Order in respect of Salasar Stock Broking Limited in the matter of Tijaria Polypipes Limited

WTM/SM/IVD/ID2/11353/2021-22 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under section 12(3) of Securities and Exchange Board of India Act, 1992 read with regulations 28(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 In respect of S. No. Name of the Noticee SEBI Registration No. 1 Salasar Stock Broking Limited INB010752633, INB230752635 and INB030752637 In the matter of Tijaria Polypipes Ltd.

1. Upon observing certain irregularities in the Initial Public Offering (IPO) of Tijaria Polypipes Limited (hereinafter referred to as ‘TPL’/‘Company’), Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), vide an ad-interim ex-parte Order dated December 28, 2011 (hereinafter referred to as ‘interim order’), inter alia, issued directions against various entities including Salasar Stock Broking Ltd. (hereinafter referred to as ‘Noticee’/‘Salasar’), restraining and further prohibiting the Noticee from buying, selling or dealing in any securities, in any manner whatsoever, in its proprietary account. The Noticee was also prohibited from entering into any fresh agreements with new clients in its operations as a stock broker till

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

further orders. The said directions issued to the Noticee were revoked by SEBI vide Order dated November 02, 2012. 2. After completion of investigation, a proceeding in terms of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 (hereinafter referred to as ‘Intermediaries Regulations’) was initiated by SEBI against the Noticee, Member, Bombay Stock Exchange (BSE), National Stock Exchange of India Ltd. (NSE), Calcutta Stock Exchange (CSE) and a stock broker registered with SEBI. For the said purpose, SEBI, vide an Order dated October 15, 2012, appointed a Designated Authority (hereinafter referred to as ’DA’) under Regulation 24(1) of the Intermediaries Regulations to enquire into the violations alleged to have been committed by the Noticee and to submit a report in accordance with the provisions of the Intermediaries Regulations. Upon completion of the enquiry, an Enquiry Report dated October 27, 2017 was submitted by the DA for consideration and taking appropriate measure by the Designated Member (hereinafter referred to as ’DM’). 3. Based on the findings of facts and after considering the explanations offered by the Noticee, the DA has noted the following in his Enquiry Report: a. The Noticee had entered into 6 structured/synchronized trades with 3 different entities wherein the Noticee purchased and sold shares of TPL in large quantities on the listing day of the scrip of the Company. b. Noticee, by purchasing shares of TPL in large quantities from three Qualified Institutional Buyers (QIBs), which the QIBs had subscribed in Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

the IPO of the scrip of TPL, has facilitated the QIBs exit from the scrip of TPL at a premium to the issue price. At the same time, DA has further noted that the allegation of funding of the Noticee by TPL to bail out the Noticee from the losses suffered by it on account of its trading on the listing day was not established. 4. In view of the above, the DA has observed that the Noticee’s acts of entering into structured deals as well as providing an exit to the three QIBs have been in violation of the provisions of Section 12A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) read with Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (b) & (e) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’). 5. In the light of the above and in accordance with regulation 27 of the Intermediaries Regulations, vide Enquiry Report dated October 27, 2017, the DA has recommended that the Noticee, as a stock broker of Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Calcutta Stock Exchange (CSE) in cash segment (under certificate of Registration ref. INB010752633, INB230752635 and INB030752637) be prohibited from registering fresh/new clients for a period of 3 months. 6. Subsequently, a post-enquiry Show Cause Notice (“SCN”) dated April 11, 2018 was issued to the Noticee in terms of regulation 28(1) of Intermediaries Regulations enclosing therewith a copy of the Enquiry

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

Report and calling upon it to show cause in terms of Regulations 28(1) and 28(2) of the Intermediaries Regulations, as to why necessary action, including passing of appropriate direction, as the DM considers appropriate, should not be taken against it. 7. Vide letter dated May 31, 2018, the Noticee submitted its reply to the SCN. In the said reply, the Noticee made the following submissions: (i) SEBI conducted examination of the steep fall in price of the scrip on the first day of trading in the shares of TPL. Thereupon, vide ex parte ad-interim order dated 28.12.2011, SEBI passed directions against us which were vacated vide order dated 02.11.2012. Meanwhile SCN dated 19.10.2012 under Regulation 25 of Intermediaries Regulations was issued to which we submitted our reply vide letter dated 16.11.2012. (ii) Thereafter present SCN was issued on 11.04.2018 i.e after a lapse of over 6 years from interim order and 5 years from revocation order which amounts to delay and incidental latches despite specific directions to pass appropriate orders on merit at the earliest. (iii) In light of the fact that the issue price was Rs. 60/- whereas our average purchase price was Rs. 48.06 per share and average sale price was Rs. 44.19 per share on NSE, we fail to understand how we gave exit to certain persons/entities at a premium to the issue price of TPL. Structured deals (iv) We weren’t aware of the orders of Mr. Hitendra Kapadia, Mr. Jivraj Zala

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

and Pinac Finstock. The alleged matching of trades with said counterparties is merely coincidental. There is no continuous pattern of matching by which it could be alleged that there was any attempt to synchronize or match trades. (v) Further, out of a total of 49 orders placed by us on BSE, only 3 are alleged to have been synchronised/structured (only 6% of our total orders) and the 3 order alleged to be synchronised/structured constituted only 0.07% of our total trades. (vi) Similarly, out of a total of 5387 trades executed by us on NSE, only 19 are alleged to be synchronised/structured (less than 0.36 % of our total trades). At the same time, none of our trades in TPL on any other days from 17.10.2011 till 26.10.2011 (i.e. 1185 trades), is even alleged to be synchronised / structured. (vii) Therefore, out of total 153 orders placed on the NSE & BSE only 6 orders are alleged to have been synchronised/structured. However, even out of these 6 only one order is alleged to have had a "0" time difference between our order and the counter party's order. (viii) Further, assuming that one of our buy orders matched with one of the sell order of Hitendrakumar Dineshbhai Kapadia, against our buy order at 14:07:58, about 191 other trades were executed before the said trade with Hitendra Kapadia, which clearly shows that all other pending sell orders at the same price first matched against our buy order. We deny that we know Mr. Hitendra Kapadia and have entered

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

structured/synchronised deal with him. Similar trends were shown with other entities. Providing exit to the QIBs (ix) The orders matched with QIBs based on prevailing market trend in terms of the automated mechanism of exchange. We had placed first order at 9:15 am for merely 1500 shares to check the market trend. Thereafter we placed 6 orders at different prices (3 orders at 9:22 am and 3 orders at 10.42 am) between price range of Rs. 51/- to 55/- for merely 2000 shares each. These orders were placed merely in anticipation to test market inclination. At 10.04 am we placed a small order of 125 shares at Rs. 63/- which was above the issue price to check the market trend, which order stood executed. Since none of our other orders stood executed we deleted the said orders after keeping them pending for more than an hour. (x) We had purchased shares in the scrip of TPL at an average price of Rs. 48.06 per share and sold shares at an average price of Rs. 44.19 per share on NSE, which goes to show that we were not wrong in anticipating the fact that the market price of the share will fall below the issue price. (xi) QIBs were trying to sell their holding at the price of Rs. 62/- from 10.00 am to 11.00 am. However, the orders were executed at 11.03.37 as it matched against buy orders which were placed/updated during the time slot at Rs. 62/-.

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

(xii) We most humbly submit that in the event there was meeting of minds between the QIBs and us then we would have placed orders at Rs 62/-between 10.00 am to 11.00 am and not between price range of Rs. 51/-to 55/- for merely 2000 shares each between 9:22 am and 10.42 am. (xiii) It was only at 11:21:51 did we place an order for 2,50,000 shares upon considering the fact that as our trades were not executed at lower price. Looking at the market trend we felt confident that the price will rise. (xiv) The said allegation is contrary to DA's own observation vide para 23 at page 27 which states that we had placed an order for 2,50,000 shares at 13:05:33 which resulted in trades for 51,027 shares at Rs. 45/-shares got executed with various sellers in the market. Further the DA has failed to appreciate that we have deleted remaining orders at 13:05:42 since the same was not executed and placed order at 13.08.07 at higher price of Rs. 48/- per share like any prudent investor so our orders would materialize into trades. Similarly at 13.08.29 we have modified our order price by increasing it to Rs. 50/- per share since out of 2,00,000 shares only 66,088 shares could be traded. (xv) We deny that our orders/trades in the scrip of TPL were to absorb the sell orders of the QIBs and to facilitate the QIBs to exit in the scrip of TPL at a premium to the issue price more so in the light of the fact that the issue price was Rs. 60/- whereas we had purchased shares in the scrip of TPL at an average price of Rs. 48.06 per share and sold shares at an average price of Rs. 44.19 per share on NSE.

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

(xvi) We are neither aware, nor concerned, nor involved nor have means to verify the orders placed by SPARROW, IPRO and CREDO. The said allegations are based on the findings that we had inter alia indulged in such trading for ensuring an exit to the QIBs and other allottees in TPL's IPO and as a result of the same, had suffered losses which were partly borne by TPL (through layered fund transactions). (xvii) To enter into structured deals to ensure an exit to the QIBs and other allottees in TPL's IPO, it is necessary to match trades with the counter party i.e. having prior understanding with the counter party. However, there is not an iota of evidence to establish that we had any connection with the counterparty or were aware of their trades. (xviii) Merely because few of our trades matched with the counterparties who are alleged to have provided exit to IPO subscribers, in absence of any prior knowledge, connection or malafide intent we cannot be alleged to have entered into structured trades with said counterparties with an intention to commit fraud or enter into unfair trade practice as alleged. Indirect Funding by TPL (xix) DA has observed that the allegations of indirect funding as against us cannot be sustained in view of the observations of Hon'ble SAT vide its Orders dated 29.06.2016 and 19.09. 2016. 8. After receipt of the aforesaid written submission from the Noticee, vide letter dated November 04, 2020, the Noticee was provided with an opportunity of personal hearing on December 08, 2020. Shri Anil Shah, Advocate and Shri

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

Pawan Sonthalia appeared as Authorized Representatives (ARs) of the Noticee for personal hearing on the scheduled date and reiterated the submissions made by the Noticee vide its letter dated May 31, 2018. During the course of personal hearing, certain queries were raised before the ARs and the Noticee was provided with 10 days’ time to submit its reply to the said queries along with additional submissions, if any. 9. Subsequently, vide Email dated December 16, 2020, the Noticee made additional submissions wherein it raised the following contentions: (i) The Enquiry Report has failed to appreciate the fact that since the allegations/observations regarding indirect funding by TPL to bail out our loss at para C does not stand established, consequently the observation at para A also fails. Thus the charge of synchronized/structured transactions too does not have any legs to stand on since there is no allegation of layering of funds to finance our losses as well as there is no motive to provide exit to the QIB’s. (ii) Out of our total trade for 37,00,674 shares, QIB’s were counter party to only 2,10,196 shares, which is merely 5.68% of our trades. (iii) The Enquiry Report is silent on the alleged connection/connivance/meeting of minds between Hitendra Kapadia, Jivraj Zala, PINAC Stock and us which is a sine qua non for alleging the charge of having entered into synchronized/structured trades. (iv) The Apex court has, in the matter of Kishore R Ajmera, succinctly observed that the difference between violation of Code of Conduct

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

Regulations and FUTP Regulations would depend on the extent of the “persistence” of indulging in transactions as observed herein. We submit that although there is no violation alleged for Code of Conduct Regulations, nevertheless the Apex Court has observed that “persistent trading’ would show deliberate intention and that a dividing line needs to be drawn on the basis of “volume of transactions” and “period of time” to show that the same were indulged. We state that we have already demonstrated that only 5.68% of our trades had matched with the QIB’s. Further the test of “period of time” that the same were indulged certainly falls short of the conclusion of the Apex Court since the allegation is only for trading done on 1 day i.e. 14.10.2011. (v) On the first day of listing/trading, price and volume is normally volatile which presents an opportunity for substantial profits primarily by way of day trading and intra-day square off. It may be observed there from that our trade quantities/ turnover and profit/loss on the listing day in respect of each such IPOs even over the last 2 years, we have had a similar pattern of substantial trading on the first day of listing/trading in respect of at least 41 other companies /IPO’s. (vi) We were observing the price pattern in the script during the initial hours between 09:15 am to 10:40 am or so since it was trading at discount to the Issue price. We were placing small orders below / around the market price in order to identify any prevailing selling pressure in scrip, as we all know that there on first day of IPO’s there was no circuit limits and Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

we thought due to prevailing volatility our orders might get executed and this would enlighten us to decide the further course of action. We are momentum traders and try to feel the pulse of market before entering big into any trades. As a consequence, thereof the same might result in profit / loss. We generally buy in a scrip having upward momentum and sell scripts showing downward momentum. (vii) After watching the volume and price action in the scrip, finally, we gathered enough conviction to enter buy order of 2,50,000 shares and 1,00,000 shares with the instinct that the first day selling gets absorbed and the price prevailing above its issue price, there was very good chance that the scrip would continue making new highs and we would be able to exit at a higher price with handsome profits. However, at the same time, as any prudent trader, we had stop loss in mind to cut our losses if the price did not perform to our expectations. Consideration of issues: 10. I have considered the report of the DA, the SCN issued to the Noticee, the written as well as the oral submissions made by the Noticee and material available on record. Having considered the above, the issues which arise for my consideration are: a. Whether on the day of listing, trades of the Noticee were fair and genuine or were placed with an object to provide exit to QIBs so as to be held liable for the violation of the provisions of Section 12A(a), (b) and (c) of the SEBI Act read with Regulations 3(a), (b), (c), (d), 4(1),

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

4(2)(a), (b) & (e) of PFUTP Regulations? b. Whether the Noticee has indulged in structured/synchronized trades with certain entities so as to be held liable for violation of provisions of Section 12A(a), (b) & (c) of the SEBI Act read with Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (b) & (e) of PFUTP Regulations? c. Whether the trades of the Noticee alleged to provide exit to QIB were funded by TPL to curtail its opening day losses? d. If yes, what would be the appropriate measure(s) that can be taken under regulation 28 of Intermediaries Regulations? 11. Before moving ahead, I find it appropriate to refer to the relevant provisions of the law allegedly violated by the Noticee. The said relevant legal provisions are reproduced below: SEBI Act Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. 12A. No person shall directly or indirectly— (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder;

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

PFUTP Regulations 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. 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; (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; (e) any act or omission amounting to manipulation of the price of a security; 12. Based on the above, I proceed to examine the findings recorded by DA as to whether the actions of the Noticee are in contravention to the provisions of Section 12A(a), (b) and (c) of the SEBI Act read with Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (b) & (e) of PFUTP Regulations.

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

13. Before proceeding to examine the issues mentioned above, I note that the Noticee has raised a preliminary contention of delay in the present proceedings. It has been contended that the present proceedings deserve to be dropped on the ground that the alleged trades pertain to the period 2011-12. In this respect, it is noted that there is no provision under SEBI Act, 1992, which prescribes time limit for taking cognizance of the alleged breach of provisions of SEBI Act, 1992 and rules and regulations made thereunder. In the instant proceedings, I note from the records that investigation was initiated immediately after the initial offer of the Company and an ex–parte ad interim order was issued on December 28, 2011. Subsequently, upon completion of investigation, a show cause notice was issued by the DA on October 19, 2012 followed by submissions of report from the DA. I also note that there was a re-appointment of DA in this case which was occasioned by internal transfer of the Officers. Upon submission of the Enquiry Report by DA, an SCN was issued to the Noticee on April 11, 2018 asking the Noticee to respond as to why action in terms of Regulations 28(1) and (2) of the Intermediaries Regulations, as deemed fit by the DM be not issued against it. 14. In view of the above, I note that there has been no delay in initiating action against the Noticee in the matter. Further, the Noticee has not been successful in showing any prejudice caused to it by any delay as the pendency of the instant proceedings has been very much known to the Noticee. Thus, the ground of delay taken by the Noticee is not tenable in Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

the absence of any evidence to suggest that the Noticee has been restricted in defending the allegations effectively. Further, it is trite law that in order to ascertain as to whether there has been actually any delay in the matter, the date when the violation came to the notice of the SEBI would be the relevant point and not the date of violation. Whether a delay in a particular case is justified or not also depends on the facts and circumstances specific to that case. In this regard, reference and reliance is placed upon the following observations of Hon’ble SAT in its order dated December 16, 2015 in the matter of Ravi Mohan & Ors. vs. SEBI: - “....................Based on decision of this Tribunal in case of HB Stockholdings Ltd. vs. SEBI (Appeal no.114 of 2012 decided on 27.08.2013) it is contended on behalf of the appellants that in view of the delay of more than 8 years in issuing the show cause notice, the impugned order is liable to be quashed and set aside. There is no merit in this contention, because, this Tribunal while setting aside the decision of SEBI on merits has clearly held in para 20 of the order, that delay itself may not be fatal in each and every case. Moreover, the Apex Court in case of Collector of Central Excise, New Delhi vs. Bhagsons Paint Industry (India) reported in 2003 (158) ELT 129 (S.C) has held that if there no statutory bar for adjudicating the matter beyond a particular date, the Tribunal cannot set aside the adjudication order merely on the ground that the adjudication order is passed after a lapse of several years from the date of issuing notice..................” 15. I further find it apt to refer to and rely upon the observation of Hon’ble

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

Securities Appellate Tribunal (SAT) vide its order dated March 17, 2020 in the matter of Pooja Vinay Jain vs. SEBI, and the relevant portion of the observation of the Hon’ble SAT is as under: “The record would show that all the documents concerning the defense of the appellant were filed by her before the AO. Therefore, for want of any prejudice the proceedings cannot be quashed simply on the ground of delay in launching the same. Further, as explained by the learned counsel for the respondent as recorded in paragraph No. 6.4 above, large numbers of entities and transactions were analyzed by SEBI which took some time.” In view of the above and in the absence of any prejudice shown by the Noticee, I find that the contention of the Noticee with respect to delay is misconceived and misplaced on facts as well as on law, hence not maintainable. 16. It is noted that SEBI conducted an Investigation into the matter of IPO of TPL and trading in the scrip of TPL on the day of its listing on BSE and NSE. It was observed during the course of investigation that three entities namely, Sparrow Asia Diversified Opportunities Fund (hereinafter referred to as "Sparrow"), IPRO Funds Ltd. (hereinafter referred to as "Ipro") and Credo India Thematic Fund Limited (hereinafter referred to as "Credo") had applied for the shares of TPL in QIB category in the IPO of TPL. Accordingly, shares were allotted to Sparrow, Ipro and Credo in the IPO. 17. Subsequently, the scrip of TPL was listed on BSE and NSE on October 14, 2011. Upon analysis of the trade data on the listing day, it is observed that Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

Sparrow and Credo sold their entire allotted quota on the listing day whereas Ipro sold majority of its quota of shares on the said listing day. As noted above, based on the preliminary findings of the investigation, an ex parte ad interim order was passed by SEBI restraining and prohibiting certain entities including the Noticee herein from buying, selling or other dealing in securities in any manner, till the said restriction was revoked vide order dated November 02, 2012. I further note from the above mentioned interim order that the said shares were allotted to the QIBs at a price of Rs. 60 per share and were sold by the QIBs at an average price of Rs. 62 per share i.e. at a premium to IPO allotment price and, despite huge fall in the price of scrip on listing day, the said QIBs were successful in selling the allotted shares at a price higher than the allotment price and thereby, booked profit in their accounts. The data regarding allotment and sale of shares by the said QIBs is as below: Table 1: Allotment and Sale of shares by QIBs Name of QIB Shares allotted in Shares sold on Shares bought by IPO listing day the Noticee Sparrow 9,74,739 9,74,739 1,49,811 Ipro 9,30,631 8,13,131 1,66,725 Credo 9,30,631 9,30,631 60,385 I note from page 9 of the interim order that the afore noted sale of majority of shares was executed by the QIBs till 11.46 AM. I also note from the trades of the QIBs that they had sold the shares of TPL at a premium to allotment price of Rs. 60 per share. I note that the last trade of the said QIBs was executed at 11:46:01 AM by which time the price of scrip was ruling

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

above the allotment price. However, subsequently the scrip of TPL closed at a price of Rs. 18.10 on NSE and Rs. 18.60 on BSE after touching a low of Rs. 16.05 on BSE and Rs. 16.50 on NSE respectively. This clearly shows that there was a huge fall in the scrip of TPL on the listing day itself. Further, strangely the said fall in the scrip has happened only subsequent to sale of shares by QIBs which means, by the time QIBs were trading in the scrip of TPL, the scrip price of TPL was holding above the allotment price. 18. It has been noticed that the QIBs sold shares on both the exchanges viz. BSE and NSE on the day of the listing of the scrip of TPL and the Noticee was counterparty to their trades on both of these exchanges. In this regard, it is noticed that the Noticee has purchased 3,76,921 shares out of total 27,18,501 shares sold by the QIB, which is 13.865% of the total shares sold by QIBs. Details of the shares bought by the Noticee and sold by the QIBs are as below: Table 2: Purchase of shares of TPL by the Noticee from QIBs Purchased % of total Purchased % of total QIB NSE BSE by Salasar sale of NSE by Salasar sale of NSE Sparrow 460000 70000 17.35 514739 79811 13.60 Credo 470631 59385 12.62 460000 1000 0.22 Ipro 345000 166725 48.33 468131 0 0 19. In this regard, I note that the total volume of shares traded in the scrip of TPL on the listing day was 10,74,40,554 whereas, on the said day, volume of shares traded by the Noticee in the scrip of TPL was 37,00,704 shares. The above, clearly depicts that though the volume of the Noticee in the scrip

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

on the day of listing was merely 3.44% of the total volume traded in the scrip of TPL on the listing day, the volume of shares traded by the Noticee which matched with the trades of QIBs as counterparties amounted to 13.865% of the shares sold by QIBs. The above data ostensibly showing increased matching of trades of the Noticee with the trades of QIBs cannot be seen as a mere coincidence of order matching, more particularly, in the backdrop of the submissions of the Noticee that it was anticipated by it that the price of the TPL would witness fall in the price. The said anticipation by the Noticee has not been supported by any cogent reason and document to substantiate the reason of having such an anticipation, which constrains me to observe that the trades of the Noticee cannot be strictly looked as trades executed in the ordinary course of dealing in the said scrip on the day of its listing. 20. The Noticee has contended that the part of its trades that matched with the trades of the above named QIBs is a small quantity of the total shares sold by the QIBs hence, it was not right to allege that QIBs were provided exit by the alleged matched trades executed by the Noticee. In this respect, I find that the contention of the Noticee is not convincing and tenable, for the reason that it has not been alleged in the SCN that the Noticee was solely responsible for providing exit to the QIBs. It has been noticed during the investigation that a number of other entities like the Noticee had indulged in buying shares from QIBs. In this regard, an indicative list of such entities has been provided at Annexure 3 to the Interim Order and I observe that Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

the Noticee is one of those entities whose buy orders for large quantities matched with the sell orders of the QIBs. Since many other such entities who were also noticed to have provided exit to the QIBs (against whom the actions have reportedly been initiated by SEBI) are not part of the present proceedings, it may not be appropriate for me to make any observation qua such entities. However, just because the Noticee’s trades partly matched with the counterparty trades of the QIBs, the contention of the Noticee that it has not indulged in any synchronised trades and has no role to play in providing exit to the QIBs, would not be a valid argument to be acceptable. 21. From the material made available, I observe that the 3 QIBs mentioned above namely, Sparrow, Ipro and Credo had offloaded 12,75,631 shares of TPL on NSE at a premium to the issue price of TPL (i.e 4,60,000 + 3,45,000 + 4,70,631 shares) on the listing day. The sell orders by these QIBs were primarily placed between 10:00:00 AM and 11:46:01 AM. The following table depicts the order entries in terms of the time slots w.r.t the orders in the scrip of TPL placed by the QIBs on NSE: Table 3: Placement of orders by QIBs on NSE Sl. Time Period (AM) No. of sell Volume Price Range Traded Qty by No. orders placed of Sell of Sell QIB during the by QIBs orders orders Rs time period 1. 10:00:00-10:10:59 5 4,60,000 62 0 2. 10:11:00-10:29:59 1 1,15,000 62 0 3. 10:30:00-10:55:59 2 1,00,000 62 0 4. 10:56:00-11:00:00 2 1,30,000 62 0 5. 11:00:01:11:20:00 2 1,25,631 62 7,71,170 6. 11:20:01-11:25:59 6 3,45,000 62-62.50 3,78,824 7. 11:26:00-11:44:00 0 N.A. N.A. N.A. 8 11:44:01 to 11:46:01 0 0 0 1,25,637

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

22. From the above, it is noted that during the time slot i.e.10:00:00 AM to 11:00:00 AM, the three QIBs had placed a total of 10 sell orders for 8,05,000 shares at a limit price of Rs 62 per share. However, none of these said orders was executed on NSE during the above mentioned period. The first trade w.r.t the orders of QIBs was executed at 11:03:37 AM and thereafter, between 11:03:37 AM and 11:25:59 AM, trades for a total number of 11,49,994 shares were executed and trades for the remaining 1,25,637 shares were executed between 11:44:01 AM and 11:46:01 AM. This shows that 100% of the sell trades of the QIBs amounting to 12,75,631 shares of TPL were executed in the time slot between 11:03:37 AM and 11:46:01 AM, out of which, trades for 90.15% of their total sale i.e. 11,49,994 shares were executed between 11:03:37 AM and 11:25:59 AM (within approximately 22 minutes). 23. At the same time, the Noticee placed its first order on NSE in the scrip at 9:15:00 AM for purchase of 1500 shares at a price of Rs. 18.45. The details of the Orders placed by the Noticee are as under: Table 4: Placement of Orders by the Noticee on NSE Buy Order No. Order Order Order Counterparty Trade Trade Observations Price Qty time Order Time Time Qty. Range Range 2011101475013182 18.45 1500 9:15:00 2011101475157969 55 2000 No trade was executed and the order was deleted 9:22:01 at 10:42:36 AM. 2011101475158525 53 2000 No trade was executed and the order was deleted 9:22:03 at 10:42:36 AM.

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

2011101475158970 51 2000 No trade was executed and the order was deleted 9:22:05 at 10:42:36 AM. 2011101475558226 63 125 10:04:23 10:04:22 10:04:23 125 55 2000 No trade was executed and the order was deleted 2011101475751853 10:42:49 at 11:35:45 AM 53 2000 No trade was executed and the order was deleted 2011101475752089 10:42:53 at 11:35:43 AM. 51 2000 No trade was executed and the order was deleted 2011101475752245 10:42:56 at 11:35:41 AM. 24. From the above table, I observe that the Noticee had placed a total of 8 buy orders in the scrip of TPL ranging from 125 to 2000 shares between 9:22:01 AM and 10:42:56 AM. All the orders except for one, were placed at a discount to allotment price. However, only one order that was placed for 125 shares at the price of Rs. 63 got executed. Rest of the orders were deleted by the Notice subsequently. 25. It is however noticed that suddenly after placing 8 orders as referred to above, the Noticee placed a large buy order for 2,50,000 shares (order no. 2011101475910750), at 11:21:51 AM, at the rate of Rs 62. Prior to the above mentioned time slot, Noticee had only placed orders in the range of 125-2000 shares. The said order of the Noticee for 2,50,000 shares got executed immediately and was matched with the pending sell orders of the aforementioned QIBs. I also note that there were several counterparties to the above noted trades, out of which, the counterparty for 2,29,509 shares

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

were the three QIBs comprising 1,00,124 shares were executed with Ipro, 70,000 shares with Sparrow and 59,385 shares were executed with Credo. 26. Immediately after executing the above noted trades for 2,50,000 shares, the Noticee placed another large buy order for 1,00,000 shares (order no. 2011101475911327) at 11:22:03 AM at a price of Rs 62. This order resulted into trades for 67,112 shares, out of which, Ipro was a counterparty for 66,601 shares while the Noticee deleted the remaining portion of the said buy order From the above noted uncanny trading pattern followed by the Noticee, it is evident that the above orders were not only placed suddenly by the Noticee departing from its immediately preceding trading pattern of placing buy orders at a discounted price to the prevailing market price, but also those trades have exposed the dubious intent of the Noticee to provide an easy exit to the QIBs by placing its buy orders in such a synchronized manner so as to match the pending sale orders of the QIBs. The submissions made by the Noticee do not support the actual trading pattern followed by it, as on the one hand the Noticee has claimed to have anticipated a fall in the price of the scrip of the Company on the day of its listing, whereas on the other hand, it deleted the orders placed below the allotment price, despite having anticipation of a fall in the price of the scrip. The Noticee apparently willingly placed buy orders to match the pending sell orders of the QIBs even at a premium to the allotment price which clearly suggests its true intent behind placing of those buy orders in the scrip on its listing day. The trading behaviour of the Noticee suggests that Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

its acts were not that of a genuine investor of the securities market having a bonafide intent to trade in the scrip on the day of its listing, rather, the unusual way of trading coupled with the facts, where the Noticee and some other entities were seen to be indulging in trades in a manner that the QIBs were successful in offloading their respective holdings on the day of listing itself at premium price, reveals the ill intent behind those alleged trades executed by the Noticee on the day of listing of the scrip of TPL. 27. The investigation has further revealed that the Noticee had placed the following orders in the scrip of TPL on NSE during the time slot 11:32:16 AM to 12:13:22 PM: Table 5: Placement of orders by Noticee during 11:32:16 AM to 12:13:22 PM on the listing day Buy Order No. Order Order Order time Counterparty Order Trade Time Trade Price Qty Time Range Range Qty. 2011101475952104 56.1 2500 11:32:16 12:03:06 to 12:03:10 12:03:09 to 2500 12:03:10 2011101476017793 61.55 250 11:47:32 11:48:54 11:48:54 250 2011101476021180 61.4 250 11:48:35 11:51:15 to 11:51:34 11:51:32 to 250 11:51:34 2011101476036576 60.85 250 11:53:52 10:23:49 11:56:04 250 2011101476037190 61.2 250 11:54:03 11:46:06 to 11:54:03 250 11:54:02 11:54:07 2011101476038974 61.35 250 11:54:38 11:54:39 11:54:39 250 2011101476045706 54.25 2000 11:56:32 9:43:44 12:05:14 2000 9:44:12 2011101476049648 57 1000 11:57:04 11:57:28 12:02:19 1000 2011101476055313 59 250 11:58:03 11:58:02 11:58:03 250 2011101476085380 51.25 2500 12:03:38 12:05:13 to 12:06:04 12:06:00 to 2500 12:06:05 2011101476105849 51.65 1000 12:06:10 12:05:47 to 12:06:11 12:06:10 to 1000 12:06:11 2011101476107392 52.1 1000 12:06:18 12:06:21 12:06:21 1000 2011101476160363 48 10000 12:13:22 12:11:33 to 12:13:18 12:13:22 10000 28. From an analysis of the above, it is evident that the Noticee, after placing a few buy orders of larger quantities, which resulted in matching with pending

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

sell orders of the QIB, has shifted to placing order for smaller quantities for which, no justifiable explanation has been furnished by the Noticee. The Noticee was advised during the course of personal hearing to provide explanation behind such abrupt change in its trading pattern leading to placement of 3 large buy orders on NSE and BSE. The Noticee, in its reply dated December 16, 2020, has submitted that it had placed buy orders of 2,50,000 shares and 1,00,000 shares with the instinct that if the first day selling gets absorbed at the price prevailing above its issue price, there was a very good chance that the script would continue making new highs and it would be able to exit at a higher price with handsome profits. In this context, I have already noted above that there wasn’t enough trade volume in the scrip of TPL until the Noticee placed its huge buy orders which can convince anyone that by picking up such large quantities of shares from the QIBs at a premium to the issue price, the Noticee would’ve been able to sell back these large quantities into the market without any difficulty. The reasoning of the Noticee that it was purchasing the shares in anticipation of further increase in price of the scrip to new highs during the day and wasn’t aware of the counterparties to its trades, does not go hand in hand with its act of cancelling of part out of its buy order for 1,00,000 shares that was left behind unexecuted after matching of its order to the extent of 67,112 shares. By advancing the aforesaid explanation, the Noticee has not been able to justify the abrupt change in its trading pattern which led to trades matching with the pending sale orders of QIBs.

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

29. I will now examine the trades of the Noticee in BSE at the time when the QIBs were trading in the scrip of TPL. I note that the 3 QIBs offloaded a total number of 13,25,370 shares on BSE. The sell orders placed by these QIBs were primarily placed between 10:00:00 AM to 11:50:40 AM. Details of the same are presented in the table below : Table 6: Placement of Orders by QIBs on BSE Time No. of sell Sell orders Price Traded Qty Trade time Period orders placed (number of Range by QIBs (AM) (AM) by QIBs shares) Rs 10:00:00- 5 0 10:10:59 4,00,000 65-70 10:11:00- 0 0 10:27:00 0 N.A. 10:27:01- 2 0 10:43:00 1,40,000 65-71 10:43:01- 4 1,44,354 11:16:00- 10:45:00 3,45,000 62 11:17:12 10:45:00- 5 0 10:46:30 2,30,000 65-71 10:46:31- 6 3,68,891 11:17:12- 10:56:15 3,99,739 62 11:17:40 10:56:16- 0 0 10:57:00 0 N.A. 10:58:00- 22 8,12,125 11:17:40- 11:50:40 10,80,631 62-62.05 11:46:34 30. From the above, I note that the QIBs had placed a total number of 44 orders during first two hours of trading on the listing day in the scrip of TPL, all at a premium to allotment price. However, there was no trading corresponding to the said order before 11.16 AM. All the sell orders however got matched with corresponding buy orders from 11.16 AM to 11.46 AM. 31. At the same time, I observe that the Noticee had placed its first order in the Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

scrip of TPL on BSE at 11:22:14 AM. The details of the Order placed by the Noticee are as under: Table 7: Placement of orders by the Noticee on BSE Order No Order Price Order Qty Order Time Traded (Rs) (AM) Qty 23000080002322 62 100000 11:22:14 100000 The above order for 1,00,000 shares resulted into trade immediately at 11:22:14 AM. Out of the total number of 1,00,000 shares traded by the Noticee, I observe that the counterparty to the Noticee’s order for 79,811 shares was Sparrow. Thereafter, the Noticee placed a buy order for a small quantity of 1000 shares (order no: 23000080002323) at 11:22:19 AM which got executed immediately with the sell order of Credo. 32. I note from the previous paragraph that the abovementioned large buy order of the Noticee placed on BSE matched with its trade pattern followed on the platform of NSE and all the 3 large buy orders, two on NSE and one on BSE, were placed within a short span between 11.21.51 AM and 11.22.14 AM. I further note that a large part of all the 3 orders got matched with the corresponding pending sell orders of QIB. 33. The Noticee has contended that it was not aware of the orders placed by any of the QIBs and there is no direct evidence available to link it to the QIBs. Merely because some subscribers in the IPO are the counter party sellers to its buy trades, the same cannot be said to be connected with the Noticee. It was also the contention of the Noticee that a large number of parties who were allotted shares in the IPO, subscribed to the same only

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

with the intentions of making quick profits by immediately selling the shares on the first day of listing/trading. Therefore, in the absence of any connection with the QIBs, there is no evidence to establish that the orders have been executed with any prior meeting of mind. In this respect, I note that the issue as to whether there has to be a direct evidence to establish the allegations of indulging into fraudulent trades against a Noticee, came up for consideration before the Hon’ble Supreme Court of India in the matter of SEBI vs. Kisore R Ajmera (AIR 2016 SC 1079), in which the Hon’ble Supreme Court of India observed that: “It is a fundamental principle of law that proof of an allegation levelled against a person may be in the form of direct substantive evidence or, as in many cases, such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled. While direct evidence is a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion there from. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion.……… While the screen-based trading system keeps the identity of the parties anonymous it will be too naïve to rest the final conclusions on said basis

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

which overlooks a meeting of minds elsewhere. Direct proof of such meeting of minds elsewhere would rarely be forthcoming. The test is one of preponderance of probabilities so far as adjudication of civil liability arising out of violation of the Act or the provisions of the Regulations framed thereunder is concerned.” 34. Keeping in mind the above observation of Hon’ble Supreme Court of India, I find in this case that the Noticee was initially placing purchase orders in the scrip of TPL at a heavily discounted price to the allotment price and such orders were place for small quantities. Thereafter, contrary to its trading pattern, suddenly it placed two large orders on NSE at a premium to allotment price. Further, after matching of part of the later order with Ipro, the Noticee cancelled the remaining portion of the pending order. This clearly shows that the trades placed by the Noticee were not trades placed by a prudent investor but were placed to achieve some oblique intent due to which the Noticee had placed those orders against the established trading norms of the market. 35. It is further alleged that the Noticee had entered into synchronized trades with certain entities. The details of the trades of the Noticee, alleged to be synchronized in nature, are as below: Table 8: Details of synchronized trades by the Noticee S. Buy/ Exchange Counterparty Noticee Qty Counterparty Qty Trade Qty No. Sell order time (price) order time (price) time (PM) (PM) (PM) 100000 100000 1 S BSE Jivraj Zala 12:10:52 (52) 12:10:56 (52) 12:10:56 91603

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

300000 300000 2 S NSE Jivraj Zala 12:11:33 (48) 12:11:36 (48) 12:11:36 273794 188000 200000 3 S NSE Jivraj Zala 13:27:55 (51) 13:27:57 (51) 13:27:57 174454 282000 200000 4 S BSE Jivraj Zala 13:28:13 (50) 13:28:20 (50) 13:28:20 192384 Hitendrakumar 500000 500000 5 B BSE Kapadia 14:07:58 (42) 14:07:58 (42) 14:07;58 477884 Pinac Stock 200000 200000 6 B NSE Brokers 14:22:35 (30) 14:22::50 (30) 14:22:50 188981 It has been brought to my notice that in the interim order, counterparties mentioned in the above table, have been alleged to have played some role in the IPO of TPL and directions were issued against all these counterparties vide the interim order. 36. I note from the above table that the Noticee was a seller in the transactions mentioned at S. Nos. 1 to 4 and it was a buyer in the transactions mentioned at S. Nos. 5 & 6. I further note that all the buy and sell orders were placed by the Noticee as well as by its counterparties within a gap of 0-15 seconds at the same price. As observed in the last column of the above table, majority of the said orders mentioned above, matched with offers of counterparties. 37. The Noticee has contended that out of a total number of 153 orders placed, only 6 had led to synchronized trades. However, I note that all the above synchronized trades had taken place after 12.10 PM i.e. subsequent to the exit of QIBs. In this regard, an analysis of the order logs submitted by it in support of its replies dated May 31, 2018 and December 16, 2020, shows that majority of the orders placed by the Noticee were for small quantities. Only 16 orders were of a quantity of more than 1,00,000 shares each, Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

including the 3 orders which matched with those of QIBs. I also note that, out of a total volume of 37,00,704 shares traded by the Noticee, the volume of shares traded through the abovementioned synchronized trades amounted to 13,99,100 shares, which is 37.80% of the total volume of shares traded by the Noticee on the day of listing of the scrip of TPL. In view of the same, even though the trades alleged to be synchronised is less in number, the volume of shares involved/traded through these trades is not so miniscule to be ignored as mere co-incidence of order. 38. The Noticee has further contended that before his trade matched with Hitendrakumar Kapadia, mentioned at S. No. 5 in above table, 191 trades were executed in the same order. In this regard, I note that the stock exchange system works on the principle of price-time priority wherein on the same price, the order which is placed first in the system gets matched first. Therefore, the said 191 trades seem to be a result of the fact that they were placed, before the Noticee and Hitendrakumar Kapadia placed their respective orders in the system. This doesn’t change the fact that a large part of the said order of the Noticee (for 4,77,884 shares out of total order for 5,00,000 shares) got matched with the order of Hitendrakumar Kapadia. The fact that both these entities placed their respective orders exactly at the same time without a gap of even 1 second and their orders matched in exact price and quantity, could be brushed aside treating them as a mere co-incidence, had the said trade been a solitary instance. However, I note that the Noticee has been alleged to have executed such synchronised

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

trades repeatedly with other entities as well. The time gap between the buy and sale orders that got matched also ranged from 0 to 15 seconds only, which do strongly indicates that there could be a meeting of minds between the counterparties to such trades elsewhere, than on the trading platform of stock exchanges, as envisaged by Hon’ble Supreme Court of India, while making their observations as quoted earlier, while passing judgment in the matter of SEBI vs Kisore V Ajmera (supra). 39. I also note that the Noticee has made contradictory statements in its replies. On the one side, the Noticee has submitted that its average purchase price of Rs. 48.06 per share shows that its anticipation that the market price of TPL will fall was proved right, while on the other hand, it has submitted that it generally buys in a scrip having upward momentum and sells a scrip showing downward momentum. Contrary to this submission, the Noticee appears to have continued placing buy orders in the scrip of TPL on both the exchanges on the listing day despite witnessing continuous fall in price. 40. It is also alleged that the Noticee has been indirectly funded by the Company for its losses incurred as a result of its trading in the shares of TPL. In this regard, it is alleged that, from the IPO proceeds of TPL, an amount of Rs. 50,10,274 was transferred by the Company to one Shareware Finvin Pvt. Ltd. (Shareware) on October 13, 2011. Thereafter, Shareware had transferred Rs.50,00,000 to the account of another entity viz; Krishna Trade & Commerce Pvt. Ltd. (Krishna) on October 17, 2011 and Krishna in turn transferred an amount of Rs. 70,00,000 to the Noticee

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

on the same day. Hence, it is alleged that the Company i.e. TPL had layered the fund transfer through other entities viz. Shareware and Krishna to hide the trail/movement of funds from its accounts to the Noticee that was transferred to bail out the loss suffered by the Noticee on account of its trading in the scrip of TPL. 41. In this regard, I note that the DA has observed that the allegation/ observations regarding diversion of funds from the account of TPL to the Noticee through layering of transactions through Shareware, Krishna etc. cannot be sustained. The DA while making the above observations has relied upon the observation of the Hon’ble Securities Appellate Tribunal (SAT), made in its order dated September 19, 2016 pertaining to the matter of Lopa S Bhavnagari vs. SEBI, wherein a similar allegation was levelled against appellant therein, who had also traded in the scrip of TPL on the listing day. In that case the Hon’ble SAT has also held : “17. We find merit in the argument made by the learned Senior Counsel for the appellants on the contention that diversion of IPO funds and thereby part funding of the losses made by the appellant cannot be sustained following the order of this Tribunal in case of Tijaria Polypipes Ltd. (Appeal No.372 of 2014 decided on 29/6/2016). However, we do not agree with the arguments that the appellant’s trading in the TPL scrip on the opening day of IPO was just business as usual.” 42. Therefore, in the light of the above observations of Hon’ble SAT and Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

findings recorded by DA, I find that based on materials on record, it is difficult to conclude with conviction that the Noticee has been funded by TPL to trade in the scrip, on the day of its listing. However, the same is irrespective of already established fraudulent and unfair trade practices adopted by the Noticee in respect of its dealings in the scrip of TPL. 43. It is also important to note that the Noticee had made a submission to the effect before the DA that it had taken a loan from Krishna to fulfil its pay-in obligations. In view of the said contention, during the course of personal hearing, the Noticee was advised to provide reasoning behind its act of continuing trading in the scrip of TPL despite suffering continuous losses throughout the day, more particularly, when it was short of funds. I find that the Noticee has failed to submit any plausible reasoning to justify its acts of indulging in the trades in the said scrip by utilising borrowed money and had to incur losses. 44. The Noticee has admittedly suffered a huge loss of Rs. 1,20,20,885 from its trades in the scrip of TPL in one day. The Noticee has submitted that, generally due to the volatility in the scrips on the listing day, it trades in those scrips for earning substantial profits primarily by way of day trading and intra-day square off trades. However, I note from the annexure E of the reply of the Noticee dated December 16, 2020 that, out of 41 scrips on which the Noticee had traded on the listing day of those respective scrips, the loss incurred by the Noticee in any of those 41 scrips was nowhere close to the huge loss suffered by it, out of its trading in the scrip of TPL.

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

45. Further, I note that the scrip price of TPL was stable from 10.00 AM to 12.00 Noon on the listing day. Thereafter, the price of the scrip was falling continuously till the closing of the market. Further, the Noticee, in its reply dated May 31, 2018, has submitted that it had anticipated fall in the scrip price of TPL. However, despite anticipating and noticing a continuous fall in the price, the Noticee kept on placing orders, both buy and sell, in the market. Any prudent investor, who trades on the basis of risk management system, would have stopped trading at some point of time to curtail its losses. However, inexplicably, the Noticee was active in the scrip till closing of the day. In this regard, I note that the Hon’ble Supreme Court of India, in its judgment in the matter of SEBI vs. Rakhi Trading Pvt. Ltd. [(2018)13 SCC 753] made the following observations: “In the instant case, one party booked gains and the other party booked a loss. Nobody intentionally trades for loss. An intentional trading for loss per se, is not a genuine dealing in securities. The platform of the stock exchange has been used for a non-genuine trade. Trading is always with the aim to make profits. But if one party consistently makes loss and that too in preplanned and rapid reverse trades, it is not genuine; it is an unfair trade practice.” (emphasis supplied) Therefore, continuous booking of loss by the Noticee at the same time when the Noticee had in advance anticipated a fall in price of the scrip of TPL, shows that the Noticee was intentionally booking loss in the scrip of TPL. In terms of the above observations of Hon’ble Supreme Court of India, such

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

intentional booking of loss cannot be termed as genuine dealing in securities and therefore, it amounts to indulging in unfair trade practice. 46. Further, the fact that large orders were placed by the Noticee and its counterparties within a gap of seconds, leading to instant matching of those orders clearly suggests that there was meeting of minds between the Noticee and its counterparties as mentioned in the Table 8. In this regard, I note from the Order dated November 02, 2012 that SEBI has also initiated adjudication proceedings against the counterparties to the synchronized trades executed by the Noticee who have been named in the Table 8. 47. The Noticee has submitted that its trading strategy was to get maximum profit out of price fluctuation and volatility observed in prices on the listing day of a scrip, and for the said reason the Noticee was trading on the listing day with minimum delivery position. However, the actual trading pattern the Noticee followed in the scrip of TPL doesn’t seem to be in line with the said strategy, since any entity with the said strategy will attempt to get the maximum out of fluctuation of the scrip price with minimum risk and without affecting the price-volume of the scrip by its own trades. On the other hand, the trades of the Noticee were clearly affecting price-volume of the scrip on the listing day. Further, normally a prudent investor will not attempt to purchase shares in large quantities at once, in a scrip on the listing day as this may lead to a huge loss, as happened with the Noticee in the present matter, as it may prove to be difficult to offload such huge quantities of shares at a later stage, in case of freefall of price. The trading pattern of the Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

Noticee coupled with submissions advanced by it suggest that the Noticee, despite being aware of likely fall in the price of the scrip, purchased the shares of TPL in huge quantities without being concerned about the situation that later on it might not be in a position to offload the same. It further suggests that the trades executed by the Noticee were not transacted as fair market practice but executed under a scheme or artifice. 48. I find that Noticee has not been consistent in its submission and, at many places, it has contradicted its own statements. As observed from the preceding paragraphs, the Noticee was initially placing orders in the scrip of TPL at rates which were significantly lower than the prevailing market rate. I observe that when the prevailing market rate of TPL was hovering in the region of Rs 62 to Rs 60 on the opening day of listing, Noticee was placing buy orders in the scrip at rates which were significantly lower than the market price and also was deleting these orders immediately. Subsequently, the Noticee placed its first large buy order in the scrip of TPL at 11:21:51 AM for 2,50,000 shares. A substantial portion of this Order got matched with the sell orders placed by the QIBs. I find that the sell orders placed by the QIBs remained pending in the system until the Noticee had placed its huge buy order for 2.5 lakh shares at 11:21:51 AM. This clearly signifies that Noticee had malafide intentions and had placed its buy orders only to facilitate easy exit to the QIBs at a premium to the issue price. In the light of the aforementioned facts, I can observe that the Noticee had inter alia indulged in such trading, for ensuring an exit to the QIBs and other

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

allottees in TPL’s IPO and as a result of the same, ended up in suffering huge losses which were suspected to have been partly borne by TPL (through layered fund transactions). From the aforestated trading pattern of the Noticee, one can conclude that the Noticee was operating hand in glove with those, who wanted to ensure that the QIBs and other allottees are given easy exit at a premium to the issue price. 49. To sum up, I observe that even though the charge of funding from the Company is not found to be established based on the materials on record, nonetheless, from the consideration of the other evidences available on records and explanations offered by the Noticee, I am of the view the that trades of the Noticee have not been consistent with the established market prudence normally followed by a genuine investor, and the Noticee was found to have bought huge quantities of shares of the Company happily at a price higher than its anticipated price and held on to them on the face of falling market price of the scrip, which raises serious doubt on its intent behind executing such trades even at the cost of incurring huge losses. Similarly, the Noticee is also found to have indulged in synchronised trades as well, which are though less in number, involved high volume of shares that cannot be ignored. In view of the aforesaid, the above noted synchronised trades of the Noticee, even though may not be intended to provide exit to the QIBs but such high volume trades definitely had those fraudulent elements for being held as not fair and genuine trades. It is trite law that orders and trades which have not been found to be fair and genuine

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

are fraudulent in nature, since such orders are laced with the ingredients of artificially inducing investors to deal with the said scrip and such acts of indulging in unfair trades further possess the potential to create artificial demand and misleading appearance of trading volume in such a scrip. Hence, the acts of the Noticee of indulging in synchronised trades were succinctly unfair and fraudulent trades which were executed in violation of Section 12A(a), (b) and (c) of the SEBI Act read with Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (b) & (e) of PFUTP Regulations. 50. Without prejudice to the findings and observations in the foregoing paragraphs about the fraudulent and unfair trade practices followed by the Noticee while trading in the scrip of TPL on the listing day, I find that in the instant matter, the Noticee has already been put under restraint vide interim order dated December 28, 2011 for the said violations and misconduct and the restraint imposed vide the said interim order remained in force until the same was revoked vide another order dated November 02, 2012. Needless to state that, the said restraint was also imposed for the violation of provisions of the SEBI Act, 1992 and the regulations made thereunder. Vide the above mentioned interim order, the Noticee has not only been prohibited from buying, selling or dealing in any securities, in any manner whatsoever, in its proprietary account, but was also prohibited from entering into any fresh agreements with new clients in its operations as a stock broker till the restrain so imposed was revoked by the subsequent revocation order. Thus, effectively, the restraint and prohibition order qua

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

the Noticee remained in force for a period of 10 months. It has also been submitted before me that no further complaints have been brought on record against the Noticee based on which any further actions could be contemplated for initiation against it. 51. I also note that the allegations based on which restraint was imposed vide the interim order was in exercise of the power under Section 11B of SEBI Act, 1992 and the allegations based on which the instant proceedings have been initiated are in connection with the same underlying violations for which the restraint was imposed vide the aforesaid interim order dated December 28, 2011 by invoking the provisions of Section 11B of SEBI Act. Hence considering the above, I am inclined to take a view that the present activities of the Noticee do not indicate any material event that would adversely affect its status as Stock Broker, when it has submitted that its activities in the securities market is limited to a few clients or its proprietary trades only. In the absence of any further incriminating evidence to the contrary and the fact that for the same offences and violations, the Noticee has already undergone restraint for a period of Ten months vide the interim order dated December 28, 2011, that was revoked by the subsequent order dated November 02, 2012, I am of the view that it would be sufficient to meet the end of justice that this proceeding is disposed of without any further measure being taken against the Noticee. ORDER 52. In view of the above, in exercise of powers conferred on me under Section

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.

12 (3) of the SEBI Act read with regulation 27 and regulation 28 of the SEBI (Intermediaries) Regulations, 2008, and upon consideration of the facts and circumstances as above, I hereby dispose of the extant enquiry proceedings and the SCN dated November April 11, 2018 against the Noticee, i.e. Salasar Stock Broking Limited without any direction. 53. This Order disposes of the enquiry proceedings initiated against the Noticee following the investigation conducted by SEBI into the alleged irregularities in the trading in the scrip of Tijaria Polypipes Limited for the period September 29, 2009 to December 31, 2009.

Sd/- Date: April 19, 2021 S. K. Mohanty Place-Mumbai Whole Time Member

Order in respect of Salasar Stock Broking Ltd. in the matter of Tijaria Polypipes Ltd.