Order in the matter of Ranbaxy Laboratories Ltd

WTM/PS/33/IVD-ID8/AUG /2010 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER IN THE MATTER OF RANBAXY LABORATORIES LTD. In respect of: N. H. Securities Ltd. (SEBI Registration No. INB 230643938), K.N.P. Securities Ltd. (SEBI Registration No. INB 010991437), V.N. Parekh Securities Ltd. (SEBI Registration No. INB 010998635) and Triumph Securities Ltd. (SEBI Registration No. INB 010980535) Date of hearing: March 09, 2010 Appearances For Noticees : Mr. R. Krishnan, Advocate For SEBI : Mr. Viplove Thakur, Presenting Officer Mr. Ashish Kumar, Deputy General Manager Ms. Neetika Rajpal, Manager Mr. Pradeep Kumar, Legal Officer Order Under Regulation 28(2) read with Regulations 38(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted investigations into the buying, selling and dealings in the shares of Ranbaxy Laboratories Ltd. (hereinafter referred to as ‘Ranbaxy’) for the period of January, 1999 to October, 1999. The trading details of the person who had traded in the scrip were collected and analyzed along with the data of volumes contributed by the entities traded during the relevant period. During the investigation period, the price of the scrip increased from Rs.270 as on January, 1999 to Rs. 1,200 as on October, 1999. This price rise was accompanied by significant increase in volumes of the scrip.

2. During the course of investigations, it was inter alia revealed that the brokers viz. N.H. Securities Ltd. [SEBI Registration No. INB 230643938], K.N.P.

Securities Ltd. [SEBI Registration No. INB 010991437], V.N. Parekh Securities Ltd. [SEBI Registration No. INB 010998635] and Triumph Securities Ltd. [SEBI Registration No. INB 010980535] (hereinafter collectively referred to as ‘noticees’) all registered with SEBI at the relevant point of time, as stock broker had executed trades in the nature of synchronized deals. Such deals were mainly executed among the Ketan Parekh group entities/ associates.

3. Based on the findings of the investigations, SEBI initiated enquiry proceedings as against the noticees in terms of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to an ‘Enquiry Regulations’), by appointing an Enquiry Officer under Regulation 5(1) of the Enquiry Regulations vide order dated July 24, 2003. SEBI appointed the Enquiry Officer, to enquire into the alleged violation of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (hereinafter referred to as ‘PFUTP Regulations’) and SEBI (Stock Broker and Sub Brokers) Regulations, 1992 (hereinafter referred to as ‘Broker Regulations’). The Enquiry Officer submitted separate Reports all dated March 16, 2004, in terms of Regulation 13(1) of the Enquiry Regulations and recommending a penalty of cancellation of certificate of registration to all the noticees for violating the provisions of Regulation 4(a),(b),(c) and (d) of PFUTP Regulations as applicable at the relevant period of time, read with Regulation 4(2)(a),(b),(e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, Regulation 7 read with Clause A(3) and (4) of the SEBI (Stock Brokers and Sub Brokers) Rules, 1992, Bye-law 357 of BSE bye-laws, Rule 4(b) and (e) of Rules of NSE and Regulations 4.5.4(c) and 4.6.2 of Regulations of NSE.

4. Subsequently, show cause notices (hereinafter referred to as ‘SCN’) all dated January 30, 2006, under Regulation 13(2) of the Enquiry Regulations were issued to all the noticees asking them to show cause as to why the appropriate penalty including the penalty recommended by the Enquiry

Officer, should not be imposed. Vide these SCN, the noticees were also asked to explain as to why consequential action under Regulation 3(2) of SEBI (Criteria for fit and Proper Person) Regulations, 2004, should not be taken against them. The noticees were advised to reply to the SCN, together with the documents that they may choose to rely upon in support of their replies within fifteen days of the receipt thereof. It was also informed to the noticees that in case of failure, it would be presumed that they had no explanation to offer and SEBI shall be free to take such action in the manner as it deemed fit. Copy of the Enquiry Reports were also forwarded to the noticees along with the SCN.

5. The noticees replied to the SCN vide their respective letters all dated March 03, 2006, and requested for an opportunity of personal hearing. Accordingly, an opportunity of hearing was granted to all noticees on March 09, 2010. On the date fixed Mr. R. Krishnan, Advocate appeared on behalf of noticees and reiterated their respective replies.

6. Mr. Krishnan also placed an order of Hon’ble Company Law Board dated December 23, 2008 on record in the matter of Triumph Securities Ltd. I have seen the order of Hon’ble Company Law Board and note that the same restrains the directors of the company to function as directors. I note that as in the present matter the reply of Triumph Securities Ltd is on record and the matter has already been delayed for long. I find no merit in keeping these proceedings pending further. Considering this, I am proceeding in the matter of Triumph Securities Ltd. on the basis of material available on record.

7. I have carefully considered the Enquiry Reports, the SCN issued to the noticees and their replies. I note that the contentions of noticees in their replies are more or less similar. The main contentions of noticees, in brief are: - Each entity is a separate legal entity and their dealings cannot be grouped together to come with similar findings and allegations. - Alleged transactions are genuine trades and were executed on the instructions of their clients, while acting as brokers. The trades were done on the order matching mechanism of exchange.

- Negotiated deals vide SEBI Circular dated September 14, 1999 is considered to be valid and completely legal transaction. - Had not acted in concert and the transactions were not done in collusion with the group entities of Ketan Parekh. - Their certificate of registration cancelled by SEBI with effect from March 8, 2004. Their participation is no more continuous in the securities market. - Transactions were executed only on few days. - Have not been provided with complete trade/ order logs and other information. Sought cross examination of persons whose statements have been relied upon. - K.N.P. Securities Ltd. was not a member of NSE and hence not governed by its rules and regulations. - N.H. Securities Ltd. was not a member of BSE and hence not governed by its bye-laws. - V.N. Parekh Securities Ltd. was not a member of NSE and hence not governed by its rules and regulations. - Triumph Securities Ltd. was not a member of NSE and hence not governed by its rules and regulations.

8. At the outset, I note the contention raised by the noticees that they have not been supplied with the trade/ order logs and other relied upon documents. I observe from the Enquiry Report that no such plea was taken by noticees before the Enquiry Officer. However, I note that no document, which has not been provided to the noticee, is being relied upon in the present proceedings.

9. Further, the noticees have argued that they were not acting in concert with the Ketan Parekh entities and their dealings cannot be grouped together. I note that the noticees herein were the broking entities controlled by Ketan Parekh at the relevant point of time. The argument of noticees appears to be baseless and devoid of any merits, in view of the SEBI order dated March 08, 2004, as they were found to have indulged in manipulative trades in various scrips along with the entities controlled by Ketan Parekh. I note that the findings of the said order were challenged by the noticees herein before

Hon’ble Securities Appellate Tribunal (hereinafter referred to as ‘SAT’). Hon’ble SAT after considering the material on record preferred to dismiss the appeals of noticees on merits. Pursuant to this, noticees have not filed any appeal against the order of Hon’ble SAT. In view of this, I note that the Order of SEBI passed on March 08, 2004 stands in place by which the registrations of noticees were cancelled.

10. Considering this, I note that no useful purpose will be served by again canceling the certificate of registration of noticees. Therefore, I hereby dispose of the present Enquiry proceedings initiated against the noticees accordingly.

11. I note that pursuant to the notification of the Intermediaries Regulations, the Enquiry Regulations have been repealed and in terms of Regulation 38(2) of the Intermediaries Regulations, notwithstanding such repeal, any enquiry commenced under the Enquiry Regulations, shall be deemed to have been commenced under the corresponding provisions of intermediaries Regulations.

12. Taking into consideration, the facts and circumstances of the case, I, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 28(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby dispose of the present Enquiry proceedings as against N.H. Securities Ltd. [SEBI Registration No. INB 230643938], K.N.P. Securities Ltd. [SEBI Registration No. INB 010991437], V.N. Parekh Securities Ltd. [SEBI Registration No. INB 010998635] and Triumph Securities Ltd. [SEBI Registration No. INB 010980535].

DATE : August 03, 2010 PRASHANT SARAN PLACE : MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA