Order in respect of Shamken Spinners Limited and Ors

WTM/RKA/IVD/NRO/153/2014 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: - 1) SHAMKEN SPINNERS LIMITED 2) MR. VIDYA NAND GARG, DIRECTOR 3) MR. H. B. CHATURVEDI, DIRECTOR 4) MR. AMIT CHATURVEDI, DIRECTOR 5) MR. L. C. CHANARI, DIRECTOR 6) MR. SANJAY CHATURVEDI, DIRECTOR IN THE MATTER OF SHAMKEN MULTIFAB LIMITED.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) initiated investigations in the unusual price movement in the scrip of Shamken Multifab Limited (hereinafter referred to as “SML” or the company) following an unusual sharp rise in price from ₹6/- on February 23, 2000 to ₹25.55/- on July 20, 2000 accompanied with an unusual rise in net traded quantity, from average traded volume of 9,800 shares in the period May-June 2000 to 92,400 shares during the period June 21, 2000 to July 18, 2000. 2. The investigation inter alia revealed that – (a) There was a price movement in the share price of SML from ₹6/- on February 23, 2000 to ₹25.55/- on July 20, 2000. The analysis of trading has been carried out in two different trading periods, i.e., February 23, 2000 to June 20, 2000 and June 21, 2000 to July 18, 2000.

(b) Trading in the scrip of SML was largely concentrated with two stock brokers, namely, Maheshwari Technical & Financial Services Ltd. (hereinafter referred to as “Maheshwari”) and Adroit Financial Services Ltd. (hereinafter referred to as “Adroit”) who had entered into large number of cross and structured deals. These brokers were mainly trading for a common client namely Vandana Securities Ltd. (hereinafter referred to as “Vandana”), who was acting as unregistered sub-broker. Adroit had also traded for its clients, namely, Ms. Sonali Bansal, M/s Shiv Vani Associates and Mr. Moti Ram. The affairs of firm Shiv Vani

Order in respect of Shamken Spinners Limited and Ors.

Associates and trades of Ms. Sonali Bansal were handled by one Mr. Amit Bansal (husband of Ms. Sonali Bansal and brother of Mr. Manish Bansal). (c) Vandana was mainly trading for M/s. Prasneeta Constructions (hereinafter referred to as “Prasneeta”) and M/s. Dhanvarsha Investment (hereinafter referred to as “Dhanvarsha”). Both these entities were linked to each other. The proprietor of Dhanvarsha, namely, Mr. Jeev Narayan Mishra is an employee of director of Prasneeta. Both Dhanvarsha and Prasneeta had admitted that they were trading for SML group. They have also stated that they were introduced to SML group by Mr. P. K. Agarwal who is a Chartered Accountant and also a friend of Mr. Praveen Juneja, director of SML. Mr. P. K. Agarwal reportedly played an instrumental role in managing the share price manipulation for SML. It has been contended by Mr. I. C. Jindal of Vandana that Mr. P. K. Agarwal used to place orders on behalf of Dhanvarsha and Prasneeta. (d) The entire trading in the shares by these clients was for various promoter group concerns of SML. SML has admitted that their promoter group concerns had acquired shares from Dhanvarsha. Fund flow trail has also shown that Dhanvarsha and Prasneeta had received money from SML group concerns for the purpose of trading in the scrip of SML. SML had also given funds to these entities for acquiring its own shares. It is clear that the SML attempted to influence price rise of its scrip by trading effected through front entities. (e) Further, by creating false market in the scrip, the entities, i.e., stock brokers/Vandana/ Dhanvarsha/Prasneeta/Mr. P. K. Agarwal/SML and its group concerns also apparently have attempted to induce general public to deal in the scrip. Probably, the motive could be to exit from the scrip (after booking profit) once general public had been lured into it.

3. In view of the above, show cause notices (SCNs) dated February 17, 2005 were issued under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (the SEBI Act) read with regulation 12 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 ("PFUTP Regulations, 1995") read with regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations, 2003") by SEBI to Shamken Spinners Ltd. (hereinafter referred to as “SSL”) and its directors, Mr. Vidya Nand Garg, Mr. H.B. Chaturvedi, Mr. Amit Chaturvedi, Mr. L. C. Chanari and Mr. Sanjay Chaturvedi (hereinafter collectively referred to as “the noticees” or individually by their respective names).

4. In the SCNs issued to the noticees it was, inter alia, alleged that– (a) The flow of transactions that created the artificial market and made possible the sharp rise in price in SML were as under: Maheshwari SML group P K Agarwal group Vandana Adroit (b) SML group consists of SML and its group companies, namely, Shamken Multifab Ltd., Lotus Garments P. Ltd., Right Credit & Sec Pvt. Ltd., Shamken Spinners Ltd., Kotwan Traders P. Ltd., Angel Textiles P. Ltd. and Sohit Investments P. Ltd. (c) The P. K. Aggarwal group consists of M/s. Dhanvarsha Investments (Proprietor Mr. Jeev Narayan Mishra) and Prasneeta Constructions Pvt Ltd. (d) Two stock brokers of NSE namely Maheshwari and Adroit accounted for approximately 95% of the total net traded quantity during the relevant period and that both the stock brokers had mainly traded on behalf of a common client, namely, Vandana. (e) Further, Adroit had also dealt for Ms. Sonali Bansal, M/s. Shiv Vani Associates and Mr. Moti Ram, who in-turn were dealing for Mr. I. C. Jindal, director, Vandana. (f) Both the stock brokers have 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 February 23, 2000 to June 20, 2000 their net buy was 5,61,500 shares, i.e., 81.15% of the total net buy of 6,83,500 shares of NSE. During the next period of June 21, 2000 to July 18, 2000 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 SML group was the ultimate client (of Maheshwari and Adroit) who had traded through two entities namely Dhanvarsha and Prasneeta, linked to one Mr. P.K. Agarwal, Chartered Accounatnt. (i) Vandana acting in the capacity of an unregistered sub-broker had traded on behalf of Dhanvarsha and Prasneeta. (j) Mr. Jeev Narayan Mishra, proprietor Dhanvarsha has stated in his statement that all his dealings in SML shares were on behalf of SML group only and no dealings were done in his own account.

He also stated that all the orders were placed by Mr. Pravin Juneja (director of SML) and sometimes by Mr. V.R. Rao (Sr. Manager of SML group, who is also a subordinate of Mr. Pravin Juneja). Mr. Ajay Kumar Agarwal director of Prasneeta, in his statement recordeed on October 30, 2003 has 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 share was done by Prasneeta, it was at the instance of Mr. Pravin Juneja of SML. (k) Shamken Multifab Ltd. admitted that 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 that the payment was made by SSL. (l) SML group was behind the trading in the scrip of SML was further proved from the transactions in the current account no. 50320 of Mr. Jeev Narayan Mishra with Nedungadi Bank (now merged with PNB), Mayur Vihar, Delhi. The said bank account was opened specifically for the purpose of executing task of trading in the scrip of SML.

The account was opened on June 01, 2000 and it remained operational till April '2001. From the statement of the account it appears that more than 90% of the payments had been made to Vandana and 80% of credit entries revealed that all the payments have been made by SML group. (m) SSL alongwith its group companies traded/financed for trading in the scrip 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. (n) It was alleged that the noticees have violated the provisions of regulation 4(a), (b), (c) and (e) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (the PFUTP Regulations, 1995) read with regulation 4 (2) (a) (d) and (e) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (the PFUTP Regulations, 2003). 5. SSL through its legal representative Luthra & Luthra Law Offices vide letter dated April 11, 2005 replied to the SCNs and submitted the following: 1) SSL denied all the allegations set forth in the SCNs and submitted that no offence has been made out under regulation 4 of the PFUTP Regulations.

2) The instant 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 PFUTP Regulations, 1995 any investigation pending at the commencement of the PFUTP Regulations, 2003 shall be continued and disposed of in accordance with the procedure laid down in the PFUTP Regulations, 2003. 3) In February 2000, the SML group decided to increase their holding in the flagship company SML and also in another group company Shamken Cotsyn Ltd. (hereinafter referred as “SCL”). Four of the SML group companies, namely, Sohit Investments Pvt. Ltd., Angel Textiles Pvt. Ltd., Kotwan Traders Pvt. Ltd. and Lotus Garments Pvt. Ltd. purchased shares of SML in batches beginning March 9, 2000. 4) The SML group transacted through Dhanvarsha and Prasneeta for buying the shares of SML and SCL for which they were paid their due brokerage. Neither Dhanvarsha nor Prasneeta were ever authorized by the SML group to trade in the SML in order to create any artificial volumes.

5) The SML group had no direct nexus/contact/privity with either Maheshwari or Adroit. 6) None of the Shamken group directors/officers/employees were ever mandated by the Board of any SML group company to trade in SML/SCL or to authorize any broker to trade in SML/SCL shares in a fraudulent manner at any point in time. 7) SSL and the SML group and its promoters and directors were not in any other way connected to Dhanvarsha or Prasneeta except to the limited manner. 8) Between the period May 31, 2000 and August 05, 2000 four of the SML 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 SCL were purchased by Sohit Investments P. Ltd. between July 10, 2000 and Nov 25, 2000 for ₹11,36,777 for which payment to Dhanvarsha was made by SSL. 9) Allegation by SEBI that SML shares were sold by the SML group is completely false and baseless. There is absolutely no evidence whatsoever to show that the SML group sold any SML shares as no such sale took place.

10) 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. 11) Perusal of trade logs show that there are several trades by the said two stock brokers where the buy price has been lower than the last traded price. 12) SEBI has failed to consider that the SML group has not made any profit out of the investments in SML shares. SEBI has failed to show that there was an intention or motive to manipulate markets, which is prerequisite for an offence to be made out under regulation 4 of the PFUTP Regulations, 1995.

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 SML group. 14) SML 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 SML group and therefore no liability can be fastened on SSL or the other SML 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 SML group cannot be held liable for the fraud, if any, committed by Mr. Pravin Juneja. 16) The SML group was not connected in any manner to Maheshwari, Adroit or Vandana 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. Jeev Narayan Mishra and in particular Mr. I.C.

Jindal indulged in the activity without any express or tacit approval of SML or the SML 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 Narayan Mishra. 18) Mr. Pravin Juneja was the Director (Corporate Finance) and the Company Secretary of SML, Shamken Cotsyn Ltd., Shamken Spinners Ltd. 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. H. B. Chaturvedi and SSL/SML, Mr. Pravin Juneja was the person in charge of placement of orders, appointing and dealing with brokers and making payments. 20) Mr. Pravin Juneja appointed Dhanvarsha and engaged Mr. Jeev Narayan Mishra, placed the orders to buy SML shares and also made payments for the same. 21) Mr. Jeev Narayan Mishra and Mr. A. K. Aggarwal, Director of Prasneeta have stated on record that all orders to deal in SML shares or other SML group shares came from Mr. Pravin Juneja. Mr. H. B. Chaturvedi did not know of Mr. Pravin Juneja’s dealings with Mr. P. K. Aggarwal, Mr. Jeev Narayan Mishra or Mr. A K Aggarwal.

22) The scheme as elaborated on by SEBI in the SCNs if true was conceived and executed solely by Mr. Juneja with the intention of enriching himself. 23) SEBI has not initiated any action against the intermediaries whom it has claimed were engaging in cross and structured deals. 24) Tracking of flow of funds revealing that SML group was the ultimate client of Maheshwari and Adroit is completely wrong and baseless.

25) Allegations that certain payments were made by the SML 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 SML 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 SML group. 26) The allegation 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. The fact that certain payments were made from this account to Dhanvarsha or to Mr. Jeev Narayan 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. Jeev Narayan Mishra.

27) Appointment of Dhanvarsha was merely by way of administrative convenience and by way of introduction by Mr. P. K. Aggarwal, who assured the SML 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. 28) A scrutiny of Dhanvarsh’s account and Mr. Jeev Narayan 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. 29) Shares of SML were bought through Dhanvarsha and Prasneeta. 30) Certain payments were made by SSL to Vandana at the instance of Dhanvarsha, and SSL had no direct dealing with Vandana. 31) The words of regulations 4(a) and 4(e) of the PFUTP Regulations, 2003 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. 32) Regulation 4(b) of the PFUTP Regulations, 1995 requires indulgence in acts that are calculated to mislead persons. It is not established by SEBI that the SML group had any such intention. The fact that SML 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. 33) Regulation 4(c) of the PFUTP Regulations, 1995 requires indulgence in transactions that are not genuine. SML group has taken delivery of all shares of SML and is still holding them clearly shows that the transactions were genuine transactions. 34) The price of the security can be manipulated by both buying and selling of shares. SML group has bought SML shares and were never sold by SSL or SML group. 6. An opportunity of personal hearing was granted to the noticees before the then Whole Time Member of SEBI on November 7, 2008, December 12, 2008, June 24, 2009 and May 21, 2010 wherein, in some instances the noticees requested for adjournment and in some instances it was informed that the noticees would be applying for consent.

I note that the consent applications filed by the noticees have been rejected. However, the instant proceedings have remained pending for logical conclusion. Following the principles of natural justice further opportunities were granted to the noticees before me. However, they failed to appear before me. 7. 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. 8. Before dealing with allegations and charges, I deem it necessary to refer to the provisions of 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;"

9. In this case, it is noted from the SCNs that there was a price rise in the scrip of SML from ₹6/-on February 23, 2000 to ₹25.55/- on July 20, 2000. Two stock brokers, viz., Maheshwari and Adroit had entered into cross deals and structured deals in the scrip of SML and through such transactions they had directly/indirectly influenced the price of the scrip. I further note that SML and its group concerns including Shamken Spinners Ltd. were the ultimate clients of the said brokers. These two stock brokers were mainly trading for a common client viz., Vandana, who was mainly trading for 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.

10. I note that SML has admitted that their promoter group concerns had acquired shares from Dhanvarsha. Further, the cross deals through Maheshwari and Adroit constituted 13.69% and 17.11% of the gross traded quantity for the market in this scrip. During the period from June 21, 2000 to July 18, 2000, 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. I note that 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 that the payment was made by SSL, SML, Lotus Garments Ltd. and Right Credit and securities Pvt. Ltd. 11. Mr. Jeev Narayan Mishra, proprietor of Dhanvarsha has stated that his dealing in SML shares were on behalf of SML group only and no dealing were done in his own account and that no bills/contract notes have been issued by Dhanvarsha for the shares purchased by SML group.

Admittedly, Mr. Jeev Narayan Mishra was an employee of Prasneeta a company of Mr. Ajay Kumar Agarwal who had introduced him to Mr. Praveen Juneja, one of the directors of SML. Mr. Jeev Narayan Mishra has also stated that Dhanvarsha was opened with a specific purpose of executing transactions in the scrip of SML. Whenever Mr. Praven Juneja and Mr. V. R. Rao asked Mr. Jeev Narayan Mishra 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. Further, all the money credited into accounts no. 2116 and 50320 came from SML group. 12. 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. In light of the aforesaid, it cannot be disputed that SML group were the ultimate clients of brokers Maheshwari and Adroit.

13. SSL has informed that appointment of Dhanvarsha was merely by way of administrative convenience and by way of introduction by Mr. P. K. Aggarwal who assured SML group that Dhanvarsha was an entity already dealing in securities. I note that Mr. P. K. Aggarwal was a friend of Mr. Praveen Juneja and is also related to Mr. I. C. Jindal and Mr. Ajay Kumar Agarwal. 14. In this case, it is noted that several payments have been made by SSL to Prasneeta, Dhanvarsha and Vandana. I further note that Shamken Spinners Ltd. has bought 2,66,920 shares of SML from Prasneeta who had purchased through Vandana during March-May 2000 and payment of ₹49.21 lacs was made by SSL to Prasneeta for the said purchase. SSL also paid ₹73.35 lacs through 24 cheques to Dhanvarsha. 15. SSL has contended that the SML 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 SML group, had bought and sold shares through brokers Maheshwari and Adroit that has resulted into cross deals and structured deals.

Hence the contention that SML group has not sold shares is not 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. 16. I also note that there was a price rise observed in the scrip of SML and that the stock brokers Maheshwari and Adroit through cross deals and structured deals had directly/indirectly influenced the price of the scrip. I further note that SML and its group concerns including SSL were the ultimate clients of the said stock brokers. 17. I note that both Dhanvarsha and Prasneeta are not registered as broker/sub-broker with SEBI. I further note that Mr. Jeev Narayan Mishra of Dhanvarsha had no prior experience of share market. I also note that Mr. Ajay Kumar Agarwal was new to share market and had no knowledge that registration from SEBI is compulsory to act as sub-broker. Considering the facts and circumstances that huge transactions were carried out by SML group including SSL through Dhanvarsha and Prasneeta, SSL and its group companies did not trade through a registered stock broker / sub-broker and engaged unregistered entities namely Dhanvarsha, Prasneeta and Vandana to trade in the shares of SML, I am of the view that such transactions were not mere coincidences but were carried out for the purpose of manipulation in the price and volume of the scrip of SML.

18. SSL has further contended that the instant 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. In this regard SSL has placed reliance on regulation 13 of the PFUTP Regulations, 2003 that states that notwithstanding repeal of the PFUTP Regulations, 1995 any investigation pending at the commencement of the PFUTP Regulations, 2003 shall be continued and disposed of in accordance with the procedure laid down in 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 SCNs allege violations of regulations 4 (a), (b), (c) and (e) of the 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 the 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 SCNs.

Therefore, I do not find any fault with the inclusion of provisions of regulation 4 of the PFUTP Regulations, 2003 in the SCNs and reject the contentions of the noticees in this regard. 19. Considering the above facts and circumstances of this case, I do not find any material to differ from the allegations and charges in the SCNs and find that Shamken Spinners Ltd. and its directors, namely, Mr. Vidya Nand Garg, Mr. H.B. Chaturvedi, Mr. Amit Chaturvedi, Mr. L. C.

Chanari and Mr. Sanjay Chaturvedi have violated the provisions of regulation 4(a), (b), (c) and (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with Regulation 4 (2) (a), (d) and (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 20. 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. 21. 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 Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with regulation 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 hereby restrain Shamken Spinners Ltd. and its directors, namely, Mr. Vidya Nand Garg, Mr. H.B. Chaturvedi, Mr. Amit Chaturvedi, Mr. L. C. Chanari and Mr. Sanjay 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. 22. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure that the direction given in this order are complied with. This order shall come into force with immediate effect

Sd/-

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