Order in the matter of trading by Chetan Dogra Group entities in the scrips of Vertex Spinning Limited and DMC International Limited.

WTM/SKM/EFD1-DRA2/29/2019 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: S. K. MOHANTY, WHOLE TIME MEMBER ORDER Under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 In respect of:

Notice No. NAMES OF THE NOTICEE PAN 1. Mr. Chetan Dogra ABNPD1798C 2. Chetan Dogra HUF AACHC5554P 3. Daffodil Tradex Private Limited AACCD5773A 4. CRS Traders and Exporters Private Limited AACCC7337B 5. CRS Wealth Creators Private Limited AAECC2483N 6. Shraddha Entertainment Private Limited AAKCS8199P 7. Subah Multimedia Private Limited AAKCS8196C 8. Tulip Expotrade Private Limited AACCT6697B (The entities mentioned above are individually known by their respective name or Noticee no. and collectively referred to as “Noticees”) In the matter of trading by Chetan Dogra Group entities in the scrips of Vertex Spinning Limited and DMC International Limited. Background: 1. An investigation was undertaken by Securities and Exchange Board of India (hereinafter referred to as “SEBI”) for the period of April 1, 2010 to September 30, 2010 (hereinafter referred to as “Investigation Period”) into the scrips of Vertex Spinning Limited (hereinafter referred to as “VSL”) and DMC International Limited (hereinafter referred to as “DMCIL”) (name changed to DMC Education Limited) for possible violation, if any, of the provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) and rules and regulations made thereunder.

Order in the matter of Vertex Spinning Limited and DMC International Limited

2. During the course of investigation, the price volume data the scrip of VSL and DMCIL were analyzed. Price volume information of the scrip VSL and DMCIL during pre-Investigation Period, Investigation Period & post Investigation Period are under: Table No. 1 In the scrip of VSL Period Date Price / Opening Closing Low Price High Price Avg. No. of Volume Price(Volume) Price(Volume) (Volume) (Volume) shares traded on the first day on the last day during the during the daily during of the period of the period period period the period (Total) Before 04 Jan Price 3.6 3.18 2.75 4.34 Investigation 2010 To (19.02.2010) (11.03.2010) 196858 March 31, Volume 21847 283515 7306 1083688 2010 (09.02.2010) (09.03.2010) Investigation April Price 3.23 2.84 1.64 5 Period 01, 2010 to (05.07.2010) (13.05.2010) Sep 30, 2010 Volume 80223 481758 18576 6266044 433545 (08.09.2010) (05.07.2010) After Oct Price 2.98 2.14 2 4.09 Investigation 01,2010 Period to Dec (29.12.2010) (14.10.2010) 31, 2010 Volume 837567 49189 8852 1517658 199615 (24.12.2010) (12.10.2010)

Table No. 2 In the scrip of DMCIL Period Date Price/ Opening Closing Low Price High Price Avg. No of Volume Price(Volume) Price(Volume) (Volume) (Volume) shares traded on the first day on the last day during the during daily during of the period of the period period the period the period (Total) 16.55 29.60 04 Jan 25.25 17.30 Before 2010 to Price (23.03.2010) (07.01.2010) March 2,77,105 Investigation 31, 590,145 127634 7308 1006824 2010 Volume (13.01.2010) (05.03.2010)

17.60 11.40 8.69 22.00 April 01, Price (17.06.2010) (30.04.2010) Investigation 2010 to 5,17,883 Period Sep 30, 1,18,664 61,624 5032 5144689 2010 Volume (21.06.2010) (17.06.2010) 11.15 16.10 10.56 26.70 After Oct 01, 2010 to 3,86,217 Price (01.10.2010) (12.11.2010) Investigation Dec 31, Volume 1,58,827 60,666 24819 2663724 Period 2010 (14.12.2010) (14.10.2010)

3. Further, the top 10 clients who had traded in BSE in the scrip of VSL and DMCIL during the period of investigation as under: Table No. 3 In the scrip of VSL Buy Client Name Total % of Trd Sell Client Name Total % of Trd Volume Volume JMP Securities Pvt Ltd 8479223 15.28 JMP Securities Pvt Ltd 8641059 15.57 Chetan Dogra 3101667 5.59 Chetan Dogra 6316366 11.38 Chetan Dogra HUF 2428682 4.38 Chetan Dogra HUF 3103652 5.59 Sneha Pawan Agarwal 1477172 2.66 Sneha Pawan Agarwal 1504127 2.71 Pawan Agarwal (HUF) 1259443 2.27 Pawan Agarwal (HUF) 1251556 2.26 BP Fintrade Private Limited 1171329 2.11 BP Fintrade Private Limited 1171347 2.11 Jyoti Portfolio Limited 1020000 1.84 Jyoti Portfolio Limited 920000 1.66 Jayshree Umakant Raje 841920 1.52 Vibhuti 800000 1.44 Chimanlal Maneklal Zoom Colonizers Private 709968 1.28 775000 1.40 Securities Private Limited Limited Ravi Prakash Sharma 632266 1.14 Balwant Singh Bisht 772069 1.39 Top 10 Buy Clients 21121670 38.06 Top 10 Sell Clients 25255176 45.51 Remaining Clients 34372059 61.94 Remaining Clients 30238553 54.49 Total Traded Volume 55493729 100.00 Total Traded Volume 55493729 100.00

Table No. 4 In the scrip of DMCIL Buy Client Name Total % of Trd Sell Client Name Total % of Trd Volume Volume Ours Trading And Holdings Ours Trading And Holdings 6328251 9.55 6310730 9.52 Pvt. Ltd Pvt. Ltd JMP Sec. Pvt Ltd 4177229 6.30 JMP Sec. Pvt Ltd 4177225 6.30 Bharat Gupta 2592180 3.91 Bharat Gupta 2631583 3.97 J V Stock Broking Pvt. Ltd. 2559648 3.86 J V Stock Broking Pvt. Ltd. 2559645 3.86 Krishna Infomedia Ltd. 2544748 3.84 Krishna Infomedia Ltd. 2538708 3.83

Chetan Dogra HUF 2351210 3.55 Chetan Dogra HUF 2346004 3.54 Atul Mittal 1809000 2.73 Mahender Singh 2034994 3.07 Mahender Singh 1759032 2.65 Atul Mittal 1909150 2.88 Shark Communications Pvt Shark Communications Pvt 1722546 2.60 1766913 2.67 Ltd Ltd Chetan Dogra 1086839 1.64 Chetan Dogra 1365946 2.06 Top 10 Buy clients 26930683 40.63 Top 10 Sell clients 27640898 41.70 Remaining Buy Clients 39358403 59.37 Remaining Sell Clients 38648188 58.30 Total Traded Volume 66289086 100.00 Total Traded Volume 66289086 100.00 4. It has been revealed in the investigation that the top 10 clients accounted for 38.06 % of the buy volume and 45.51% of the sell volume in the scrip of VSL and amongst the top 10 clients, the Noticees viz., Chetan Dogra (Noticee no.1) and Chetan Dogra HUF (Noticee no. 2) have bought 31,01,667 shares (5.59% of total traded volume) and 24,28,682 shares (4.38% of total traded volume) respectively. The Noticee no. 1 and Noticee no. 2 have also sold 63,16,366 shares (11.38% of total traded volume) and 31,03,652 shares (5.59% of total traded volume) respectively. 5. The investigation has also observed that Chetan Dogra (Noticee no.1) and Chetan Dogra HUF (Noticee no. 2) executed self-trades in respect of 1,08,808 shares and 2,70,472 shares respectively in the scrip of VSL.

6. Similarly, the contribution of the Noticee no. 1 and the Noticee no. 2 in the trade of the scrip of DMCIL were significant as they have bought 10,86,839 shares (1.64% of total traded volume) and 23,51,210 shares (3.55% of total traded volume) respectively. Similarly, these two Noticees have sold 13,65,946 shares (2.06% of total traded volume) and 23,46,004 shares (3.54% of total traded volume) of DMCIL respectively, during the Investigation Period. 7. The investigation has also observed that Chetan Dogra (Noticee no.1) and Chetan Dogra HUF (Noticee no. 2) executed self-trades in respect of 1,66,147 shares and 6,03,547 shares in the scrip of DMCIL. 8. Thus, based on the finding of facts unearthed in the course of investigation, it was inter-alia observed that the two entities viz. Chetan Dogra (Noticee no. 1) and Chetan Dogra HUF (Noticee no. 2) have indulged in execution of self-trades in the scrip of VSL and DMCIL. 9. The investigation has also revealed that there were off-market transfers of shares amongst the suspected entities during the period of investigation wherein, some of the promoters of VSL transferred shares in the off-market to Chetan Dogra and his group entities viz. Daffodils Tradex (Noticee no. 3), Shraddha Entertainment Pvt. Ltd (Noticee no. 6), Subah Multimedia Pvt. Ltd (Noticee no. 7) and Tulip Export Pvt. Ltd (Noticee no. 8) wherein Chetan Dogra (Noticee no. 1) is one of the directors and such off-market transfers were not executed against sufficient and valid consideration.

It has been observed that such transfers of shares through off market transactions without receipt of adequate consideration, were camouflaged as shares being lent to Chetan Dogra Group (hereinafter referred to as “CDG”) entities under loan agreements dated April 25, 2010, April 29, 2010, April 30, 2010 and May 14, 2010. 10. Additionally, it was also observed that the Noticee nos. 4 & 5, which are connected/associated with the Noticee no. 1 were alleged to be involved in the acts of synchronized trades as well as reversal and self-trades in a number of scrips, thereby contributing to the price rise by way of their manipulative and artificial trades. The alleged pattern of trading were noticed in number of scrips on repeated basis and hence have been alleged to be in violation of the provisions of Section 12 A (a) (b) (c) of SEBI Act read with Regulation 3 (a) (b) (c) (d) read with Regulation 4 (1) 4 (2) (a) and (g) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) read with Section 16 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as “SCR Act”).

Accordingly, a common Show Cause Notice dated September 05, 2017 (hereinafter referred to as “SCN”) was issued to all the Noticees, asking them to respond as to why suitable direction under Section 11, 11(4) & 11 (B) SEBI Act, should not be issued against them. 11. It is noted that the SCN was sent through speed post. The same was returned undelivered and therefore, the SCN was served through affixture. However, no reply has been received from any of the Noticees. Subsequently, in compliance with principle of natural justice, an opportunity of personal hearing was also accorded to the Noticees and the said hearing Notice was also served through affixture. It is also noted that the notice of personal hearing to the Noticee no. 8 was served through publication. None of the Noticees appeared on the scheduled date of hearing on May 02, 2019. I find that sufficient opportunities have been granted to the Noticees and no useful purpose would be achieved by granting any other opportunity, hence, I proceed to deal with matter ex parte, based on materials available on record. Consideration of Issues and Findings 12. In view of the above, the issues that require consideration are as under: (i) Issue I: Whether the Noticees are connected entities?

(ii) Issue II: Whether the Noticees have acted in violation of the provisions of Section 16 of SCR Act, 1956, while dealing in off-market transactions in the shares of VSL? (iii) Issue III: Whether the act of the Noticees no. 1 and Noticee no. 2 have resulted in violations of the provisions of Section 12 A (a), (b), (c) of SEBI Act read with Regulation 3 (a), (b), (c), (d), 4 (1) 4 (2) (a) and (g) of SEBI (PFUTP) Regulations? Issue I: Whether the Noticees are connected entities? 13. It is noted that during the investigation, certain entities including Chetan Dogra were identified as connected entities and the said connection was based on inter se connections established because of common addresses, KYC documents, common directorship and off market transfers. From the materials on record, it is noted that the Noticee no. 1 (Chetan Dogra) is the Karta of the Noticee no. 2 ( Chetan Dogra HUF) and as per the KYC documents of these two Noticees, they both share common address and located at 801, Tower-1, NRI Complex, Sea Wood estate, Palm Beach Road, Nerul, Navi Mumbai, Maharashtra. Further, the Noticee no. 1 is one of the director in the Noticee no. 3 to 8. Besides, there are off market transfers of shares of VSL between the Noticees (except the Noticee no. 4 & the Noticee no. 5) and the promoter of VSL.

Considering, the aforesaid and particularly, considering that the Noticee no. 1 is the Karta of the Noticee no. 2, and that the Noticee no. 1 is the common director in the Noticee nos. 3 to 8 and also the fact that there were off-market transactions of shares amongst them, I find that it can be reasonably concluded that the Noticees are connected entities. Moreover, the allegations of their connections based on the above have not been disputed by any of the Noticees which further establishes that the Noticees have nothing to dispute so far as their inter-connectedness is concerned. Issue II: Whether the Noticees have acted in violation of the provisions of Section 16 of SCR Act, 1956, while dealing in off-market transactions in the shares of VSL? 14. Before I proceed with the aforesaid issue, it is pertinent to reproduce the relevant provisions of SCR Act, 1956 for ready reference as under: Section 2 (i) of SCR Act “spot delivery contract” means a contract which provides for:- (a) actual delivery of securities and the payment of a price therefor either on the same day as the date of the contract or on the next day, the actual period taken for the dispatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality; (b) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository; …….

Section 16 of SCR Act:- Power to prohibit contracts in certain cases. (1) If the Central Government is of opinion that it is necessary to prevent undesirable speculation in specified securities in any State or area, it may, by notification in the Official Gazette, declare that no person in the State or area specified in the notification shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of any security specified in the notification except to the extent and in the manner, if any, specified therein. (2) All contracts in contravention of the provisions of sub-section (1) entered into after the date of notification issued thereunder shall be illegal.

Section 18 of SCR Act - Exclusion of spot delivery contracts from sections 13, 14, 15 and 17. (1) Nothing contained in sections 13, 14, 15 and 17 shall apply to spot delivery contracts. (2) Notwithstanding anything contained in sub-section (1), if the Central Government1 is of opinion that in the interest of the trade or in the public interest it is expedient to regulate and control the business of dealing in spot delivery contracts also in any State or area (whether section 13 has been declared to apply to that State or area or not), it may, by notification in the Official Gazette, declare that the provisions of section 17 shall also apply to such State or area in respect of spot delivery contracts generally or in respect of spot delivery contracts for the sale or purchase of such securities as may be specified in the notification, and may also specify the manner in which, and the extent to which, the provisions of that section shall so apply. SEBI Notification G.S.R 219(E) dated March 2, 2000 “In exercise of the powers conferred by sub-section (1) of section 16 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), read with Government of India Notification No. S.O.

573(E), dated 30th July, 1992, (See [1992] 75 Comp Cas (St.) 216.) and Notification No. 183(E), dated 1st March, 2000, (See page 53 supra.) issued under section 29A of the said Act, the Securities and Exchange Board of India (hereinafter referred to as "the Board") being of the opinion that it is necessary to prevent undesirable speculation in securities in the whole of India, hereby declare that no person in the territory to which the said Act extends, shall, save with the permission of the Board, enter into any contract for sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery or contract in derivatives as is permissible under the said Act or the Securities and Exchange Board of India Act, 1992 (15 of 1992), and the rules and regulations made under such Acts and rules, regulations and bye-laws of a recognised stock exchange………………... 15. I note that during the Investigation Period, there were off-market transfers in the scrip of VSL wherein some of the promoters of VSL viz. Green Cottage and Resorts Limited, Phenomenal Craft Pvt Ltd., Yellow Consultants Pvt Ltd and Zoom Colonizers Pvt Ltd. Have transferred shares in off-market to Noticee no. 1, 2, 3, 6, 7 and 8 viz. Chetan Dogra, Chetan Dogra HUF, Daffodils Tradex Pvt. Ltd, Shraddha Entertainment Pvt. Ltd., Subah Multimedia Pvt. Ltd. and Tulip Export Pvt. Ltd. Details of such transfers have been tabulated below-: Table No. 5 Date of Source Client Name Target Client Name Transferred No of Transfer (Prompters of VSL) Quantity Transactions 26.04.2010 Phenomenal Craft Pvt Limited Chetan Dogra 700000 3 26.04.2010 Phenomenal Craft Pvt Limited Daffodil Tradex Pvt Ltd 200000 1 26.04.2010 Phenomenal Craft Pvt Limited Chetan Dogra HUF 100000 1 Zoom Colonizers Private 29.04.2010 Subah Multimedia Pvt Ltd 2500000 1 Limited Yellow Consultants Private Shraddha Entertainment Pvt 30.04.2010 2500000 1 Limited Ltd

Green Cottage And Resorts 14.05.2010 Tulip Expotrade Pvt Ltd 1000000 1 Ltd 16. I note from the table no. 5 that shares have been transferred to the Noticees no. 1, 2, 3, 6, 7 and 8, which implies transfer of beneficial ownership of the shares to these Noticees. The transfer of beneficial ownership comes along with the rights and liabilities attached to the ownership of shares. As per the statutory provisions governing dealing in securities which happens outside the market platform of a recognized stock exchange, the settlement relating to such transfer of securities and the payment of consideration required to be made against such transfer, shall have to be either on the same day or at the most next day. In this process, the actual period taken for the dispatch of the securities or the remittance of money would be excluded for the purpose computation of the period of settlement as stated above. Further, the said exemption is available only where parties to the contract are located at geographically distant places. 17. As can be noted from the above table no. 5, there were transfer of 70.00 lacs shares from the promoter entities of VSL to the Noticee no. 1 and its related entities.

It was further noted that the market value of those 70.00 lacs shares of VSL were Rs 2.85 Crore ( approx.), whereas as per the agreement entered into by the CDG, the agreed price to be paid for those shares of VSL was only Rs 1.255 Crore. It has been noticed in the investigation that there was no compliance by CDG as far as payment of consideration qua the transfer of those 70.00 lacs shares was concerned. Details of such off market transfers along with payment details are tabulated below: Table No. 6 Sl. Name of the Name of Target No. of shares Mode of receipt Price received No. Source Promoter Entity transferred of payment-by company Entity (CDG group Cash, Cheque, entity) adjusted with other transfer 1. 1,00,000 Equity Cheque No. Rs 13.00 lakh Phenomenal Craft Chetan Dogra Shares on 180863 drawn on realized through Pvt Limited (Noticee no. 1) 26/04/2010 HDFC Bank cheque 2. Daffodil Tradex 2,00,000 Equity ,Fort Branch Phenomenal Craft Pvt Ltd (Noticee Shares on dated 29.04.2010 Pvt Limited no. 3) 26/04/2010 3. Chetan Dogra 1,00,000 Equity Phenomenal Craft HUF (Noticee Shares on Pvt Limited no. 2) 26/04/2010 4. Chetan Dogra 1,00,000 Equity Phenomenal Craft (Noticee no. 1) Shares on Pvt Limited 26/04/2010 5. Chetan Dogra 5,00,000 Equity Phenomenal Craft (Noticee no. 1) Shares on Pvt Limited 26/04/2010 6. 25,00,000 Equity Cheque No. Rs 37.50 lakhs.

Subah Multimedia Zoom Colonizers Shares on 136644 dated Cheque received Pvt Ltd (Noticee Private Limited 29/04/2010 03.05.2010 and were bounced and no. 7) Cheque no.

Sl. Name of the Name of Target No. of shares Mode of receipt Price received No. Source Promoter Entity transferred of payment-by company Entity (CDG group Cash, Cheque, entity) adjusted with other transfer 136645 dated no payment 03.05.2010. realized at all. 7. 25,00,000 Equity Cheque No. Rs 37.50 lakhs. Shraddha Shares on 643332 dated Cheque received Yellow Consultants Entertainment 30/04/2010 03.05.2010 were bounced Private Limited Pvt Ltd (Noticee and no payment no. 6) realized at all. 8. 10,00,000 Equity Cheque No. Rs 37.50 lakhs. Tulip Expotrade Shares on 643388 dated Cheque received Green Cottage And Pvt Ltd (Noticee 14/05/2010 03.05.2010 were bounced Resorts Ltd no. 8) and no payment realized at all.

18. From the above details, I note that admittedly there was a transfer of 70.00 lacs shares from the promoters’ entities of VSL to the Noticee no. 1 and its related/ associated entities. As per record, the total amount agreed for purchase of those shares of 70.00 lacs was Rs 1.255 Crore, while the investigation has revealed that the market value of those shares were Rs 2.85 Crore. In any case, the Noticee no. 1 has made payment of Rs 13.00 lacs only and the balance amount of consideration from the agreed amount was not received by the promoters of VSL since the cheques issued towards payment of balance purchase consideration amount were not honoured. I, therefore hold that, the allegations made in the SCN that the off-market transactions made by the Noticees in the scrip of VSL were in violations of provisions of Section 16 of SCR Act are proved to be correct. 19. From the details of the transaction as shown in the above tables no 5 & 6, I find that the off market transaction in the scrip of VSL was also resorted to by the Noticee nos. 1, 2, 3, 6, 7 & 8. However, there was no transaction entered into by or with the Noticee nos. 4 & 5. Therefore, it was revealed that except for the Noticee nos. 4 & 5, all other Noticees have purchased shares of VSL in an off market mode.

The total consideration agreed against the purchase of those 70.00 lacs shares were Rs 1.255 Crore, whereas as per records made available before me, the amount paid against the total consideration was only Rs 13.00 lacs. No reply has been filed by any of the Noticees. The Noticees have also preferred not to appear before me to advance any submissions in response to the allegations made in the SCN. In the absence of any documents contrary to the allegations, I find that the acts of the Noticees of transacting in the shares of VSL through off market mechanism does not comply with the provision under Section 16 of SCR Act. I further note that the Hon’ble Securities Appellate Tribunal in its order in the matter of Alok Kehtan Vs. SEBI, (Appeal No. 55 of 2007- DoD 17/07/2007), while dealing with the issue of implication of transacting outside the stock exchange mechanism have observed that: “...........it is clear that the appellant sold his unlisted shares on 25.08.1999 in an off market transaction and received the sale consideration of `22,50,000/‐only in January, 2000 which is much beyond the time permitted by section 2(i) of the SCR Act.

Since the transaction was off market, the contract for the sale of shares could only be by way of spot delivery in view of the restriction imposed by the Board under section 16 of SCR Act which mandates that the sale consideration ought to have been received either on the same day of the transaction or on the following day. It is, thus, clear that the sale of shares by the appellant on 25.08.1999 in the off market transaction is Adjudication Order in the matter of Pithampur Steels Ltd., violative of the restriction imposed under section 16 read with section 2(i) of SCR Act.” 20. Considering the above observation of Hon’ble SAT and the undisputed fact that the Noticees have failed to make the actual payment of consideration amount within the stipulated time, I am of the view that the act of the Noticee nos. 1, 2, 3, 6, 7 & 8 are found to be in violation of the provisions of section 16 of SCR Act, 1956. Issue III: Whether the act of the Noticee no. 1 and Noticee no. 2 have resulted in violations of the provisions of Section 12 A (a), (b), (c) of SEBI Act read with Regulation 3 (a), (b), (c), (d), 4 (1) 4 (2) (a) and (g) of SEBI (PFUTP) Regulations?

21. I note that in the SCN, the Noticees have been alleged to have violated provisions of SEBI Act and various provisions of PFUTP Regulations. Therefore, before moving forward on this issue, it would be proper to visit the aforesatated provisions alleged to have been violated in the SCN. The said provisions are produced hereunder for ready reference: Section 12 A (a) (b) (c) of SEBI Act No person shall directly or indirectly— (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c)engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder; Regulation 3 of SEBI (PFUTP) Regulations: - Prohibition of certain dealings in securities 3. 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 thereunder;

(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 thereunder. Regulation 4 of SEBI (PFUTP) Regulations: - 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; (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security 22. It has been alleged that the Noticee no.1 and the Noticee no. 2 have executed artificial and manipulative trades in the scrip of VSL and DMCIL by way of self-trades. The details of such self-trades executed by the Noticee no 1 in the scrip of VSL and DMCIL are as under: Table No. 7 Self-trades by the Noticee no. 1 in VSL Trade date Self-trades Total market % of Self- Trades % of Self-trades to volume (no. of volume trades to executed by total trades executed shares) (no. of market Noticee-1 (no. by Noticee-1 shares) volume of (no. of shares) shares) 30/04/2010 7,944 2,42,915 3.27 17,056 46.58 13/05/2010 1,200 6,78,061 0.18 2,43,807 0.49 17/05/2010 2,598 6,87,923 0.38 4,17,100 0.62 18/05/2010 50,110 4,07,925 12.28 2,30,567 21.73 19/05/2010 190 7,09,929 0.03 4,06,065 0.05 20/05/2010 25,000 3,82,362 6.54 1,00,161 24.96 24/05/2010 6,425 3,27,563 1.96 1,19,713 5.37 26/05/2010 15,265 7,22,821 2.11 4,32,668 3.53 01/06/2010 75 9,81,202 0.01 73,341 0.10 15/06/2010 1 11,30,866 0.00 10,41,675 0.00 Total 1,08,808 62,71,567 1.73 30,82,153 3.53

Table No. 8 Self-trades by the Noticee no. 1 in DMCIL

Trade date Self-trades Total market % of Self- Trades % of Self-trades to volume (no. of volume trades to executed by total trades shares) (no. of market Noticee-1 executed by shares) volume (no. (no. of Noticee-1 of shares) shares) 30/06/2010 3,427 9,61,890 0.36 49,600 6.91 01/07/2010 240 6,06,505 0.04 1,68,139 0.14 02/07/2010 1,00,600 6,30,329 15.96 1,90,414 52.83 05/07/2010 5,165 4,27,902 1.21 21,838 23.65 06/07/2010 31,965 3,27,543 9.76 44,800 71.35 07/07/2010 1 5,28,379 0.00 39,000 0.00 13/07/2010 18,400 2,24,135 8.21 21,000 87.62 15/07/2010 500 5,87,746 0.09 1,43,305 0.35 16/07/2010 5,849 9,76,135 0.60 1,11,651 5.24 Total 1,66,147 52,70,564 3.15 7,89,747 21.04

23. From the details as mentioned in the table no. 7 above, it is noted that the Noticee no. 1 has executed self-trades quite frequently and almost as a matter of habit. During the Investigation Period, the Noticee no. 1 was found to have been indulged in self-trades on 53 times over a period of 10 trading days between 30/04/2010 and 15/06/2010. Thus, on an average, the Noticee no. 1 has indulged in executing more than 5 self-trades per day in the scrips of VSL. Further, through such self-trades, the Noticee no. 1 has contributed to 1.73% (1,08,808 shares) of the total traded volume over a period of 10 trading days, which was as much as 12.28 % of the total traded volume in the scrip of VSL on 18/05/2010. Thus, from the analysis of the trades of the Noticee no. 1, I find that on May 18, 2010, contribution of self-trade by the Noticee no. 1 was more than 12% of the total traded volume, which was enough to create artificial volumes in the scrip of VSL. 24. It is also noted from the table no. 7 above that during the aforesaid 10 trading days, the Noticee no. 1 has traded for a total quantity of 30,82,153 shares in the scrip of VSL. On comparing the quantity of shares traded by him through self-trades with the total quantity of shares traded by the Noticee no. 1 in the scrip of VSL, I find that out of the total traded shares of 30,82,153, the Noticee had executed self-trades in 1,08,808 shares which was 3.53% of his total traded volume in the scrip of VSL. It was also observed that the contribution of self-trades by the Noticee no. 1 in the scrip of VSL went up to the level of 46.58% of his own total trades executed in the said scrip on 30.04.2010.

25. Similarly, the Noticee no. 1 was alleged to be involved in execution of self-trades in the scrip of DMCIL. From the analysis of trades executed by the Noticee no. 1 in the scrip of DMCIL as mentioned in table no. 8 above, it is observed that though the SCN alleged that the Noticee had executed self-trades for a quantity of 1,65,046 shares, from the trades log of the Noticee in the scrip, it is noted that the Noticee no. 1 had actually indulged in self-trades on 25 occasions over the period of 9 trading days between 30/06/2010 and 16/07/2010 for a total quantity of 1,66,147 shares. Thus, on an average the Noticee no. 1 had indulged in executing more than 2 self-trades per day in the scrip of DMCIL. Further, through such trades, the Noticee no. 1 has contributed 3.15% (1,66,147 shares) of the total traded volume of the said scrip over the period of 9 trading days. From the analysis of the trades of the Noticee no. 1, I also find that over such a small period, contribution of self-trades to the total trades in the scrip of DMCIL by the Noticee no. 1 was more than 15% on 02/07/2010 and more than 9% on 06/07/2010. Further, the percentage of self-trades by the Noticee no. 1 to his total number of trades had gone up to the level of 87.62% on 13.07.2010. These self-trades are indicative of the artificial volumes created by the Noticee on the trading in the scrip pf DMCIL. 26. As pointed out earlier, the Noticee no. 1 is the Karta of the Noticee no. 2. Both the Noticees i.e. No. 1 & No. 2 shared common address and both of them have been alleged to have indulged in self-trades in the scrip of VSL and DMCIL. As far as the trading and indulging in self-trade by the Noticee no. 1 is concerned, the same has been dealt in the preceding paragraphs. Now, I shall deal with the trades of the Noticee no. 2 in the scrip of VSL and DMCIL. The trades as alleged in the SCN and as available on record pertaining to the Noticee no. 2 in the scrip of VSL and DMCIL are tabulated as under: Table No. 9 Self-trades by the Noticee no. 2 in VSL

Trade date Self-trades Total market % of Self- Trades % of Self-volume (no. of volume trades to executed by trades to total shares) (no. of market Noticee-2 (no. trades shares) volume (no. of executed by of shares) shares) Noticee-2

27/05/2010 63,794 10,80,615 5.90 5,80,349 10.99 28/05/2010 51,644 4,40,937 11.71 3,13,848 16.46 31/05/2010 65,000 4,22,658 15.38 1,99,314 32.61 01/06/2010 22,999 9,81,202 2.34 7,79,694 2.95 02/06/2010 34,378 6,39,880 5.37 2,60,344 13.20 03/06/2010 21,435 3,38,273 6.34 3,14,252 6.82 04/06/2010 11,127 6,81,608 1.63 3,92,435 2.84 07/06/2010 95 2,24,325 0.04 44,734 0.21 Total 2,70,472 48,09,498 5.62 28,84,970 9.38

Table No. 10 Self-trades by the Noticee no. 2 in DMCIL

Trade date Self-trades Total market % of Self- Trades % of Self-volume (no. of volume trades to executed by trades to total shares) (no. of market Noticee-2 (no. trades shares) volume (no. of executed by of shares) shares) Noticee-2

25/06/2010 315 7,41,281 0.04 1,45,850 0.22 28/06/2010 544 9,40,336 0.06 1,19,237 0.46 29/06/2010 27,884 6,31,609 4.41 95,234 29.28 30/06/2010 1,79,423 9,61,890 18.65 6,21,321 28.88 01/07/2010 16,678 6,06,505 2.75 2,15,733 7.73 02/07/2010 2,050 6,30,329 0.33 95,037 2.16 05/07/2010 11,865 4,27,902 2.77 83,021 14.29 07/07/2010 1,37,159 5,28,379 25.96 2,77,529 49.42 08/07/2010 83,818 5,80,829 14.43 3,75,552 22.32 12/07/2010 5,000 5,10,103 0.98 2,62,196 1.91 14/07/2010 1,847 5,13,457 0.36 1,29,740 1.42 16/07/2010 1,30,254 9,76,135 13.34 4,00,356 32.53 21/07/2010 6,710 2,10,629 3.19 26,949 24.90 Total 6,03,547 82,59,384 7.31 28,47,755 21.19

27. From the details as mentioned in the above table no. 9, it is noted that the Noticee no. 2 was involved in artificial self-trades almost on a regular basis. During the Investigation Period, the Noticee no. 2 was found to be indulged in self-trades on 139 times over the period of 8 trading days between 27/05/2010 and 07/06/2010. Thus, I observe that, on an average the Noticee no. 2 was indulged in executing more than 17 self-trades per trading day. Further, through such trades, the Noticee no. 2 contributed to 5.62% (2,70,472 shares) of the total traded volume, which was as much as 15.38 % of the total traded volume in the scrip of VSL on 31.05.2010. Thus, from the analysis of the trades of the Noticee no. 2, I find that that over such a small period, contribution of self-trades to the total trades in the scrip of VSL by the Noticee no. 2 exceeded beyond 11% on two occasion viz. on 28.05.2010 and 31.05.2010, which was enough to create artificial volumes in the scrip of VSL. 28. It is also noted from the above table no. 9 that during the aforesaid 8 days, the Noticee no. 2 has traded for a total quantity of 28,84,970 shares in the scrip of VSL.

On comparing the quantity of shares traded through self-trades with the total quantity of shares traded by the Noticee No. 2 in the scrip of VSL, I find that out of the total traded shares of 28,84,970, the Noticee No. 2 had executed self-trades in 2,70,472 shares which was 5.62% of his total traded volume, I find that the contribution of self-trades by the Noticee no. 2 in that scrip went up to the level of 32.61% of his own total trades executed on 31.05.2010. 29. The Noticee no. 2 was alleged to be involved in execution of self-trades in the scrip of DMCIL. From the analysis of trades executed by the Noticee no. 2 in the scrip of DMCIL as demonstrated in table no. 10 above, it is observed that although the SCN alleged that the Noticee no. 2 had executed self-trades for a quantity of 5,08,630 shares, from the trades log of the Noticee in the scrip, it is noted that the Noticee no. 2 has actually indulged in self-trades on 156 occasions over a period of 13 trading days between 25/06/2010 and 21/07/2010 for a total quantity of 6,03,547 shares. Thus, on an average, the Noticee no. 2 has indulged in executing 12 self-trades per day.

Further, through such trades, the Noticee no. 2 has contributed 7.31% (6,03,547 shares) of the total traded volume. From the analysis of the trades by the Noticee no. 2, I also find that over such a small period, contribution of self-trades to the total trades in the scrip of DMCIL executed by the Noticee no. 2 was more than 20% on six occasion which had also gone up to the level of 49.42% on 07.07.2010. The manner in which the Noticee no. 2 has executed self-trades as explained above, shows that the Noticee had the intention of creating artificial volumes in the trading of the scrip of DMCIL. 30. I find that self-trades are classified as those trades executed in the stock market in which, both the buyer and the seller remains the same entity, meaning thereby, entity in such trades is same on both the sides i.e. buy and sell side. Consequently, self-trades do not result in change in beneficial ownership of the security. I have already dealt in detail, on the frequency and number of self-trades executed by the Noticee no. 1 & the Noticee no. 2 in the scrip of VSL and DMCIL in the preceding paragraphs.

As self-trades do not result in change in the beneficial ownership, consequently, no effective transfer of shares takes place in self-trade. In such a scenario, self-trades are used as a tool for generating artificial volume and in creating misleading appearance of trading in a scrip. While dealing with cost and consequences of self-trades, the Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”) in the matter of Balwinder Singh v. SEBI (DoD- 11.02.2014) have observed that self-trades (or wash-trades) are per se, not allowed under SEBI Act and regulations made thereunder. The Hon’ble SAT further in the matter of Chirag Tanna v. The Adjudicating Officer (DoD-16.06.2011), while dealing with the consequences of self-trades or trades which do not result in transfer of beneficial ownership, have observed that such trades are admittedly fictitious and are executed merely to create artificial volume in the traded scrip. Normally, such trades are found to be fictitious and not genuine for the reason that in such trades buyer and seller remains the same. Therefore, even though there may not be an abnormal movement in the price of a scrip, entities who are alleged to have indulged in such trades, which don’t result in change of beneficial ownership and where entities fail to explain the circumstances for resorting to execution of self-trades, it would not be proper to permit self-trades without any imputation merely on the ground that such trades had not caused any movement in the price of the scrip or the entities had no malafide intention to manipulate the scrip.

I also note that the Hon’ble SAT in the case of HJ Securities Pvt Ltd v. SEBI (DOD-11.05.2012), have made the observation that simply because the number of such self-trades is not large by itself cannot justify execution of self-trades. 31. I also note the observation of the Hon’be SAT in case of Ketan Parekh v. SEBI (DoD- 14.07.2006 in Appeal No. 2 of 2004), wherein the Hon’ble SAT has observed that in the absence of direct evidence, the intention could be gathered from the attending circumstances so as to find out whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism or not. 32. Considering the aforesaid judicial observations and the nature and trading pattern of the two Noticees i.e. the Noticee no. 1 & the Noticee no. 2 in the scrip of VSL and DMCIL, it leaves no doubt in my mind that the self-trades executed by the two Noticees satisfy all the ingredient to be held as trades executed with an intention to create artificial volumes in the scrip. I have already made my observation relating to the self-trades executed by the two Noticees, the frequency with which such self-trades were executed and the percentage of volume of such self-trades to the total trades executed by the two Noticees.

Further, the facts of receiving the shares from the promoter group entities for a paltry sum of Rs 13.00 lakh as against the total market value of Rs 2.85 Crore and commencement of trading in the scrips immediately after receiving the shares from the promoter group in an off-market transaction are considered as sufficient indication to reveal and expose the intent of the Noticee no.1 and 2 behind the execution of self-trades. I further observe that no reply has been filed by any of the Noticees and none of them has preferred to avail the opportunity of personal hearing. Therefore, I have nothing on record rebutting the allegations made in the SCN. In this respect, I find it apt to refer and rely on the observation of the Hon’ble SAT in the case of Classic Credit Ltd. vs. SEBI (Appeal No. 68 of 2003, DoD-08.12.2006) wherein the Hon’ble SAT has inter alia, observed that - "............ the appellants did not file any reply to the second show-cause notice. This being so, it has to be presumed that the charges alleged against them in the show cause notice were admitted by them”. The above observations of the Hon’ble SAT has been reiterated in the case of Sanjay Kumar Tayal & Others v SEBI (Appeal No. 68 of 2013- DoD- 11.02.2014), wherein the Hon’ble SAT has reaffirmed that– “………………As rightly contended by Mr. Rustomjee, learned senior counsel for respondents, appellants have neither filed reply to show cause notices issued to them nor have availed opportunity of personal hearing offered to them in the adjudication proceedings and, therefore, appellants are presumed to have admitted charges levelled against them in the show cause notices…………….”.

33. From the aforesaid findings, I find that such high volumes of self-trades executed by the two Noticees cannot have any purpose other than to create artificial volumes and misleading appearances of trading in the scrips thereby adversely impacting the market, which is further evident from the high percentage of self-trades to the total traded volume in the two scrips that were quite significant on various dates as highlighted in the previous paragraphs. Therefore, I find that self-trades executed by the Noticee are fraudulent and unfair trades executed with a manipulative intent. If the Noticees were genuine investors and were not having any manipulative intent, then the Noticees could not have adopted such mechanism of selling/purchasing shares of same scrip on repeated basis. 34. Thus, having found the two Noticee guilty of fraudulent and unfair trade practices by resorting to self-trades over a period on a repeated basis, in my view the Noticees did not conduct their trades as genuine investors of securities market. In this respect, the Hon’ble Supreme Court in the case of SEBI v. Rakhi Trading Pvt. Ltd., (2018) 13 SCC 753 has observed that Regulation 4(1) of PFUTP Regulations in clear and unmistakable terms has provided that “no person shall indulge in a fraudulent or an unfair trade practice in securities” and further appreciated that fairness, integrity and transparency are the hallmarks of the stock market in India and the stock market is not a platform for any fraudulent or unfair trade practice.

The Hon’ble Court has further observed that “The SEBI Act, 1992 was enacted to protect the interest of the investors in securities. Protection of interest of investors should necessarily include prevention of misuse of the market.” 35. In view of the foregoing, I have no hesitation to conclude that the Noticee no. 1 and Noticee no. 2 have executed self-trades with the intention to manipulate the market or defeat its mechanism and thereby have violated the provisions of Section 12 A (a) (b) (c) of SEBI Act read with Regulation 3 (a) (b) (c) (d) read with Regulation 4 (1) 4 (2) (a) and (g) of SEBI (PFUTP) Regulations, 2003. 36. As observed in the beginning, the Noticee no. 4 & 5 has nothing to do in the scrip of VSL and DMCIL. There are no allegations qua them for dealing in the scrip of VSL & DMCIL. It is however observed that these two Noticees have been alleged to be in breach of provisions of SEBI Act and rules and regulations made thereunder pertaining to their trades in scrips other than VSL and DMCIL for which, appropriate adjudication proceedings have since been commenced against them.

However, these two Noticees have not been found dealing in any manner in the scrip of VSL & DMCIL. I also note that through the said adjudication proceedings, the Noticee no. 4 & 5 have been subjected to appropriate monetary penalties for their acts in violations of the provisions of law pertaining to their trading in scrips other than VSL & DMCIL. Therefore, I find that the present proceedings against Noticee no. 4 and 5 are infructuous and there is no merit in issuing further directions against them for their dealings in the scrips other than in the scrip of VSL and DMCIL. Directions: 37. In view of the aforesaid violations by the Noticees, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4) and 11B read with Section 19 of the Securities and Exchange Board of India Act, 1992, hereby restrain the following Noticees 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 period mentioned below, from the date of this order.

During the period of restraint, the existing holding of securities including units of mutual funds, of the Noticees shall remain frozen. S. No. Name of the Noticee PAN Period of restrain and prohibition 1. Mr. Chetan Dogra ABNPD1798C Two Years 2. Chetan Dogra HUF AACHC5554P Two Years 3. Daffodil Tradex Private AACCD5773A Two Years Limited 4. Shraddha Entertainment AAKCS8199P Two Years Private Limited 5. Subah Multimedia Private AAKCS8196C Two Years Limited 6. Tulip Expotrade Private AACCT6697B Two Years Limited

38. The Order shall come into force with the immediate effect. 39. A copy of this order shall be forwarded to the Noticees, all the recognized stock exchange, depositories and registrar and transfer agents for ensuring compliance with the above directions.

-Sd- Date: October 29, 2019 S. K. MOHANTY Place: Mumbai WHOLE TIME MEMBER