Order in the matter of Shree Shaleen Textiles Ltd.[SAT Appeal No.:225 /2019]

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 In Re: Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 In respect of: S. No. Name of the Entity PAN Mr. Jayeshkumar Narottamdas Gandhi AABPG5669E 1. Ms. Bharati Jayesh Gandhi AAFPG5855L 2. Mr. Deval Jayesh Gandhi AISPG4164H 3.

In the matter of Shree Shaleen Textiles Limited

BACKGROUND 1. Shree Shaleen Textiles Limited (hereinafter referred to as “SSTL / Company”) was incorporated in the year 1980. SSTL’s key Products/ Revenue Segments include Cloth trade. The company is listed only on BSE Ltd. 2. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted an investigation in the scrip of SSTL based on a reference received from the Principal Director of Income Tax (Investigation), Kolkata. The focus of the investigation was to ascertain whether there were any violations of the provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) by certain

Order in the matter of Shree Shaleen Textiles Limited entities in the scrip of SSTL during the period period November 01, 2011 to November 30, 2014 (hereinafter referred to as “Investigation Period”). 3. During the investigation period, corporate announcements broadly included declaration of financial results and meetings of the Board of Directors of the Company. Further, it is observed from the Investigation Report (hereinafter referred to as “IR”) that net sales of the company increased from ` 0.37 crore as on March 31, 2011 to ` 2.65 crore as on March 31, 2014. The profit of company increased from ` 0.30 crore for the year ended March 31, 2011 to ` 0.48 crore for the year ended March 31, 2014. 4. On the basis of price rise/fall, during the investigation period, 4 patches were identified. The open, high, low, close price of the scrip before, during and after the period of investigation are as under: Patches Period Particular Open High Low Close Avg. s Volume Pre IP 01/09/201 Price 52.5 70.15 52.5 70.15 50 Period 1 – [16/09/2011] [18/10/2011] [16/09/2011] [18/10/2011] 30/10/201 Volume 50 50 [Multiple 50 [Multiple 50 1 [16/09/2011] Dates] Dates] [18/10/2011] Patch-1 - 01/11/201 Price 73.65 77.30 73.65 77.30 50 Pre Bonus 1 – [02/11/2011] [06/02/2012] [02/11/2011] [06/02/2012] – IP 29/03/201 Volume 50 50 [Multiple 50 [Multiple 50 Period 2 [02/11/2011] Dates] Dates] [06/02/2012] Patch – 2 - 30/03/201 Price 4 111.85 4 111.85 142 Post 2 – [30/03/2012] [05/03/2013] [30/03/2012] [05/03/2013] Bonus – IP 05/03/201 Volume 50 5010 2 25 period 3 [30/03/2012] [15/02/2013] [28/12/2012] [05/03/2013] Patch – 3 - 06/03/201 Price 23.45 66.15 23.45 59.1 251640 Post-Split 3 – [07/03/2013] [07/10/2013] [07/03/2013] [31/12/2013] – IP period 31/12/201 Volume 10025 831801 15 831801 3 [07/03/2013] [31/12/2013] [02/04/2013] [31/12/2013] Patch – 4 - 01/01/201 Price 59.1 59.95 4.93 6.75 392184 Price Fall 4 – [01/01/2014] [06/04/2014] [11/08/2014] [28/11/2014] period 30/11/201 Volume 281813 6195523 1 959726 4 [01/01/2014] [26/03/2014] [12/02/2014] [28/11/2014] Post IP 01/12/201 Price 7.00 7.12 4.95 6.06 327443 Period 4 – [01/12/2014] [26/12/2014] [09/12/2014] [06/01/2015] 31/01/201 Volume 1136350 1389650 650 1000 5 [01/12/2014] [15/12/2014] [19/12/2014] [06/01/2015] SHOW CAUSE NOTICE 5. Consequent to the investigation, a show cause notice dated July 28, 2017 (hereinafter referred to as “SCN”) was served on Mr. Jayeshkumar Narottamdas Gandhi (hereinafter referred to as “Noticee No. 1”), Ms. Bharati Jayesh Gandhi (hereinafter referred to as “Noticee No. 2”) and Mr. Deval Jayesh Gandhi (hereinafter referred to as “Noticee No. 3”) in the extant matter.

The SCN inter alia alleged as follows: a) The LTP analysis of the 4 patches was done and the details of Patch 2 qua the Noticees is given below: LTP Analysis: Patch-2: Post Bonus – Price Rise Period – 30/03/2012 to 05/03/2013:  During this period, the price of the scrip rose from ` 4 (Opening Price) as on March 30, 2012 to ` 111.85 (High Price and Close Price) as on March 05, 2013. Further, with ex-date of March 06, 2013, SSTL sub-divided face value of shares from ` 10/- to ` 2/. The list of shareholders received from RTI (Purva Sharegistry (I) Pvt Ltd.) was analyzed and it was observed that as on March 31, 2012, 85.34% of the share capital (5,76,050 shares out of 6,75,000 shares) were held in physical form or with entities which had converted warrants (shares issued on conversion of warrants were under lock-in till November 14, 2012). The net top 10 sellers LTP analysis were carried out as under: Net LTP Pos. LTP Negative LTP Zero LTP % of +ve No.of Trade No.of Neg. Trade No.of Trade No.of LTP to Mkt PAN Name Net LTP Trade Qty Trades Pos. LTP Qty Trades LTP Qty Trades Qty Trades +ve LTP AHQPK9496D Anjana Arun Karwa 14.03 322 11 14.03 322 11 0.00 0 0 0 0 15.52 AAQHS7786D Shyam Rathi Huf 12.98 70 7 12.98 60 6 0.00 0 0 10 1 14.36 Jayeshkumar AABPG5669E 12.45 95 4 12.45 95 4 0.00 0 0 0 0 13.77 Narottamdas Gandhi AAEHN5511R Nishith M Shah Huf 11.00 75 3 11.00 75 3 0.00 0 0 0 0 12.17 AAFPG5855L Bharati Jayesh Gandhi 8.58 110 6 8.58 110 6 0.00 0 0 0 0 9.49 AISPG4164H Deval Jayesh Gandhi 6.33 60 4 6.33 60 4 0.00 0 0 0 0 7.00 Maheshkumar AEJPK2394G Ghewarchand 4.80 10 1 4.80 10 1 0.00 0 0 0 0 5.31 Vanigota ABXPH7639E Vishnu Daji Hode 4.15 30 1 4.15 30 1 0.00 0 0 0 0 4.59 AFDPG6008E Kajal Sunil Gowadia 3.95 10 1 3.95 10 1 0.00 0 0 0 0 4.37 AEXPG4216P Shivani Amit Gowada 3.60 10 1 3.60 10 1 0.00 0 0 0 0 3.98 Total 81.87 792 39 81.87 782 38 0.00 0 0 10 1 90.57 Market 107.85 9947 137 107.85 1617 69 0.00 0 0 8330 68 100.00

 From the above table, it can be observed that top 10 net sell LTP entities contributed to 90.57% of market positive LTP. From the analysis of KYC / UCC received from BSE, off market transactions, bank account statements (for investigation period) linked to the trading accounts of the top net sell LTP entities contributing more than 5% of the positive LTP, following was observed: S. No Entity Name Basis of Connection 1 Jayeshkumar  Jayeshkumar Narottamdas Gandhi and Bharati Jayesh Gandhi share Narottamdas common phone number (28332109) (Annexure 1.1). Gandhi  Deval Jayesh Gandhi, Jayeshkumar Narottamdas Gandhi, Bharati Jayesh Gandhi share common address (B/403 7 Star Appts Jairaj Nagar Borivali W, Mumbai, Maharashtra - 400091).  Jayeshkumar Narottamdas Gandhi and Bharati Jayesh Gandhi were 2 Bharati Jayesh join holders in demat account No. IN300183 10278210. Gandhi  Deval Jayesh Gandhi and Jayeshkumar Narottamdas Gandhi were 3 Deval Jayesh joint holders in demat account no. 12029700 00011179. Gandhi  Bharati Jayesh Gandhi and Deval Jayesh Gandhi were joint holders in demat account no. IN303382 10005442).  In view of the low volume price increase and substantial positive LTP contribution (90.57% of market positive LTP) by top 10 net LTP contributors, as sellers, sell orders of the top 10 net sell LTP contributors contributing more than 5% of the positive LTP in more than one trade were analyzed and the trades of the Noticee are as under: Sharehol pendin ding No. of Sell sell g buy LTP before trades Order date Order time Order No. Sell Client name order order order variati sell order in a rate qty at this on as per day price Demat Account 150001290397 Deval Jayesh 1 14.09.2012 14:50:24.4174170 13.38 10 30800 0.63 2000 88 Gandhi 150001551548 Deval Jayesh 1 25.09.2012 14:59:17.9095210 14.74 15 26700 0.70 1990 71 Gandhi 190001800023 Bharati Jayesh 1 09.10.2012 12:41:48.6918400 17.05 15 33700 0.81 4000 07 Gandhi 160001501758 Bharati Jayesh 1 01.11.2012 13:51:59.7908680 22.80 25 9800 1.07 3985 45 Gandhi 180001940396 Deval Jayesh 1 19.11.2012 15:13:52.6343620 26.30 15 8300 1.25 1975 49 Gandhi 190001780912 Bharati Jayesh 1 29.11.2012 10:30:10.0596760 30.35 20 5700 1.40 3960 91 Gandhi 230001071407 Bharati Jayesh 10 04.12.2012 13:00:25.0467370 33.40 10 7700 1.55 3940 45 Gandhi

220001151855 Bharati Jayesh 1 26.12.2012 15:11:46.7969970 35.05 15 9500 1.65 3930 62 Gandhi Jayeshkumar 150001162646 1 03.01.2013 15:11:37.6316980 Narottamdas 40.50 20 5000 1.90 3915 Gandhi 140001350679 Bharati Jayesh 1 09.01.2013 14:17:26.2727030 44.60 25 9950 2.10 3915 61 Gandhi Jayeshkumar 150001100779 1 15.01.2013 12:39:28.8570040 Narottamdas 49.10 30 12950 2.30 3890 53 Gandhi Jayeshkumar 140001452209 1 28.01.2013 14:40:35.5120780 Narottamdas 62.55 20 33800 2.95 3890 80 Gandhi 170001450736 Deval Jayesh 5 13.02.2013 15:16:17.4846620 79.65 20 18000 3.75 1960 63 Gandhi Jayeshkumar 140001350055 1 05.03.2013 11:29:09.7971810 Narottamdas 111.85 25 18110 5.30 3890 17 Gandhi Period: 14.09.2012 to 05.03.2012; No. of Trades: 14; LTP contribution: 27.36 (30.26% of Pos. LTP Cont.)  From the table above, it was observed that Noticees have sold few shares ranging from 10 to 30 shares in-spite of holding more shares and having more buy demand at the price that Noticee placed the sell orders. It can also be observed that Noticees have not executed more than one trade in a day asa seller. Further, aforesaid trades were the only trades executed during the day, except on two occasions. By these trades, Noticees have matched the prevailing buy orders which were placed at the prices higher than the LTP and contributed to increase in the price of the scrip with each of their trades. In view of the repeated nature of such trades by Noticees, it is alleged that they have increased the price of the scrip. b) In view of the above it is alleged that Noticees as seller have indulged in trades that resulted in the manipulation of the price of the scrip and have created misleading appearance of trading in the scrip through the aforesaid trades which has resulted in the alleged violation of Regulations 3(a), (b), (c), (d) and Regulations 4(1), 4(2) (a), (e) of PFUTP Regulations. c) Noticees were advised to show cause as to why suitable actions/directions in terms of Sections 11(1), 11(4) and 11B of SEBI Act should not be initiated against them for the alleged violation of the provisions of PFUTP Regulations. Further,

Noticees were advised to submit a reply to the SCN within 21 days from the date of receipt of the SCN. REPLY & HEARING 6. In response to the SCN, Noticees vide a common letter dated August 18, 2017 requested time till September 30, 2017 to submit a reply to the SCN. The Noticee’s request was considered and vide a letter dated August 22, 2017, Noticees were advised to submit a reply to the SCN by September 18, 2017. 7. Vide letter dated September 20, 2017, Noticees requested for copy of certain documents which were provided to them vide letter dated October 4, 2017. Further, Noticees were granted time till October 18, 2017 to submit a reply to the SCN. Noticees vide their common letter dated November 6, 2017 requested for copies of documents, correspondences, statements and other relevant records, investigation report along with annexures which were relied upon to issue the SCN. Vide letter dated November 16, 2017, Noticees were provided with copy of the IR along with annexures and were granted a final opportunity to submit a reply to the SCN on or before December 4, 2017. 8. Noticees vide their letter dated November 29, 2017 submitted that the compact disc provided to them appears to be corrupted.

Noticees were provided a fresh compact disc vide letter dated December 5, 2017 and were granted time till December 20, 2017 to submit a reply to the SCN. Noticees again vide their letter dated December 11, 2017 submitted that the compact disc provided to them appears to be corrupted. Noticees were again provided a fresh compact disc vide letter dated December 15, 2017 and were granted time till December 31, 2017 to submit a reply to the SCN. 9. Vide hearing notice dated November 14, 2018, Noticees were granted an opportunity of hearing on November 22, 2018 at SEBI Bhavan, Mumbai. On the day of scheduled hearing, Mr. Geet Shikhar, appeared on behalf of the Noticees as their authorised representative (hereinafter referred to as ‘AR’). The AR submitted that the Noticee No. 1 is hospitalized in Asian Heart, BKC. Since, he is hospitalized, he may be exempted from filing a signed reply. After perusing the medical certificate submitted by the AR, the said request was acceded to and reply dated November 20, 2018 submitted by the Noticee was taken on record. The AR further submitted as follows:  As regards the connection alleged in the SCN, admittedly they are connected to each other as husband, wife and son.

They are not connected to the company.  As regards, second allegation in the SCN that the Noticee is one of the top ten sellers who contributed to the positive LTP it is stated that there were many corporate announcements about the company. Hence, the Noticees traded in the shares of the company.  Mr. Jayeshkumar Narottamdas Gandhi traded on behalf of Ms. Bharati Jayesh Gandhi and Mr. Deval Jayesh Gandhi. Since, he was not interested to liquidate his entire holding so shares were sold in tranches.  All the trades were done on market and counter party was not known to them. Total volume of shares traded by all three Noticees were 38,935 shares which is 0.0031% of the total market volume during the investigation period.  Mr. Jayeshkumar Narottamdas Gandhi was trading in the shares for the last 30 years and no action was ever taken against him except two SCNs he received in 2017.  AR is advised to submit the details such as how he acquired these shares, at what price, on which date, on market or off market and the source of funds for such purchase. The details has to be supported by third party verifiable documents such as Income Tax Returns for two years preceding the purchase of the shares and bank statements.  Further, AR is advised to submit third party verifiable documents such as demat statement and broking account statement during the relevant period i.e. one year preceding and one year after the Investigation period in order to substantiate the normal trading behaviour of the Noticees.  AR sought time to file additional written submissions and the same was granted till December 22, 2018. 10. Noticee No. 1 on behalf of other Noticees vide his reply dated November 20, 2018 which was submitted at the time of hearing, inter alia submitted as follows:

 I was holding shares of SSTL since past many years and was looking for opportunity to exit the scrip as and when there will be trading in the scrip.  At present I have got a large portfolio and hold shares of various companies like Century Ply, Aditya Birla Capital, Suzlon, and many more. We are also holding physical shares of Oswal Sugars, S M Dyechem, Niwas Spinning, Garware Synthetic, Nutra Plus, Pulsar International Limited etc. Hence, holding the shares of SSTL was not unusual.  I take note of the surplus funds available with all the family members after deducting all the expenses and decide on various investment avenues available with us. Normally, I decide the scrip in which investment is to be made by all the family members.  Admittedly, the company came out with various corporate announcements during the investigation period viz. bonus issue, sub division of shares, preferential issue etc. which certainly always has a positive effect on the price of the scrip. It appears that these factors have not been taken into account while investigating the price manipulation and we have been wrongly roped in the proceedings.  As per price volume data obtained from the website of BSE, it appears that price of the shares of the company increased gradually and did not spurt suddenly.

Price volume data further reveals that the price of the scrip was constant for a particular day with a little fluctuation over and above the opening price and no major price rise and fall throughout the day. Thus, we state that the price rise was gradual over a period of nearly three years and not all of a sudden.  In so far as LTP analysis is concerned, we have traded in small quantities and in tranches since we never wanted to liquidate our portfolio completely. Besides, the stock exchanges do not have any such embargo as to the minimum amount of shares that can be liquidated at a particular point of time. We had shares of SSTL from quite a long time and were eyeing on price rise and trends in the scrip so that we can liquidate a small portion of our holdings in the market and get good return on investment. We noted that there were many buyers for the scrip but comparatively less number of sellers. That was a great opportunity for us to liquidate the holdings and get best price for our shares since we had shares of SSTL. Thus, we decided to liquidate our holdings in tranches.  As per trade log and order log, it can be observed that in majority of the trades, buy orders were available in the market since the beginning of the market hours which is 9:15 am and we entered the orders later on.

We only sold our shares at the price which was available at the electronic trading platform, hence, the allegation that we contributed to the price rise is baseless.  No action has been taken by SEBI against the buyers of trades executed by them. This has vitiated the whole proceedings and this makes the notice untenable in fact and in law. 11. Pursuant to the hearing, Noticees made additional written submissions vide their letter dated December 17, 2018 wherein they reiterated their earlier submissions and further submitted as follows:  As regards the mode of acquisition of shares of SSTL, it is submitted that we have acquired shares in physical form through an account payee cheque. The details regarding the date of purchase in addition to the payment made along with the mode of payment have been provided herewith:

Name of Date of No. of Amount Name of the Cheque the Purchase Shares (`) Bank No. Entity Jayesh 14/3/2012 100 7750 State Bank 074830 Gandhi of India 29/3/2012 100 7800 ICICI Bank 468511 Bharti 29/3/2012 100 7800 ICICI Bank 468510 Gandhi Deval 14/3/2012 100 7800 Bank of 304211 Gandhi Maharashtra

 As regards the source of funds for acquisition of such shares, it is submitted that the same was acquired from our own sources. Income Tax return for the period 1/4/2010 to 31/3/2011, 1/4/2011 to 31/3/2012, 1/4/2012 to 31/3/2013, 1/4/2013 to 31/3/2014 and 1/4/2014 to 31/3/2015 was submitted by the Noticees.

 I am holding large portfolio of various companies in physical form e.g. Oswal Sugar, Niwas Spinning, Nutra plus, Jaywant products etc.  Noticees submitted their ledger and demat statement for the period April 2010 to March, 2016. FINDINGS & CONSIDERATIONS 12. I have perused the SCN, written and oral submissions and other materials available on record. On perusal of the same, the following issues arise for consideration: (i) Whether the Noticees have manipulated the price in the scrip of SSTL during the period March, 2012 to March, 2013? (ii) If answer to issue No. (i) is in affirmative, whether the Noticees have violated the provisions of PFUTP Regulations? (iii) If answer to issue Nos. (ii) is in affirmative, what directions, if any should be issued against the Noticees? Issue No. 1 - Whether the Noticee has manipulated the price in the scrip of SSTL during the period March, 2012 to March, 2013? 13. It is noted from the material made available on record that the Noticees have executed 14 sell trades in the scrip during the patch-2 which were over the LTP, for 265 shares. Noticees’ LTP contribution in the scrip is ` 27.36/- which is 30.26% of positive LTP contribution in the scrip.

From the material made available on record, I note that though the Noticees were holding substantial number of shares in the range of 1960 – 4000 shares during patch-2, the Noticees were releasing miniscule quantity of shares (10-30 shares) even though there were large pending buy orders over the LTP. The days when the Noticees had executed the said 14 trades, pending buy orders were in the range of 5,000 shares to 33,700 shares. It is observed that when the Noticees were trading, which is almost 6 months, the scrip was traded only on 45 days. Out of the said 45 trading days on 39 trading days only 1 trade was executed in the scrip and out of the remaining 6 trading days, on 2 trading days 2 trades were executed. This coupled with the fact that the average volume in the scrip during patch- 2 of the investigation period which spanned almost a year, was 142 shares, would make a prudent investor to sell its shares at the very first opportunity that he/she is coming across. In the given situation, there were considerable buy order quantity pending in the system and that too over the LTP.

It is not the case of the Noticees that on multiple occasions they had placed sell orders for more than 30 shares and the order was not executed. Considering the aforesaid, the submission of the Noticees that there was a great opportunity to liquidate the holdings in tranches and get the best price for their shares, is not acceptable. Noticees at frequent interval have executed the miniscule quantity of sell trade in the scrip over a period of almost 6 months. Thus, based on the trading pattern of the Noticees in the scrip, it is held that the same is not genuine but is manipulative in nature. 14. Noticee’s submission that he was holding shares of SSTL for past many years and was looking for an opportunity to exit is not factually correct. As per Noticees own submission, they had first acquired the shares in off market on March 14, 2012 and the first sell trade was executed by the Noticee No. 3 on September 14, 2012. 15. Noticees have further submitted that the IR has not taken into account the impact of corporate announcements have had on the price of the scrip. In this regard, it is noted that there are a host of factors that affect the price of the scrip and one of them is corporate announcements.

However, the movement in the price of the scrip from ` 4/- to ` 11.85/-, cannot be fully explained by the said corporate announcements. There are also other devices adopted by market participants to artificially influence the price in a scrip. As discussed in preceding paragraphs, Noticees by executing sell trades in miniscule quantity at frequent intervals when there was a large pending buy order have contributed ` 27.36/- to the price of the scrip which as held earlier is manipulative in nature. 16. Noticees have submitted that price volume data reveals that the price of the scrip was constant for a particular day with a little fluctuation over and above the opening price and no major price rise and fall throughout the day. It is noted from the IR that during the period November 1, 2011 to March 29, 2012, just before patch-2 that only 2 trades were executed in the scrip and the price had increased from ` 73.65 to ` 77.3. Moreover, during patch-2, March 30, 2012 to March 5, 2013 (almost a year) when Noticees were trading, the scrip was traded only on 70 days. Out of the said 70 trading days, on 63 days trades only one trade was executed in the scrip.

All this indicates that there were days when there was no trading in the scrip and when there was any trading in the scrip, mostly it was 1 trade. Thus, intra-day stability of the price is not relevant. 17. I note that trades at higher than LTP, undoubtedly have a potential of raising the price of the scrip and the same gives a wrong impression about the price of the scrip in the market based on miniscule quantities traded. It must not be forgotten that every trade establishes the price of the scrip and trades executed at higher than LTP results in the price of the scrip going up which may influence the innocent/gullible investors. In cases of market manipulation, admittedly, no direct evidence would be forthcoming / available. Manipulative transactions are to be tested on the conduct of parties and abnormality of practices which defy normal logic and laid down procedures. What is needed, is to prove that in a factual matrix, preponderance of probabilities indicate a fraud. In this regard, the observations of Hon’ble Supreme Court of India in SEBI Vs. Kishore R Ajmera et.al. decided on February 23, 2016 wherein the Hon’ble Court while deciding the matter under SEBI Act and PFUTP Regulations where there was no direct evidence forthcoming, observed as follows: “It is a fundamental principle of law that proof of an allegation levelled against a person may be in the form of direct substantive evidence or, as in many cases, such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled.

While direct evidence is a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion…” 18. At the time of the hearing, Noticees were advised to submit their demat statement and broking statement, one year preceding and one year after the investigation period, to substantiate its normal trading pattern. Noticees, have submitted their demat statement and ledger maintained with their stock broker. Noticees trading in other scrips was accessed through the system. It is noted that during the financial year 2012-2013, Noticees have traded in various scrips and out 393 instances that they have collectively traded as a seller (it is an admitted position that Noticee No. 1 was trading on behalf of others), they have placed sell order above 30 shares on 348 instances, which is 88.5% of their trading.

However, in the scrip of SSTL, there is zero instance of placing sell order over 30 shares during patch-2. 19. Thus, from the above, it can be gathered that during the normal course of Noticees trading, Noticees do not normally put sell orders for miniscule quantity of shares. Noticee’s trading behavior in the scrip under inquiry does not follow its usual pattern of putting sell orders. Hence, the trading behavior of the Noticees in other scrips also does not justify their trading in SSTL which has already been held to be manipulative. 20. Noticees have submitted that Noticees are neither connected to the counter parties to their trades nor are they connected with the company. In this regard, I note that the extant matter is not based on the connection between the Noticees and the company or their counter parties, rather on the manipulative transactions carried out in the scrip. As observed by Hon’ble Apex Court in the matter of SEBI Vs. Kishore R Ajmera et.al, in matters like the current one, totality of the attending facts and circumstances surrounding the allegations has to be seen to arrive at a conclusion.

In the instant matter Noticees were repeatedly entering sell orders for miniscule quantity inspite of having substantial holding and large pending buy orders in the system. Further, Noticees trading behavior in SSTL was at variance from their trading pattern in other scrips. All the aforesaid, indicates that the Noticees were not genuine traders in the scrip. 21. In view of the above, the findings that have been gathered from various circumstances for instance overall trades executed in the scrip (number of trading days and number of trades) including the average volume before and during patch- 2, volume of the trade effected by the Noticees vis-à-vis their holding, the period of persistence in trading in the scrip, the particulars of the buy and sell orders, trading behavior in other scrips, the totality of the picture that emerges leads to the conclusion that Noticees by executing the aforesaid sell trades have manipulated the price of the scrip and have created a misleading appearance of trading in the scrip.

Issue No. 2 - If answer to issue No. (i) is in affirmative, whether the Noticee has violated the provisions of PFUTP Regulations? 22. Before embarking upon the necessary discussions, I would like to reproduce the relevant provisions of PFUTP Regulations: Regulation 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.

Regulation 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; … (e) any act or omission amounting to manipulation of the price of a security; 23. In view of the conclusion arrived at paragraph 21 wherein it has been held that the trades for miniscule quantity executed by the Noticees over the LTP in the scrip are manipulative and misleading in nature, it is also held that such trades are fraudulent in nature and would operate as deceit upon any person trading in the extant scrip. Further, as discussed in preceding paragraphs, Noticees by executing impugned trades in the scrip have also manipulated the price of the scrip. I therefore, find that Noticees have violated Regulations 3(a), (b), (c), (d) and Regulations 4(1), 4(2) (a) and (e) of PFUTP Regulations.

Issue No. 3 - If answer to issue Nos. (ii) is in affirmative, what directions, if any should be issued against the Noticee? 24. Section 11 of SEBI Act casts a duty on the Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market. For achieving such object, it has been authorised to take such measures as it thinks fit. Thus, power to take all measures necessary to discharge its duty under the statute which is a reflection of the objective disclosed in the preamble has been conferred in widest amplitude. Pursuant to the said objective, PFUTP Regulations have been framed. The said Regulations apart from other things aims to preserve and protect the market integrity in order to boost investor confidence in the securities market. By executing manipulative trades, as has been executed by the Noticees in the instant matter, the price discovery system itself is affected. It also has an adverse impact on the fairness, integrity and transparency of the stock market. In view of the same and considering the violations committed by the Noticees, I find that it becomes necessary for SEBI to issue appropriate directions against the Noticees.

ORDER 25. In the facts and circumstances of the case, I, in exercise of the powers conferred upon me in terms of Section 19 read with Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, hereby restrain Mr. Jayeshkumar Narottamdas Gandhi (PAN: AABPG5669E), Ms. Bharati Jayesh Gandhi (PAN:AAFPG58853) and Mr. Deval Jayesh Gandhi (PAN: AISPG4164H) from accessing the securities market for a period of four years from the date of this order 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, whatsoever, for a period of four years, from the date of this order. Needless to say, in view of prohibition on sale of securities, it is clarified that during the period of restraint, the existing holding, including units of mutual funds, of the Noticees shall remain frozen. 26. The order qua the Noticees shall come into force with immediate effect. It is clarified that separate order(s) will be passed in respect of other entities against whom show cause notice dated July 28, 2017 has been issued in the extant matter.

27. A copy of this order shall be served upon all recognised Stock Exchanges, Depositories and the Registrar and Share Transfer Agents to ensure compliance with the above directions.

-Sd- DATE: January 31, 2019 MADHABI PURI BUCH PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA