Order in the matter of trading by connected entitites in respect of Samta Jain

WTM/PS/ 07/IVD/ID-4/ APRIL/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER In the matter of Temptation Foods Limited. In respect of Samta Jain (PAN: ACOPJ3258P) Date of hearing: December 23, 2011 Appearances: For Noticee: Mr. Vinay Chauhan, Advocate For SEBI: Mr. A.S. Mithwani, Deputy General Manager Mr. Siddhesh Lotlikar, Assistant General Manager Mr. Pradeep Kumar, Assistant Legal Adviser Mr. Parag Sinha, Presenting Officer 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 ‘SEBI’) during routine market surveillance, observed synchronized deals in the scrips of 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 referred to as ‘Temptation’) (hereinafter collectively referred to as ‘five scrips’). On examination of the trade data relating to the five scrips, inter-linkages between certain entities dealing in the five scrips were noticed in the form of off-market transactions as well as synchronized deals on the market. These entities having inter-linkages are collectively referred to as the ‘connected clients’. The name of these connected clients is placed at Annexure 1. The connected clients were found to be having large trading concentration in the five scrips and a substantial portion of their trading amongst themselves in synchronized nature was found to have contributed to the increase in the market volume. The preliminary investigation also revealed instances where delivery obligations of one connected client were fulfilled by the off-market borrowing of the shares from another connected client, and thereafter the borrower was seen to have bought back the shares from the market and returned the same to the lender through off-market transfer.

2. Pursuant to the preliminary investigation, SEBI restrained inter-alia Samta Jain (hereinafter referred to as ‘noticee’) from accessing the securities market and further prohibited her from buying, selling or dealing in the securities market, directly or indirectly, till further directions, 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’).

3. The said interim order also gave the noticee an opportunity to file objections, if any, to the order within fifteen days from the date of order. Samta Jain filed her objections to the interim order vide letter dated June 18, 2009. Subsequently, an opportunity of personal hearing was granted to the noticee on July 21, 2009. After considering the objections and material available on record, SEBI passed an order dated January 19, 2010 confirming its earlier order dated June 04, 2009.

4. SEBI had conducted the investigation relating to trading in the scrip of Temptation for the period August 1, 2007 to February 28, 2009 (hereinafter referred to as the ‘investigation period’) on the Bombay Stock Exchange Ltd. (hereinafter referred to as ‘BSE’). Thereafter, upon completion of the investigation, SEBI issued a notice dated August 1, 2011 (hereinafter referred to as ‘SCN’) to Samta Jain under Sections 11, 11(4) and 11B of the SEBI Act read with Regulation 11 of SEBI (Prohibition of Fraudulent Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’) with respect to its trading in the scrip of Temptation.

5. The SCN alleged that the noticee had executed synchronized transactions with connected clients and reversal of trades, which resulted in the creation of artificial volumes in the scrips of Temptation. It was also alleged that the noticee manipulated the price of the scrip of Temptation. The acts of the noticee were thus alleged to be in violation of Regulation 3(a), (b), (c), (d) and 4(2) (a), (b), (e) and (g) of the PFUTP

Regulations read with Section 12A (a), (b) and (c) of the SEBI Act. Accordingly, noticee was called upon to show cause as to why directions in terms of Sections 11, 11(4) and 11B of the SEBI Act, including debarring her from accessing the securities market and prohibiting her from buying, selling or otherwise dealing in securities for an appropriate period of time, should not be issued against her.

6. The noticee, vide letter dated August 23, 2011 replied to the SCN and sought an opportunity for personal hearing. Accordingly, an opportunity for personal hearing was granted to the noticee on December 23, 2011, when Mr. Vinay Chauhan, the authorized representative of the noticee, appeared before me and made submissions.

7. The submissions of the noticee in brief are: a. The noticee is not part of the connected clients. Transactions executed by the noticee were independent of the transactions carried out by the other entities named in the SCN. The noticee’s trading had no connection with the noticee’s relationship with Sudhir Jain, who is her brother. b. The transactions were delivery based. c. The noticee’s trades constitute a meager 0.071% of the total purchases and 1.5% of the total sale in the scrip during the investigation period. d. The noticee has not executed any synchronized trades/ reversal of trades in the scrip of Temptation. e. The noticee did not carry out any off market transfers. f. The noticee had not contributed to the price increase.

8. I have carefully considered the ad interim order passed by SEBI dated June 04, 2009, the objections filed by the noticees, the confirmatory order of SEBI dated January 19, 2010, the SCN, reply to the SCN dated August 23, 2011, and all the material available on record.

9. I note that from the SCN and annexures thereto, that Samta Jain is the sister of Sudhir Jain and Surabhi Jain is the neice of Sudhir Jain. Sudhir Jain and Rashmi Jain (both husband and wife) are the directors of Flex Trade P. Ltd. (‘Flex’) and Beejay

Investment & Financial Consultants P. Ltd. (‘Beejay’). Further, Adish Jain and Peeyush Jain, the directors of Eversight Tradecom P. Ltd. (‘Eversight) are relatives of Sudhir Jain. Vicky Kothari, director of Stupendors Traders P. Ltd. (‘Stupendors’) is the brother-in-law of Sudhir Jain. Thus, Sudhir Jain, Rashmi Jain, Beejay, Flex, Samta Jain, Surabhi Jain, Eversight and Stupendors are related to each other. Venture Business Advisors P. Ltd. (‘Venture’), a promoter of Temptation is a shareholder of Stupendors. I also note that the SCN states that Samta Jain is also connected with Maruti Securities Ltd. (‘Maruti’) by virtue of her being the non-promoter group preferential allottee of Maruti. However, in her reply, the noticee has clarified that though she made an application to subscribe to convertible warrants, she decided to not go ahead with the same and no warrants were issued to her by Maruti.

10. Further, I note that Samta Jain bought 165,381 shares and sold 3,60,457 shares of Temptation during the investigation period. On July 11, 2008 Samta Jain bought 25,000 shares out of which one trade for 15,000 shares was a synchronized transaction. The noticee placed a buy order of 15,000 shares of Temptation at 15:19:15 hrs on July 11, 2008 which matched in a time difference of 3 seconds with the sell trade of the connected client Beejay. Thereafter on July 14, 2008 Samta Jain reversed the trades by selling 24,000 shares back to Beejay and 1,000 shares to Sudhir Jain. Further, on July 29, 2008, Sudhir Jain placed a buy order for 15,000 shares at 13:53:06 which matched in a time difference of 9 seconds with the sell trade of the noticee. Moreover, on August 19, 2008, Samta Jain sold 20,000 shares to the connected client Eversight. The illustration is as under:- Trade Trad Trad Order Order Order Buyer Buy Sell Seller Traded CP CP CP Time Qty Rat Date e e Time Qty Rate Name Member Member Name Qty Order Order Order Diff Diff e No. Rate Name Name Time Qty Rate Diff 11/07/0 108 300 15:19:1 15000 300.0 Samta Microsec Religare Beeja 15000 15:19:18 15000 300 0:00:03 0 0 8 5 0 Jain y 29/07/0 40 299 13:53:0 15000 299 Sudhir Sharekhan Microsec Samta 15000 13:53:15 15000 299 0:00:09 0 0 8 6 Jain Jain

11. During the period August 1, 2007 to October 17, 2007 the price of the scrip of Temptation increased from Rs.95.95 on August 1, 2007 to Rs.257 on October 17,

2007 i.e. a price rise of 167.85% in 54 trading session. I note that the noticee has submitted that only in two trades the difference in price between the last traded price (LTP) and the order placed by the noticee was more than one rupee, and has prayed that hence it cannot be held that she contributed to the increase in the price of the scrip. However, the trades of the noticee and her connected/ related entities Beejay and Sudhir Jain were significant. When manipulators operate in large groups, the individual contributions could be small, but the group as a whole has a larger impact on the market. In this case too, the noticee is apparently a part of a group of 26 persons given in Annexure 1.

12. I note that the trades of the noticee have contributed to the creation of artificial volume and also impacted the price of the scrip of Temptation. However, I note that the noticee has been restrained from accessing the securities market and prohibited from buying, selling or dealing in the securities market since June 4, 2009. The noticee has thus undergone debarment from securities market for more than two (2) years and nine (9) months. I find that the period of debarment already undergone by the noticee is proportionate to the violations committed by the noticee. In view of the same, I order as under:

13. In view of the foregoing, 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 04, 2009 and confirmatory order dated January 19, 2010 against Samta Jain with immediate effect and also dispose of the SCN without any further direction.

DATE : APRIL 9, 2012 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA