Order in respect of representations of Ketan Ramanlal Shah HUF and Vinay Ramanlal Shah HUF – in the matter of Illiquid Stock Options

1. Securities and Exchange Board of India ("SEBI"), vide an ad interim ex-parte order dated August 20, 2015 (hereinafter referred to as “interim order”), restrained 59 entities, including Vinay Ramanlal Shah HUF (PAN- AABHV9007P) and Ketan Ramanlal Shah HUF (PAN - AACHK9724K), (hereinafter referred to as “debarred clients”), from buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions. 2. The debarred clients, through their authorised representative, IC Legal (Advocates & Solicitors), represented to SEBI vide letters dated November 4, 2015 and January 19, 2016 that they had kept shares as margin with their stock brokers viz. Edelweiss Broking Limited, Angel Broking Private Limited and Dharamshi Securities Private Limited. The debarred clients claimed that some of these shares belong to their relatives and are lying with the stock brokers. However, on account of the interim order, the debarred clients are unable to return the shares to their relatives. 3. In support of their aforesaid claims, the debarred clients, inter alia, have submitted the following documents: a. Transaction statements for transfer of shares from the relatives’ demat accounts to debarred client’s demat accounts; b. Delivery Instruction Slips for transfer of shares; and c. Contract notes for purchase of shares by the relatives. 4. SEBI vide separate letters dated February 8, 2016 to the two debarred clients, inter alia, had permitted the following: “... a. to subscribe to units of the mutual funds including through SIP and redeem the units of the mutual funds so subscribed; b. to avail the benefits of corporate actions like rights issue, bonus issue, stock split, dividend, etc. c. to sell the securities lying in your demat accounts as on the date of the interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange, in orderly manner Disposal of the representations of Ketan Shah HUF & Vinay Shah HUF under the supervision of the stock exchanges so as not to disturb the market equilibrium and deposit the sale proceeds in an interest bearing escrow account with a nationalized bank. d. the sale proceeds lying in the aforesaid escrow account shall be dealt with and utilised under the supervision of the concerned stock exchange as provided hereunder:-

 the sale proceeds may be kept in a fixed deposit with a nationalized bank or may be utilised for subscription to units of the mutual funds which shall always be held in the demat form and if such units are redeemed the proceeds thereof shall be credited to the aforesaid escrow account or may be utilised for subscription to the units of mutual funds; Explanation: For the purposes of determining the portfolio value of the entities, the value of portfolio of securities lying in the demat account/s (individual and joint both) on the date of the interim order after excluding the value of shares that have been suspended from trading as on the date of the communication shall be considered. For NBFCs and stock brokers the value of portfolio shall exclude the value of clients' securities lying in their demat accounts. e. The aforementioned window for sale of shares lying in respective portfolio shall be withdrawn if you execute any trade beyond those mentioned in point (3) above. The aforesaid reliefs shall be subject to the supervision of exchanges and depositories. The concerned depositories/ exchanges may be contacted in this regard.” 5. The debarred clients, through their authorised representative, IC Legal, vide letters dated March 28, 2016 and March 30, 2016 reiterated their request.

Further, vide letters dated August 29, 2016 and September 12, 2016, the debarred clients have provided the following documents in support of their claims: a. Certificate by Chartered Accountant inter alia certifying the following (along with relevant enclosures): “We have verified the Books of Accounts and other records of our client produced before us and based on the examination of the records, this is to certify that the following shares were purchased by the concerned relative/ connected entity and ultimately the shares were transferred to the demat account of our client and the said shares have ever since not returned to the concerned relative/ connected entity; This is to certify that our client has pledged shares of relative/ connected entity with the Stock Broker/ commodity Broker /NBFC as collateral securities in our client's account maintained with them. Details are provided in Annexure. Further, we have verified the books of accounts and other records of client's relative/ connected entity and certify that the shares shown against their names in Annexure are owned by them and are properly recorded in their respective Books of Accounts and shown in their return of income filed with the income tax department.” b. Undertaking from the debarred clients, inter alia stating the following: “I, hereby state and undertake that information relevant to our letter dated 12.09.2016 and the details provided to the statutory auditors are true and correct to the best of our knowledge and belief and that 'we have not suppressed any material fact.

Further we state and undertake that in case if any discrepancy/deviation is observed in our submissions during the course of continuing examination/ investigation by SEBI then we would be liable for appropriate action for misrepresentation of facts or wrongful declaration.” c. List of securities belonging to relatives, lying in the debarred clients’ demat accounts with the stock brokers and/ or lying as margin with the stock brokers:

Shares of Vinay Ramanlal Shah HUF Ownership, as Sl. per client/ CA No. Scrip Name Quantity certificate Shares are lying As margin with Angel Broking Private 1 Delta 25521 Shah Coal Pvt. Ltd. Limited As margin with Angel Broking Private 2 DB Realty 37678 Shah Coal Pvt. Ltd. Limited As margin with Angel Broking Private 3 FSL 100000 Vinay Shah Limited As margin with Angel Broking Private 4 MCX Ltd. 24350 Shah Coal Pvt. Ltd. Limited As margin with Angel Broking Private 5 MCX Ltd. 4372 Vinay Shah Limited As margin with Angel Broking Private 6 Neyeli Lignite 100000 Vinay Shah Limited As margin with Angel Broking Private 7 NIIT Limited 85000 Vinay Shah Limited As margin with Angel Broking Private 8 PTC Finance 50000 Vinay Shah Limited In debarred client’s Demat Acc. No. 1203230000587956 with Edelweiss 9 MCX Ltd. 7000 Vinay Shah Securities Limited

TV 18 In debarred client’s Demat Acc. No. Broadcast 1203230000587956 with Edelweiss 10 Network 200000 Shah Coal Pvt. Ltd. Securities Limited

As margin with Edelweiss Broking 112686 Limited TV 18 11 Vinay Shah In debarred client’s Demat Acc. No. Broadcast 1203230000587956 with Edelweiss Network 152314 Securities Limited

Shares of Ketan Ramanlal Shah HUF Ownership, as Sl. per client/ CA No. Scrip Name Quantity certificate Shares are lying Bombay As margin with Angel Commodities 1 Burma Trading 5000 Ketan Shah Broking Pvt. Ltd. Bombay As margin with Angel Commodities 2 Burma Trading 5000 Vinay Shah Broking Pvt. Ltd. Bombay As margin with Angel Commodities 3 Burma Trading 1000 Yogini Shah Broking Pvt. Ltd. Bombay As margin with Angel Commodities 4 Burma Trading 1000 Parul Shah Broking Pvt. Ltd. Balakrishna As margin with Angel Broking Private 5 Industries 9000 Ketan Shah Limited As margin with Angel Commodities 6 Coal India 5400 Shah Coal Pvt. Ltd. Broking Pvt. Ltd. As margin with Angel Commodities 7 DB Realty 37500 Shah Coal Pvt. Ltd. Broking Pvt. Ltd. As margin with Angel Broking Private 8 EIH Limited 25000 Vinay Shah Limited India Bulls As margin with Angel Broking Private 9 Reality 150000 Vinay Shah Limited As margin with Angel Broking Private 10 Jyoti Structure 110000 Ketan Shah Limited As margin with Angel Broking Private 54026 Limited As margin with Angel Commodities 11 MCX Ltd. 10500 Vinay Shah Broking Pvt. Ltd. As margin with Angel Broking Private 12 NTPC 50000 Vinay Shah Limited As margin with Angel Commodities 13 NIIT Limited 91868 Vinay Shah Broking Pvt. Ltd. Nirvikara Paper Mills As margin with Angel Broking Private 14 Limited 1000 Ketan Shah Limited 15 Pipavav 30000 Vinay Ramanlal As margin with Angel Broking Private

Defence and Shah HUF Limited Offshore Pipavav Defence and As margin with Angel Commodities 16 Offshore 10000 Kunal Shah Broking Pvt. Ltd. Pipavav Defence and As margin with Angel Commodities 17 Offshore 10000 Ketan Shah Broking Pvt. Ltd. Pipavav Defence and As margin with Angel Commodities 18 Offshore 10000 Vinay Shah Broking Pvt. Ltd. Reliance As margin with Angel Broking Private 19 Power 35233 Shah Coal Pvt. Ltd. Limited Reliance As margin with Angel Broking Private 20 Power 3200 Purvi Shah Limited As margin with Angel Broking Private 21 SKF Bearings 5000 Vinay Shah Limited Triveni As margin with Angel Broking Private 22 Engeneering 100000 Ketan Shah Limited In debarred client’s Demat Acc. No. 1203230000587941 with Edelweiss 23 DB Realty 72000 Shah Coal Pvt. Ltd. Securities Limited In debarred client’s Demat Acc. No. 1203230000587941 with Edelweiss 24 MCX 10000 Vinay Shah Securities Limited As margin with Edelweiss Broking 25 United Spirits 2000 Shah Coal Pvt. Ltd. Limited As margin with Dharamshi Securities 26 Capital First 7900 Aditi Shah Private Limited As margin with Dharamshi Securities 27 SKF Bearings 5000 Vinay Shah Private Limited

6. Given the significant number of transactions and the complexity involved in purchase of shares by the relatives in multiple tranches through different stock brokers (dating back to 2008 as well), transfer of shares by the relatives to the debarred clients through multiple layers (through 3-4 entities) and in some instances return of shares from stock broker’s margin account to debarred client’s demat account, spanning over a number of years (e.g. 2008-2015), only sample instances were verified. Based on the sample instances verified, I note that:

a. As per copies of trade bills/ contract notes generated by the stock broker, the relatives had purchased the shares as early as in 2008.

b. Prima facie, the said relatives’ demat accounts are jointly held by the constituents of the HUF (i.e. debarred clients) and their immediate relatives.

c. The relatives transferred the shares either directly to the debarred clients’ demat account or through multiple entities.

d. In some instances, the debarred clients have placed the shares as margin with their respective stock brokers and in some instances had retained the shares in their demat account. 7. The coparceners of the HUFs (i.e. debarred clients) are as follows:

Constituents of Vinay Ramanlal Shah HUF (Client 1) PAN Karta Vinay Ramanlal Shah AACPS4765J Coparceners Yogini Vinay Shah ABHPS9967J Kunal Vinay Shah BMPPS2312K

Constituents of Ketan Ramanlal Shah HUF (Client 2) PAN Karta Ketan Ramanlal Shah AACPS4763Q Coparceners Parul Ketan Shah AACPS1558F Rohan Ketan Shah CFZPS1558F

8. Based on the submissions of the debarred clients, I further note that the relatives from whom the shares have been acquired, are constituents of the HUF (i.e. the debarred clients) or the immediate relatives’ viz. brother/ daughter. Details are placed below:

Sl. Name of the relative PAN Relation with Client No. 1 Vinay Ramanlal Shah AACPS4765J Karta of Client 1 & brother of Karta of Client 2 Coparcener of Client 1 & Son of Karta of 2 Kunal Vinay Shah BMPPS2312K Client 1 3 Ketan Ramanlal Shah AACPS4763Q Karta of Client 2 & brother of Karta of Client 1 4 Purvi Vinay Shah AQQPS9586D Daughter of Karta of Client 1 5 Aditi Vinay Shah DCKPS0924N Daughter of Karta of Client 1 Coparcener of Client 1 & Wife of Karta of 6 Yogini Vinay Shah ABHPS9967J Client 1 Shah Coal Private Directors – Karta of Client 1 & Karta of Client 7 AADCS9231R Limited 2

9. Considering the aforesaid submissions and documents brought on record, in terms of the common relief granted vide confirmatory order no. WTM/RKA/ISD/102/2016 dated August 22, 2016 read with clarification no. WTM/RKA/ISD/107/2016 dated August 24,

2016 in the said matter, I, hereby, allow the debarred clients viz. Vinay Ramanlal Shah HUF and Ketan Ramanlal Shah HUF to return the shares to their relatives subject to:

a. the relief/relaxation granted in terms of paragraph 38(b)(ii) of the order no. WTM/RKA/ISD/102/2016 dated August 22, 2016 read with paragraph 2(b)(ii) of the clarification no. WTM/RKA/ISD/107/2016 dated August 24, 2016, i.e., upto 25% of the value of the portfolio* as on the date of the interim order or the amount in excess of the profit made/ loss incurred, whichever is higher;

b. Undertaking being furnished, to the depositories, by each relative of the debarred clients, to whom the shares belong and are being returned to, that in the event of misrepresentation of facts or wrongful declaration, he/she/it would be liable for appropriate action in accordance with law including bringing back the shares or the money which he/she/it would have realised by the sale of shares and he/she/it shall do so forthwith.

*The portfolio value with respect to the debarred clients will include the value of securities in the demat account/s including the value of securities lying in the respective stock brokers’ margin account 10. The aforesaid shall be subject to the supervision of the depositories and shall be without prejudice to the findings of pending investigation in the matter. 11. All the representations of the debarred clients in this regard are accordingly disposed off.

Sd/- DATE: OCTOBER 18th, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA