Order in the matter of M/s Kinetic Capital Services Limited & M/s Shubh International Limited

Under section 11(1), 11(4)(b) and 11B of the Securities and Exchange Board of India Act, 1992. In respect of 1.) M/s. Gagan Securities, 2.) Shri Ajay Jain, 3.) M/s. Unique Securities, 4.) Shri Deepak Batra, 5.) M/s. G. K. Investments 6.) Shri Parveen Bansal 7.) Shri Rajesh Kumar, 8.) Shri Asim Jain and 9.) Shri Sunil Gupta

In the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited. 1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) had conducted an investigation in buying, selling and dealing in the shares of M/s. Kinetic Capital Services Limited (hereinafter referred to as "Kinetic)" and M/s. Shubh International Limited (now known as M/s Geetanjali Credit & Capital Ltd.) for the period February 23, 1999 to May 21, 1999 (Investigation Period). 2. It was observed that during the investigation period:- i. The price of the shares of Kinetic increased from a low of ` 20.60/- on December 22, 1998 to a high of ` 65/- on May 17, 1999 and the price of the shares of M/s. Shubh International Limited (hereinafter referred to as 'Shubh') increased from ` 19/- on February 23, 1999 to ` 48/- on May 21, 1999 at Delhi Stock Exchange (DSE). ii. Majority of the trades in the scrip of Kinetic and all the trading in the scrip of Shubh at DSE was carried out by two brokers namely M/s. Indus Portfolio Private Ltd. (hereinafter referred as "Indus") and M/s. V. H. Securities Ltd. (herein after referred as "VH"). Trading in the scrip of Shubh was circular in nature. iii. Indus had traded in the scrip of Kinetic as well as Shubh, on behalf of its unregistered sub-broker, M/s Gagan Securities, who dealt on behalf of M/s. G. K. Investments, who in turn traded on behalf of Shri Deepak Batra, who had traded on behalf of Shri Parveen Bansal and Shri Rajesh Kumar. iv. VH had traded in the scrip of Kinetic as well as Shubh, on behalf of its unregistered sub-broker, Shri Ajay Jain trading as an individual as well as his proprietary concern viz; M/s. Unique Securities. Shri Ajay Jain traded on own account and on behalf of his clients namely Shri Rajesh Kumar, Shri Asim Jain and Shri Sunil Gupta. He traded as proprietary concern

Order in the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.

M/s. Unique Securities on his own account and on behalf of his client Shri Asim Jain. The same has been presented in the following flow chart :

M/s. V. H. Securities Ltd. Ajay Jain Unique Securities

Proprietary Rajesh Kumar Ashim Jani Proprietary

Asim Jain Sunil Gupta v. The price of shares of Shubh increased due to single trade at a price more than last closing price, on 18 trading days. Further, it was observed that in the scrip of Kinetic as well, the price increased due to single trade each on 19 trading days and two to four trades on 6 other trading days. vi. It was observed that M/s. Gagan Securities, Shri Ajay Jain, M/s. Unique Securities, Shri Deepak Batra, M/s. G. K. Investments, Shri Parveen Bansal, Shri Rajesh Kumar, Shri Asim Jain and Shri Sunil Gupta were acting in concert with the object of manipulating the scrip prices, thereby violated regulation 4(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 (PFUTP Regulations). Further, M/s. Gagan Securities acted as sub-broker of M/s. Indus, Shri Ajay Jain and M/s. Unique Securities acted as sub-broker of M/s. VH, without being registered with SEBI in contravention of rule 3 of SEBI (Stock Broker and Sub-broker) Rules, 1992 (Stock Broker and Sub-broker Rules). 3. Based on the findings of the investigation, Show Cause Notices (SCNs) dated November 27, 2001 were issued under section 11B of the SEBI Act, 1992 read with regulation 11 of PFUTP Regulations to M/s. Gagan Securities, Shri Ajay Jain, M/s. Unique Securities, Shri Deepak Batra, M/s. G. K. Investments, Shri Parveen Bansal, Shri Rajesh Kumar, Shri Asim Jain and Shri Sunil Gupta (hereinafter collectively referred as "the noticees") calling upon them to show cause as to why suitable directions including direction of prohibiting access to capital market and dealing in securities for a suitable period should not be issued against them. 4. SCNs issued to Shri Asim Jain, Shri Rajesh Kumar and Shri Sunil Gupta were returned undelivered. Accordingly, on July 19, 2014, SCNs were served on Shri Ashim Jain and Shri Sunil Gupta by way of affixture on their last known addresses. The last known address of Shri. Rajesh Kumar could not be located. Therefore, the SCN to Shri Rajesh Kumar was served through publication in newspapers on December 11, 2014. The SCN was also published on the SEBI website.

5. Shri Anil Batra, vide letter dated February 15, 2002, submitted the reply to the SCN for himself and his proprietary concern M/s. Gagan Securities stating inter alia that: a) The alleged transactions were executed on their terminal over a period of 6 months with low volumes on behalf of M/s. G. K. Investments which was managed by Shri Deepak Batra and his wife Ms. Vanita Batra. The transactions were bona fide transactions and they had no means to suspect their nature. b) They did not have personal interest in the said transactions except earning normal brokerage on the said transactions. c) They did not have any means to check the transactions after deliveries were given to M/s. G. K. Investments. 6. Shri Deepak Batra, vide letters one dated nil but received on December 18, 2001 and another dated February 15, 2002, submitted reply for himself and his proprietary concern M/s. G. K. Investments stating, inter alia that: a) The allegations are based on arbitrary grounds. b) He had dealt in the scrip of M/s. Kinetic and M/s. Shubh only on behalf of Shri Praveen Bansal and he does not know Mr. Deepak Gupta, Mr. Asim Jain, Mr. Sunil Gupta and Shri Ajay Jain. 7. Shri Ajay Jain, vide letter dated Dec 6, 2001, submitted reply for himself and for his proprietary concern M/s. Unique Securities stating inter alia that: a) He was trading in equity shares in less quantity and has stopped equity trading activities since last one year. b) He further claimed ignorance of law and submitted that his actions were not intentional or deliberate.

8. Shri Parveen Bansal replied to the SCN vide his letter dated Dec 6, 2001, inter alia as below: a) He has denied the allegation of his involvement in price manipulations through structured trade in the market and stated that the allegation was on arbitrary ground. b) He also stated that he and Shri Deepak Gupta were regional council members of the ICAI and know each other in that capacity and did not have any business association.

c) Observation that M/s. Gagan Securities, M/s. G. K. Investments and Mr. Rajesh Kumar are all based at Rohtak does not establish a nexus to manipulate the stock prices of M/s. Kinetic and M/s. Shubh. 9. Shri Asim Jain, Shri Rajesh Kumar and Shri Sunil Gupta have not submitted their reply to the SCN issued to them and served through substituted service as aforesaid.

10. Several opportunities of personal hearing were granted to the noticee on various occasions before the then Whole Time Members. However, the noticees failed to appear on the scheduled dates. An opportunity of personal hearing was given the noticees before me on November 23, 2012, the noticees once again failed to appear on the scheduled date. Further, even after publication of notice about the SCN to Shri Rajesh Kumar was done in newspapers on December 11, 2014 and the SCN was also hosted on the SEBI website, Shri Asim Jain, Shri Rajesh Kumar and Shri Sunil Gupta have failed to submit their reply to the SCN. Considering these facts, I am of the view that enough opportunities of personal hearing have been provided to the noticees and they do not want to avail the opportunity of personal hearing. I, therefore, proceed with on the basis of material available on record.

11. I have carefully considered the SCN, replies of the noticees and other material on record. Before dealing with the merit of the case, it is deemed relevant to refer to the provisions of rules and regulations that are alleged to have been violated by the noticees. Those provisions are reproduced hereunder:

SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. 4. No person shall - (a) effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person; SEBI (Stock brokers and sub-broker) Rules, 1992 Rule 3 - No stock-broker or sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by the Board under the Regulations: Provided that such person may continue to buy, sell or deal in securities if he has made an application for such registration till the disposal of such application. 12. I have carefully considered the SCN and, replies of the noticees. It is undisputed fact that the price of the scrip of Kinetic had increased from ` 20.60/- on December 22, 1998 to ` 65/- on May 17, 1999 by way of a single trade each on 19 trading days and by way of 2 to 4 trades on 6 other trading days during the period. Further, the price in the scrip of Shubh also increased from `19/- on February 23, 1999 to ` 48/- on May 21, 1999 by way of a single trade each on 18 trading days. It is also undisputed fact that stock brokers viz., Indus and VH dealt in the scrips for M/s. Gagan Securities and Shri Ajay Jain, respectively. Further, M/s Gagan Securities dealt for G.K. Investments, which in-turn dealt for Shri. Rajesh Kumar and Shri. Praveen Bansal. Furthermore, Shri. Ajay Jain dealt in his and his firm's name M/s Unique Securities and also on behalf of his clients, namely, Shri. Rajesh Kumar, Shri Asim Jain and Shri Sunil Gupta. The trade details as described in the SCNs have not been disputed the noticees and are as following: Kinetic Capital Services Limited Broker Sub-broker Clients Clients Indus Portfolio Gagan Securities G K Investments Parveen Bansal Buy Sell Buy Sell Buy Sell Buy Sell 2700 600 2700 600 2700 600 2700 - Deepak Batra Buy Sell - 600

VH Securities Ajay Jain Asim Jain Buy Sell Buy Sell Buy Sell 2400 2600 2400 2300 2000 2000 Sunil Gupta Buy Sell 400 300 Unique Securities Asim Jain Buy Sell Buy Sell - 1200 - 1200

Shubh International Limited Broker Sub-broker Clients Clients Indus Portfolio Gagan Securities G K Investments Parveen Bansal Buy Sell Buy Sell Buy Sell Buy Sell - 4800 - 4800 - 4800 - 4000 Rajesh Kumar Buy Sell - 800

VH Securities Ajay Jain Rajesh Kumar Buy Sell Buy Sell Buy Sell 4700 - 2500 - 1000 - Ajay Jain Buy Sell 1500 - Unique Securities Buy Sell 2200 -

13. It is noted from the SCN that shares of Shubh were traded amongst Shri Praveen Bansal, Gagan Securities, Indus, VH, Shri Ajay Jain/Unique securities and Shri Rajesh Kumar through circular trading as described herein below:-

Parveen Rajesh Bansal Kumar 6 1 5 Gagan Ajay Jain Unique

2 7 4 9 8 Indus V. H.

3 14. It is also noted that such pattern of circular trading in the scrip of Shubh was repeated on many occasions during the investigation period. I further note that both the scrips in question were illiquid scrips. During the investigation period the entire dealings in the scrip of Shubh was between the aforesaid clients through two identified stock brokers i.e. Indus and VH. Further, major dealing in the scrip of Kinetic also was between common clients through the same set of stock brokers. Further, all the trades amongst these clients in both scrips were executed at a price higher than the previous day price. I also note that during the investigation period, the pattern of price movement in both the scrips was same when same set of stock-brokers, unregistered sub-brokers and clients were trading in the scrips.

15. The noticees have failed to give any plausible explanation to the allegations and have contended that mere fact that they are all based at Rohtak cannot establish a nexus to manipulate the prices of the shares of Kinetic and Shubh. I am of the view that same city of residence of the entities may not be the sole ground to allege connection amongst them. However, the facts and circumstances such as conduct of involved parties, pattern of their transductions and trading on two illiquid scrips in the same manner during same period through common stock-brokers, etc. may indicate concerted actions amongst the transaction parties. Considering the facts and circumstances as described in the SCN, I am of the opinion that the above trades of the noticees are of too much of a coincidence in anonymous screen based trading system. Such repeated transactions in illiquid scrips in anonymous screen based trading are possible only through coordinated and deliberate matching of orders by the involved parties acting in league/concert with a premeditated understanding. I, therefore, find that the noticees dealt in the illiquid scrips of Kinetic and Shubh with intent to tamper with the free, fair and transparent price discovery system of the stock exchange and manipulate the prices of the scrips of Kinetic and Shubh.

I, therefore, find that the noticees have violated the provisions of regulation 4(a) of PFUTP Regulations. 16. Apart from the above, M/s. Gagan Securities, Shri Ajay Jain/ M/s. Unique Securities were acting as unregistered sub-brokers. They have not disputed this allegation. It is also noted that M/s. Gagan Securities had issued purchase and sale bills for transactions of its clients. I, therefore, find that M/s. Gagan Securities, Shri Ajay Jain and M/s. Unique Securities have contravened the then applicable rule 3 of Stock Broker and Sub-broker Rules. 17. As the transactions of the noticees had potential to distort the price discovery process at the stock exchange and disturbs the market equilibrium and had manipulated the price of both the scrip and some of the noticees had also acted as unregistered sub-brokers, consequences of such contravention should follow. In this regard, I have also taken note that the transactions in question related to the year 1999. There are no allegations in the SCN of creation of artificial volume, loss to the investors, gain or loss to the noticees, if any, etc have also not been quantified or alleged.

18. Considering the above, I, in exercise of the powers conferred upon me by virtue of section 19 read with sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 and regulation 11 and 12 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 and regulation 11 and 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, hereby restrain the following entities from accessing the securities market and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner for the period indicated in the following table:- Sl. No. Name of the entity Period 1. M/s. Gagan Securities 3 years 2. Shri Ajay Jain 3 years 3. M/s. Unique Securities, 3 years 4. Shri Deepak Batra, 1 year 5. M/s. G. K. Investments 1 year 6. Shri Parveen Bansal 1 year 7. Shri Rajesh Kumar 1 year 8. Shri Asim Jain 1 year 9. Shri Sunil Gupta 1 year

19. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure that the above directions are complied with. 20. This order shall come into force with immediate effect.

Sd/- DATE : April 13th, 2015 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA