Order in the matter of L.N. Industries India Ltd.

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992

In the matter of trading by certain entities in the scrip of LN Industries India Ltd. (formerly known as L N Polyesters Ltd.)

In respect of – Sr. Noticee PAN No. 1 Nanji B Gala AACPG0137E 2 G M Farmanullah AALPF0973G 3 Gala Rajesh N (HUF) AAAHR5530C 4 Gala Rajesh N AAAHR5530C 5 Padma Mundunuri AHOPM6134A 6 China Jogiraju Patsamatla AGNPP9377N 7 Sanjaysinh Manusinh Rathod AHAPR0749L

1. Background –

1.1. The present matter emanates from a reference received from the Office of the Principal Director of Income Tax (Investigation), Ahmedabad by way of a letter

Order in the matter of LN Industries India Ltd. (formerly known as L N Polyesters Ltd.)

dated February 10, 2015, forwarding therewith statement recordings of various accommodation entry providers, their associates, dummy directors etc. alleging that such entities generated bogus Long Term Capital Gains (“LTCG”) through the stock exchange mechanism in various scrips. LN Industries India Ltd. was one of such scrips mentioned in the aforesaid letter.

1.2. Accordingly, the matter was taken up for investigation for alleged manipulation of scrip price of LN Industries India Ltd. The investigation was to ascertain whether there was any violation of the provisions of the SEBI Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 in the scrip of LN Industries India Ltd.

1.3. Investigation Period – Considering the price-volume movements, the Investigation Period was determined as December 01, 2006 to August 31, 2012. The said Investigation Period was further divided into eight patches. The said patches being: a. Patch-1 - December 01, 2006 to October 03, 2007 (Price rise) b. Patch-2 - October 04, 2007 to April 03, 2008 (Price fall) c. Patch-3 - April 04, 2008 to September 25, 2008 (Price rise) d. Patch-4 - September 26, 2008 to May 31, 2009 (Price fall) e. Patch-5 - June 1, 2009 to August 18, 2009 (Price rise) f. Patch-6 - August 19, 2009 to March 15, 2010 (Price fall) g. Patch-7 - March 16, 2010 to April 07, 2011 (Price rise) h. Patch-8 - April 08, 2011 to August 31, 2012 (Price fall)

1.4. The price-volume movement in the said scrip is as under:

Table-1 Total traded Period Dates Opening Closing Low High shares (Daily Avg.) 8.50 13.50 Price 12.87 9.73 Prior to (21.11.2006) (01.09.2006) 01.09.2006- Investigation 1576 30.11.2006 Period 1 7054 Vol. 4810 120 (03.11.2006) (30.10.2006) 6.05 27.15 Patch-1 Price 10 26.25 (29.03.2007) (03.10.2007) (Price rise)- 5966 01.12.2006- 1 86464 03.10.2007 Vol. 661 63559 (13.02.2007) (10.09.2007) Patch-2 7.81 25.80 Price 25.8 9.5 (Price fall) (03.04.2008) (04.10.2007) 4558 04.10.2007- 1 58999 03.04.2008 Vol. 18630 31 (31.01.2008) (08.01.2008) Patch-3 8.13 14.5 Price 9.5 14.5 (Price rise) (17.04.2008) (25.09.2008) 1921 04.04.2008- 1 20000 Vol. 109 100 25.09.2008 (22.08.2008) (23.06.2008) Patch-4 6.49 14.5 Price 14.5 7 During (Price fall)- (24.02.2009) (07.10.2008) 283 Investigation 26.09.2008- 1 1526 Vol. 20 142 period 31.05.2009 (06.11.2008) (15.04.2009) 6.66 41.40 Patch-5 Price 6.66 41.15 (01.06.2009) (18.082009) (Price rise)- 12596 01.06.2009- 10 92889 Vol. 310 59562 18.08.2009 (04.06.2009) (17.08.2009) 14.75 43.20 Patch-6 Price 42.3 14.75 (15.03.2010) (19.08.2009) (Price fall) 18802 19.08.2009- 150 445334 15.03.2010 Vol. 59004 5042 (17.08.2009) (09.03.2010) 14.05 38.95 Patch-7 Price 14.05 38.9 (16.03.2010) (07.04.2011) (Price rise)- 40291 16.03.2010- 180 1051668 07.04.2011 Vol. 68622 148588 (21.02.2011) (07.05.2010)

Patch-8 6.05 40.00 Price 40 6.58 (Price fall) (31.08.2012) (08.04.2011) 14423 08.04.2011- 1 382157 31.08.2012 Vol. 103308 1211 (29.09.2011) (28.09.2011) 5.84 8.25 After Price 6.38 8.1 01.09.2012- (03.09.2012) (08.11.2012) investigation 3071 30.11.2012 period 1 14201 Vol. 1114 3013 (08.09.2012) (12.11.2012)

1.5. Consequent to the said investigation, it was observed that five entities namely: i) Gala Rajesh N (HUF), ii) Nanji B Gala, iii) Padma Mundunuri, iv) China Jogiraju Patsamatla and v) G M Farmanullah had entered into trades that resulted in manipulation of the price of the scrip and created a misleading appearance of trading in the scrip. Further, karta Gala Rajesh N executed transactions on behalf of Gala Rajesh N (HUF). Thus, it was stated that the above-mentioned six (5+1) entities had violated Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2) (a) and (e) of the SEBI (PFUTP) Regulations, 2003. Further, the investigation observed that one entity, Sanjaysinh Manusinh Rathod manipulated the scrip price and created a misleading appearance of trading in the scrip by executing self-trades thereby violating Regulations 3(a)(b)(c)(d), 4(1), 4(2)(a),(b),(e) and (g) of SEBI (PFUTP) Regulations, 2003.

1.6. Based on the above findings, it was inter alia proposed that proceedings u/s 11B, and 11(4) read with section 11(1) of the SEBI Act, 1992 be initiated.

2. Issuance of Show Cause Notice

2.1. In view of the above, a show-cause notice bearing number EFD/DRA- 4/SD/CS/6309/1/2018 dated February 28, 2018 (the “SCN”) was issued to the Noticees as mentioned in the title of this Order.

2.2. The said SCN states that a. Nanji B Gala (Noticee No.1), Gala Rajesh N HUF (Noticee No.3) and Gala Rajesh N (Noticee No. 4), who are related to each other have in 153 out of a total of 157 positive LTP contributing trades, placed buy orders after the respective sell orders which were already available at prices higher than LTP, which contributed to positive LTP of Rs. 99.17. Similarly, sell orders for large quantity of shares were available before placing buy orders but the Noticees repeatedly placed buy orders for small quantities (single digits) in 136 instances and contributed to significant positive LTP of Rs.94.35. The Noticees followed this trading pattern on 58 days, thereby contributing to significant positive LTP. Accordingly, the Noticees have manipulated the price of the scrip through their trades violating provisions of the PFUTP Regulations, 2003. b. G M Farmanullah (Noticee No.2) had no bona-fide intention of buying as he placed buy orders of small quantities, even when sell orders for large quantity of shares were available. The Noticee on 7 instances placed such buy orders for small quantities within a span of 3 days, contributing Rs.8.98 (14.17% of total market positive LTP) to total market positive LTP; as such manipulating the price of the scrip. c. Padma Mundunuri (Noticee No. 5) and China Jogiraju Patsamatla (Noticee No. 6), who are related to each other as daughter and father, made a total positive LTP contribution of Rs.11.95 (18.86% of total market positive LTP) from their trades as buyers and as sellers the two Noticees had made a total positive LTP contribution of Rs.7.77 (12.26% of total market positive LTP).

Further, the Noticees had repeatedly entered into synchronised and reversal trades in a total of 9 instances on 9 days which resulted in increase in the scrip price in the said 9 instances. So, as such, the SCN alleged that the Noticees were not acting as genuine buyers or sellers and had no bona fide intention to buy or sell, but to manipulate the scrip price and create a misleading appearance of trading in the scrip by such trades. d. Sanjaysinh Rathod (Noticee No. 7) was both seller and buyer on 10 occasions, and each of these trades resulted in decrease in the scrip price, contributing to a total of Rs. -4.20 to the negative LTP (33.82% of total market negative LTP). The traded quantity in all the 10 negative contributing trades was 1 share only over a span of 9 days. These self-trades of the Noticee did not result in any change in beneficial ownership and also continuously decreased the scrip price, and as such the Noticee was not acting as a genuine buyer or seller and had no bona fide intention to buy or sell.

2.3. The provisions relied upon in the SCN are as under:

“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;

(b) ….

(e) any act or omission amounting to manipulation of the price of a security”

3. Personal Hearing, and Replies and Written Submissions from the Noticees –

3.1. Further to the issuance of the SCN, the Noticees were provided opportunities of personal hearing. The details of the personal hearings granted in the matter are provided in the table hereunder:

Table-2

Date Noticees Appeared  Noticee Nos. 5 and 6 entered appearance through their authorised representative, SPRS and Co., Company Secretaries. September  Noticee No. 7 made personal appearance via 03, 2019 teleconferencing from SEBI-WRO.  Noticee Nos. 5 and 6 entered appearance through their authorised representative, SPRS and Co., Company Secretaries. September  Noticee Nos. 1, 3 and 4 entered appearance through their 19, 2019 authorised representative, Advocate Rinku Valanju

November  Noticee Nos. 1, 3 and 4 entered appearance through their 19, 2019 authorised representative, Advocate Rinku Valanju

3.2. In this respect, it is stated that replies dated September 17, 2019, September 16, 2019 and April 20, 2018 to the SCN have been received from Noticee Nos. 1, 3 and 4. Further, additional written submissions dated November 18, 2019 have been received from the said Noticees. Similarly, reply dated March 20, 2018 has been received from Noticee Nos. 5 and 6. Further, reply dated March 20, 2018, and additional written submissions dated September 11, 2019 has been received from Noticee No. 7. It is stated that Noticee No. 2, G M Farmanullah, has neither submitted any reply nor entered appearance pursuant to the opportunities of personal hearing provided.

3.3. In this respect, it is stated that attempt was made to deliver by post the hearing notice dated May 24, 2019, informing of the personal hearing on September 03, 2019, to Noticee No. 2, G.M. Farmanullah. However, the same could not be delivered at the Noticee’s address on record: 13, Rose Garden, IInd Street, South Ukkadam, Coimbatore- 641001. Subsequently, it came to the knowledge of SEBI that Noticee No. 2, G M Farmanullah, was not residing in Coimbatore and had moved to Trichy. Accordingly, the said Notice was contacted over telephone and the said hearing notice was delivered by post on August 22, 2019 to the Noticee at his Trichy address: House No.11, Thiruvalluvar Salai, New Selva Nagar, Pon Nagar, Trichy- 620001. Even though, the Noticee had received the said hearing notice, no reply was submitted by him nor any attempt was made by him to appear for the personal hearing.

3.4. Noticee-wise summary of the replies/submissions received from the Noticees is as under:

Nanji B Gala (Noticee No.1), Gala Rajesh N HUF (Noticee No.3) and Gala Rajesh N (Noticee No. 4)

Common submissions a. Noticee No.1, Naji Gala was the father of Noticee No.4, Gala Rajesh N, and Noticee No. 3 was the HUF where Noticee No. 4 was the Karta. The above Noticees had no connection with any of the other Noticees in the matter. b. The transactions pertain to the period 2006-2007, whereas the SCN was issued in the month of February 2018, so there is a delay of 11 years in the issuance of the SCN. Reliance placed on the Order of the Hon’ble SAT in Subhkam Securities Private Limited V. SEBI (Appeal No. 73 of 2012). c. The SCN must set out the circumstances requiring such drastic use of power under 11 (4) and 11 B after about 11 years. The said Noticees have sought to place reliance on Order of the Hon’ble SAT in Libord Securities Ltd. V. SEBI ( Appeal No. 24 of 2008) and the Order of the Hon’ble Supreme Court in SEBI v. Libord Securities Ltd. (Civil Appeal No. 6091 of 2008). d. The Noticees did the trades in the nature of delivery based and intra-day jobbing. e. The SCN is ambiguous and the allegations levied lack material particulars. f. No disproportionate gain or unfair advantage has been received by the Noticees and they have not caused any loss to any investor or group of investors.

g. The Noticees have met all settlement obligations and traded in other scrips during the investigation period. h. The Noticees acted in good faith and deny that they had manipulated the price of the scrip through their trades. i. The fund transfers was a family loan and the said fund transfer had nothing to do with the trading in the scrip of LN Industries. The fund transfer took place in 2010 whereas the trading in the scrip was done during the year 2006-2007. j. There is no embargo on placing an order at positive LTP. Positive LTP may or may not result into NHP. Manipulation in price cannot be related solely to positive LTP. Positive LTP can be genuine from the perspective of market participants some of whom can be desperate buyers and desperate sellers. k. Trades were executed at positive LTP within permissible circuit limits, hence, no illegality can be attributed to these trades. l. The Noticees are not connected nor associated with the promoters of the Company and the same has not been alleged. Also no connection has been shown between the Noticees and the respective counter parties to the trades effected by them.

Specific submissions by Nanji B. Gala, Noticee No.1 m. The Noticee has transacted in the scrip only in the months of 01 December 2006 to 26 March 2007, when the price was ranging between Rs. 6.8 to 10 and reached a high of Rs. 10.5 on January 19, 2007. There was a price fall of Rs. 3.2 (Rs. 10 – Rs. 6.8), in light of which the purported positive LTP contribution of Rs 14.48 of the Noticee is of no relevance. n. The actual price rise of the scrip took place after 24th July 2007, during which period the Noticee did not trade in the shares of the scrip. o. In all the trades, the orders were placed first by the seller and then by the buyer, the Noticee. p. The Noticee’s trading volume was significant and not one or two shares. q. The Noticee placed limit price order in the morning for substantial quantity of shares and subsequently during the day, the Noticee was modifying the order in terms of price and trades were getting executed.

Specific submissions by Gala Rajesh N (HUF), Noticee No. 3 r. The Noticee has transacted in the scrip only in the months of March 26, 2007 to July 06, 2007, when the price was ranging between Rs. 6.8 to 7.28 and reached a high of Rs. 10. s. The actual price rise of the scrip took place after 24th July 2007, during which period the Noticee did not trade in the shares of the scrip. t. In all the trades, the orders were placed first by the seller and then by the buyer, the Noticee. u. The Noticee’s trading volume was significant and not one or two shares. On 11.04. 2007 the Noticee had placed a buy order of 1522 shares, which resulted into 10 trades. Out of the 10 trades only 3 trades resulted in 1 share being bought. On 25.04. 07, the Noticee had placed a buy order of 1100 shares which resulted into 3 trades, and none of the said trades resulted into trade of 1 share. v. The Noticee placed limit price order in the morning for substantial quantity of shares and subsequently during the day, the Noticee was modifying the order in terms of price and trades were getting executed.

Padma Mundunuri (Noticee No. 5) and China Jogiraju Patsamatla (Noticee No. 6)

w. Noticee Nos. 5 and 6 are daughter and father and maintained Demat Accounts with Cholamandalam Securities Limited. Noticee No. 5 was a dentist and Noticee No.6 did not have any knowledge of the securities market. x. A total of 28, 345 shares were held by Noticee No. 5 from January 2008 to March 2011, and the same were disposed of in March 2011. Similarly, Noticee No. 6 held a total of 100 shares in September 2008 and the same were disposed of in June, 2009. y. There was no intention on the part of the Noticees to manipulate the share price and make gains therefrom. The quantity of shares held was not significant and may not have affected the share price. z. The Noticees had given the rights to enter trades on their behalf to their broker, Cholamandalam Securities Limited, and as such they had no knowledge of entering into trades. aa. The trading account of the Noticees was linked to a bank account from which funds were used for all purchases, and the bank account was a limit account and accordingly upon the reaching of the limit no further funds could be used from such bank account. bb. The Noticees gave an undertaking that any such incident shall not be repeated and precaution will be taken to not provide any authorisation to a third person/outsider to operate the accounts on their behalf.

Sanjaysinh Rathod (Noticee No. 7)

cc. In 2009, the said Noticee purchased 50 shares, which were sold by him in a few days. However, the Noticee did not remember, since it had been more than 10 years, as to how unknowingly the self-trades were carried out. dd. The Noticee was not related to any of the other Noicees in the matter. ee. The Noticee was a small investor, and made investments in companies after reading the 52-week lowest price of scrips as provided in the Gujarati editions of Financial Express and Economic Times. ff. The shares were not bought pursuant to the receipt of any tips. gg. The gains earned from the purchase and sale of the shares was not more than Rs. 30 to 40. hh. The Noticee was a resident of Madhavpur in the Rajkot district of Gujarat and primary occupation was to drive an auto-rickshaw. ii. The Noticee did not act knowingly or with the intent of defrauding anyone. However, the Noticee submitted that if some act had been committed by him the same was inadvertent and asked for pardon for the same.

4. Consideration – 4.1. The only issue that arises for consideration in the matter is whether Noticee Nos. 1 to 7 have manipulated the scrip price and created a misleading appearance of trading in the scrip of L N Industries Ltd. (formerly known as L N Polyesters Ltd.). For this purpose, the trading pattern of the Noticess is being examined hereunder.

5. A. Nanji B Gala (Noticee No.1), Gala Rajesh N HUF (Noticee No.3) and Gala Rajesh N (Noticee No. 4) 5.1. With respect to the above mentioned Noticees, the SCN has alleged that – a. Nanji B Gala (Noticee No.1), Gala Rajesh N (HUF) (Noticee No.3) and Gala Rajesh N (Noticee No. 4), being the Karta of Noticee No. 3, manipulated the price of the scrip through their trades and violated regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003.

b. During Patch-1 period i.e., 01.12.2006-03.10.2007, Noticee Nos. 1 and 3, who were related, were amongst the top 10 positive LTP contributors as buyers.

c. The top 10 entities contributed Rs.129.25 to positive LTP (49.84% to market positive LTP of Rs. 259.32 ). Out of the above 10, the positive LTP contribution of Noticee Nos. 1 and 3 was Rs.99.68 (38.44% of total market positive LTP). Further, it is stated that the said Noticees placed single digit buy orders in 136 instances, making a positive LTP contribution of Rs.94.35 (36.38% of total market positive LTP).

d. The Noticees followed this trading pattern on 58 days and this contributed to significant positive LTP.

e. Sell orders for large quantity of shares were available before the buy orders were placed, but the said Noticees repeatedly placed buy orders for small quantities.

f. The said Noticees did not act as genuine buyers and had no bona fide intention to buy because in-spite of large disclosed quantity of sell orders, the said Noticees placed single-digit buy orders. Further, the trading pattern of the said Noticees disclosed that their intention was to mark the price higher and not merely to enter into the buy transactions, and as such the said Noticees manipulated the scrip price and created a misleading appearance of trading in the scrip by such trades. 5.2. The Noticees have raised a preliminary objection that the transactions pertain to the period 2006-2007 while the SCN has been issued in the month of February 2018, after a delay of 11 years, and that the SCN must set out the circumstances requiring such drastic use of power under 11 (4) and 11 B after about 11 years. Reliance in this regard has been placed on the Orders of the Hon’ble SAT in Subhkam Securities Private Limited V. SEBI (Appeal No. 73 of 2012) and Libord Securities Ltd. V. SEBI ( Appeal No. 24 of 2008) and the Order of the Hon’ble Supreme Court in SEBI v. Libord Securities Ltd. (Civil Appeal No. 6091 of 2008).

5.3. The primary defences on merits placed by the Noticees are: a) trades executed at positive LTP within permissible circuit limits is not prohibited; b) the Noticees traded in substantial quantity and not one or two shares; c) the trades for small quantities were in the nature of delivery based and intra-day jobbing; d) the Noticees not only bought but also sold shares; e) the Noticees did not receive any disproportionate gain or unfair advantage and did not cause any loss to an investor or group of investors; and f) the Noticees were not connected to either the promoter of the Company or to the respective counter-parties to the trades effected by them.

5.4. Before proceeding with the preliminary objection raised with respect to the delay in issuance of the SCN and the invocation of Section 11(4) and Section 11 B thereto, it would be relevant to deal with the substantive submissions made by the said Noticees.

5.5. The said Noticees have been alleged to have manipulated the price of the scrip by buying small amounts of shares at prices above the LTP. The principle of trading in securities assumes that a buyer would always want to buy ‘low’ and a seller would want to sell ‘high’. Therefore, the buying of shares by a buyer at prices higher than the LTP raises suspicion that the trades are not genuine and may be with an intent to manipulate the price of the scrip.

5.6. In this regard, the top 10 entities contributing to positive LTP as buyers during Patch-1 (December 01, 2006 to October 03, 2007) of the investigation period is as under:

Table-3 All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Positive Buyer Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of LTP to impact traded trades impact traded trades impact traded trades traded trades Total in Rs. in Rs. in Rs. Market Positive LTP Gala Rajesh 53.50 24327 159 72.64 2377 94 -19.14 18052 37 3898 28 28.01 N (HUF) (Noticee No.3)

Nanji B 24.48 7368 108 27.04 1586 63 -2.56 4265 20 1517 25 10.43 Gala (Noticee No.1) Priti Nitin 5.39 3824 62 13.29 274 23 -7.90 2263 24 1287 15 5.13 Sheth Nilu Chopra 3.45 2000 3 3.45 2000 3 0.00 0 0 0 0 1.33 Kalyanmal 3.42 9761 28 3.42 1002 3 0.00 0 0 8759 25 1.32 Vijay Jain Prem Ratan 2.13 400 2 2.13 400 2 0.00 0 0 0 0 0.82 Lahoty Bcb Finance 2.05 9070 18 2.05 2877 3 0.00 0 0 6193 15 0.79 Limited Pramod 1.80 1200 3 1.80 1101 2 0.00 0 0 99 1 0.69 Kumar Pareek Venkateswara 1.58 2500 5 1.58 125 2 0.00 0 0 2375 3 0.61 Rao Andey Omkar 1.45 2200 8 1.85 1750 5 -0.40 400 2 50 1 0.71 Somani Mal Total by top 99.25 62650 396 129.25 13492 200 -30.00 24980 83 24178 113 49.84 10 entities Remaining -82.73 1142546 2743 130.07 199163 493 -212.80 191808 715 751575 1535 50.16 entities

All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Positive Buyer Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of LTP to impact traded trades impact traded trades impact traded trades traded trades Total in Rs. in Rs. in Rs. Market Positive LTP Total 16.52 1205196 3139 259.32 212655 693 -242.80 216788 798 775753 1648 100.00

5.7. The SCN, on the basis of the above, has stated that the total positive LTP contribution by Noticee Nos. 1 and 3 is (Rs. 72.64 + 27.04) Rs.99.68 amounting to 38.44% of total market positive LTP. Further, in 153 out of total 157 positive LTP contributing trades, buy orders of the Noticees were placed after the respective sell orders which were already available at prices higher than LTP. Further, the Noticees placed buy orders for small quantities (single digits) in 136 instances and contributed to significant positive LTP of Rs.94.35 (36.38% of total market positive LTP). Of the said 136 instances, it is observed that Noticee No. 1 had executed 26 single digit buy orders and Noticee No. 3 had executed 110 single digit buy orders.

5.8. In response to the repeated miniscule orders, the Noticees have claimed that their trades were in the nature of intra-day jobbing and delivery based transactions. In this respect, the Noticees have explained that the Noticees were carrying out above-mentioned transactions in multiple scrips, and so it was not possible to place all scrips on a tracker on an online screen. Therefore, in order to get an update on the scrip (in terms of volume, prices on touch line, buy quantity, sell quantity and such other parameters), the Noticees used to refresh the screen by placing an order for small quantities or 1 share.

5.9. Further, upon the perusal of the trading history of the Noticees, as submitted by them, it is observed that during the relevant period the Noticees were in fact trading in many other scrips. At this point, it would be relevant to examine the trading activity of the Noticees in the scrip.

5.10. Noticee No. 1, Nanji B. Gala bought 9,604 shares of the Company and sold all the shares he had bought. It must be stated here that the allegation in the SCN pertains to the Noticee’s buy trades during Patch-1 of the Investigation Period i.e., December 01, 2006 to October 03, 2007. In this regard, the Settlement Summary of trades in the scrip, as submitted by the Noticee, reveals that the total number of shares bought during Patch-1 was 5,744 at an average rate of Rs. 8.19, i.e. at a total cost of Rs. 47,058.94. Similarly, the total number of shares sold during Patch-1 was 7,845 at an average rate of Rs. 8.84, a total income of Rs. 69,360.70. The said sale of shares included the sale of 2,101 shares bought prior to December 01, 2006, which amounted to Rs. 15,119.24. So, the profit earned by the Noticee on the sale of 5,744 shares bought during Patch -1 was (69,360.70 - 47,058.94) - 15,119.24 i.e., Rs. 7, 182.52 based on average sale price.

5.11. Similarly, in respect of Noticee No. 3, Rajesh Nanji Gala HUF for the period December 01, 2006 to March 26, 2007, the Settlement Summary of trades in the scrip, as submitted by the Noticee, reveals that the total number of shares bought during Patch-1 was 3,227 at an average rate of Rs. 7.50 and 21,100 at an average rate of Rs. 7.05 thereby buying a total of 24,327 shares at a cost of Rs. 1,73,023.04. Similarly, the Noticee sold 3,227 shares at an average rate of Rs. 7.77 and 21,100 at an average rate of Rs. 7.63, thereby selling a total of 24,327 shares for Rs.

1,86,049.91. So, the profit earned by the Noticee on the sale of 24,327 shares bought during Patch -1 was Rs. 13,026.87 based on average sale price.

5.12. Also, the Noticees have stated that the price started increasing from July 24, 2007 during which period the Noticees have not traded. In this regard, the following is observed from the Investigation Report: In Patch-1, the scrip opened at Rs. 10 on December 01, 2006 and closed at Rs. 26.25 on October 03, 2007; in Patch-2, the scrip opened at Rs. 25.8 on October 04, 2007 and closed at Rs. 9.5 on April 03, 2008; in Patch-3, the scrip opened at Rs. 9.50 on April 04, 2008 and closed at Rs. 14.50 on September 25, 2008; in Patch-4, the scrip opened at Rs. 14.50 on September 26, 2008 and closed at Rs. 7 on May 31, 2009; in Patch -5, the scrip opened at Rs. 6.66 on June 1, 2009 and closed at Rs. 41.15 on August 18, 2009; in Patch- 6, the scrip opened at Rs. 42.30 on August 19, 2009 and closed at Rs. 14.75 on March 15, 2010; in Patch -7, the scrip opened at Rs. 14.05 on March 15, 2010 and closed at Rs. 38.90 on April 07, 2011; and in Patch -8, the scrip opened at Rs.40 on April 08, 2011 and closed at Rs. 6.58 on August 31, 2012. The aforesaid movement of price in the scrip along with the volume traded is depicted in the graph below:

Price Volume chart 45 1200000 40 1000000 35 30 800000 25 600000 20 15 400000 10 200000 5 0 0 01-Dec-06 01-Dec-07 01-Dec-08 01-Dec-09 01-Dec-10 01-Dec-11 No.of Shares Close Price

It is seen from the above that the price of the scrip gained momentum and peaked only after the Patch-1 (December 01, 2006 to October 03, 2007) period.

5.13. Further, the Noticees have claimed that they did not place buy orders to manipulate the price of the scrip as the buy orders placed, which contributed to positive LTP, were actually placed after sell orders had been placed at higher than LTP prices. In this respect, it is stated that Noticee No.1, Nanji Gala effected 63 trades, which contributed to positive LTP. On an analysis of the trade logs, it is observed that in all the 63 trades, the sell orders had been placed before the buy orders were placed by Noticee No. 1. Similarly, in respect of Noticee No. 3, it is stated that Noticee No.3, Gala Rajesh N (HUF) effected 94 trades, which contributed to positive LTP. On an analysis of the trade logs, it is observed that in all the 94 trades, the sell orders had been placed before the buy orders were placed by Noticee No. 1, as claimed by him.

5.14. Furthermore, the Noticees have stated that they actively trade in the securities markets and during Patch-1 also the Noticees were involved in the trading of other scrips. The Noticees, as part of their submissions, have provided lists, enumerating the scrips in which trading was carried out by the Noticees during Patch-1 period. As per the list provided by Noticee No. 1, he traded in the scrips of about 375 companies, between March 29, 2006 and March 28, 2007. Similarly, as per the list provided by Noticee No. 3, between March 29, 2006 and March 27, 2007, the said Noticee traded in the scrips of about 525 companies.

5.15. From a perusal of the above facts, it is seen that the Noticees were actively involved in the purchase and sale of shares in the securities market. It was observed that the buy orders were placed by the Noticees subsequent to various sellers placing their sell orders at higher-than LTP. Further, the profit earned by Noticee Nos. 1 and 3, from the purchase and sale of the shares of L.N. Industries during the Patch-1 period was respectively Rs. 7, 182.52 and Rs. 13,026.87. The amounts made as profit by the Noticees are not substantial. Furthermore, the trading of the Noticees in the scrip of L.N. Industries Ltd. was confined to only Patch-1 period. During the said period, the scrip opened at Rs. 10 on December 01, 2006 and closed at Rs. 26.25 on October 03, 2007. The share price of L.N. Industries reached its peak of Rs. 42.30 on August 19, 2009, in Patch- 6 period, during which time the Noticees had no trading activity in the shares of L.N. Industries.

5.16. Thus, upon a collective reading of the above facts, it does not appear that the said Noticees effected the trades in Patch-1 period for creating a misleading appearance of trading and manipulating the price of the scrip. Accordingly, the allegation that the Noticee Nos. 1 and 3 had manipulated the price of the scrip through their trades thereby violating regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003 does not stand proved.

5.17. In view of the above finding, the preliminary objection raised by the said Noticees in respect of the delay in issuance of the SCN and the invocation of Section 11(4) and Section 11 B thereto requires no further consideration.

5. B. G M Farmanullah (Noticee No.2)

5.18. With respect to the above mentioned Noticee, the SCN has alleged that – a. G M Farmanullah (Noticee No.2) manipulated the price of the scrip through his trades and violated regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003.

b. During Patch-3 period i.e., 04.04.2008-25.09.2008, Noticee No. 2 was amongst the top 10 positive LTP contributors as a buyer.

c. The top 10 entities contributed Rs.39.04 to positive LTP (61.60% to market positive LTP of Rs. 63.38 ) in 56 trades. Out of the above 10, the positive LTP contribution of Noticee No. 2 was Rs.8.98 (14.17% of total market positive LTP). Further, all the 7 trades placed by the said Noticee were single digit buy orders.

d. The Noticee followed this trading pattern on 3 days and has contributed to significant positive LTP.

e. Sell orders for large quantity of shares were available before the buy orders were placed, but the Noticee repeatedly placed buy orders for small quantities.

f. The said Noticee repeatedly entered into such trades on a total of 7 instances. It was observed that the Noticee was not acting as a genuine buyer and had no bona fide intention to buy, because in-spite of large disclosed quantity of sell orders, small quantity buy orders were placed which contributed to significant positive LTP. The said trading pattern demonstrated that the intention of the Noticee was to mark the price higher and not merely to enter into buy transactions.

5.19. The said Noticee, even after due service of Notices, has neither provided any reply to the allegations made in the SCN nor availed the opportunity of personal hearing to advance his submissions before me. In such circumstance, the allegations in the SCN against the said Noticee are taken up for consideration, on the basis of the material available on record.

5.20. In this regard, the analysis of top 10 entities contributing to positive LTP as buyers during Patch -3 period (April 04, 2008 to September 25, 2008 ) is as under:

Table-4

All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Buyer Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of Positive impact traded trades impact traded trades impact traded trades traded trades LTP to in Rs. in Rs. in Rs. Total Market Positive LTP 1 Padma 6.71 10416 49 8.79 3068 22 -2.08 2062 6 5286 21 13.87 Mundunuri 2 G M 3.76 3307 18 8.98 7 7 -5.22 3300 11 0 0 14.17 Farmanullah (Noticee No.2) 3 China Jogiraju 3.16 250 5 3.16 250 5 0.00 0 0 0 0 4.99 Patsamatla 4 Venkata Raju 2.35 225 4 2.35 225 4 0.00 0 0 0 0 3.71 Saripella 5 Suman Vikas 1.78 6310 9 2.04 636 3 -0.26 1500 2 4174 4 3.22 Wahane 6 Kalyan Kumar 1.55 100 1 1.55 100 1 0.00 0 0 0 0 2.45 Kanasani 7 Shilpa Sehgal 1.45 38 4 1.45 12 1 0.00 0 0 26 3 2.29 8 Atul Kumar 1.42 55 2 1.43 50 1 -0.01 5 1 0 0 2.26 9 Mayur 1.42 25 1 1.42 25 1 0.00 0 0 0 0 2.24 Jamnadas Vora 10 Shree Adhunik 1.42 774 4 2.32 2 2 -0.90 772 2 0 0 3.66 Securities Total by top 10 25.02 21500 97 33.49 4375 47 -8.47 7639 22 9486 28 52.84 entities Remaining -20.02 136043 393 29.89 26444 104 -49.91 35184 120 74415 169 47.16 entities Total 5.00 157543 490 63.38 30819 151 -58.38 42823 142 83901 197 100.00

5.21. I note that during Patch-3 period i.e., April 04, 2008 to September 25, 2008, the said Noticee was amongst the top 10 positive LTP contributors as a buyer, and all the 7 trades placed by him were single digit buy orders. I further note that the Noticee followed this trading pattern for 3 days contributing to positive LTP.

5.22. The trading data reveals that during Patch-3, the total number of trades that contributed to positive LTP was 151. Out of the same, the Noticee had 7 trades, which is 4.6 percent of the total trades. Similarly, the total number of shares that contributed to positive LTP was 30,819, out of which a total of 7 shares were bought by the said Noticee, constituting 0.22 percent of the total shares traded. Thus, from the above, it is evident that the contribution of the said Noticee to total number of trades and the total number of shares traded which contribute to positive LTP was quite minimal.

5.23. Furthermore, it is revealed from the above mentioned trading data that the Noticee had effected in total 18 buy trades, of which 7 trades contributed to positive LTP and 11 trades contributed to negative LTP. It is relevant to note that the 11 trades, which contributed to negative LTP, were for 3300 shares, while the 7 trades which contributed to positive LTP were for 7 shares only.

5.24. It is a fact that the Noticee’s buy trades of small quantities contributed about 15% to the total market positive LTP. However, for a conclusion to be drawn that such trading activity was for manipulating the price of the scrip, it is necessary to consider the overall trading behaviour of the Noticee.

5.25. From the details as brought out above, it is evident that of the total 18 trades, a majority i.e., 11 trades did not contribute to positive LTP. Similarly, of a total of 3307 shares bought by the Noticee No. 2, only 7 shares contributed to positive LTP. The shares contributing to positive LTP were minimal and constituted only 0.22 percent of the total shares bought by the Noticee; so the predominant number of shares were bought by way of trades that did not contribute to positive LTP. Thus, on an overall assessment, I am inclined to believe that Noticee No. 2 has not engaged in the abovementioned trades to manipulate the price of the scrip.

5.26. In light of the above, it does not appear that the said Noticee effected 7 trades for creating a misleading appearance of trading and manipulating the price of the scrip. Accordingly, the allegation that the Noticee has manipulated the price of the scrip through his trades for creating a misleading appearance of trading thereby violating regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003 does not stand proved.

5. C. Padma Mundunuri (Noticee No. 5) and China Jogiraju Patsamatla (Noticee No. 6)

5.27. With respect to the above mentioned Noticees, the SCN has alleged that – a. Padma Mundunuri (Noticee No. 5) and China Jogiraju Patsamatla (Noticee No. 6), who are related to each other as daughter and father, manipulated the price of the scrip through their trades, thereby violating regulation 3 (a), (b), (c), (d) and regulation 4(1), 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003.

b. During Patch-3 period i.e., 04.04.2008-25.09.2008, Noticee Nos. 5 and 6 were amongst the top 10 positive LTP contributors as buyers.

c. The top 10 entities contributed Rs.33.49 to positive LTP (52.84% to market positive LTP of Rs. 63.38) in 47 trades. Out of the above 10, the positive LTP contribution of the said Noticees was Rs.11.95 (18.86% of total market positive LTP) in 54 trades.

d. During the Patch-3 period, Noticee No. 5 and 6 were amongst the top 10 positive LTP contributors as sellers also. The top 10 entities contributed Rs.39.04 to positive LTP (61.60% to market positive LTP of Rs. 63.38) in 56 trades. Out of the above 10, the positive LTP contribution by the two connected entities Padma (Noticee No. 5) and Jogiraju (Noticee No. 6) was Rs.7.77 (12.26% of total market positive LTP).

e. In 9 out of total 12 positive LTP contributing trades, the Noticees placed buy and sell orders between themselves which contributed to positive LTP of Rs.5.49 (or 8.66% to market positive LTP). Padma (Noticee No. 5) and Jogiraju (Noticee No. 6) repeatedly entered into synchronised and reversal trades in a total of 9 instances, as shown above, which resulted in increase in the scrip price in all the 9 instances. It was observed that they were not acting as genuine buyers or sellers and had no bona fide intention to buy or sell and their intention was to mark the price higher. It was observed that Padma (Noticee No. 5) and Jogiraju (Noticee No. 6) manipulated the scrip price and created a misleading appearance of trading in the scrip by such trades.

5.28. In this regard, the analysis of top 10 entities contributing to positive LTP as buyers in Patch -3 period (April 04, 2008 to September 25, 2008 ) is as under:

Table-5

All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Positive Buyer Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of LTP to impact traded trades impact traded trades impact traded trades traded trades Total in Rs. in Rs. in Rs. Market Positive LTP Padma Mundunuri 6.71 10416 49 8.79 3068 22 -2.08 2062 6 5286 21 13.87 (Noticee No. 5) G M Farmanullah 3.76 3307 18 8.98 7 7 -5.22 3300 11 0 0 14.17 (Noticee No. 2) China Jogiraju 3.16 250 5 3.16 250 5 0.00 0 0 0 0 4.99 Patsamatla (Noticee no 6) Venkata Raju Saripella 2.35 225 4 2.35 225 4 0.00 0 0 0 0 3.71 Suman Vikas Wahane 1.78 6310 9 2.04 636 3 -0.26 1500 2 4174 4 3.22 Kalyan Kumar Kanasani 1.55 100 1 1.55 100 1 0.00 0 0 0 0 2.45 Shilpa Sehgal 1.45 38 4 1.45 12 1 0.00 0 0 26 3 2.29 Atul Kumar 1.42 55 2 1.43 50 1 -0.01 5 1 0 0 2.26 Mayur Jamnadas Vora 1.42 25 1 1.42 25 1 0.00 0 0 0 0 2.24 Shree Adhunik Securities 1.42 774 4 2.32 2 2 -0.90 772 2 0 0 3.66 Total by top 10 entities 25.02 21500 97 33.49 4375 47 -8.47 7639 22 9486 28 52.84 Remaining entities -20.02 136043 393 29.89 26444 104 -49.91 35184 120 74415 169 47.16 Total 5.00 157543 490 63.38 30819 151 -58.38 42823 142 83901 197 100.00

5.29. The trading data reveals that Noticee Nos. 5 and 6 had collectively effected 54 trades for a total of 10, 666 shares. Out of the same, 27 trades for a quantity of 3,318 shares contributed to positive LTP of Rs. 11.95 i.e., 18.86 % of the total market positive LTP.

5.30. In this regard, the analysis of top 10 entities contributing to positive LTP as sellers in Patch -3 period (April 04, 2008 to September 25, 2008 ) is as under:

Table-6

All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Positive Seller Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of LTP to impact traded trades impact traded trades impact traded trades traded trades Total in Rs. in Rs. in Rs. Market Positive LTP Venkata Vasantha kumari 12.14 4723 40 16.23 1890 19 -4.09 169 9 2664 12 25.61 Gurram Shiv Kumar Nemani 3.12 640 10 3.24 434 5 -0.12 51 2 155 3 5.11 Padma Mundunuri 2.68 1890 13 4.53 400 8 -1.85 1440 4 50 1 7.15 (Noticee No. 5) China Jogiraju 2.33 200 4 2.33 200 4 0.00 0 0 0 0 3.68 Patsamatla (Noticee No. 6) Hembaran Laha Laha 1.90 1950 4 1.90 1686 3 0.00 0 0 264 1 3.00 A V H S Prasada Rao 1.88 611 11 2.42 250 6 -0.54 161 2 200 3 3.82 G M Farmanullah (Noticee 1.57 3307 18 4.27 1463 6 -2.70 1041 9 803 3 6.74 No. 2) Ramchandra Ramchandra 1.42 25 1 1.42 25 1 0.00 0 0 0 0 2.24 Vsss Varma Nadimpally 1.40 497 4 1.45 12 1 -0.05 100 1 385 2 2.29 Harshvadan Vrajlal Katwa 1.25 100 3 1.25 100 3 0.00 0 0 0 0 1.97 Total by top 10 entities 29.69 13943 108 39.04 6460 56 -9.35 2962 27 4521 25 61.60 Remaining entities -24.69 143600 382 24.34 24359 95 -49.03 39861 115 79380 172 38.40 Market total 5.00 157543 490 63.38 30819 151 -58.38 42823 142 83901 197 100.00

5.31. The trading data reveals that Noticee Nos. 5 and 6 had collectively effected 17 trades for a total of 2090 shares as sellers. Out of the same, 12 trades for a quantity of 600 shares contributed to a positive LTP of Rs. 7.77 i.e., 12.26 % of the total market positive LTP.

5.32. Furthermore, it has been alleged in the SCN that the above Noticees had also carried out synchronized and reversal trades. In this regard, 9 trades have been identified in the SCN wherein synchronization and reversal were carried out. The details of the same are hereunder:

Table-7

Buy LTP Buy Sell Sell Order Trade Trade Trade Buyer Name Seller Name Order Differe Order Order Date Time Time Price Qty. Time nce Qty. Qty. China Jogiraju Padma Patsamatla Mundunuri 14:08:57. 14:08:10.44 14:08:58.25 02.09.2008 11.85 0.56 50 50 50 (Noticee No. (Noticee No. 8900670 68890 51120 6) 5) Padma China Jogiraju Mundunuri Patsamatla 10:21:53. 10:21:29.37 10:21:53.46 04.09.2008 12.44 0.59 50 50 50 (Noticee No. (Noticee No. 3018530 30790 96600 5) 6) Padma China Jogiraju Mundunuri 10:12:09. 10:11:51.18 10:12:10.42 05.09.2008 Patsamatla(No 13.06 0.62 50 50 50 (Noticee No. 9203040 61710 62910 ticee No. 6) 5) Padma China Jogiraju Mundunuri Patsamatla 10:19:40. 10:18:11.40 10:19:40.83 08.09.2008 12.45 0.45 50 50 50 (Noticee No. (Noticee No. 3694950 52160 37270 5) 6) China Jogiraju Padma Patsamatla Mundunuri 10:19:28. 10:20:14.11 10:20:14.39 09.09.2008 13.07 0.62 50 50 50 (Noticee No. (Noticee No. 9305650 58750 96310 6) 5) Padma China Jogiraju Mundunuri Patsamatla 10:28:56. 10:27:52.38 10:28:56.92 12.09.2008 13.65 0.58 50 50 50 (Noticee No. (Noticee No. 8779190 22370 86910 5) 6) China Jogiraju Padma Patsamatla Mundunuri 10:14:56. 10:14:38.97 10:14:57.59 15.09.2008 14.33 0.68 50 50 50 (Noticee No. (Noticee No. 9510870 36550 25270 6) 5) China Jogiraju Padma Patsamatla Mundunuri 10:46:42. 10:46:19.92 10:46:42.39 19.09.2008 14.30 0.68 50 50 50 (Noticee No. (Noticee No. 3419270 00890 52660 6) 5) Padma China Jogiraju Mundunuri Patsamatla 09:58:30. 09:58:17.70 09:58:30.67 25.09.2008 15.01 0.71 50 50 50 (Noticee No. (Noticee No. 2881500 92600 82980 5) 6)

5.33. It is observed from the above table that on 9 instances, buy orders and sell orders were placed within minutes of each other, and the buy quantity and sell quantity were exactly the same. Further, it is also observed from the above table that on the first instance i.e, September 02, 2008, the buyer was Noticee No. 6 and the seller was Noticee No. 5 for 50 shares. Subsequently, Noticee No. 6 became the seller and Noticee No. 5 became the buyer for 50 shares. This pattern is observed though the course of the said 9 trades.

5.34. In view of the above, it is seen that the said Noticees have a) as buyers effected trades which resulted in positive LTP of Rs. 11.95 i.e. 18.86 % of the total market positive LTP; and b) effected synchronized and reversal trades.

5.35. In this respect, the said Noticees have acknowledged that they are related, with Noticee No. 6 being the father and Noticee no. 5 being the daughter. The Noticees have also submitted that they did not have the intention to manipulate the share price and their holding was not significant. Further, the said Noticees have undertaken not to repeat such actions and that they shall not in the future give authorization to any third person to operate any account on their behalf. The said Noticees in the personal hearing dated September 19, 2019 stated that they had given the rights to enter trades on their behalf to their stockbroker, Cholamandalam Securities Limited, and as such had no knowledge of entering into trades as alleged in the SCN. In respect of this claim, no documentary proof has been provided by the said Noticees.

5.36. Upon a consideration of the above facts, it is seen that the trades effected by the said Noticees fall under the category of synchronized and reversal trades. This was carried out on 9 instances and was continued from September 02, 2008 to September 25, 2008. The Noticees’ authorisation in favour of their broker has not been submitted. Thus, it appears that the said Noticees have carried out synchronized and reversal trades. Accordingly, In find that the allegation that Noticee Nos. 5 and 6 have manipulated the price of the scrip through their trades thereby violating regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003 stands proved.

5. D. Sanjaysinh Rathod (Noticee No. 7) 5.37. With respect to the above mentioned Noticee, the SCN has alleged that – a. Sanjaysinh Rathod (Noticee No. 7) manipulated the price of the scrip through his trades and violated regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003.

b. During Patch-4 period i.e., September 25, 2008– May 31, 2009, Noticee No.7 contributed Rs. - 4.09 to negative LTP (32.93% of total market negative LTP). All the 10 negative LTP contributing trades were self-trades of the said Noticees which contributed to a negative LTP of Rs.3.69 (or 29.71% to market negative LTP).

c. In all the above negative LTP contributing trades, Sanjaysinh (Noticee No. 7) was both buyer and seller and each of these trades resulted in decrease in the scrip price. Sanjaysinh (Noticee No. 7) contributed Rs. -4.20 to negative LTP (33.82% of total market negative LTP). Trade log analysis in respect of Sanjaysinh was done and it was observed that in 7 out of 10 negative LTP contributing trades, buy orders were placed after the respective sell orders which contributed to negative LTP of Rs.-3.05. Sanjaysinh had done 10 self-trades which contributed to negative LTP of Rs.3.69 (or 29.71% to market negative LTP). The traded quantity in all the 10 negative contributing trades was 1 share only on 9 different days.

5.38. In this regard, the analysis of the top 10 entities contributing to negative LTP as sellers in Patch-4 period (September 25, 2008– May 31, 2009) is as under:

Table-8 All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Seller Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of Negative impact traded trades impact traded trades impact traded trades traded trades LTP to in Rs. in Rs. in Rs. Total Market Negative LTP Sanjaysinh -4.09 73 15 0.00 0 0 -4.09 10 10 63 5 32.93 Manusinh Rathod (Noticee No. 7) Jashiben Bhanabhai -1.04 201 4 0.00 0 0 -1.04 16 2 185 2 8.37 Randeri Jayshri Satish Joshi -0.68 600 8 0.46 1 1 -1.14 6 2 593 5 9.18 Vasudev Bhanabhai -0.68 1 1 0.00 0 0 -0.68 1 1 0 0 5.48 Randeri V Srinivas Rao -0.61 300 2 0.00 0 0 -0.61 200 1 100 1 4.91

All trades LTP diff > 0 LTP diff < 0 LTP diff = 0 % of Seller Name LTP QTY No of LTP QTY No of LTP QTY No of QTY No of Negative impact traded trades impact traded trades impact traded trades traded trades LTP to in Rs. in Rs. in Rs. Total Market Negative LTP Bhavin Maganbhai -0.56 100 1 0.00 0 0 -0.56 100 1 0 0 4.51 Patel Sanjeeva Reddy -0.50 141 2 0.00 0 0 -0.50 1 1 140 1 4.03 Pamulaparthy Prakash Narandas -0.45 972 4 0.00 0 0 -0.45 680 1 292 3 3.62 Bansiwala Rakeshbhai -0.45 106 3 0.27 1 1 -0.72 5 1 100 1 5.80 Dayalbhai Patel Fakhra Khan -0.34 140 1 0.00 0 0 -0.34 140 1 0 0 2.74 Total by top 10 -9.40 2634 41 0.73 2 2 -10.13 1159 21 1473 18 81.57 entities Remaining entities 1.90 10388 70 4.19 2678 18 -2.29 1591 15 6119 37 18.43 Market total -7.50 13022 111 4.92 2680 20 -12.42 2750 36 7592 55 100.00

5.39. I note that during Patch-4 period i.e., September 26, 2008– May 31, 2009, the price of the scrip opened at Rs.14.50 and closed at Rs.7.00 with a net LTP of Rs.-7.50 and a market negative LTP of Rs.-12.42. The said Noticee was amongst the top 10 negative LTP contributors, and all the 10 trades effected by him were single digit sell orders. I further note, that the 10 trades effected by the said Noticee were self-trades.

5.40. The trading data reveals that during Patch-4, the total number of trades that contributed to negative LTP was 36. These 36 trades were for a total of 2750 shares. The said Noticee’s trades contributing to the market negative LTP was 10, although the same was for only 10 shares.

5.41. Further, it is revealed from the above mentioned trading data that the Noticee had traded in a total of 73 shares in 15 trades. Out of the said total shares, 63 shares were sold by way of 5 trades, and the rest 10 shares were sold by way of 10 trades, which were self-trades.

5.42. The Noticee in his reply has stated that he was an auto-rickshaw driver by profession and invested in shares following the 52-week lowest price of scrips as provided in the Gujarati editions of the Financial Express and Economic Times. He also stated that he had made a minimal gain of not more than Rs. 30 to 40 per share from the purchase and sale of 73 shares. He has further stated that he did not act knowingly or with the intent of defrauding anyone in effecting the trades.

5.43. Considering the above, I find that the Noticee’s trading activity was limited to 73 shares. Further, the Noticee had effected a total of 15 trades and out of this 10 trades for 10 shares were self-trades, which had contributed to the negative LTP. Thus, the quantum of such self-trades was quite low. Furthermore, I find that the daily average traded quantity during Patch-4 was 283. This is the lowest for any patch during the investigation period. That being the case, the 10 trades of 1 share each had a relatively greater contribution to the negative LTP as would have otherwise occurred.

5.44. Furthermore, I am inclined to accept the stand of the Noticcee that the 10 self-trades were effected unknowingly and without any intent to defraud as only a handful of shares were involved in such self-trades, and nothing in the facts weigh towards a conclusion to the contrary.

5.45. In light of the above, it does not appear that the said Noticee effected the 10 self-trades with the intent of creating a misleading appearance of trading and manipulating the price of the scrip. Accordingly, the allegation that Noticee No. 7 manipulated the price of the scrip through his trades thereby violating regulation 3 (a), (b), (c), (d) and regulation 4(1) 4(2) (a) and (e) of SEBI (PFUTP) Regulations, 2003 does not stand proved. 6. Conclusion – 6.1. In consideration of the above findings, I conclude that the trades in Patch-1 period executed by Noticee No. 1, Nanji B Gala and Noticee No. 3, Gala Rajesh N (HUF) do not appear to be for the purpose of creating a misleading appearance of trading and manipulating the price of the scrip, as alleged in the SCN. Similarly, Noticee No. 2, G M Farmanullah cannot be held liable for the 7 trades alleged in the SCN. Further, the allegation of 10 self-trades against Noticee No. 7, Sanjaysinh Manusinh Rathod does not stand substantiated. As regards, Noticee No. 5, Padma Mundunuri and Noticee No. 6, China Jogiraju Patsamatla, I am of the view that their trades fall under the category of synchronized and reversal trades, which is likely to create a misleading appearance of trading and manipulating the price of the scrip. However, I am inclined to view the same with leniency in light of the minimal contribution to the manipulation as alleged in the SCN, when viewed separately and independently. Hence, Noticee Nos. 5 and 6 deserve a warning with respect to their conduct.

7. Directions –

7.1. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4) and 11B and in the interest of the securities market, hereby issue the following directions: a. The SCN in respect of Nanji B Gala (Noticee No. 1); G M Farmanulla (Noticee No. 2); Gala Rajesh N (HUF) (Noticee No. 3); Gala Rajesh N (Noticee No. 4); and Sanjaysinh Manusinh Rathod (Noticee No. 7) is hereby disposed of without any directions. b. Padma Mundunuri (Noticee No. 5) and China Jogiraju Patsamatla (Noticee No. 6) are hereby strongly warned in respect of the trades carried out by them in the instant matter. The said Noticees are directed to forthwith discontinue any similar arrangement/agreement entered into by them with the stockbroker for placing orders on their behalf, and are advised to be careful and cautious as regards their conduct of trades in the securities markets henceforth. c. This Order shall come into force with immediate effect.

7.2. A copy of this order shall be forwarded to the Noticees immediately.

Place: Mumbai G. MAHALINGAM Date: July 17, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA