Order in respect of Rights Credit & Securities Ltd. and Ors

WTM/RKA/IVD/NRO/146 & 147/2014 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1), 11(4) (b) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN RESPECT OF:

S. NAME OF THE ENTITIES ORDER NO. NO. 1 RIGHTS CREDIT & SECURITIES PVT. LTD. AND ITS 146 DIRECTORS, MR. ANOOP CHATURVEDI AND MS. SUNITA CHATURVEDI 2 LOTUS GARMENTS LIMITED AND ITS DIRECTORS, MR. 147 AVDESH CHATURVEDI AND MS. SUDHA CHATURVEDI

IN THE MATTER OF SHAMKEN MULTIFAB LIMITED. 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI’) carried out an investigation into the trading in the shares of Shamken Multifab Limited (hereinafter referred to as “SML”) for the period February 23, 2000 to July 18, 2000 (hereinafter referred to as "the investigation period") in order to ascertain whether any provisions of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") and Rules and Regulations made thereunder have been violated. During the investigation period, the shares of SML were listed on Bombay Stock Exchange Ltd. ('BSE'), Delhi Stock Exchange Ltd. ('DSE'), Calcutta Stock Exchange Ltd. ('CSE') and Ahmedabad Stock Exchange Ltd. ('ASE'). 2. During the investigation period the shares of SML were largely traded on NSE whereas the trading on the other stock exchanges was miniscule. On NSE, there was an unusual rise in the price of the scrip of SML from ₹ 6/- on February 23, 2000 to ₹ 25.55/- on July 20, 2000. Along with the price rise, there was also an unusual rise in the average traded volume of the scrip of SML from 9,800 shares during the period May-June 2000 to 92,400 shares during the period June-July 2000. Under the investigation, the analysis of trading was carried out in respect of two different trading periods, i.e. February 23, 2000 to June 20, 2000 ("1st period") and June 21, 2000 to July 18, 2000 ("2nd period").

Order in respect of Rights Credit & Securities Ltd. and Ors.

3. Pursuant to the investigation, a Show Cause Notice ("SCN") dated February 17, 2005 was issued by SEBI to Rights Credit & Securities Pvt. Ltd. and its directors Mr. Anoop Chaturvedi and Ms. Sunita Chaturvedi, and Lotus Garments Ltd. and its directors Mr. Avdesh Chaturvedi and Ms. Sudha Chaturvedi (hereinafter collectively referred to as the 'Noticees' and individually by their respective names) calling upon them to show cause as to why directions under sections 11(4)(b) and 11B of the SEBI Act should not be issued against them including restraining them from associating with the securities market in any capacity whatsoever and associating with any of the intermediaries in the securities market for an appropriate period. It was alleged in the SCN that the Noticees have violated regulation 4 (a), (b), (c) and (e) of SEBI (Prohibition of Fraudulent and Unfair trade Practices relating to Securities Market) Regulations, 1995 (hereinafter referred to as the "PFUTP Regulations, 1995") read with regulations 4(2) (a), (d) and (e) of SEBI (Prohibition of Fraudulent and Unfair trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as the "PFUTP Regulations, 2003").

The findings of the investigation on the basis of which the allegations leveled in the SCN were made are as under:- a) Shamken Group consisted of SML, Lotus Garments Pvt. Ltd., Right Credit & Sec Pvt. Ltd., Shamken Spinners Ltd., Kotwan Traders Pvt. Ltd., Angel Textiles Pvt. Ltd. and Sohit Investments Pvt. Ltd. b) P K Aggarwal group consisted of Dhanvarsha Investments ("Dhanvarsha") and Prasneeta Constructions Pvt Ltd. ("Prasneeta"). Mr. Jeev Narayan Mishra was the proprietor of Dhanvarsha. Dhanvarsha and Prasneeta were acting as unregistered sub-brokers. c) Two brokers of NSE namely, Maheshwari Technical & Financial Services Ltd. ("Maheshwari") and Adroit Financial Services Ltd. ("Adroit") accounted for approx. 95% of the net traded quantity during the relevant period and both the brokers mainly traded on behalf of a common client namely, Vandana Securities Ltd. ("Vandana") who was allegedly acting as an unregistered sub-broker. d) Vandana, in the capacity of an unregistered sob-broker had traded on behalf of Dhanvarsha and Prasneeta. During the 1st period, when the price of the scrip of SML increased from ₹6 to ₹18 the gross buying by these clients of Vandana was 6,95,200 shares (53% of the total buy volume at NSE) and the net buying by these clients was 4,68,200 shares (68.50% of the total net buying on NSE).

Further during the 2nd period, the entire trading by Vandana was done for Dhanvarsha. The gross trading by Dhanvarsha (through Vandana) was 89.30% of the total trading of 3,79,600 shares, whereas the net buying was 96.83 of the total buying of 1,13,800 shares.

e) Further, Adroit had also dealt for certain other entities namely, Mrs. Sonali Bansal, Shiv Vani Associates and Mr. Moti Ram, who in turn were dealing for Mr. I. C. Jindal, director of Vandana. f) It was observed that both the brokers had entered into a number of cross deals, structured deals and synchronized transactions on behalf of their clients. g) Gross trading by Maheshwari and Adroit was 44.79% and 75.87%, respectively of the total trading in the scrip at NSE during 1st and 2nd period under investigation. Further their combined gross buying during 1st and 2nd period under investigation was 66.06% and 90.25%, respectively, of the total buying at NSE. Also, during the 1st period under investigation, their net buy was 5,61,500 shares, i.e. 81,15% of the total net buy of 6,83,500 shares at NSE. During the 2nd period under investigation, their net buy was 1,09,600 shares, i.e. 96.30% of the total net buy of 1,13,800 shares at NSE. h) The funds flow revealed that Shamken Group was the ultimate client of Maheshwari and Adroit who had traded through two entities namely, Dhanvarsha and Prasneeta.

Vandana acting as an unregistered sub-broker had traded on behalf of Dhanvarsha and Prasneeta. i) Mr. Jeev Narayan Mishra, proprietor of Dhanvarsha stated in his statement that all his dealings in SML shares were on behalf of Shamken Group only and no dealings were done in his own account. He also stated that the orders were mostly placed by Mr. Pravin Juneja (director of SML) and sometimes by Mr. V. R. Rao (Senior. Manager of Shamken Group, and a subordinate of Mr. Pravin Juneja). j) Mr. Ajay Kumar Agarwal, director of Prasneeta, in his statement also admitted that Prasneeta was introduced to trading in the scrip of SML by Mr. Pravin Juneja for a commission and all the orders for purchase were given to Prasneeta either by Mr. Pravin Juneja himself or his representative and that whatever trading in SML shares was done by Prasneeta, it was at the instance of Mr. Pravin Juneja. k) The purchases were made by four group companies, viz. Sohit Investments Pvt. Ltd., Angel Textiles Pvt. Ltd., Kotwan Traders Pvt. Ltd. and Lotus Garments Pvt. Ltd. and the payment in respect thereof was made by Shamken Spinners Ltd. l) The information obtained from Citibank indicated that payment in respect of the purchases was also being made directly by SML through its account no. 0417964223 with Citibank.

Further, funds were also transferred from the account of Rights Credits & Securities Pvt. Ltd., a group concern of SML. m) It was observed that current account no 50320 in the name of Mr. Jeev Narayan Mishra with Nedungadi Bank (now merged with PNB), Mayur Vihar, Phase II, Delhi was opened specifically for the purpose of executing trading in the scrip of SML. The account was opened on June 1, 2000 and it remained operational till April 2001 The account statement showed that more than 90% of the payments had been made to Vandana, and 80% of credit entries revealed that all the payments had been made by Shamken Group including Right Credits & Securities Pvt. Ltd. and Lotus Garments Pvt. Ltd. It was noted from the bank account of Vandana that some of the cheques were received by it from the account of Prasneeta and some of the cheques were received by it directly from the account of SSL which were duly signed by Mr. Praveen Juneja. n) Scrutiny of account of Dhanvarsha revealed that an amount of ₹1,72,20,746 was deposited in its account no. 50320 during the period June 2000 to April 2001. Further, an amount of ₹1,01,19,133 was deposited in account no. 2116 in the name of Mr. Jeev Narayan Mishra during the period September 2000 to July 2001. Mr. Jeev Narayan Mishra (proprietor of Dhanvarsha) in his statement claimed that all the money credited into account no. 2116 and 50320 came from Shamken Group including Right Credits & Securities Pvt. Ltd. and Lotus Garments Pvt. Ltd. o) The flow of transactions that created the artificial volume and made possible the sharp rise in price in SML were as under: Maheshwari Shamken group P K Agarwal group Vandana Adroit p) It was observed that Right Credits & Securities Pvt. Ltd. and Lotus Garments Pvt. Ltd. along with their group companies traded and financed the trading of the shares of SML with an intention to create a false market in the scrip of SML and contributed to the artificial increase in its share price.

4. The Noticees replied to the SCN vide letter dated June 8, 2005, through their legal representative, inter alia, submitting the following: 1) Rights Credit & Securities Pvt. Ltd. and Lotus Garments Limited denied all the allegations set forth in the SCN. 2) The instance proceedings as far as they relate to regulation 4 of the PFUTP Regulations, 2003 are not maintainable in law since the period covered by the instant investigation is prior to 2003. Regulation 13 of the PFUTP Regulations, 2003 clearly states that notwithstanding repeal of the FUTP Regulations, 1995 any investigation pending at the commencement of the FUTP Regulations, 2003 shall be continued and disposed of in accordance with the procedure laid down in the FUTP Regulations, 2003. 3) In February 2000, the Shamken Group decided to increase its holding in SML and also in another group company, i.e. Shamken Cotsyn Ltd. in batches beginning from March 9, 2000. The Shamken Group transacted through Dhanvarsha and Prasneeta for buying the shares of SML and Shamken Cotsyn Ltd. for which they were paid their due brokerage.

Neither Dhanvarsha nor Prasneeta were ever authorized by the Shamken Group to trade in the SML securities in order to create any artificial volumes. 4) Four of the Shamken group companies namely, Sohit Investments Private Limited, Angel Textiles Private Limited, Kotwan Traders Private Limited and Lotus Garments Private Limited purchased shares of SML in batches beginning March 9, 2000. The shares were actually purchased and deliveries were obtained. None of the shares were subsequently sold. 5) The Shamken Group had no direct nexus / contact with either Maheshwari or Adroit. 6) None of the Sahmken group directors/officers/employees was ever mandated by the Board of any Shamken Group company to trade in SML or to authorize any broker to trade in Shamken Group to trade in the SML in order to create any artificial volumes 7) Kotwan Traders Private Limited and Angel Textiles Private Limited and the Shamken Group and its promoters and directors were not in any other way connected to Dhanvarsha or Prasneeta except to the limited manner of purchase of shares. 8) Between the period March 9,.2000 and May 23, 2000, the Shamken Group purchased 5,29,020 shares of SML through Dhanvarsha and Prasneeta for ₹90,03,550.

None of these shares were purchased by SML itself, nor any money advanced by SML for the purchase of its own shares. 9) Between the period May 31, 2000 and August 5, 2000, four of the Shamken Group concerns namely, Sohit Investments Pvt. Ltd., Angel Textiles Pvt. Ltd., Kotwan Traders Pvt. Ltd. and Lotus Graments Pvt. Ltd. purchased 2,60,600 shares of SML for ₹55,25,104.90 through Dhanvarsha. Further, 1,09,000 shares of Shamken Cotsyn Ltd. were purchased by Sohit Investments Pvt. Ltd. between July 10, 2000 and Nov 25, 2000 for ₹11,36,777 for which payment to Dhanvarsha was made by Shamken Spinners Ltd. 10) Allegation by SEBI that SML shares were sold by the Shamken Group is completely false and baseless. There is absolutely no evidence whatsoever to show that the Shamken Group sold any SML shares. 11) The allegation that Maheshwari and Adroit engaged in synchronized trades with a view to artificially inflate the price of the SML scrip is apparently misconceived. Perusal of trade logs show that there are several trades by the said two brokers where the buy price has been lower than the last traded price.

12) SEBI has failed to consider that the Shamken Group has not made any profit out of the investments in SML shares. 13) There has not been a single complaint made by any investor nor have the investors been induced into purchasing or selling any SML securities. No investor has suffered any loss on account of any transaction or purchase of SML shares by the Shamken Group.

14) Shamken Group cannot be held liable for the nature and manner in which Dhanvarsha and Prasneeta decided to deal with the shares of SML. Their dealings and relationships with Vandana, Maheshwari and Adroit is not in any way connected to the Shamken Group and therefore no liability can be fastened on Shamken Group companies for their actions. 15) If Mr. Pravin Juneja is found to have given the directions to artificially create volumes, Mr. Pravin Juneja had no authority, express, implied or ostensible to do so. The Shamken Group cannot be held liable for the fraud, if any, committed by Mr. Pravin Juneja. 16) The Shamken Group was not connected in any manner to Maheshwari, Adroit or Vandana Securities and Mr. I C Jindal placed the orders in the scrip of SML with Maheshwari and Adroit. That if all the allegation of price rise is true, it appears that Prasneeta with the help of Mr. J N Mishra and in particular Mr. Jindal indulged in the activity without any express or tacit approval of SML or the Shamken Group. 17) Mr. H B Chaturvedi was not aware of any of Mr. Pravin Juneja’s dealings with Mr. P K Aggarwal or Mr. Jeev Narain Mishra.

18) Mr. Pravin Juneja was the Director (Corporate Finance) and the Company Secretary of SML, Shamken Cotsyn Limited, Shamken Spinners Limited Mr. Pravin Juneja was the person who was in charge of execution of to buy the shares of SML. 19) Pursuant to investment decisions having being taken by Mr. Chaturvedi and Shamken Spinners Limited / SML, Mr. Juneja was the person in charge of placement of orders, appointing and dealing with brokers and making payments. 20) Mr. Juneja appointed Dhanvarsha and engaged Mr. J N Mishra, placed the orders to buy SML shares and also made payments for the same. The scheme as elaborated on by SEBI in the SCN if true was conceived and executed solely by Mr. Juneja with the intention of enriching himself. 21) Mr. J N Mishra and Mr. A K Aggarwal, Director of Prasneeta have stated on record that all orders to deal in SML shares or other Shamken Group shares came from Mr. Pravin Juneja. Mr. Chaturvedi did not know of Mr. Juneja’s dealings with Mr. P K Aggarwal, Mr. J N Mishra or Mr. A K Aggarwal. 22) SEBI has not initiated any action against the intermediaries whom it has claimed were engaging in cross and structured deals.

23) Tracking of flow of funds revealing that Shamken Group was the ultimate client of Maheshwari and Adroit is completely wrong and baseless. 24) Allegations that certain payments were made by the Shamken Group to current account no. 50320 of Dhanvarsha with Nedungadi bank and that this account was opened with the specific purpose of trading in the scrip of SML is completely false. There is no proof to support this allegation. The fact that 80% of the credit entries in the said account were made up of cheques from the Shamken Group does not prove that the account was specifically opened only for the purpose of dealing in SML scrip and further does not amount to an offence. The account was opened by Dhanvarsha and not by the Shamken Group. 25) The allegation by SEBI that payments for SML shares were made by funds provided by SML is wrong and denied. None of the payments for SML shares came from SML’s account no. 0417964223 with Citibank as alleged by SEBI. The fact that certain payments were made from this account to Dhanvarsha or to Mr. J N Mishra directly does not show that the payment was made for the purchase of SML shares.

There are no purchases of SML shares corresponding to the dates of payment to Dhanvarsha or Mr. J N Mishra. 26) Appointment of Dhanvarsha was merely by way of administrative convenience and by way of introduction by Mr. P K Aggarwal, who assured the Shamken Group that Dhanvarsha was an entity already dealing in securities. Just because an unregistered sub-broker is appointed for purchase of shares does not mean that the appointment was for the purpose of creating a false market in the SML scrip. 27) A scrutiny of Dhanvarsha’s account and Mr. Mishra’s account with Nedungadi bank indicates that amounts of ₹ 1,72,20,746 and ₹ 1,01,19,133 respectively were deposited into the said accounts. SEBI has relied on a period that is wholly different than from the one under investigation i.e. SEBI has taken into account the period of June 2000 to July 2001, whereas its investigation pertains to February 2000 to July 2000. 28) Shares of SML were bought through Dhanvarsha and Prasneeta for the purpose of increasing the shareholdings of the group companies in their flagship company SML. 29) Certain payments were made by Shamken Spinners Limited to Vandana at the instance of Dhanvarsha, and Shamken Spinners Limited had no direct dealing with Vandana.

30) The words of Regulations 4(a) and 4(e) clearly shows that intention to artificially raise the price and thereby induce persons into purchase or sale of securities must be proved. SEBI has failed to establish the intention to create an artificial market and has also failed to show that any persons were induced as a result. No investor has made any complaint to SEBI that they were induced into purchasing or selling shares of SML. 31) Regulation 4(b) requires indulgence in acts that are calculated to mislead persons. It is not established by SEBI that the Shamken Group had any such intention. The fact that Shamken Group did not sell any of the shares of SML that had been purchased and is still holding them clearly establishes its stance that the only intention was to increase its shareholding. 32) Regulation 4(c) requires indulgence in transactions that are not genuine. Shamken Group has taken delivery of all shares of SML and is still holding them clearly shows that the transactions were genuine transactions. 33) The price of the security can be manipulated by both buying and selling of shares.

Shamken Group has bought SML shares and were never sold by Rights Credit & Securities Pvt. Ltd. Lotus Garments Limited or SML group.

5. Opportunities of personal hearing were granted by the then Whole Time Member to the Noticees on November 7, .2008, December 12, 2008, June 24, 2009 and May 21, .2010. However, Noticees sought adjournments and did not appear on any of the aforesaid dates. Further, opportunities of personal hearing were also afforded to the Noticees on March 13, 2012 and November 23, .2012 but the Noticees again failed to appear.

6. I have considered the SCN and other material on record. I note that the Noticees have made their written submissions but have not utilized the opportunities given for personal hearing. I conclude that they do not have to submit anything beyond what has been submitted by them in their written submissions. I, therefore, proceed to decide the matter on merits considering such written submissions made by the Noticees. 7. Before dealing with allegations and charges, I deem it necessary to refer to the provisions alleged to have been violated by the noticees in this case. Those provisions are reproduced as under:- SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 " 4. No person shall - (a) effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person; (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market; (c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions; (e) pay, offer or agree to pay or offer, directly or indirectly, to any person any money or money's worth for inducing another person to purchase or sell any security with the sole object of inflating, depressing, or causing fluctuations in the market price of securities." SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 "4. Prohibition of manipulative, fraudulent and unfair trade practices (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;

(d) paying, offering or agreeing to pay or offer, directly or indirectly, to any person any money or money’s worth for inducing such person for dealing in any security with the object of inflating, depressing, maintaining or causing fluctuation in the price of such security; (e) any act or omission amounting to manipulation of the price of a security;" 8. The question for consideration in the present case is whether the Noticees along with their group companies traded with an intention to create a false market in the scrip of SML and contributed to the artificial increase in its share price. 9. The Noticees have contended that since the transactions under consideration pertain to the year 2000, the present proceedings are not maintainable in so far as they relate to regulation 4 of the PFUTP Regulations, 2003 because the regulations relating to "Repeals and savings" only draw reference to the procedure to be followed under the PFUTP Regulations 2003. In this regard, I note that regulation 13(2) of the PFUTP Regulations 2003 provides that notwithstanding repeal of the PFUTP Regulations 1995, any violation of regulations 3, 4, 5 and 6 thereof shall be investigated and proceeded against in accordance with the procedure laid down in these regulations.

The SCN alleges violations of regulations 4 (a), (b), (c) and (e) of PFUTP Regulations, 1995 read with regulations 4(2) (a), (d) and (e) of the PFUTP Regulations, 2003 against the Noticees. It is pertinent to note that the charge of violation of the provisions of regulation 4 of the PFUTP Regulations, 2003 has not been independently leveled in the present case rather it is read with the corresponding provisions of PFUTP Regulations, 1995. The violations of regulation 4 of the PFUTP Regulations,1995 would have been proceeded against the Noticees even if the provisions of regulation 4 of the PFUTP Regulations, 2003 were not mentioned in the SCN. Therefore, I do not find any fault with the inclusion of provisions of regulation 4 of PFUTP Regulations, 2003 in the SCN and reject the contentions of the Noticees in this regard. 10. The Noticees have also contended that no action has been taken by SEBI against the brokers (i.e. Maheshwari and Adroit) who had entered into cross deals and synchronized deals in the scrip of SML during the period under investigation. In this regard, it is pertinent to note that Enquiry Proceedings under the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations 2002 were initiated by SEBI in the matter of SML against Maheshwari and Adroit, which were subsequently settled by them and consent orders in respect thereof were passed by SEBI on August 12, 2010 and November 1, 2012, respectively.

In view of the above, I do not find any merit in the said contention of the Noticees.

11. In the present case, the following facts are undisputed:-

 In February 2000, the Shamken Group decided to increase its holding in SML and Shamken Cotsyn Ltd.  Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd were group companies of SML and were part of the Shamken group.  The Shamken Group transacted through Dhanvarsha and Prasneeta for buying the shares of SML and Shamken Cotsyn Ltd.  Between the period March 9, 2000 and May 23, 2000, the Shamken Group purchased 5,29,020 shares of SML through Dhanvarsha and Prasneeta for ₹90,03,550.  Dhanvarsha and Prasneeta were not registered with SEBI as sub-brokers. 12. I note that from February 23, 2000 to July 20, 2000, on NSE, the price of the scrip of SML increased from ₹ 6/- to ₹ 25.55/-. Along with the price rise, there was also an increase in the average traded volume of the scrip of SML from 9,800 shares during the period May-June 2000 to 92,400 shares during the period June-July 2000. Two brokers viz., Adroit and Maheshwari accounted for approx. 95% of the net traded quantity during the relevant period and both the brokers mainly traded on behalf of a common client, Vandana. Vandana, acted as an unregistered sob-broker and traded mainly on behalf of Dhanvarsha and Prasneeta.

I further note that Vandana was mainly trading for Dhanvarsha and Prasneeta who have admitted in their statement that they were trading for Shamken Group including Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd. 13. I note that cross deals through Maheshwari and Adroit constituted 13.69% and 17.11% of the gross traded quantity for the market in this scrip. Further, during the 2nd period of investigation 363 structured deals amounting to 2,17,800 shares were executed by Maheshwari and Adroit on behalf of Vandana / Dhanvarsha which constituted 28.69% of the gross traded quantity at NSE in SML shares. Also, Vandana has traded for its clients Dhanvarsha and Prasneeta. Gross buying and net buying by these two clients constituted 53.08% and 35.75%, respectively of the total buying at NSE. 14. During the investigation period on behalf of Vandana, Maheshwari bought 8,71,000 shares and sold 3,00,700 shares whereas Adroit bought 2,17,800 and sold 1,55,500 shares on its behalf. Maheshwari and Adroit also executed on behalf of Vandana 363 structured deals for 2,17,800 shares which constituted 28.69% of the gross traded quantity at NSE in SML shares.

15. I note that Vandana purchased 6,95,200 shares (gross) which constituted 53.08% of total quantity traded volume during the investigation period on behalf of Dhanvarsha and Prasneeta.

Further, its net purchase on their behalf was 68.50% (4,68,200 shares) of the total net quantity of 6,83,500 shares at NSE. 16. Admittedly, in the present case, the Shamken group had traded through Dhanvarsha and Prasneeta in the scrip of SML. I note that Mr. Jeev Narayan Mishra, proprietor of Dhanvarsha stated in his statement that all his dealings in SML shares were on behalf of Shamken Group only and no dealings were done in his own account. He also stated that the orders were mostly placed by Mr. Pravin Juneja (director of SML) and sometimes by Mr. V. R. Rao (Senior. Manager of SML, and a subordinate of Mr. Pravin Juneja). I further note that Mr. Ajay Kumar Agarwal, director of Prasneeta, in his statement admitted that Prasneeta was introduced to trading in the scrip of SML by Mr. Pravin Juneja for a commission and all the orders for purchase were given to Prasneeta either by Mr. Pravin Juneja himself or his representative and that whatever trading in SML shares was done by Prasneeta, it was at the instance of Mr. Pravin Juneja. 17. I note that purchases were made by four group companies of SML viz. Sohit Investments Private Limited, Angel Textiles Private Limited, Kotwan Traders Private Limited and Lotus Garments Private Limited and that the payment was made by Shamken Spinners Limited.

I further note that from the information obtained from Citi Bank the payment was also being made directly by SML through its account no. 0417964223 with Citi Bank. Further, funds were also received from the account of Right Credits & Securities Private Limited and Lotus Garments Private Limited, both group concerns of SML. 18. I note that the firm Dhanvarsha was opened with a specific purpose of executing transactions in the scrip of Shamken Multifab Ltd. I note from the statement of Mr. Jeev Narayan Mishra that he was an employee of Prasneeta. a company of Mr. Ajay Kumar Agarwal and that Mr. Ajay Kumar Agarwal had introduced him to Mr. Praveen Juneja, one of the directors of SML. He further stated that. whenever Mr. Juneja and Mr. V R Rao asked him to purchase shares of SML, buy orders were placed with Vandana. SML used to give money through cheques and the same were deposited in the account of Dhanvarsha. He also stated that all the money credited into accounts no. 2116 and 50320 came from Shamken Group. 19. I note that Mr. Ajay Kumar Agarwal, director of Prasneeta has stated that they were induced to trade in the shares of SML by Mr. Praveen Juneja and were offered an incentive of 10 paisa in the form of commission for acquiring the shares of SML.

I further note from the statement that all the orders for purchase were given by Mr. Praveen Juneja or his representative. Accordingly, orders were placed for dealing in SML through Vandana.

20. I note that several payments have been made by Shamken Spinners Ltd. to Prasneeta, Dhanvarsha and Vandana. Further, Shamken Spinners Ltd. has bought 2,66,920 shares of SML from Prasneeta who had purchased through Vandana during March-May 2000. Furthermore, payment of ₹49.21 lacs was made by Shamken Spinners Ltd. to Prasneeta for the said purchase. Payments were also made by Shamken Spinners Ltd. to Vandana at the instance of Dhanvarsha.

21. I also note that SML had issued 8 cheques amounting to ₹25,87,751/- to Mr. Jeev Narayan Mishra, which were credited in the account no. SB 2116 maintained with Nedungadi Bank Ltd. (presently PNB), Mayur Vihar branch, New Delhi. Details of the credits are tabulated below-

S. Cheque Date Amount Issuing Credited in the account No. no. Bank of Jeev Narayan Mishra a/c on 1 017480 2.5.2001 250220 Citibank 04.5.2001 2 017500 9.5.2001 848846 Citibank 11.5.2001 3 071612 14.5.2001 318618 Citibank 16.5.2001 4 071616 21.5.2001 190500 Citibank 23.5.2001 5 071629 24.5.2001 562373 Citibank 26.5.2001 6 071652 4.6.2001 63000 Citibank 7.6.2001 7 071662 7.6.2001 41000 Citibank 11.6.2001 8 071678 14.6.2001 313194 Citibank 16.6.2001 25,87,751

22. In light of the aforesaid, it is clear that the Shamken Group, of which Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd were also a part, was the ultimate client of brokers Maheshwari and Adroit. 23. I note that Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd had submitted that appointment of Dhanvarsha was merely by way of administrative convenience. Further, it had been introduced to the Shamken group by Mr. P K Aggarwal who assured Shamken Group that Dhanvarsha was an entity already dealing in securities. I note from the material on record that Mr. P K Aggarwal was a good friend of Mr. Praveen Juneja. Further, Mr. P K Aggarwal is related to Mr. I C Jindal and Mr. Ajay Kumar Agarwal. I also note that Mr. Jeev Narayan Mishra (proprietor of Dhanvarsha) was not even a graduate and had no prior experience of dealing in securities market. Further, Mr. Ajay Kumar Agarwal (director of Prasneeta) was also new to securities market. Thus, the fact that the Shamken group had chosen them to transact on its behalf, itself raises serious doubts regarding its intent.

24. It is surprising to note that Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd, who were acting upon the plan of the Shamken group to consolidate its holding in SML, chose to purchase shares of SML through two unregistered sub-brokers i.e. Dhanvarsha and Prasneeta, which in turn purchase shares from another unregistered sub-broker i.e. Vandana, which in turn purchased shares only through two brokers, which had accounted for majority of the trading volume in the scrip of during the investigation period. Further, the payments in respect of the purchase of shares by the Shamken group were also made by SML directly to Dhanvarsha and Vandana. In my view if the intention of the Shamken group genuinely had been consolidation of its holding in SML it would have transacted through registered intermediaries and SML would not have been a party to any of the payments. 25. It has been contested by Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd that the Shamken Group has not sold any shares and that merely buying of shares cannot result into manipulation. I note that Vandana who had traded on behalf of Dhanvarsha and Prasneeta who indeed were trading on behalf of Shamken Group, including Sohit Investments Private Limited, Kotwan Traders Private Limited and Angel Textiles Private Limited and has bought and sold shares through brokers Maheshwari and Adroit that has resulted into cross deals and structured deals.

Hence the contention that Shamken Group has not sold shares does not appear to be satisfactory. Further, merely buying of shares can also result in price manipulation as it generates interest in the scrip and thereby induces other person to trade in the scrip. 26. Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd have purchased shares of SML and payments were made by Shamken Spinners Limited to Dhanvarsha, Prasneeta and Vandana (entities who were not registered with SEBI as broker / sub-broker) for the purchase of shares of SML. 27. I note that the directors of Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd at the relevant time, being in control of its day to day affairs, had the knowledge of the acts/omissions of their respective companies. They were also under an obligation to ensure that acts and transactions of SML were not in violation of any of the applicable provisions of SEBI Regulations or other applicable laws. I, therefore, find that the above named directors of Rights Credit & Securities Pvt. Ltd. and Lotus Garments Ltd. were responsible for their acts and omissions in this case.

28. In view of the facts and circumstances of this case discussed hereinabove, I do not find any material to differ from the allegations and charges leveled in the SCN and find that Rights Credit & Securities Pvt. Ltd. and its directors Mr. Anoop Chaturvedi and Ms. Sunita Chaturvedi, and Lotus Garments Ltd. and its directors Mr. Avdesh Chaturvedi and Ms. Sudha Chaturvedi have violated regulation 4(a), (b) (c) and (e) of PFUTP Regulations, 1995 read with regulation 4 (2)(a)(d) and (e) of PFUTP Regulations, 2003. 29. I am of the considered view that such fraudulent activities pose prudential threat to the market integrity and orderly development of securities market. I, however, note that the transaction in question had taken place long back in the year 2000. Further, the SCNs that had been issued in the year 2004 do not clearly bring out the magnitude of contribution of the Noticees in the alleged price and market manipulation in the scrip of SML. 30. Considering the fact and circumstances of this case and the abovementioned mitigating factors, I, in exercise of powers conferred upon me under section 19 read with section 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, regulation 11 of the PFUTP Regulations, 1995 read with regulation 13 of the PFUTP Regulations, 2003 hereby restrain Rights Credit & Securities Pvt. Ltd., Mr. Anoop Chaturvedi, Ms. Sunita Chaturvedi, Lotus Garments Ltd., Mr. Avdesh Chaturvedi and Ms. Sudha Chaturvedi from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for a period of two years from the date of this order.

31. This order shall come into force with immediate effect. A copy of the order shall be served on the Noticees and the stock exchanges for ensuring due compliance with the above directions.

Sd/-

DATE: DECEMBER 9th, 2014 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA