Order in the matter of trading by connected entities in respect of Chimming Trading Company Pvt. Limited, Mr. Rajendra Kumar Agarwal, Mr. Ravikant Choudhary and Mr. Shyam Sunder Shah

WTM/PS/11/IVD/ID-4/MAY/2011 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Sections 11, 11(4) and 11 B of the Securities and Exchange Board of India Act, 1992 read with Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

1. Securities and Exchange Board of India (hereinafter referred to as the ‘SEBI’) during routine market surveillance, observed synchronized deals in scrips namely Cals Refineries Limited, Confidence Petroleum India Limited, Bang Overseas Limited, Shree Precoated Steels Limited (presently known as Ajmera Realty & Infra India Limited) and Temptation Foods Limited (hereinafter after collectively referred to as ‘five scrips’). Examination in the five scrips revealed inter-linkages between the entities dealing in the said five scrips in the form of off-market transactions as well as synchronized deals on market, these entities were collectively referred to as the ‘connected clients’. These connected clients were found to have large trading concentration in terms of trading volume on the Bombay Stock Exchange (hereinafter referred to as ‘BSE’) in the said five scrips, a substantial portion of their trading was amongst themselves in synchronized nature which contributed to the increase in the market volume. The preliminary investigation also revealed instances where delivery obligations of one connected client was fulfilled by off-market borrowing of the shares from another connected client, thereafter the borrower bought back the shares from market and returned the same to the lender through off-market transfer.

2. Pursuant to the preliminary investigation, SEBI vide an ad interim ex-parte Order dated June 04, 2009 issued under Sections 11, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’), restrained inter-alia Chimming Trading Company Pvt. Limited, Mr. Rajendra Kumar Agarwal, Mr. Ravikant Choudhary and Mr. Shyam Sunder

Shah from accessing the securities market and further prohibited them from buying, selling or dealing in the securities market, directly or indirectly, till further directions in this regard.

3. The said interim order also provided the entities/ persons to whom directions were issued, an opportunity to file their objections, if any, to the order within 15 days from the date of order. Chimming Trading Company Pvt. Limited, Rajendra Kumar Agarwal and Ravikant Choudhary filed their objections to this. However, Mr. Shyam Sunder Shah failed to submit objections if any, to the interim order of SEBI.

4. The objections were considered by SEBI and an opportunity of personal hearing was granted to Chimming Trading Company Pvt. Limited, Mr. Rajendra Kumar Agarwal and Mr. Ravikant Choudhary. Upon considering the objections and material available on record, SEBI passed the orders confirming earlier order dated June 04, 2009. The relevant dates of the orders passed by SEBI against the entities are detailed below:

S. No. Name of the entity Date of the confirmatory order 1. Chimming Trading Company P. Ltd. March 25, 2010 2. Rajendra Kumar Agarwal December 31, 2009 3. Ravikant Choudhary November 24, 2009 4. Shyam Sunder Shah September 30, 2009

5. Pursuant to this, Mr. Ravikant Choudhary challenged the confirmatory order of SEBI dated November 24, 2009, before the Hon’ble Securities Appellate Tribunal (hereinafter referred to as ‘SAT’). Hon’ble SAT, while not going into the merits of the arguments, directed SEBI to lift the prohibition imposed upon Mr. Ravikant Choudhary vide SEBI’s orders dated June 04, 2009 and November 24, 2009, subject to his depositing an amount of `15 Lacs in an escrow account. Accordingly, Mr. Ravikant Choudhary submitted a fixed deposit receipt drawn on HDFC Bank Limited dated January 19, 2010 with a lien marked in favour of SEBI.

6. Upon completion of the investigation, Chimming Trading Company Pvt. Limited and Mr. Rajendra Kumar Agarwal were found involved in one off-market transaction each in the scrips of Cals Refineries Limited and Bang Overseas Limited respectively. Further, Mr. Ravikant Choudhary, has been found trading in 2,000 shares of Confidence Petroleum India Limited. As regards Mr. Shyam Sunder Shah, I note that he was found involved in only one off-market transaction in the scrip of Bang Overseas Limited. However, on careful scrutiny of the material available on record, there is not enough evidence to suggest that Chimming Trading Company Pvt. Limited, Mr. Rajendra Kumar Agarwal, Mr. Ravikant Choudhary and Mr. Shyam Sunder Shah were involved in manipulation of the five scrips mentioned in the para 1 above.

7. Considering the facts and circumstances of the case and the material available on record, I am inclined to give Chimming Trading Company Pvt. Limited, Mr. Rajendra Kumar Agarwal, Mr. Ravikant Choudhary and Mr. Shyam Sunder Shah the benefit of doubt in respect of the manipulation in the said five scrips. In view of the foregoing, I do not find it appropriate to continue with the directions passed by SEBI, vide order dated June 04, 2009, which was subsequently confirmed, vide respective orders as against Chimming Trading Company Pvt. Limited, Mr. Rajendra Kumar Agarwal, Mr. Ravikant Choudhary and Mr. Shyam Sunder Shah.

8. Accordingly, I, in exercise of the powers conferred upon me under Section 19 of the SEBI Act read with Sections 11, 11B and 11(4) thereof, do hereby revoke the interim directions issued vide ad interim ex-parte order dated June 4, 2009 and confirmatory orders dated March 25, 2010, December 31, 2009, November 24, 2009 and September 30, 2009 October 05, 2005, against Chimming Trading Company Pvt. Limited [PAN: AADCC 1382M], Mr. Rajendra Kumar Agarwal [PAN: ACKPA 8794M], Mr. Ravikant Choudhary [PAN: AAEPR 7102C] and Mr. Shyam Sunder Shah [PAN: BGCPS 4475G] with immediate effect.

9. In the light of the above, the lien on the fixed deposit submitted by Mr. Ravikant Choudhary marked in favor of SEBI be revoked/ cancelled.

DATE : MAY 16, 2011 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA