Order in the matter of synchronized trading by connected clients

IN THE MATTER OF SYNCRONISED TRADING BY CONNECTED PERSONS In respect of Mr. Jitendra Mannalal Jain, Ms. Renu Madhusudhan Paliwal, Ms. Rashmi R. Gandhi, Alpesh R. Shah (HUF), Anil Rajmal Shah (HUF), Ms. Hemlata Ramesh Hankare, Hasmukh Valchand Jain (HUF), Naresh V. Rajawat (HUF), Mr. Pawanben Valchand Jain, Ms. Reeta Naresh Rajawat, Mr. Kunal Dilip Kothari, Ms. Shweta Bharat Kothari, Ms. Neela Khicha, Ms. Shobha Dilip Kothari, Kamlesh P. Jain (HUF), Mr. Hitesh Mahendra Jain. Date of hearings: May 31, 2010 and June 21, 2010 Appearance: For Noticees: Mr. Daniel Arif, Advocate and Mr. Durga Prasad, Advocate for Kamlesh P. Jain (HUF), Ms. Shobha Dilip Kothari, Ms. Neela Klicha, Ms. Shweta Bharat Kothari, Mr. Kunal Dilip Kothari, Ms. Reeta Naresh Rajawat, Ms. Pawanben Valchand Jain, Hasmukh Valchand Jain (HUF), Mr. Hitesth Mahendra Jain, Mr. Naresh V. Rajawat. Mr. Anil Shah for Anil Rajmal Shah (HUF), Mr. Alpesh R. Shah for Alpesh R Shah( HUF), Mr. Ramchandra Gandhi for Ms. Rashmi R Gandhi, None for Jitendra Mannalal Jain, Renu Mahdusudan Paliwal and Hemlata Ramesh Hankare For SEBI: Mr. G. Ramar, General Manager Mr. Lamber Singh, Manager Mr. Pradeep Kumar, Legal Officer Mr. Vasudha Goenka, Legal Officer ORDER UNDER SECTIONS 11, 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

1. The Securities and Exchange Board of India (hereinafter referred to as SEBI), vide an ex-parte ad interim order dated February 20, 2010 (hereinafter referred to as the ‘interim order’), in the matter of synchronized trading by connected clients, inter alia directed various persons/ entities namely Mr. Jitendra Mannalal Jain, Ms. Renu Madhusudhan Paliwal, Ms. Rashmi R. Gandhi, Alpesh R. Shah (HUF), Anil Rajmal Shah (HUF), Ms. Hemlata

Ramesh Hankare, Hasmukh Valchand Jain (HUF), Naresh V. Rajawat (HUF), Mr. Pawanben Valchand Jain, Ms. Reeta Naresh Rajawat, Mr. Kunal Dilip Kothari, Ms. Shweta Bharat Kothari, Ms. Neela Khicha, Ms. Shobha Dilip Kothari, Kamlesh P. Jain (HUF), Mr. Hitesh Mahendra Jain not to buy, sell or deal in the securities market, till further directions as these were prima facie found to have acted as a group and played key role in creating artificial volumes in various scrips namely All Cargo Global Logistics Ltd., Asian Star Co. Ltd., KSL & Industries Ltd., Mavens Biotech Ltd., Panoramic Universal Ltd., Ravi Electronics Ltd., Sat Industries Ltd. and Ushdev International Ltd. during the periods of March 01, 2009 to June 30, 2009 (Period I) and July 01, 2009 to September 20, 2009 (Period 2). The persons against whom the interim order was passed were advised that they may file their objections, if any, within twenty one days from the date of the said order and also avail of an opportunity of personal hearing, if they so desire.

2. For reference purposes these 16 persons/ entities mentioned in para 1 would be collectively referred to as ‘parties’ and individually by their respective names. As regards the scrip these would be collectively referred to as ‘stated scrips’ and individually by their respective names.

3. Pursuant to the passing of interim order, the parties namely Hitesh M. Jain, Ms. Shobha Dilip Kothari, Kunal D. Kothari, Ms. Shweta B. Kothari and Kamlesh Jain (HUF) replied vide their common letter dated March 29, 2010. Vide another common letter dated March 29, 2010, Naresh Rajawat (HUF), Ms. Reeta N. Rajawat, Ms. Neela Kicha, Ms. Pawanben V. Jain and Hasmukh V. Jain (HUF) replied. Alpesh R. Shah (HUF) and Anil Rajmal Shah (HUF) also replied vide their respective letters both dated March 09, 2010. Ms. Renu Madhusudan Paliwal vide her letter dated May 13, 2010, sought some details from SEBI which were provided to her.

4. The submissions of the parties in brief are: a. Hitesh M. Jain, Ms. Shobha Dilip Kothari, Kunal D. Kothari, Ms. Shweta B. Kothari and Kamlesh Jain (HUF) vide their letter dated March 29, 2010 and Naresh Rajwat (HUF), Ms. Reeta N. Rajawat, Ms. Neela Kicha, Ms. Pawanben Valchand Jain, Hasmukh V. Jain (HUF) vide their letter dated March 29, 2010, took common arguments. These are: - always maintained transparency, integrity, honesty and accountability in all operations. - all transactions were undertaken in normal course of business in accordance with the Rules/ Regulations framed by SEBI/ stock exchanges. - findings are vague as the same do not disclose, whose trading details were analysed. - have not been provided with complete examination report. - at relevant time, were not aware that the orders placed by them were being matched with same quantity and price by counter party clients. - had no link/ relation/ nexus/ connection with the counter party broker/ client. - no evidence to establish that they indulged in any fraudulent and unfair trade practices. - Their volumes in period 1 were very low as compared to the total volumes for that period. Had not traded during period 2. b. The arguments of Alpesh R. Shah (HUF) and Anil Rajmal Shah were also common, these are: - Alpesh R. Shah and Anil R. Shah are brothers. Both had traded in many scrips through brokers KNC Shares and Securities Ltd. and Emkay Global Financial Services Ltd. - The trades were in the nature of jobbing transactions and they were not part of the group. - Have not been provided with the details of persons with whom their trades were synchronized. - SEBI order does not indicate what was their role in different scrips. - Both had not traded in four out of eight scrips. - Both had not traded in the stated scrips in pre examination period.

- Both did few delivery based transaction with KNC Shares and Securities Pvt. Ltd. - Alpesh R. Shah had not traded after May 2009 i.e. during period 2 and Anil Rajmal Shah had not traded after June, 2009. - trades were done with genuine intention.

c. The parties namely Jitendra Mannanlal Jain, Ms. Renu Madhusudan Paliwal, and Ms. Hemlata Ramesh Hankare have not filed any objections.

5. Thereafter, an opportunity of hearing was granted to all the parties on May 31, 2010. On the date fixed Mr. Daniel Arif, Advocate and Mr. Durga Prasad, Advocate appeared for entities namely Kamlesh P. Jain (HUF), Ms. Shobha Dilip Kothari, Ms. Neela Klicha, Ms. Shweta Bharat Kothari, Kunal Dilip Kothari, Ms. Reeta Naresh Rajawat, Ms. Pawanben Valchand Jain, Hasmukh Valchand Jain (HUF), Hitesth Mahendra Jain, Naresh V. Rajawat and made submissions on the lines of the submissions/ objections filed by the parties. Mr. Anil Shah appeared for Anil Rajmal Shah (HUF) and Mr. Alpesh R. Shah appeared for Alpesh R. Shah (HUF) and relied upon their replies.

6. None appeared for others on this date of hearing. Considering the interests of justice, another opportunity of personal hearing was granted to Ms. Hemlata Ramesh Hankare, Jitendra Mannanlal Jain, Ms. Renu Madhusudan Paliwal and Ms. Rashmi R. Gandhi on June 21, 2010. On the date fixed Mr. Ramchandra Gandhi appeared for Ms. Rashmi R. Gandhi and made submissions. None appeared for others.

7. I have considered the respective replies/ objections filed by the parties, the submissions made on their behalf during the personal hearing and the relevant material available on record. The limited issue to be considered in this Order is to decide whether, based on the available material on record and after considering the submissions made by the parties, the directions issued by SEBI vide the interim order needs to be continued, revoked or modified in any manner, in so far as it relates to the parties.

8. The parties who have filed reply and appeared for the personal hearing have taken a common argument that they had no links/ connections with the counterparty clients and were not part of the group as stated in the interim order. It has also been argued that the details of persons with whom the trades were synchronized have not been provided to them. In this regard, I note that parties were found to be the part of a group on prima facie identification of these in creating artificial volumes in the stated scrips and same has been discussed broadly in the interim order. I note that the tables of connections as given in the interim order do not show any direct link between a few of the parties. However, considering the preliminary stage of the matter, nothing can be said conclusively as regards the relation with the counterparties. I note that the investigation in the matter is in progress and the findings would reveal the actual role of each of the parties and their relationship with each other. Thus, at the present stage, I am of the considered view that it would not be appropriate to give any conclusive findings as to any fact or submissions made by the parties.

9. The interim order has also discussed in detail the trading concentration of the group of parties to the market trades in the stated scrips. Further, their concentration in the synchronized trades among the group of parties was found to be significant, which suggests some concerted efforts by the parties to match their orders within the group only. I note that the parties as a group have contributed considerable percentage volume in the stated scrips. Such conduct of parties appears to be highly suspicious as trading by a few entities in one or two scrips in this manner can be a coincidence, but trading by the parties has been observed in many scrips and that also in the same pattern of synchronization. This suggests some efforts by the parties to match their orders within the group only.

10. I note that the parties who have filed their objections to the interim order have submitted their total volumes in various stated scrips. It has been argued that such volumes are very low compared to the total volume provided by SEBI. I have seen these details and the material available on record, the volume contributed by Anil Rajmal Shah, Alpesh R. Shah, Hitesh M. Jain, Ms. Shobha Dilip Kothari, Kunal D. Kothari, Ms. Shweta B. Kothari, Kamlesh Jain (HUF), Naresh Rajawat (HUF), Ms. Reeta N. Rajawat, Ms. Neela Kicha, Ms. Pawanben V. Jain and Hasmukh V. Jain (HUF) to the total volume in the stated scrips have been brought out below for reference: Table-A All Asian Mavens Rasi Ushdev KSL Panoram SAT Cargo Star Electro Inter Ind UNI Ind Hitesh M. Jain 6,020 1,820 3,300 - 15,000 2,600 6,335 - Shobha D. Kothari 451 - 670 - 5,000 - - - Kunal D. Kothari 2,950 2,300 3,300 1,000 13,700 6,993 2,000 4,000 Shweta B. Kothari 1,600 1,299 - - 8,000 2,000 3,000 - Kamlesh Jain (HUF) 2,631 1,600 5,335 2,000 6,000 - 2,833 - Naresh Rajawat (HUF) 2,300 2,200 1,000 1,000 14,700 5,000 - - Reeta N. Rajawat 5,040 2,100 4,340 2,000 30,000 3,000 10,500 Pawanben V. Jain 2,711 3,950 2,250 1,000 21,000 2,000 5,000 2,000 Hasmukh V. Jain (HUF) 1,000 1,500 2,125 500 14,000 3,500 - - Neela Khicha 1,500 2,700 2,000 - 12,500 3,000 2,500 - Anil Rajmal Shah (HUF) 25,515 - 12300 - 2500 - 24,961 - Alpesh R. Shah (HUF) 14,731 1,800 7,510 - - - 24,483 - 11. Having considered the volume contributed by these entities and the circumstances which led to the passing of interim order, I note that the group of persons/ entities as said above was prima facie found to have joined hands in breaching market integrity by manipulating the volumes of the stated scrips. In a case of this kind, the individual acts of persons should not be isolated from the case, rather the focus should be on the case in its entirety and it is the ultimate goal of manipulators that should be critically assessed.

12. Before proceeding further, a few instances of square off/ circular trading among the parties where same number of shares are being rotated may be seen as brought out below: Table-B Selling Member Sell Client Name Buying Member Buy Client Name Qty. Traded Instances of square off/ circular trading in the scrip of Mavens May 05, 2009 Emkay Global Hemlata Ramesh Hankare Finquest Securities Rashmi R. Gandhi 1,650 Finquest Securities Rashmi R. Gandhi India Capital Market Hitesh M. Jain 1,650 India Capital Market Hitesh M. Jain Emkay Global Hemlata Ramesh Hankare 1,650 May 08, 2009

India Capital Market Pawanaben V. Jain Finquest Securities Rashmi R. Gandhi 1,250 Finquest Securities Rashmi R. Gandhi Emkay Global Alpesh R. Shah 1,250 Emkay Global Alpesh R. Shah Ramniklal Mohanlal Renu Madhusudan Paliwal 1,250 Ramniklal Mohanlal Renu Madhusudan Paliwal India Capital Market Pawanaben V. Jain 1,250 June 02, 2009 Ramniklal Mohanlal Renu Madhusudan Paliwal Finquest Securities Rashmi R. Gandhi 10,000 Finquest Securities Rashmi R. Gandhi Emkay Global Hemlata Ramesh Hankare 10,000 Emkay Global Hemlata Ramesh Hankare Ramniklal Mohanlal Renu Madhusudan Paliwal 10,000 Instances of square off/ circular trading in the scrip of All Cargo March 03, 2009 India Capital Market Naresh V. Rajawat Emkay Global Jitendra Mannanlal Jain 500 Emkay Global Jitendra Mannanlal Jain Ramniklal Mohanlal Renu Madhusudan Paliwal 500 Ramniklal Mohanlal Renu Madhusudan Paliwal India Capital Market Naresh V. Rajawat 500 June 03, 2009 Emkay Global Anil Rajmal Shah Finquest Securities Rashmi R. Gandhi 1,980 Finquest Securities Rashmi R. Gandhi Ramniklal Mohanlal Renu Madhusudan Paliwal 1,980 Ramniklal Mohanlal Renu Madhusudan Paliwal Emkay Global Anil Rajmal Shah 1,980

Considering these details, I note that no unknown persons can trade continuously by putting orders in such a pattern in different scrips, it cannot be a coincidence. Such trading by the group as a whole prima facie contributed significantly to the total volume in the market. Such increase in volumes in the stated scrips was primarily attributed to the trades done by the parties. Execution of such trades repeatedly for several days by the parties in a group reveals that they were having some nexus with each other.

13. Thus, at the present stage, I am of the considered opinion that it would not be appropriate to give any conclusive findings as to any fact or submissions made by the parties. The objections made by the parties would be considered in detail by the investigation before coming to any conclusion in respect of them in the matter. Therefore, at the present state, as the investigation in the matter is in progress, I do not find it fit to modify/ revoke the ad interim directions issued vide Order dated February 20, 2010, till the completion of investigation in the matter. I am convinced that the directions in the interim order in respect of the parties needs to be continued, till further directions. Needless to say, the same would be reviewed after the conclusion of investigation. I note that the interim order was issued after taking into consideration the prima facie fraudulent, abusive and manipulative activities committed by certain persons identified in the said order. The interim order was passed for restoring the confidence of innocent investors and to prevent the manipulators from causing more harm to the securities market.

14. In view of the foregoing, 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 Sections 11, 11(4) and 11B thereof, hereby confirm the directions issued against Mr. Jitendra Mannalal Jain, Ms. Renu Madhusudhan Paliwal, Ms. Rashmi R. Gandhi, Alpesh R. Shah (HUF), Anil Rajmal Shah (HUF), Ms. Hemlata Ramesh Hankare, Hasmukh Valchand Jain (HUF), Naresh V. Rajawat (HUF), Mr. Pawanben Valchand Jain, Ms. Reeta Naresh Rajawat, Mr. Kunal Dilip Kothari, Ms. Shweta Bharat Kothari, Ms. Neela Khicha, Ms. Shobha Dilip Kothari, Kamlesh P. Jain (HUF) and Mr. Hitesh Mahendra Jain, vide ex-parte ad interim Order dated February 20, 2010, in the matter of ‘Synchronized Trading by Connected Clients’.

PLACE : MUMBAI PRASHANT SARAN DATE : 6/OCT/2010 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA