Order in respect of Shiv Vani Associates & Another

WTM/RKA/IVD/NRO/152/2014 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN RESPECT OF SHIV VANI ASSOCIATES AND ITS PROPRIETOR MR. MANISH BANSAL 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 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 Narain Mishra is an employee of director of Prasneeta. Both Dhanvarsha and Prasneeta

Order in respect of Shiv Vani Associates & Another 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 August 31, 2004 were issued under section 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 (the 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 (the PFUTP Regulations, 2003) by SEBI to M/s. Shiv Vani Associates and its proprietor Mr. Manish Bansal (hereinafter collectively referred to as "the Noticees” or by their respective names) calling upon them to show cause as to why directions under section 11B of the SEBI Act, 1992 including, inter-alia, directions of restraining them from accessing the securities market and prohibiting them from buying, selling and dealing in securities, should not be issued against them.

In the SCNs issued to the Noticees it was alleged that– (a). 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 these stock brokers had mainly traded on behalf of their common client, namely, Vandana. (b). M/s Shiv Vani Associates purchased 2,300 shares and sold 8,300 shares in the scrip of SML through Adroit. Further, as per information furnished by Vandana, nominal trading was also done for it by Vandana.

(c). M/s Shiv Vani Associates was introduced to Adroit by Mr. I. C. Jindal, director of Vandana. Mr. Manish Bansal, in his statement dated December 13, 2003 had stated that the firm was involved in buying and selling in shares of SML for various clients and the affair of this firm were handled by his elder brother Mr. Amit Bansal, a director of Maheshwari. Mr. Ajay Kumar Gupta, director of Adroit has also stated in his statement that Mr. Amit Bansal was placing orders and receiving deliveries for M/s Shiv Vani Associates. (d). Mr. Manish Bansal had also stated that orders in SML were received from Mr. I. C. Jindal. Vandana had also admitted that shares were purchased from M/s. Shiv Vani Associates. (e). Mr. Manish Bansal had lent name of M/s Shiv Vani Associates thereby provided a link to SML group for rigging the share price of SML and thus aided and abetted the market manipulation in the scrip of SML by Vandana, Mr. I. C. Jindal and SML group. (f). It was alleged that the Noticees have violated provisions of regulation 4(a), (b) and (c) of the PFUTP Regulations, 1995 read with regulation 4 (2) (a) and (e) of the PFUTP Regulations, 2003. Further, by dealing as unregistered sub-broker, M/s Shiv Vani Associates has also violated rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub- Brokers) Rules, 1992 (the Stock Brokers Rules) (since rescinded) read with section 12(1) of the SEBI Act, 1992. 4. Mr. Manish Bansal vide letter dated October 8, 2004 filed reply to the SCNs wherein he denied the allegations and charges stated in the SCNs.

He, inter alia, submitted that: (a) The Noticees were not aware of the alleged unusual rise in the net traded quantity of the shares of SML during the period as alleged. (b) Their dealing was just a part of normal business and therefore their transactions had nothing to do with the alleged unusual rise in the net traded quantity of the shares of SML as alleged. (c) They are not aware of the trading quantity of Maheshwari and Adroit during the alleged relevant period and they are not aware of the aforesaid transaction done by Maheshwari and Adroit, mainly with Vandana. (d) With regard to the placing of orders in the shares of SML to Adroit through Mr. Amit Bansal, it has been submitted that Mr. Amit Bansal was helping the Noticees in various transaction as he being the elder brother of Mr. Manish Bansal, Mr. Amit Bansal acted as the guiding force. (e) There was no such intention either on the part of the Noticees or on the part of Mr. Amit Bansal to do any short of rigging in the price of the scrip of SML. (f) SEBI has completely failed to establish that there was actually any intention on the Noticees' part to do rigging in the price of SML.

(g) The basis to arrive at the conclusion that the Noticees had violated the various provisions/ regulations of the SEBI Act, 1992 is highly un-justified and unfair. (h) SEBI has completely failed to establish as to whether the alleged price rise induced any person/entity to actually buy the shares of SML and whether there was any loss incurred by any person/entity who might have purchased the shares of SML after the alleged false rise in shares of the SML. (i) The said show cause notice is infructuous as no action as contemplated in the said notice could now be taken as the Noticees have already stopped doing business in the securities. 5. An opportunity of personal hearing was granted to the Noticees before the then Whole Time Member of SEBI on November 7, 2008 and December 12, 2008. Mr. Manish Bansal had appeared on December 12, 2008. However, no order was passed in the matter. Following the principles of natural justice further opportunities were granted to them before me. However, the notices issued in this regard were returned undelivered from the last known address of the Noticees.

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

SEBI Act, 1992 "12. (1) No stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act."

SEBI (Stock Brokers and Sub-Brokers) Rules, 1992 "3. No stock-broker or sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by the Board under the Regulations: Provided that such person may continue to buy, sell or deal in securities if he has made an application for such registration till the disposal of such application."

8. 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. It is further noted that Dhanvarsha and Prasneeta have admitted in their statement that they were trading for SML group and SML had admitted that their promoter group concerns had acquired shares from Dhanvarsha. Mr. Amit Bansal was placing orders and receiving deliveries for the Noticees. The Noticees have though generally denied the allegations and charges, they have not disputed any transaction, relation, connection alleged in the SCNs. They have also not substantiated their stand on the basis of any material or evidence, whether documentary or circumstantial. It has been submitted that Mr. Amit Bansal brother of Mr. Manish Bansal acted as the 'guiding force' in the transactions of the Noticees.

9. 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 Mr. Manish Bansal through M/s Shiv Vani Associates has lent name and thereby provided a link to SML group for rigging the share price of SML and also aided and abetted the market manipulation in the scrip of SML. Thus, the Noticees have violated the provisions of regulation 4(a), (b) and (c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with Regulation 4 (2) (a) and (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 10. 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. 11. Considering the facts 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 and 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 M/s. Shiv Vani Associates and its proprietor Mr. Manish Bansal from accessing the securities market and prohibit it from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for a period of one year from the date of this order. 12. 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