Order in respect of tradings by Mr. Prashant Kamble[SAT Appeal No.:202/2015]

1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') conducted investigation with respect to the trading activities of Mr. Prashant Kamble (hereinafter referred to as ‘noticee') at National Stock Exchange of India Ltd. (hereinafter referred to as ‘NSE’) and Bombay Stock Exchange Ltd. (hereinafter referred to as 'BSE') for the period of August 16, 2008 to September 2009 (hereinafter referred to as “1st period”), and October, 2009 to June, 2010 (hereinafter referred to as 2nd period) (collectively referred to as the 'Investigation Period'). 2. The investigation inter alia revealed that: (a) The noticee had invested in a total of 89 scrips during the Investigation Period and the gross buy and sell value of the same were approximately `28.48 crores and `28.74 crores, respectively. (b) Of these 89 scrips, the noticee had allegedly indulged in self-trades in 21 scrips accounting for 75,725 shares on 189 instances during the Investigation Period details of which are described in the following table: Table 1: Details of self-trade by the noticee

No. of Self Sl. No. Scrip name Total Buy Total Sale Self trade qty trades 1 Crystal Software Solutions Ltd. 1,53,837 1,53,007 15,190 3 2 Sanguine Media Ltd. 15,15,476 15,15,421 10,769 31 3 Jumbo Bag Ltd. 2,90,571 2,45,936 8,215 13

Order in respect of tradings by Mr. Prashant Kamble

4 Gandhinagar Hotels Ltd. 2,56,336 2,43,764 15,473 31 5 G.S. Auto International Ltd. 15,77,830 15,77,630 12,403 29 6 SKS Logistics Ltd. 8,48,154 8,31,923 8,741 31 7 Gokul Refoils and Solvent Limited 23,705 23,705 650 1 8 Softech Infinium Solutions Limited 1,74,700 2,73,700 1,200 6 9 Kanani Industries Ltd. 96,823 96,681 1,016 7 10 Arihant Capital Markets Ltd. 13,566 13,566 911 3 11 Marg Ltd. 16,279 16,279 289 1 12 Gujarat Metallic Coal & Coke Ltd. 10,33,051 10,33,051 459 19 13 Syncom Formulations (I) Ltd. 45,196 45,196 187 1 14 Interworld Digital Ltd. 14,31,549 14,31,464 95 3 15 Panchsheel Organic Ltd. 42,587 42,587 80 2 16 Indiaco Ventures Ltd. 443 443 11 3 17 Meuse Kara & Sungrace Mafatlal Ltd. 98,003 55,943 10 1 18 Swasti Vinayaka Synthetics Ltd. 8,21,460 8,21,379 10 1 19 Shalibhadra Finance Ltd. 78,083 78,083 10 1 20 Beckons Industries Ltd. 86,103 86,103 5 1 21 Sacheta Metals Ltd. 75,001 67,951 1 1 TOTAL 75,725 189 (c) Out of these 189 instances of alleged self-trades by the noticee, on 111 instances (i.e., 59% of the total alleged instances of self-trades by the noticee) accounting for 53,185 shares (i.e., 70% of total number of shares self-traded by the noticee), the time difference between placing the buy orders and the sell orders was less than 10 minutes. The time-wise details of these alleged self-trades is described in the following table: Table 2: Self Trades and Time Difference Time Difference No. of Trades Less than 1 Minute 55 Between 1 -2 Minutes 13 Between 2 - 5 Minutes 25 Between 5 - 10 Minutes 18 Total 111

3. Based on these facts, a Show Cause Notice (hereinafter referred to as ‘SCN’) dated January 10, 2014 was issued to the noticee alleging inter alia that the noticee allegedly executed 189 such self-trades in 21 scrips accounting for 75,725 shares to provide a false and misleading appearance of trading in the said scrip and thereby contravened the provisions of regulations 3(a),(b),(c),(d), 4(1), 4(2) (a) and (g) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (the PFUTP Regulations) by the noticee. The provisions of the regulations alleged to be contravened by the noticee are reproduced hereunder: "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; (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security; ..................................................”

4. Vide its letter dated April 4, 2014, the noticee submitted its reply to the SCN. The noticee was also granted an opportunity of personal hearing on May 15, 2014 when Mr. Joby Mathew, Advocate appeared as the Authorized Representative (hereinafter referred to as "AR") of the noticee and made submissions. The replies and submissions of the noticee are inter alia as under: (a) SEBI did not provide the complete investigation report to the noticee.

(b) SEBI did not provide copies of BSE and NSE reports in this regard. (c) SEBI has provided the noticee only the extracts of the trade and order logs containing its trades only. In the absence of the complete trade and order log it is erroneous to conclude that the trades of the noticee were deliberately matched with each other. (d) The noticee had traded in 89 scrips during the Investigation Period which stretches over almost 2 years. However, only 189 trades in 21 scrips are self-trades which clearly shows that the said alleged self-trades are mere coincidence and are on account of the automatic and anonymous order matching system of the stock exchange. (e) SEBI did not provide the noticee any data to show that the said alleged self-trades led to creation of artificial volume in the scrips or that the same was done with the intention to create artificial volume in the scrip. In this regard, the noticee has relied upon certain observations in the extracts of the investigation report. (f) The investigation by SEBI, BSE and NSE did not conclude that the noticee’s trades had created an artificial market or created a false or misleading appearance of trading.

(g) The fact that the a particular trade was a self-trade, i.e., that the noticee’s buy and sell orders in a particular scrip matched against its own orders is not known to it or to the market. It is only known to the stock exchange/SEBI. (h) The noticee is a trader and not merely an investor. Therefore, it is its endeavour to square off positions in securities at the earliest and not to take delivery of securities to the extent possible. (i) During the Investigation Period, the noticee had traded in 89 scrips for 687 days and had executed alleged 189 self-trades in 21 scrips. Out of these 189 alleged self-trades, the time difference in respect of 111 alleged self-trades was around 10 minutes. (j) The gross buy and gross sell volume of the noticee was insignificant during the 1st period and the 2nd period. (k) During the 1st period, at BSE the percentage of the noticee's trades to the market volume ranged from 0 to 5.16% and he had made a loss of `53.09 lakhs while trading in 37 scrips. At NSE, the noticee’s trades were not very significant and he had made a loss of `8,502/- while trading in 16 scrips.

(l) During the 2nd period, the trades of the noticee in 3 scrips at BSE exceeded 10% of the market volume. At NSE, the volume of trades of the noticee in 8 scrips was less than 1% of the market volume and he had suffered a loss of `30,747/-. (m) Considering the above, SEBI did not further analyse or investigate the trades of the noticee except for its trades in the scrip of Softech Infinium Solutions Ltd. for the period of January 12, 2010 to February 09, 2013 on BSE. 5. I have carefully considered the SCN issued to the noticee, his reply/submissions and the relevant material available on record. Before dealing with the merits of the instant case, I deem it necessary to deal with the preliminary issue raised by the noticee in his reply/submissions. I note that during the instant proceedings, the noticee had asked for the relevant details/documents like the complete trade and order log, copies of the Investigation Report and reports submitted to SEBI by BSE and NSE based on which the SCN was issued to him. In this regard, I note that the noticee has been provided with the relevant trade and order log with respect to the alleged self-trades executed by him, along with the SCN dated January 10, 2014. As regards the contention of the noticee for furnishing of the extract or copy of the Investigation Report, I note that the Investigation Report is not evidence relied upon in the SCN issued to the noticee.

The findings of the Investigation Report have been narrated in the SCN which is a self-contained document containing all the allegations and charges against the noticees. The SCN also clearly mentions the provisions of law alleged to have been violated by him and the basis of charges against him. In my view, no prejudice would be caused to the noticee if the Investigation Report or its extract is not provided to him. Nonetheless, the relevant extract of the Investigation Report related to the noticee has already been provided to the him vide letter dated March 4, 2014 and no reliance has been made on any document which has not been provided to the noticee while arriving at finding in this order. In my view, no prejudice would be caused to the noticee if only the relevant extract of the Investigation Report is provided to him. 6. Coming to the allegations leveled against the noticee, I note that during the Investigation Period the noticee had traded in a total of 89 scrips and the gross buy and sell value of the same were approximately `28.48 crores and `28.74 crores, respectively. Out of these, on 189 instances the noticee himself was the buy as well as the sell client in respect of 75,725 shares in 21 scrips.

I note that these facts have not been disputed by the noticee. With regards to such trades where the buy and sell client is the same, it is relevant to mention the order of the Hon’ble Securities Appellate Tribunal (the Hon’ble SAT) in the matter of M/s. Jayantilal Khandwala & Sons Pvt. Ltd. vs. SEBI (Appeal no. 24 of 2011 decided on June 8, 2011) whereby it has held that: “one cannot buy and sell shares from himself. Such transactions are obviously fictitious and meant only to create false volumes on the trading screen of the exchange.” In view of these facts, I find that the noticee has indulged in self-trades in respect of 75,725 shares in 21 scrips on 189 instances. 7. The noticee has contended that his alleged self-trades were merely a coincidence and that he was not aware of the same on account of the automatic and anonymous order matching systems of the stock exchanges. I note that the noticee has indulged in self-trades in 75,725 shares of 21 scrips on 189 instances. Moreover, out of these 189 instances, the time difference in respect of 55 self-trades accounting for 12,626 shares in 14 scrips was less than a minute, as described in Table 2 above.

The fact that on a substantial number of occasions the noticee has indulged in self-trades puts to rest the contention of the noticee that his trades were coincidence and that he was not aware of the same. The proximity in the time of such self-trades and the number of instances of such self-trades clearly imputes pre-conceived motive of the noticee to create a false and misleading appearance of trading in the said scrips. In view of these facts and circumstances, I find that the noticee has indulged in self-trades in respect of 75,725 shares of 21 scrips on 189 instances without any intention to effect change in the beneficial ownership of such shares. Self-trades per se do not result in change in ownership of shares and hence, frequent indulgence in the same by anyone can only be for the purpose of artificially increasing the volume of trading in the relevant scrip. I, therefore, do not find merit in the submission of the noticee that these self-trades were merely a coincidence and that he was not aware of the same on account of the automatic and anonymous order matching systems of the stock exchanges.

The above self-trades did not intend to effect change in beneficial ownership of traded shares and were, therefore, illegal. It is relevant to mention that with regard to the nature and effect of self-trades the Hon’ble SAT, in the matter of M/s. Jayantilal Khandwala & Sons Pvt. Ltd. vs. SEBI (Appeal no. 24 of 2011 decided on June 8, 2011), has held that: “one cannot buy and sell shares from himself. Such transactions are obviously fictitious and meant only to create false volumes on the trading screen of the exchange.” 8. The noticee has submitted that his gross buy and gross sell volume was insignificant during the 1st period and the 2nd period and that he had incurred losses in his trades during the said period. In this regard, the noticee has relied upon certain extracts of the Investigation Report. I have perused the said extracts of the Investigation Report and note that the findings in the said extracts of the Investigation Report do not pertain to the allegation of self-trades and as such have not been relied upon in the SCN. Nonetheless, the allegation in the instant case pertains to 189 instances of self-trades accounting 75,725 shares in 21 scrips by the noticee and it has been held by the Hon’ble SAT on various occasions that self-trades are fictitious and are meant only to create false volumes on the trading screen of the stock exchanges.

In view of these facts, it is immaterial as to whether the self-trades by the noticee resulted in creation of volume in the said scrips or not or whether the noticee has incurred loss or made profits in his trades. In this regard, it is relevant to mention that the Hon’ble SAT, in the matter of M/s Marwadi Shares and Finance Limited vs SEBI (Appeal no. 85 of 2011decided on July 26, 2012) has held that: “Coming to the merits of the case, we are of the view that the order passed by the adjudicating officer needs to be upheld. It is not in dispute that the appellant traded in the scrip of the company on behalf of Nathani group entities for period of 101 trading days during the investigation period. 200 trades involving 318 shares were alleged to be fictitious, the buy clients and the sell clients being the same. Out of these 200 fictitious trades, 197 trades were executed with traded quantity of one share where the buying and selling party was the same. Self trades, by their very nature, are fictitious.” 9. In view of the above, I am of the view that the noticee has indulged in self-trades in 21 scrips on 189 occasions in respect of 75,725 shares without the intention of change of ownership of such shares and thus indulged in an act which creates false or misleading appearance of trading in the securities market.

I, therefore, find that the has contravened the provisions of regulations 3(a), (b), (c), (d) and 4(1), 4(2) (a) and (g) of the PFUTP Regulations, 2003 as alleged in the SCN. 10. I, however, find few mitigating factors in this case. Firstly, the noticee has been found to have indulged in self-trades in only 75,725 shares spread over 21 scrips as against the total volume of 1,73,32,565 shares (buy and sale) in the said 21 scrips. Secondly, there is no charge of any price manipulation or ill gotten gain. Given these facts, the quantum of transaction of self-trades in this case is very less likely to have any price impact in most of the scrips involved, as is borne out from Table No. 1. Considering all the facts and circumstances of the case and the mitigating factors, I, in order to protect the interest of investors and the integrity of the securities market, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11 and 11B thereof and regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 hereby prohibit Mr. Prashant Kamble 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.

11. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure that the direction given in the above para are complied with. This order shall come into force with immediate effect. Sd/- DATE: NOVEMBER 11th, 2014 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA