, I observe this case merits extension of benefit of doubt in respect of the allegation raised in the SCN.

ISSUE No. 2- If issue No. 1 is determined in affirmative, then whether the Noticee had violated the provisions of regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of PFUTP Regulations?

34. In view of the findings above, I am of the considered view that the Noticee is entitled for a benefit of doubt in respect of an alleged violation of provisions of regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of PFUTP Regulations.

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited

ORDER

35. 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 September 19, 2014 issued, qua Mr. Rajesh Pravin Bhanushali without any directions.

36. In view of the observations at para 32 of this order, SEBI shall lodge/report a complaint/the information, expeditiously, before police authorities having jurisdiction, on the forgery, creation of false and fabricated documents and any other related provisions of law under Indian Penal Code, 1860, for its investigation and resultant proceedings in court of law.

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

-Sd- DATE: JANUARY 15, 2018 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in respect of Rajesh Pravin Bhanushali in the matter of M/s Gemstone Investment Limited