Order in respect of Vishvas Securities Limited in the matter of Gangotri Textiles Limited

WTM/RKA/EFD-DRA-III/122/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Regulations 28(2) of the Securities And Exchange Board of India (Intermediaries) Regulations, 2008 – In the matter of Gangotri Textiles Limited In respect of Vishvas Securities Limited (PAN: AAACV2921N) – Stock Broker – NSE (SEBI Registration Number – INB230914232 and INF230914232) 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted investigation in respect of buying, selling and dealing in the shares of Gangotri Textiles Limited (hereafter referred to as “Gangotri”/“Company”), for the period from April 07, 2006 to May 31, 2006 (hereinafter referred to as “Investigation Period”). The shares of Gangotri are listed on the BSE Limited (hereinafter referred to as “BSE”) and National Stock Exchange of India Limited (hereinafter referred to as “NSE”). 2. Before Investigation Period (January 2006 to April 6, 2006): It was observed that the scrip of Gangotri was not listed in NSE during January 2006 to April 6, 2006 and it was only traded in BSE. The highest price during this period was `52.25 (intra day high on February 6, 2006) and lowest price during this period was `40.55 (intra day low on March 28, 2006). The average daily traded quantity during this period was for 77,036 shares. 3. During Investigation Period (April 7, 2006 to May 31, 2006): The scrip of Gangotri was traded in both NSE and BSE. Details of price volume data at BSE and NSE for the period April 07, 2006 to May 31, 2006 are as follows:-

Exchange Open High Low Close Volume Average Daily Volume BSE 53.25 70.95 43.00 44.35 8941975 241675 07/04/2006 05/05/2006 19/04/2006 31/05/2006 NSE 56.00 71.05 41.25 45.40 6816750 184236 07/04/2006 05/05/2006 19/04/2006 31/05/2006 (a) It was observed that during investigation period the price of the scrip went up by 33.24% in BSE and 26.88% in NSE while the Sensex recorded a decrease of 12.21% (from 11845.13 on April 07, 2006 to 10398.61 on May 31, 2006) and Nifty recorded a decrease

In respect of Vishvas Securities Limited of 12.89% (from 3525.6 on April 07, 2006 to 3071.05 on May 31, 2006). (b) The price of the scrip mainly increased from April 20, 2006 to May 05, 2006, i.e. during these 12 trading days, the price of the scrip has increased from `41.2/43 (NSE/BSE) on April 19, 2006 to `71.05/70.95 (NSE/BSE) on May 05, 2006 a rise of 72.45%/65% (NSE/BSE) along with volume spurt.

(c) As on March 06, 2013 the price of the scrip at NSE and BSE was `2.55 and `2.24 respectively. 4. After Investigation Period (June 2006 to December 2006): The scrip of Gangotri was opened at `45.95/45.2 (NSE/BSE) on June 1, 2006 and closed at `27.35/26.7 (NSE/BSE) on December 29, 2006. The highest price during this period was `46.25 in (intra day high on June 2, 2006) in NSE and `46.65 (intra day high on June 5, 2006) in BSE. The lowest price during this period was `24 (intra day low on December 13, 2006) in both NSE and BSE. The average daily traded quantity during this period was for 34,080/43,717 (NSE/BSE) shares. 5. It was observed that, during the investigation period, certain entities as mentioned hereunder trading through their respective stock had allegedly executed synchronized trades, circular trades and reversal trades among themselves and traded in significant variation to the Last Traded Price (LTP) in the shares of Gangotri:- Sr. No. Name of the entity/client Name of the stock broker 1. Ishita Finstock Limited Vishvas Securities Limited (VSL) (Ishita) 2. Sunita Gupta (Sunita) Shri Parasram Holdings Private Limited (Parasram) 3 Purshottam Khandelwal SIC Stocks and Services private Limited (SIC) (Purshottam) 4. Cosmo Corporate Services Integrated Master Securities Private Limited Limited (Cosmo) (Integrated) 5. Master Finlease Limited (Master) 6. Avisha Credit capital Limited Mefcom Securities Limited (Mefcom) (Avisha) 7. Vishvas Projects Limited (VPL) 8. Praveen Poddar (Praveen) TCP Stock Brokers Limited (TCP) 9. Quantum Global Securities Sam Global Securities Limited at BSE and Leasing Company Limited (Quantum) and in their proprietary trades at NSE 10. Mefcom 11. ISF Securities Ltd (ISF) 12. VSL Proprietary trades 13. Anupama Communications Proprietary trades Private Limited (Anupama) 14. SIC Proprietary trades

The aforesaid clients and stock brokers are hereinafter collectively referred to as “Vishwas Group” 6. It was alleged that VSL trading for its client Ishita and also for itself in its proprietary account had violated the provisions of sections 12A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as "SEBI Act") and regulations 3(a), (b), (c) and (d), 4(1), 4(2)(a), (e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) and regulation 7 read with clause A(1), (2), (3), (4) and (5) of the Code of Conduct for Stock Brokers specified under schedule II and regulation 17(1) read with regulation 18 of the SEBI (Stock Brokers and Sub Brokers) Regulations 1992, (hereinafter referred to as “Stock Broker Regulations”). 7. Pursuant to the investigation Mr. Piyoosh Gupta was appointed as Designated Authority (hereinafter referred to as “DA”), under the SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as ‘Intermediaries Regulations’) to enquire into the alleged violations by VSL. Consequent, to the transfer of Mr. Piyoosh Gupta, Mr. Jayanta Jash was appointed as the DA in the matter. VSL neither submitted any reply/submissions to the show cause notice issued by the DA nor did it avail the opportunity of personal hearing before him despite service of the relevant notices upon it. The DA submitted a Report dated August 28, 2014 wherein he found as following-. (a) The various entities of the Vishvas Group are connected amongst themselves on the basis of the following factors-:

Sr. Entity Connection with other entities of Group No (Broker ) 1 Master  Same address as Avisha and VPL (Formerly Known as Mefcom Agro (Integrated.) Industries Ltd.)  Shareholder in VSL.( 19.24% as on 30.09.2006)  Off market transfer of shares with VSL 2 Purshottam  Off market transfer of shares from Anupama (SIC)  Entered into synchronized trades with entities at sr. no. 8, 9. 3 Anupama  off market transfer of shares to Purshottam  Directors of Anupama (Rakesh Mishra, Ram Dutt Joshi) are also directors in Cosmo 4 Cosmo  Off market transfer of shares with Master (Integrated)  Entered into synchronized trades with entities at sr. no. 6,7,8,9. 5 ISF  Off market transfer of shares from Master (BSE:-SMC.  Entered into synchronized trades with entities at sr. no. 6,7,8,9.

NSE:-ISF.)

6 Quantum  Entered into synchronized trades with entities at sr. no. 4, 5, 7, 10, and 12. 7 Ishita  Entered into large no. of synchronized trades with entities at sr. no. 1, (VSL) 4, 5, 6, and 10. 8 Praveen  Entered into large no. of synchronized trades with entities at sr. no. 2, (TCP) 4, 5, 9 and 10. 9 Sunita  Entered into large no. of synchronized trades with entities at sr. no. 2, (Parasram) 4, 5, 8 and 10. 10 Mefcom  Same address, same e-mail Id, same director (Vijay Mehta) as of Mefcom Infrastructure Project Limited and director (Vijay Mehta) belongs to promoter group of VPL. 11 Avisha  Holder of 25% stake in VSL. (337380 Shares as on 30.09.2006. (Shriram  Same address as VPL and Master Insight Share  Directors of Avisha (Shubha Jhindal, Vijay Jhindal, and Rakesh Brokers Agarwal) are also directors in Master Ltd.) 12 VSL  Old Address of VPL same as address of VSL., i.e., “912, Kailash Building, Kasturba Gandhi Marg, New Delhi".  Off market transfer shares to Master, SIC (8/7/2006, 50000 shares) and Avisha  Avisha and Master were the shareholders of VSL. as on 30.9.2006.  Atul Joshi one of the directors of VSL is also director in VPL. 13 VPL  Same address as Avisha and Master (Mefcom)

14 SIC  Received 50,000 shares from VSL through off market.  Holding 10.7% shares in VPL as on 20/9/2006.  Transfer of substantial amount to Avisha.

(b) From the above table it was observed that:  The old address of Mefcom is same as of the VSL, i.e., “912, Kailash Building, Kasturba Gandhi Marg, New Delhi". Mefcom and Noticee had common director. VSL had made off-market share transfer to Master, SIC and Avisha. Shareholding of Master and Avisha in VSL as on September 30, 2006 was 19.24% and 25% respectively. Thus, VSL, Mefcom, Master and Avisha are directly connected to each other  The members of Vishvas Group namely, VSL’s client Ishita, Cosmo, Master, Purshottam, Praveen, Sunita, Quantum, VPL, Avisha, Mefcom, ISF, VSL, Anupama and SIC are connected to each other.

 VSL had traded for itself in proprietary account and for its client Ishita in the scrip of Gangotri at NSE. (c) Traded quantity of Vishvas Group at BSE and NSE (During Investigation Period) are as under:-

Traded quantity (During Investigation Period) Sr. Members of Vishvas BSE NSE No. Group Buy Sell Buy Sell 1 Master 38000 18386 20500 111400 2 Purshottam 2927835 2882486 0 0 3 Anupama 0 0 0 0 4 Cosmo 445643 320630 401520 471184 5 ISF 389748 338795 453396 368574 6 Quantum 0 0 302095 286835 7 Ishita 0 0 1953803 1569204 8 Praveen 460990 460990 0 0 9 Sunita 342246 342246 0 0 10 Mefcom 443942 348370 610646 667122 11 Avisha 50000 0 0 0 12 VSL 0 0 134460 118661 13 VPL 100000 0 0 0 14 SIC 0 0 0 0 Total 5198404 4711903 3876420 3592980 (d) From the above, it was found that:  Nine members of Vishvas Group, namely, Master, Cosmo, Purshottam, ISF, Praveen, Sunita, Mefcom, Avisha and VPL had traded in the scrip of Gangotri at BSE.  Seven members of Vishvas Group namely, Master, Cosmo, ISF, Quantum, Ishita, Mefcom and VSL had traded in the scrip of Gangotri at NSE.  Total buy and sell quantity of the members of Vishvas Group at BSE was 51,98,404 shares and 47,11,903 shares, respectively.  Total buy and sell quantity of the members of Vishvas Group at NSE was 38,76,420 shares and 35,92,980 shares, respectively.  VSL for its client Ishita had bought 19,53,803 shares of Gangotri and sold 15,69,204 shares of Gangotri at NSE.  VSL had bought 1,34,460 shares of Gangotri and sold 1,18,661 shares of Gangotri at NSE through proprietary trades.

TRADE CONCENTRATION AT NSE: (e) The total traded volume of the scrip of Gangotri during investigation period was 68,16,750 shares. Top 10 trading brokers including VSL had contributed 72.8% (49,62,603 shares) and 69.4% (47,33,357 shares) of gross buy and gross sell, respectively. VSL was the highest contributor to both gross buy and gross sell, respectively - with 36.3% (24,77,101 shares) and 26.6% (18,15,976 shares) of total market quantity. (f) During investigation period, top 10 trading clients had contributed 67.42% (45,95,836 shares) and 59.85% (40,80,121 shares) of the gross buy and gross sell, respectively. Out of top 10 trading clients, six members of Vishvas Group namely, Ishita (trading through VSL), Mefcom, ISF, Cosmo, Quantum and VSL appeared in gross buy with total contribution of 56.56% (38,55,920 shares) and six members of Vishvas Group namely, Ishita (trading through VSL), Mefcom, ISF, Cosmo, Quantum and VSL appeared in gross sell with total contribution of 51.07% (34,81,580 shares). Ishita trading through VSL was the highest contributor to both gross buy and gross sell of total market quantity. VSL, for its client Ishita, had bought 19,53,803 shares (28.66%) and sold 15,69,204 (23.02%) shares of Gangotri. It had bought 1,34,460 shares and sold 1,18,661 shares of Gangotri while trading in its proprietary account. VSL had bought 20,88,263 shares of Gangotri for itself and for its client Ishita i.e. 84.3% of its total purchase and it had sold 16,87,865 shares of Gangotri for itself and for its client Ishita, i.e., 92.9% of its total sale. (g) Out of total 37 trading days, during the investigation period, VSL had traded (bought and sold) in the shares of Gangotri for its client Ishita on 24 days and for itself on 8 days. The details of the day wise such buy and sell transactions are as under:

Date Stock Broker Client Name Buy Sell 21-Apr-06 41232 37887 24-Apr-06 52045 55490 25-Apr-06 223264 202638 26-Apr-06 23834 21150 27-Apr-06 42594 712 28-Apr-06 96750 89141 29-Apr-06 VSL Ishita 51495 48707 2-May-06 70366 69478 3-May-06 83759 51251 4-May-06 176527 127828 5-May-06 1453 7853 8-May-06 28039 12843 9-May-06 142955 149486

10-May-06 84873 84749 11-May-06 112972 106955 12-May-06 89620 89620 15-May-06 83028 30775 16-May-06 113060 110493 17-May-06 98144 83037 18-May-06 11401 10074 19-May-06 37374 25951 22-May-06 2739 24520 23-May-06 208733 91332 24-May-06 77546 37234 Total 1953803 1569204

Date Stock Broker Client Name Buy Sell 24-Apr-06 100 25-Apr-06 59 59 27-Apr-06 53 53 9-May-06 9974 4330 VSL VSL 10-May-06 107389 97602 12-May-06 7 15-May-06 1613 1612 18-May-06 15265 15005 Total 134460 118661 (h) 3 members of Vishvas Group namely, Ishita, ISF and the VSL appeared at net buy position and 3 members of Vishvas Group namely, Master, Cosmo and Mefcom appeared at net sell position. At the end of the investigation period the net buy position of the VSL's client Ishita was 3,84,599 shares and that of the VSL was 15799 shares. SYNCHRONIZED TRADES AT NSE (i) During the investigation period there were 21,451 trades for a traded quantity of 68,16,750 shares at NSE. Out of these, 495 trades for 14,48,679 shares (21.25% of the total traded quantity) were synchronized trades i.e. the difference between buy order time and sell order time was less than 60 seconds with no difference between buy and sell price and quantity. (j) Out of total 37 trading days during the investigation period, when synchronized trading was being done at NSE on 30 trading days (out of which members of Vishvas Group appeared in 24 trading days).

Out of these 24 days, on 23 days, synchronized trades of members of Vishvas Group was more than 50% of the total market synchronized trades and on 15 days, the contribution of volumes through synchronized trades by the members of Vishvas Group was more than 15% to the total market volume. For example, on May 24, 2006 the total day traded volume was 1,35,845 shares out of which 56,862 shares (41.86% shares) were traded by members of Vishvas Group through synchronised trades. (k) Seven members of Vishvas Group namely, Ishita, Cosmo, Master, Noticee, Quantum, Mefcom and ISF indulged in 312 synchronized trades for 12,01,751 shares (82.95% of total synchronized quantity). The details of synchronized trade amongst the member of Vishvas Group are as under: – Particul ars Seller Name Buyer Name Ishita Quantum VSL Mefcom Cosmo ISF Master Total Mefcom 122738 73820 5000 00 56927 53390 7000 318875 Ishita 00 73439 00 136008 42150 44444 00 296041 Cosmo 110657 4975 00 81341 00 32925 00 229898 2765 Quantum 68063 00 3 41787 29953 1000 00 168456 ISF 67724 18996 1992 35350 37300 00 00 161362 VSL 00 4975 00 16340 00 00 00 21315 Master 3804 00 00 00 00 2000 00 5804 3464 Total 372986 176205 5 310826 166330 133759 7000 1201751 (l) From the above, it was observed that:  Out of total 24,77,101 shares bought by the VSL at NSE during investigation period for its clients and on its proprietary account, 2,96,041 shares bought by it for its client Ishita were synchronized with the trades of other members of the Vishvas Group i.e. Quantum, Mefcom, Cosmo and ISF and 21,315 shares bought by it in its proprietary account were synchronized with the trades of Quantum and Mefcom.

 Out of total 18,15,976 shares soldby VSL for its clients and on its proprietary account at NSE during investigation period, 3,72,986 shares sold by it for its client Ishita were synchronized with the trades of Quantum, Mefcom, Cosmo, ISF and Master and 34,645 shares sold by it on its proprietary account were synchronized with the trades of Mefcom, Quantum and ISF.

 On May 18, 2006, VSL bought 4,900 shares of Gangotri @ `57.80 on its proprietary account from Mefcom at 09:58:47. The buy order was placed it @ `57.80 for 5,000 shares at 09:58:47 and the sell order was placed by Mefcom @ `57.80 for 5,000 shares at 09:58:32. The order time difference was 15 seconds. VSL again sold 3,700 shares of Gangotri back to Mefcom @ `56.45 at 10:01:08 i.e. the trade was reversed within 4 minutes. In the reverse trade the sell order was placed by VSL on its proprietary acount at 10:01:00 @ `56.45 for 5,000 shares and the buy order was placed by Mefcom at 10:01:08 @ `56.45 for 5,000 shares. The order time difference was 8 seconds.

 On May 19, 2006, VSL sold 10,000 shares of Gangotri @ `55.50 for its client Ishita to Mefcom at 10:35:21. The sell order was placed by it at 10:35:21 @ `55.50 for 10,000 shares and the buy order was placed by Mefcom at 10:35:20 @ `55.50 for 10,000 shares. The order time difference was 1 seconds. VSL again bought back 10,000 shares of Gangotri for its client Ishita from Mefcom @ `55.85 at 11:03:29 i.e. the trade was reversed within 30 minutes. In the reverse trade the sell order was placed by Mefcom at 11:03:11 @ `55.85 for 10,000 shares and the buy order was placed by VSL for its client Ishita at 11:03:29 @ `55.85 for 10,000 shares. The order time difference was 18 seconds. (m) Details of total number of synchronized buy and sell orders by the members of Vishvas Group during investigation period are as under: Client Buy Sell Total Name Count Count Total Count Count Total Sell Total Total Total of Buy of Buy Buy Qty of Sell of Sell Qty Orders Trades Qty Order Trades Orders Trades s Ishita 51 70 296041 65 92 372986 116 162 669027 Mefcom 62 102 318875 58 68 310826 120 170 629701 ISF 32 42 161362 23 23 133759 55 65 295121 Quantum 33 51 168456 31 40 176205 64 91 344661 Cosmo 36 40 229898 31 68 166330 67 108 396228 VSL 4 4 21315 8 19 34645 12 23 55960 Master 3 3 5804 2 2 7000 5 5 12804 221 312 1201751 218 312 1201751 439 624 240350 Total 2

 From the above table, it was observed that out of total 624 synchronized trades (buy and sell) by Vishvas Group for 24,03,502 shares, VSL indulged in 162 synchronized trades for 6,69,027 shares while trading for its client Ishita and in 23 synchronized trades for itself for 55,960 shares.

CIRCULAR TRADES AND REVERSAL TRADES AT NSE (n) Seven members of Vishvas Group namely Ishita, Cosmo, Master, Noticee, Quantum, Mefcom and ISF were involved in circular trades on 29 trading days out of 37 trading days during investigation period and created artificial volume of 23,56,185 shares (34.56% of total market volume) by buying and selling among themselves. These transactions took place in 2419 trades. Out of the same, circular trades aggregating to 12,01,751 shares from 312 trades were synchronized. Out of 29 trading days, on 10 days, the percentage of circular trade volume of the seven entities of Vishvas Group to the total market volume was more than 40% and on 5 days it was more than 60%. The details of circular trades among the seven members of Vishvas Group are as under: Circular Trades Sellers Grand Buyers ISF Mefcom VSL Cosmo Ishita Master Quantum Total ISF 625 110961 6552 68158 157108 00 33458 376862 Mefcom 68254 550 5000 102992 231230 7040 100574 515640 VSL 26258 24142 497 100 5022 00 14980 70999 Cosmo 36925 123702 00 00 143512 00 27975 332114 Ishita 157329 188865 2570 183095 92185 29825 107776 761645 Master 2000 00 00 00 7841 00 00 9841 Quantum 2000 76917 48823 59751 101533 00 60 289084 Grand Total 293391 525137 63442 414096 738431 36865 284823 2356185 (o) From the above table, it was observed that:

 Out of total shares bought (24,77,101 shares) by VSL for its clients and for itself during investigation period, 7,61,645 shares bought by it for its client Ishita, were involved in circular trading with the other members of the Vishvas Group i.e. ISF, Mefcom ,VSL Cosmo, Master, Ishita and Quantum and 70,999 shares bought by VSL for itself, were involved in circular trading with the other members of the Vishvas Group i.e. ISF, Mefcom, VSL, Cosmo, Ishita and Quantum.

 Out of total shares sold (18,15,976 shares) by the Noticee for its clients and for itself during investigation period, 7,38,431 shares sold by the Noticee for its client Ishita, were involved in circular trading with the other members of the Vishvas Group i.e. ISF, Mefcom, VSL, Cosmo, Master, Ishita and Quantum and 63,442 shares sold by VSL for itself, were involved in circular trading with the other members of the Vishvas Group i.e. ISF, Mefcom, VSL, Ishita and Quantum.

(p) During investigation period, circular trading among Vishvas Group were observed from April 21, 2006 till May 31, 2006. Some of the instances of circular trading are as follows:

 Circular pattern observed on April 25, 2006 among the group is as under:

 Circular pattern observed on May 18, 2006 among the group is as under:

(q) At NSE, VSL had bought 24,77,101 shares and sold 18,15,976 shares for its clients (total traded volume of VSL was 42,93,077 shares). Out of its total trading volume (for its client Ishita and for itself), 7,24,987 shares were traded through synchronized transactions and 16,34,517 shares were traded through circular trades with other members of Vishvas Group. SELF TRADES AT NSE (r) VSL had indulged in self-trades for its client Ishita and in its proprietary account as under:-

Name of the entity Number of trades Traded Qty Ishita 333 92,185 VSL 37 497

PRICE MANIPULATION (s) Last Traded Price (LTP) analysis:- During investigation period, the price of the scrip had decreased in patch I & III and increased in patch II as discussed hereafter: Patch I (April 7, 2006 to April 20, 2006): Exchange Opening Closing price Trading % Change in Average price (April 20, 2006) days price of the scrip Daily (April 07, Traded 2006) Volume BSE 53.25 44.75 8 Days 15.96% 70713 (Decrease) NSE 56.00 44.40 8 Days 20.70% 68005 (Decrease)

Patch II (April 21, 2006 to May 5, 2006): Exchange Opening price Closing Trading % Change in Average (April 21, 2006) price days price of the Daily (May 05, scrip Traded 2006) Volume BSE 46.00 66.55 11 Days 44.70% 338391 (Increase) NSE 46.00 66.90 11 Days 45.40% 213738 (Increase)

Patch III (May 8, 2006 to May 31, 2006): Exchange Opening Closing Trading % Change in Average price price days price of the Daily (May 08, (May 31, scrip Traded 2006) 2006) Volume BSE 64.50 44.35 18 Days 31.20% 258554 (Decrease) NSE 63.55 45.40 18 Days 28.60% 217866 (Decrease)

 All the member of Vishvas Group started trading on or after April 21, 2006 i.e. they had traded only during patch II (Period of price rise) and patch III (Period of price fall).

 The day from when the members of Vishvas Group started trading, the average trading volume of the scrip at NSE had gone up significantly from 68,005 shares (during April 07, 2006 to April 20, 2006) to 2,13,738 shares (during April 21, 2006 to May 05, 2006) and 2,17,866 shares (during May 08, 2006 to May 31, 2006).

(t) LTP contribution of Visvas Group at NSE: Total cumulative positive and negative LTP contribution was ` 995.25 and `1007.25, respectively during investigation period in NSE whereas, seven members of Vishvas Group namely, Ishita, Cosmo, Master, Mefcom, VSL, Quantum and ISF had contributed `489.05 and `.307.90, respectively. The details of contribution of seven members of Vishvas Group to cumulative positive and negative LTP variation are as under:

Sr. No. Client Sum of Positive Sum of Negative Total positive Name LTP ` LTP ` Cumulative LTP 1 Ishita 365.95 -229.2 136.75 2 Mefcom 56.55 -45 11.55 3 VSL 32.1 -18.5 13.6 4 Cosmo 14.5 -6.7 7.8 5 Quantum 10.55 -3.7 6.85 6 ISF 8.8 -4.6 4.2 7 Master 0.6 -0.2 0.4 Total 489.05 -307.90 181.15

 VSL through its client Ishita had contributed `365.95 to total cumulative positive LTP and `229.2 to total cumulative negative LTP.

 VSL trading on its proprietary account had contributed `32.1 to total cumulative positive LTP and `18.5 to total cumulative negative LTP. (u) 90% of total gross amount traded by VSL for its client Ishita during the period April 21, 2006 to May 24, 2006 was in the scrip of Gangotri. A list of other scrips in which Ishita had traded is as under: NSE Symbol Gross Amount (In ` Lacs) GANGOTRI 2096.73 JKPAPER 238.76 BINDALAGRO 14.15 POLARIS 0.42 (v) During investigations, VSL was asked to provide details with respect to the trades done by Ishita, KYC and ledger account of Ishita, their beneficiary account statement, contract notes, bank account statements of Noticee and its directors and promoters. VSL, vide letter dated April 05, 2011, submitted only KYC documents of Ishita and stated that the other information required by SEBI was too old and as it had shifted its office from Mumbai to Delhi, it was very difficult for it to provide any further information.

(w) In view of the above findings and observations the DA has concluded in his Report that: (i) The price movement of the shares of Gangotri was artificial and designed to create a false market. (ii) VSL had allowed its client Ishita to place simultaneously both buy and sell orders of same quantity at the same price in the scrip of Gangotri which led to price rise. (iii) It indulged in synchronized, circular & reversal trades between the selected entities/brokers among themselves have also been noticed from the trade and order log. These trades had identical quantities and rates. Order time of these trades show that both buy and sale orders were given either in identical time or within a gap of few seconds. It had also allowed its client Ishita to execute self trades and it also indulged in self trades while trading in its proprietary account. (iv) Through reversal, circular, self and synchronized trades created a false and misleading appearance of trading, created artificial volume in the shares of Gangotri and manipulated the price of the scrip of Gangotri. (v) It had failed to exercise due skill, care and diligence and not maintained high standards of integrity, promptitude, fairness in the conduct of business as a stock broker.

It had also failed to preserve the books of account and other records maintained under regulation 17 of Stock Brokers Regulation for a minimum period of 5 years. (vi) As VSL had failed to submit a reply to the show cause notice issued by the DA and had failed to avail opportunities provided by him, the DA drew adverse inference and held that VSL has admitted the charges alleged in the matter. 8. In view of the above, the DA has recommended suspension of the certificate of registration of VSL for a period of six (6) months. 9. After considering the Report, a Show Cause Notice (SCN) dated September 30, 2015 including therewith the copy of the Report was issued to VSL (hereinafter referred to as ‘the Noticee’), under regulation 28(1) of the Intermediaries Regulations, calling upon it to show cause as to why action as recommended by the DA or as deemed fit by the Designated Member should not be taken against it. The said SCN was delivered vide Speed Post at the address 606, Kailash Building, K G Marg, New Delhi – 110001. However, no reply to the SCN was received by it. Thereafter, the matter was brought before me in the month of May 2016 for granting opportunity of personal hearing.

In the interest of natural justice, an opportunity of personal hearing was granted to the Noticee on June 1, 2016 which it failed to avail despite service of notice upon it in that regard. I am of the view that Noticee had been provided sufficient opportunities in the matter before the DA and after the issuance of the SCN. Considering the fact that the Noticee had been avoiding the opportunities despite service of notice, I am of the view that interest of justice would not be met if the matter is further delayed by providing further opportunities and the mater can be proceeded with on the basis of SCN and the Report. 10. In this case, the Noticee has been charged with the violations of the provisions of sections 12A(a), (b) and (c) of the SEBI Act read with regulations 3(a), (b), (c) and (d), 4(1), 4(2)(a), (e) and (g) of the PFUTP Regulations and regulation 7 read with clause A(1), (2), (3), (4) and (5) of the Code of Conduct for Stock Brokers specified under schedule II and regulation 17(1) read with regulation 18 of the Stock Broker Regulations. The aforesaid provisions are reproduced hereunder: SEBI Act, 1992 "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 there under;" PFUTP Regulations "Prohibition of certain dealings in securities. 3. 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 securities 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 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;

………………………………………………………………………………. (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security;" Stock Broker Regulations. Stock brokers to abide by Code of Conduct. Regulation 7. The stock broker holding a certificate shall at all times abide by the Code of Conduct as specified in Schedule II. SCHEDULE II Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 CODE OF CONDUCT FOR STOCK BROKERS [Regulation 7] A. General. 1) Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. 2) Exercise of due skill and care: A stock-broker shall act with due skill, care and diligence in the conduct of all his business. 3) Manipulation: A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. 4) Malpractices: A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market.

A stockbroker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness. 5) Compliance with statutory requirements: A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the Stock Exchange from time to time as may be applicable to him. Regulation 17: To maintain proper books of account, records, etc. (1) Every Stock Broker shall keep and maintain the following books of account, records and documents, namely :— (a) Register of transactions (Sauda Book); (b) Clients ledger; (c) General ledger; (d) Journals; (e) Cash book; (f) Bank pass book; (g) Documents register containing, inter alia, particulars of securities received and delivered in physical form and the statement of account and other records relating to receipt and delivery of securities provided by the depository participants in respect of dematerialized securities; (h) Member’s contract books showing details of all contracts entered into by him with other members of the same exchange or counterfoils or duplicates of memos of confirmation issued to such other members; (i) Counterfoils or duplicates of contract notes issued to clients;

(j) Written consent of clients in respect of contracts entered into as principals; (k) Margin deposit book; (l) Registers of accounts of sub-brokers; (m) An agreement with a sub-broker specifying the scope of authority, and responsibilities of the Stock Broker and such Sub-broker; (n) Client account opening form in the format as may be specified by the Board. (2) …………. (3) …………… Regulation 18: Maintenance of books of account and records. Every stock broker shall preserve the books of account and other records maintained under regulation 17 for a minimum period of five years. 11. I find that the Noticee has failed to make any defence by filing reply or make written or oral submissions. It is pertinent to mention that there is no scale to measure fraudulent, deceptive and manipulative device, plan and artifice or its impact and the findings in that regard always depend on inferences drawn from a mass of factual details. Findings in this regard can also be gleaned from patterns of transactions/dealings of connected parties, their conduct/behaviour, proximity of time in placing orders, frequency of trades, etc. 12. In the instant case, a clear pattern of synchronised and circular trading is evident in the trades of the Noticee while trading for its client Ishita and also on its proprietary account when counter parties to those trades were members of Vishvas Group as found in the Report.

Such repeated transactions in large quantities amongst connected parties as found in this case cannot be just a coincidence. Further, a clear pattern of circular trading is evident in the trades amongst the Noticee trading for its client Ishita and also on its proprietary account with other members of Vishvas Group in the manner:- A>B>C>D>A. In the instant case, the bulk of such transactions was amongst the Vishvas Group entities with almost the same set of counterparties. Placing of the orders with same counterparties for same quantity of shares at the same price within nil or too negligible time difference repeatedly over a period of time in bulk of such transactions with a set of connected counterparties, as brought out in the Report are clear indication that those trades were synchronised as a pre-planned device, artifice and contrivance. In this regard, the following observations of the Hon’ble SAT in Ketan Parekh Vs. SEBI, Appeal no. 2/2004 decided on July 14, 2006, are worth mentioning: “.......... A synchronised transaction will, however, be illegal or violative of the Regulations if it is executed with a view to manipulate the market or if it results in circular trading or is dubious in nature and is executed with a view to avoid regulatory detection or does not involve change of beneficial ownership or is executed to create false volumes resulting in upsetting the market equilibrium.

Any transaction executed with the intention to defeat the market mechanism whether negotiated or not would be illegal. Whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of the parties which could be inferred from the attending circumstances because direct evidence in such cases may not be available. The nature of the transaction executed, the frequency with which such transactions are undertaken, the value of the transactions, whether they involve circular trading and whether there is real change of beneficial ownership, the conditions then prevailing in the market are some of the factors which go to show the intention of the parties. This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn.” 13. In the screen based trading the manipulative or fraudulent intent can be inferred from various factors such as conduct of the party, pattern of transactions, etc. Such intention may be demonstrated from the attending circumstances as observed by the Hon'ble SAT in Ketan Parekh case in the following words- "The nature of transactions executed, the frequency with which such transactions are undertaken, the value of the transactions, ........., the conditions then prevailing in the market are some of the factors which go to show the intention of the parties.

This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn." 14. In this regard, I have taken into account the following observations of the Hon'ble SAT in its order dated December 13, 2010 in Appeal no. 190/2010 - Ajmera Associates Pvt. Ltd. Vs. SEBI : "... It is not in dispute that the trading system that we have on the stock exchanges is a blind trading system which maintains complete anonymity of the persons trading. The broker while executing an order (buy or sell) cannot possibly know at the time of placing the order through the system as to who the counter party is or even the counter party broker. In other words, the trading system does not permit the buyers and the sellers to have any interaction between them except through the trading system. A buy order placed on the system matches with a sell order and a trade comes to be executed and this matching is done by the system on a price time priority basis. Despite the anonymity of the system, we have seen market players and the intermediaries like the brokers executing manipulative trades by defeating the system and this is usually done by placing the buy and sell orders simultaneously for the same amount and at the same price.

Such matching orders usually result in trades in comparatively less liquid scrips. This being the system, it sometimes becomes difficult to find out whether the brokers who execute the trades of their clients and who are expected to carry out their directions are also a party to the mischief. If the broker knew at the time of executing the trade what the client was upto, then obviously he is a party to the mischief. Since the trading system maintains complete anonymity, brokers always plead that they were ignorant about the counter party or his broker. In such a situation one has to look to the trading pattern and if the trades match too often or if the matching of the trades is noticed day after day and trade after trade, one can infer that the matching was done not by the system but by manipulating the same....."

15. From the transactions as described in the Report it is noted that the connected clients had indulged in reversal of trades on several occasions in the manner:- A>B>A which created artificial volume in the scrip as those trades did not result in transfer of beneficial ownership of shares traded by them. As such, these transactions were fictitious and manipulative. Such transactions adversely affect the market as held by the Hon'ble SAT in its order dated March 22, 2010 in Appeal no. 163/2009 - in the matter of Galaxy Broking Ltd. vs SEBI as under: ".............Reverse trades are fictitious and do not transfer the beneficial ownership in the traded scrip and they are meant only to increase the volumes on the screen of the exchange which generates investor interest. It is on account of such trades and increase in volumes that the lay investors get trapped.................. Synchronised, circular and reverse trades adversely affect the market particularly, the innocent investors." 16. As brought in the Report, substantial number of synchronised transactions and circular transactions in the scrip were entered into by each of the Noticee with other members of Vishvas Group being counter parties to its trades while acting as stock brokers of Ishita as well as on its proprietary account.

In the instant case, the basis of connection amongst Vishvas Group entities have not been disputed. Further, considering the frequency and pattern of transactions, I am of the view that the above trades of the Noticee, who are found to be acting in league with counter parties, are of too much of a coincidence in anonymous screen based trading system. Such transactions are possible only through coordinated and deliberate synchronization of orders by the involved parties. I find that such repeated matching of time, rate and quantity in anonymous screen based trading could be possible only with the involvement of the Noticees under a pre-meditated plan, device and artifice to create non-genuine and artificial volume. 17. In this case, the Noticee indulged in 333 self-trades involving 92,185 shares while trading on behalf of its client Ishita and in 37 self -trades involving 497 shares while trading on its proprietary account. These self-trades were during the period when a group of connected entities of Vishwas Group including the Noticee and its client Ishita were indulged in several manipulative synchronized/circular/reversal trades in the scrip of Gangotri.

The self-trades amongst the connected parties acting in league as found in this case, did not involve 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 such 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.”

18. In the instant case, the nature of transactions, volume of the transactions and the frequency with which these transactions were undertaken by the Noticees acting in concert with counter parties connected entities of Vishvas Group cannot but lead to the conclusion that the aforesaid transactions in the scrip of Gangotri were undertaken by the Noticee for creation of artificial volume to give false or misleading appearance of trading in the scrip without intention of change in beneficial ownership. I find that indulgence in non-genuine synchronized, circular, reversal and illegal self-trades, repeatedly, with connected entities without intending to change beneficial ownership of traded shares clearly establishes creation of artificial volume as alleged in the SCN. 19. I further find that entering into such synchronized, circular and self-trades was an attempt to tamper with the free, fair and transparent price discovery system of the stock exchange. Such practices where the transactions are put in with a premeditated understanding, have potential to distort the price discovery process at the stock exchange and disturbs the market equilibrium.

This apart, the undisputed overt and covert acts and substantial contribution of the Noticee in LTP contribution in the scrip during respective Patch of price rise and fall at NSE clearly establish the involvement of the Noticee in price manipulation in the scrip as described in the Report. 20. I further find that the Noticee had not cooperated during the investigation when it failed to provide the necessary documents, information and details of its client Ishita as sought by the investigation team. Its claim that the same were not available as they were too old proves that it had failed to preserve the books of accounts and the records for 5 years since the information / details were sought in April 2011 where the details pertain to the period April /May 2006. Thus, the Noticee has not complied with the requirements of regulation 17 of the Stock Brokers Regulations. 21. In view of the above, I do not find any reason to disagree with the findings of the Designated Authority. In the facts and circumstances of the case, I find that the Noticee has contravened the provisions of sections 12A(a), (b) and (c) of the SEBI Act read with regulations 3(a), (b), (c) and (d), 4(1), 4(2)(a), (e) and (g) of the PFUTP Regulations and regulation 7 read with clause A(1), (2), (3), (4) and (5) of the Code of Conduct for Stock Brokers specified under schedule II and regulation 17(1) read with regulation 18 of the Stock Broker Regulations.

22. I note that the prohibited activities and types of contraventions as found by the Designated Authority in this matter definitely have potential to disturb the market integrity and disturb the fair, equitable and efficient functioning of securities market. I am also satisfied that it is necessary to secure the proper management of the activity of the Noticee. In these facts of and circumstances, I do not find any reason to deviate from the findings and recommendations of the Designated Authority. Hence, I am of the view that suspension of certificate of registration of Vishvas Securities Limited for a period of six months, as recommended by the Designated Authority, would be commensurate with the violations found hereinabove. 23. I, therefore, in exercise of the power conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992, read with regulations 28(2) and 38(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby suspend the certificate of registration (SEBI Registration Number – INB230914232 and INF230914232) of the stock broker, Vishvas Securities Limited, a member of the National Stock Exchange of India Limited for a period of six months.

24. A copy of this order shall also be served upon the stock broker and National Stock Exchange of India Limited in accordance with regulation 30 of the Intermediaries Regulations. 25. This order shall come into force immediately on expiry of twenty one days from the date of this order.

Sd/-

DATE: SEPTEMBER 20TH, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA