Order in the matter of Castor Seed Contracts

SEBI/WTM/MPB/60/2018

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: MADHABI PURI BUCH, WHOLE TIME MEMBER ORDER Under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 in the matter of trading in Castor Seed Contracts at NCDEX.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted a preliminary examination in respect of trading in Castor Seed Contracts at NCDEX platform for the period January 01, 2016 to January 27, 2016 (hereinafter referred to as “examination period”).

2. Upon preliminary inquiry, SEBI, prima facie, observed the following:  Few clients had taken huge long positions beyond their ability to fulfil the commitment.  There was huge concentration and lack of liquidity in the contract.  There was failure on the part of clients and as well as trading members to assess and anticipate the risk associated with the trading activity in Castor Seed Contract.  The clients had taken exposure beyond their known financial means causing systemic risk.  Trading members expressed inability to collect/deposit Mark to Market (MTM) and pay-in obligations to the exchange.

3. It was therefore prima facie found that four Trading Members namely Mid India Commodities Private Limited, Neer – Ocean Multitrade Private Limited, Investmart Commodities Limited and Leo Global Commodities Private Limited and their defaulting clients had contravened the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) and acted in fraudulent and deceitful manner which attracted prohibitions enshrined in section 12A (a) (b) and (c) of the SEBI Act and regulation 3(d) and regulation 4(1) and 4(2) (a) and (g) of the Securities and Exchange Board of India (Prohibition of Fraudulent

Order in the matter of Castor Seed Contracts and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”).

4. Further, it was also prima facie found that four Trading Members namely Mid India Commodities Private Limited, Neer – Ocean Multitrade Private Limited, Investmart Commodities Limited and Leo Global Commodities Private Limited failed to act with due skill, care and diligence in the conduct of their business in discharging their responsibilities and thereby violated clauses A(1), A(2) and A(4) of Code of Conduct for Brokers as specified in Schedule II under regulation 7 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as “Stock Brokers Regulations”).

5. Accordingly, SEBI passed Ad interim ex-parte orders dated March 02, 2016 and May 24, 2016 (“interim orders”) and restrained the following entities from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions.

Interim Order dated March 02, 2016: Sr. Name PAN No. 1 Mid India Commodities Private Limited AABCT1983F 2 Neer-Ocean Multitrade Private Limited AADCN3061E 3 Investmart Commodities Limited AAECM3447N 4 Leo Global Commodities Pvt. Limited AAACL6967A 5 Stride Multitrade Pvt. Limited AAGCS5768N 6 Mr. Vijay Saraf AERPS2485J 7 Sisne Polymers Pvt. Limited AAPCS4092L 8 Ruchi Global Limited AAACR7202A 9 Bharat Foods Co-operative Limited AAAAB3160D 10 Tanisha Multi Trading Private Limited AAECT2559E 11 Ms. Anju Jain ABEPJ8083F 12 Piyali Trading Pvt. Limited AABCR1604D 13 Vartika Mercantile Pvt. Limited AAECV0551G 14 Secunderabad Oils Limited AACCS8208H 15 UKS Oils Private Limited AAACU4566C 16 Mr. Narsinpuria Korodimal AGXPK2223Q

Order in the matter of Castor Seed Contracts

Interim order dated May 24, 2016: Sr. Name PAN No. 1 Ruchi Soya Industries Limited AAACR2892L 2 National Steel and Agro Industries Limited AAACN3548H

6. Vide the confirmatory order dated March 08, 2017, the directions issued against Mr. Narsinpuria Korodimal were revoked, while the restrictions imposed on the remaining 17 entities were confirmed subject to certain interim relaxations/relief granted vide orders dated December 23, 2016.

7. Pursuant to the above, SEBI conducted a detailed investigation. Upon completion of investigation by SEBI, the investigation did not find any adverse evidence/ conclusion in respect of violation of provisions of PFUTP Regulations warranting continuation of action under Section 11B read with 11(4) of SEBI Act, in respect of following 12 entities.

Sr. Name PAN No. 1 Mid India Commodities Private Limited AABCT1983F 2 Neer-Ocean Multitrade Private Limited AADCN3061E 3 Investmart Commodities Limited AAECM3447N 4 Leo Global Commodities Pvt. Limited AAACL6967A 5 Stride Multitrade Pvt. Limited AAGCS5768N 6 Mr. Vijay Saraf AERPS2485J 7 Sisne Polymers Pvt. Limited AAPCS4092L 8 Bharat Foods Co-operative Limited AAAAB3160D 9 Tanisha Multi Trading Private Limited AAECT2559E 10 Ms. Anju Jain ABEPJ8083F 11 Piyali Trading Pvt. Limited AABCR1604D 12 Vartika Mercantile Pvt. Limited AAECV0551G

8. However, in respect of 4 entities (out of above 12) the investigation found adverse findings with regard to clauses A(1) and A(2) of Code of Conduct for Stock Brokers as specified in Schedule II under regulation 9 of Stock Brokers Regulations, which warranted Adjudication Proceedings and Adjudication Proceedings against below mentioned 4 entities shall proceed in Order in the matter of Castor Seed Contracts accordance with law. The details of the 4 entities are as follows:- Sr. Name PAN No. 1 Mid India Commodities Private Limited AABCT1983F 2 Neer-Ocean Multitrade Private Limited AADCN3061E 3 Investmart Commodities Limited AAECM3447N 4 Leo Global Commodities Pvt. Limited AAACL6967A

9. Considering the fact that there are no adverse findings against the 12 entities with respect to their role in the manipulation in the trading in Castor Seed Contracts at NCDEX, I am of the considered view that the direction(s) issued against them vide interim order dated March 02, 2016 which were confirmed vide Order dated March 08, 2017 is liable to be revoked.

ORDER

10. In view of the foregoing, I, 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, 11(4) and 11B of the SEBI Act, hereby revoke the direction(s) issued vide interim order dated March 02, 2016 which were confirmed vide Order dated March 08, 2017 qua aforesaid 12 entities (mentioned at paragraph 7 above) with immediate effect.

11. As regards to remaining 5 entities ( given in the table below) in the matter of trading in Castor Seed Contracts at NCDEX, violations under SEBI Act, PFUTP Regulations, relevant FMC directive & circulars, were observed and SEBI shall continue its proceedings against them.

Sr. No. Name PAN 1 Secunderabad Oils Limited AACCS8208H 2 UKS Oils Private Limited AAACU4566C 3 Ruchi Global Limited AAACR7202A 4 Ruchi Soya Industries Limited AAACR2892L 5 National Steel and Agro Industries Limited AAACN3548H

Hence, the directions issued issued vide interim orders dated March 02, 2016 and May 24, 2016 which were confirmed vide Order dated March 08, 2017 against the aforesaid 5 entities shall continue. Order in the matter of Castor Seed Contracts

12. This revocation order is without prejudice to any other action SEBI may initiate as per law.

13. A copy of this Order shall be served on the Stock Exchanges and Depositories, for necessary action.

-Sd- DATE: NOVEMBER 14, 2018 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in the matter of Castor Seed Contracts