Order in the matter SIC Stocks & Services Private Limited[SAT Appeal No.:127/2017]

WTM/GM /EFD-DRA-III/ 07 /APR/2017 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under regulations 28(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 - In the matter of Gangotri Textiles Limited In respect of SIC Stocks & Services Pvt. Limited (PAN: AAHCS8176P) 1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") conducted investigation in respect of buying, selling and dealing in the shares of Gangotri Textiles limited (hereafter referred to as "Gangotri"/"Company"), during the period from April 07, 2006 to May 31, 2006 (hereinafter referred to as "Investigation Period") at NSE and BSE. This order is with respect to SIC Stocks & Services Pvt. Limited (hereinafter referred to as "SIC") which during the Investigation Period was found to have executed trades on behalf of its client Purshottam Khandelwal ("Purshottam") in the scrip of Gangotri, in BSE. Therefore any reference in this Order to trades by Purshottam may be read as trades executed by Purshottam through SIC.

2. Prior to the investigation period, the scrip of Gangotri was not listed on NSE and was only traded on BSE. During the period from January 2006 to April 6, 2006, the highest price was `52.25 (intra-day high on February 6, 2006) and lowest price was `40.55 (intra-day low on March 28, 2006). The average daily traded quantity during this period was 77,036 shares. During the Investigation Period i.e. between April 7, 2006 and May 31, 2006, the scrip of Gangotri was traded on both NSE and BSE. Details of the price volume data at BSE and NSE during the Investigation Period are as follows:- TABLE 1 Exchange Open High Low Close Average Daily Volume BSE 53.25 70.95 43.00 44.35 241675 07.04.06 05.05.06 19.04.06 31.05.06 NSE 56.00 71.05 41.25 45.40 184236 07.04.06 05.05.06 19.04.06 31.05.06

Table I reveals that during the investigation period, the price of the scrip went up by 33.24% on BSE and 26.88% on NSE while the Sensex recorded a decrease of 12.21% (from 11845.13 on April 07, 2006 to 10398.61 on May 31, 2006) and Nifty recorded a decrease of 12.89% (from 3525.6 on April 07, 2006 to 3071.05 on May 31,2006).

3. After the aforesaid investigation period, between June 2006 to December 2006 it was noted that the price of scrip opened at `45.95/45.2 (NSE/BSE) on June 1, 2006 and closed at `27.35 / 26.7 (NSE/BSE) on December 29, 2006. The highest price during this period was `46.25 in (intra-day high on June 2, 2006) in NSE and `46.65 (intra-day high on June 5, 2006) in BSE. The lowest price during this period was `24 (intra-day low on December 13, 2006) in both NSE and BSE. The average daily traded quantity during this period was for 34,080/43,717 (NSE/BSE) shares.

4. It was observed that, during the investigation period, certain entities allegedly traded as a group (hereinafter referred to as the "Vishvas Group") through their respective stock brokers or otherwise and had allegedly executed synchronized trades, circular trades and reversal trades amongst themselves and traded in significant variation to the Last Traded Price (LTP) in the shares of Gangotri. For the purpose of this order, synchronised trades are understood to be those trades where- (i) time difference, between buy order and sell order, is less than 60 seconds. (ii) there is no difference between price and quantity of the buy order and sell order.

5. The list of the Vishvas Group entities and their stock brokers, if any, are stated below:

TABLE 2 Sr. No. Name of the entity/client Name of the stock broker 1. Ishita Finstock limited Vishvas Securities limited (VSL) ("Ishita") 2. Sunita Gupta ("Sunita") Shri Parasram Holdings Private Limited (Parasram) 3. Purshottam Khandelwal SIC Stocks and Services private Limited ("Purshottam") ("SIC") 4. Praveen Poddar TCP Stock Brokers Limited ("TCP") ("Praveen") 5. Vishvas Securities Ltd. Proprietary trades ("VSL") 6. ISF Securities Ltd ("ISF") Sam Global Securities Ltd. at BSE and proprietary trades at NSE ("Sam Global") 7. Quantum Global Securities Proprietary trades and Leasing Company Limited ("Quantum")

Sr. No. Name of the entity/client Name of the stock broker 8. Anupama Communications NIL trades Private limited ("Anupama") 9. Avisha Credit Capital Ltd. Shriram Insight Share Brokers Ltd. ("Avisha") ("Shriram") 10. Cosmo Corporate Services Integrated Master Securities Pvt. Ltd. Limited ("Cosmo") ("Integrated") 11. Master Finlease limited ("Master") 12. Mefcom Securities Limited Mefcom Securities Limited ("Mefcom") ("Mefcom") 13. Vishvas Projects Limited ("VPL")

6. To enquire into the alleged violations by the Vishvas Group with respect to their trades in the Gangotri scrip, including the role of SIC therein, Shri Jayanta Jash was appointed as the Designated Authority ("DA") vide order dated November 8, 2013 under regulation 24 of SEBI (Intermediaries) Regulations, 2008 ("Intermediaries Regulations"). The DA, issued show cause notice dated January 06, 2014 to SIC. After completion of the proceedings, the DA submitted a Report dated November 25, 2014 in respect of SIC (hereinafter referred to as "the DA Report"), wherein it was found that SIC had violated the provisions of sections 12A(a), (b) and (c) of the SEBI Act read with regulations 3, 4(1), 4(2)(a), (e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 ("PFUTP Regulations") and regulation 7 read with clauses A and B(2) of Schedule II (Code of Conduct for Stock Brokers) of the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 ("Stock Brokers Regulations"). Accordingly, the DA in his Report recommended suspension of certificate of registration of SIC for a period of six months.

7. After considering the DA Report, the Designated Member (DM) caused to issue a show cause notice (SCN) dated September 30, 2015, under regulation 28(1) of the Intermediaries Regulations calling upon SIC to show cause as to why action as recommended in the DA Report or as otherwise deemed fit should not be taken against it.

8. SIC filed its preliminary reply vide letter dated December 14, 2015 and also sought inspection of documents. An opportunity of personal hearing was granted on June 2, 2016 and inspection of documents was provided on June 6, 2016. A further opportunity of personal hearing was granted on September 15, 2016 which was rescheduled to October 6, 2016. SIC sought adjournment of the said hearing. The then Whole Time Member who had granted the opportunity of personal hearing to SIC had subsequently demitted office. Consequently, a fresh opportunity of personal hearing to SIC was granted on December 15, 2016, wherein Captain (Retd.) Ashok Naik, Advocate and Mr. Brijpal, Compliance Officer-SIC appeared on behalf of SIC and made submissions, pursuant to which written submissions dated December 19, 2016 were also filed with SEBI. The oral submissions were generally a reiteration of the written replies to the SCNs issued by the DA and the WTM.

9. Summary of facts and the related observations made by the DA in his Report in relation to the trades by SIC is discussed in the following sub-paragraphs. 9.1 Connected Entities: The DA relied on the Investigation report to note that the members of the Vishvas Group were connected to each other through various means. Specifically with respect to SIC, the DA observed that SIC - (i) was connected to VSL on the basis of inter-se off-market transfer of shares; (ii) was connected to VPL on the basis of the 10.7% shareholding it held in VPL as on September 20, 2006; and (iii) was connected to Avisha on the basis of transfer of funds. Further the DA noted that Purshottam (SIC's client) was connected to Anupama on the basis of inter-se off-market transfer of shares and was connected to Praveen and Sunita on the basis of inter-se synchronised trading.

9.2 Quantum of shares traded by the Vishvas Group members at BSE and NSE during Investigation Period are as under: TABLE 3 Sr. No. Members of Traded quantity (During Investigation Period) Vishvas Gtoup BSE NSE Buy Sell Buy Sell 1. Master 38000 18386 20500 111400 2. Purshottam 2927835 2882486 0 0 3. Cosmo 445643 320630 401520 471184

4. ISF 389748 338795 453396 368574 5. Quantum 0 0 302095 286835 6. Ishita 0 0 195380 1569204 3 7. Praveen 460990 460990 0 0 8. Sunita 342246 342246 0 0 9. Mefcom 443942 348370 610646 667122 10. Avisha 50000 0 0 0 11. VSL 0 0 134460 118661 12. VPL 100000 0 0 0 Total 5198404 4711903 3876420 3592980 From the above, it is observed that within the Vishvas Group, SIC, on behalf of Purshottam contributed to 56.32 % and 61.17 % of shares bought and sold on BSE, respectively.

9.3 Trades on BSE and manipulation of volumes: During the investigation period, seven members of the Vishvas Group including Purshottam had a gross buy position with total contribution of 57.1% (51,10,404 shares) of the total traded quantity and six members of the Vishvas Group, including Purshottam had a gross sell position with a total contribution of 52.5% (46,93,517 shares) of the total traded quantity. Purshottam had bought 3,89,748 shares and sold 3,38,795 shares in the Gangotri scrip. Out of total 37 trading days during the investigation period, on 29 days, Purshottam had bought and sold the shares of Gangotri. It is observed that on 4 days, the net position of Pursuhottam was zero.

9.3.1 During the investigation period, 24,154 trades were executed for a total traded quantity of 89,41,975 shares at BSE. Out of these, 430 trades for 15,60,914 shares (17.45% of the total traded quantity) were synchronized trades i.e. the difference between buy order time and sell order time was less than 60 seconds and there was no difference between the buy order rate and the sell order rate and between the buy order quantity and the sell order quantity. Out of a total of 420 synchronized trades (buy & sell) by Vishvas Group for 24,52,618 shares, Purshottam indulged in 133 synchronized trades for 7,89,063 shares. Purshottam bought a total of 29,32,135 shares during the investigation period out of which 1,52,555 shares were synchronised with other members of the Vishvas Group. Purshottam sold a total of 28,87,586 shares during the investigation period, out of which 6,36,508 shares were synchronized with other members of the Vishvas Group. The DA report cited one such instance of synchronized trades and reversal of trades by Purshottam with other members of Vishvas Group on April 28, 2006. On the said date, a sell order was placed by Purshottam at 10:32:57 at the rate of `58.35 for 10,000 shares and a buy order was placed by Mefcom at 10:33:11 at the rate of `58.35 for 10,000 shares. The orders resulted in sale of 10, 000 shares from Purshottam to Mefcom at the rate of `58.35 at 10:33:11. The time difference between orders was 14 seconds. Subsequently, a sale order was placed by Mefcom at 10:42:30 at the rate of `58.35 for 10000 shares and Purshottam placed a buy order at 10:42:36 at the rate of `58.35 for 10,000 shares. The time difference between the orders was 6 seconds. The orders resulted in a reversal trade whereby Purshottam bought 10,000 shares from Mefcom at the rate of `58.35 at 10:42:37. The reversal trades took place within approximately 10 minutes of the first trade. 9.3.2 The DA observed that during the investigation period, circular trading among Vishvas Group was observed from April 21, 2006 till May 31, 2006. Two instances of circular trading observed on April 21 and April 27 of 2006 among the group involving Purshottam was depicted in the DA Report as under:

Circular Pattern Observed on April 21, 2006:

Circular Pattern Observed on April 27, 2006 :

Nine members of the Vishvas Group including Purshottam were involved in 2138 instances of circular trading in 29 trading days out of 37 trading days during the investigation period and created artificial volume of 26,90,184 shares (30.08% of total traded quantity) by buying and selling among themselves. Quantum of shares forming part of the aforesaid circular trades are as under:-

TABLE 4 Circular Trade Sellers Mefco Purshotta Pravee Grand Buyers Cosmo Sunita Master m m ISF n Total VPL 10000 8000 00 00 54509 6000 19597 98106 Avisha 00 00 00 00 50000 00 00 50000 Cosmo 5672 43875 00 59535 259186 7000 49152 424420 Sunita 38031 00 00 43901 82808 94132 29928 288800 Master 00 00 00 10000 13399 00 4000 27399 Mefcom 9500 36059 00 00 180381 45579 52274 323793 12469 Purshottam 72446 150814 8386 108126 65025 4 187160 716651 ISF 35602 19965 10000 21041 215666 00 38990 341264 Praveen 61559 29674 00 32044 279473 17001 00 419751 Grand 23281 29440 269018 Total 0 288387 18386 274647 1200447 6 381101 4

It was also observed that Purshottam had executed 711 self trades for 65025 shares during the Investigation Period.

9.4 Price Manipulation: On BSE, nine members of Vishvas Group namely, Cosmo, Master, Purshottam, Mefcom, Praveen, Sunita, Avisha, VPL and ISF had cumulatively contributed ` 718.05 to positive LTP and `468.65 to Negative LTP. Purshottam was the highest and significant contributor to both positive LTP and negative LTP. Purshottam had contributed `673.50 to total cumulative positive LTP and `431.70 to total cumulative negative LTP.

9.5 Violation of Stock Brokers Regulations In KYC details of Noticee's client Purshottam (Dated 31.03.2006), bank account of Purshottam was shown as Punjab National Bank (PNB), Tonk Road Branch with account No. 4064000100084502. But the ledger account of Purshottam had not revealed any transaction from the said bank account. Upon enquiry, PNB stated that the aforesaid account was opened with Bank only on July 13, 2006. Thus, it was observed that the said bank account was not operative on March 31, 2006 i.e. the date of opening of Client account (Purshottam) by the Noticee.

Further, it was alleged in the SCN that SIC had failed to deliver the contract notes to its client Purshottam within the stipulated time. In its reply to the SCN, SIC submitted that Purshottam had opted for consolidated statements of contracts notes for a period and accordingly the same were forwarded to Purshottam. SIC submitted a consolidated copy of the acknowledgement of delivery of contract notes in its reply. The DA however found that the acknowledgement of delivery only contained the signature of Purshottam and not the date on which the said contract notes were delivered. Also no evidence had been submitted indicating the purported request made by Purshottam for consolidated statements of contract notes.

10. In addition to the observations in the DA Report as discussed above, I have examined some orders placed by Purshottam and trades executed by it in the Gangotri scrip, from the relevant Order log and Trade log (copies of which had been provided to SIC vide the SCN dated January 06, 2014 issued by the DA). The details of this additional examination are noted below:

10.1 Synchronised Trades: It is seen from the statements of transactions for the period between 21st April, 2006 and 30th May, 2006 that on certain days, repeated buy/sell orders were placed with negligible time difference of each other and the trades have also been synchronised with respect to quantity and price.

A table indicating some of such orders/trades placed on BSE, as extracted from the order logs/trade logs, specifically in relation to Purushottam (indicated as PTM) is stated below:

TABLE 5

Trad Sell Buy Sell Order Buy Sell Buy Sell Trade Trade Trad e Clien Order Order Time Ordr Ordr Order Order Date Time e Qty Price Buy Client t Time Time Diff price price qty qty Cos 25/04 15:26:43 2035 52.35 PTM mo 15:26:43 15:26:35 00:00:08 52.35 52.35 2500 2500 25/04 12:10:31 4673 54.75 Sunita PTM 12:10:30 12:10:29 00:00:01 54.75 54.75 5000 5000 1312 25/04 15:04:23 4 53.65 Cosmo PTM 15:04:19 15:04:22 00:00:04 53.65 53.65 15000 15000 27/04 10:20:09 760 60.5 Mefcom PTM 10:20:05 10:20:09 00:00:04 60.5 60.5 5000 5000 2290 27/04 10:19:11 0 60.55 Praveen PTM 10:19:04 10:19:10 00:00:06 60.55 60.55 25000 25000 1000 Mefc 28/04 10:42:37 0 58.35 PTM om 10:42:36 10:42:30 00:00:06 58.35 58.35 10000 10000 28/04 10:48:18 9998 58.45 PTM ISF 10:48:17 10:47:51 00:00:26 58.45 58.45 10000 10000 28/04 10:48:23 4998 58.45 PTM ISF 10:48:23 10:47:59 00:00:24 58.45 58.45 5000 5000 1000 28/04 10:33:11 0 58.35 Mefcom PTM 10:33:11 10:32:57 00:00:14 58.35 58.35 10000 10000 2500 28/04 10:30:38 0 58.4 Cosmo PTM 10:30:34 10:30:37 00:00:03 58.4 58.4 25000 25000 1000 28/04 10:31:08 0 58.25 ISF PTM 10:30:57 10:31:07 00:00:10 58.25 58.25 10000 10000 28/04 11:10:16 1985 58.7 Praveen PTM 11:10:15 11:09:16 00:00:59 58.7 58.7 2000 2000 28/04 11:10:46 3000 58.85 Praveen PTM 11:10:46 11:10:40 00:00:06 58.85 58.85 3000 3000 Mefc 29/04 11:04:39 3010 58.95 PTM om 11:04:38 11:04:29 00:00:09 58.95 58.95 5000 5000 1000 29/04 11:06:15 0 59.4 Mefcom PTM 11:06:14 11:06:07 00:00:07 59.4 59.4 10000 10000 1000 29/04 11:10:02 0 59.8 Cosmo PTM 11:10:02 11:09:50 00:00:12 59.8 59.8 10000 10000 29/04 11:14:07 4500 59.8 Sunita PTM 11:14:06 11:13:58 00:00:08 59.8 59.8 5000 5000 29/04 11:26:29 5000 59.95 ISF PTM 11:26:28 11:26:22 00:00:06 59.95 59.95 5000 5000 02/05 10:20:54 9740 63.25 Mefcom PTM 10:20:45 10:20:54 00:00:08 63.25 63.25 10000 10000

Trad Sell Buy Sell Order Buy Sell Buy Sell Trade Trade Trad e Clien Order Order Time Ordr Ordr Order Order Date Time e Qty Price Buy Client t Time Time Diff price price qty qty 02/05 10:22:11 719 63.3 Mefcom PTM 10:22:05 10:22:11 00:00:06 63.3 63.3 10000 10000 02/05 10:22:18 9281 63.3 Mefcom PTM 10:22:05 10:22:18 00:00:13 63.3 63.3 10000 10000 02/05 10:04:59 9100 62.2 Praveen PTM 10:04:58 10:04:29 00:00:29 62.2 62.2 10000 10000 1000 02/05 10:17:10 0 62.75 ISF PTM 10:17:09 10:17:08 00:00:02 62.75 62.75 10000 10000 02/05 10:17:45 9729 62.85 Praveen PTM 10:17:43 10:17:44 00:00:02 62.85 62.85 10000 10000 02/05 10:18:56 9764 62.95 Praveen PTM 10:18:53 10:18:56 00:00:02 62.95 62.95 10000 10000 02/05 10:22:11 9281 63.3 ISF PTM 10:22:00 10:22:11 00:00:11 63.3 63.3 10000 10000 04/05 10:18:28 8802 67.35 Mefcom PTM 10:18:09 10:18:17 00:00:08 67.35 67.35 10000 10000 04/05 10:15:24 8500 67.45 ISF PTM 10:15:16 10:15:10 00:00:06 67.45 67.45 10000 10000 04/05 10:16:09 1500 67.45 Praveen PTM 10:16:02 10:15:10 00:00:52 67.45 67.45 10000 10000 04/05 10:16:09 7600 67.45 Praveen PTM 10:16:02 10:15:49 00:00:12 67.45 67.45 10000 10000 1000 04/05 10:19:15 0 67.3 Sunita PTM 10:18:58 10:19:11 00:00:13 67.3 67.3 10000 10000 2490 04/05 11:32:50 0 69.65 Praveen PTM 11:32:42 11:32:49 00:00:07 69.65 69.65 25000 25000 2500 04/05 11:36:14 0 69.85 Sunita PTM 11:36:09 11:36:13 00:00:05 69.85 69.85 25000 25000 1000 08/05 10:09:36 0 64.95 Mefcom PTM 10:09:35 10:09:26 00:00:09 64.95 64.95 10000 10000 08/05 10:10:36 5000 64.75 Praveen PTM 10:10:35 10:10:33 00:00:02 64.75 64.75 5000 5000 08/05 10:10:56 2000 64.7 Praveen PTM 10:10:55 10:10:51 00:00:04 64.7 64.7 2000 2000 Prave 09/05 10:37:40 9952 62.85 PTM en 10:37:39 10:37:29 00:00:10 62.85 62.85 10000 10000 09/05 11:59:40 9988 61.75 Mefcom PTM 11:59:37 11:59:39 00:00:02 61.75 61.75 10000 10000 09/05 10:29:26 4999 62.3 ISF PTM 10:29:25 10:29:14 00:00:12 62.3 62.3 5000 5000 09/05 11:06:13 4894 64.2 Praveen PTM 11:06:12 11:06:12 00:00:00 64.2 64.2 10000 10000 09/05 14:49:21 9000 61.85 Vishvas PTM 14:49:17 14:49:21 00:00:04 61.85 61.85 9000 9000 Sunit 10/05 9:58:00 5000 61.75 PTM a 09:57:59 09:57:49 00:00:10 61.75 61.75 5000 5000 10/05 10:07:45 4950 61.4 PTM ISF 10:07:44 10:07:38 00:00:06 61.4 61.4 5000 5000 Prave 10/05 10:09:04 999 61.3 PTM en 10:09:03 10:09:01 00:00:02 61.3 61.3 1000 1000 Sunit 10/05 10:49:01 4700 62.45 PTM a 10:49:00 10:48:28 00:00:32 62.45 62.45 5000 5000 10/05 10:49:42 4000 62.4 ISF PTM 10:49:37 10:49:42 00:00:05 62.4 62.4 4000 4000 10/05 11:09:12 5000 61.75 ISF PTM 11:09:11 11:08:59 00:00:12 61.75 61.75 5000 5000 10/05 11:09:33 3000 61.7 ISF PTM 11:09:27 11:09:32 00:00:05 61.7 61.7 3000 3000 10/05 11:09:48 4000 61.75 ISF PTM 11:09:47 11:09:40 00:00:07 61.75 61.75 4000 4000 10/05 11:40:20 4005 62.25 Cosmo PTM 11:40:17 11:40:20 00:00:03 62.25 62.25 5000 5000 1000 10/05 14:43:49 0 60.65 Praveen PTM 14:43:48 14:43:46 00:00:01 60.65 60.65 10000 10000 10/05 14:44:28 500 60.7 Praveen PTM 14:44:27 14:44:20 00:00:07 60.7 60.7 500 500 10/05 14:55:56 4995 61.2 Praveen PTM 14:55:56 14:55:51 00:00:04 61.2 61.2 5000 5000 10/05 14:56:16 4810 61.4 Praveen PTM 14:56:15 14:56:12 00:00:04 61.4 61.4 5000 5000 Prave 11/05 9:58:22 3999 62.4 PTM en 09:58:21 09:58:09 00:00:12 62.4 62.4 4000 4000 11/05 13:35:22 9531 61.15 ISF PTM 13:35:21 13:35:19 00:00:02 61.15 61.15 10000 10000

Trad Sell Buy Sell Order Buy Sell Buy Sell Trade Trade Trad e Clien Order Order Time Ordr Ordr Order Order Date Time e Qty Price Buy Client t Time Time Diff price price qty qty 11/05 13:35:51 2031 61.15 ISF PTM 13:35:50 13:35:40 00:00:10 61.15 61.15 2500 2500 11/05 15:01:11 9979 61.05 Vishvas PTM 15:01:08 15:01:10 00:00:02 61.05 61.05 10000 10000 11/05 15:01:29 4979 61.05 Vishvas PTM 15:01:27 15:01:28 00:00:01 61.05 61.05 5000 5000 Prave 12/05 9:58:19 9975 61.75 PTM en 09:58:18 09:57:59 00:00:19 61.75 61.75 10000 10000 12/05 15:19:15 4907 59.85 PTM ISF 15:19:14 15:19:10 00:00:04 59.85 59.85 5000 5000 Cos 12/05 15:29:10 2500 59.45 PTM mo 15:29:09 15:29:00 00:00:09 59.45 59.45 2500 2500 12/05 10:28:59 8851 61.45 Mefcom PTM 10:28:58 10:28:57 00:00:01 61.45 61.45 10000 10000 12/05 11:09:07 9914 61.3 Praveen PTM 11:09:01 11:09:06 00:00:05 61.3 61.3 10000 10000 12/05 11:12:25 8624 61.15 Praveen PTM 11:12:00 11:12:24 00:00:24 61.15 61.15 10000 10000 2500 12/05 15:02:32 0 60.75 Cosmo PTM 15:02:31 15:02:26 00:00:05 60.75 60.75 25000 25000 12/05 15:03:21 5000 60.8 Cosmo PTM 15:03:21 15:03:19 00:00:01 60.8 60.8 5000 5000 12/05 15:10:09 9722 60.4 ISF PTM 15:10:03 15:10:08 00:00:05 60.4 60.4 10000 10000 Cos 15/05 11:21:00 9653 62.35 PTM mo 11:20:59 11:20:50 00:00:09 62.35 62.35 10000 10000 Mefc 15/05 11:27:39 5000 62.55 PTM om 11:27:39 11:27:32 00:00:07 62.55 62.55 5000 5000 15/05 10:52:42 2500 61.2 Mefcom PTM 10:52:41 10:52:39 00:00:02 61.2 61.2 2500 2500 15/05 10:52:54 2500 61.35 Mefcom PTM 10:52:53 10:52:51 00:00:02 61.35 61.35 2500 2500 15/05 10:16:54 9002 60.85 Cosmo PTM 10:16:52 10:16:53 00:00:01 60.85 60.85 10000 10000 15/05 11:16:00 4799 62.2 Praveen PTM 11:15:59 11:15:42 00:00:18 62.2 62.2 5000 5000 16/05 11:20:43 3500 62.35 Mefcom PTM 11:20:30 11:20:43 00:00:13 62.35 62.35 6000 6000 16/05 10:42:21 5000 62.75 Praveen PTM 10:42:20 10:42:16 00:00:05 62.75 62.75 5000 5000 16/05 10:42:31 4900 62.75 Praveen PTM 10:42:30 10:42:27 00:00:03 62.75 62.75 5000 5000 16/05 10:42:46 4000 62.75 Praveen PTM 10:42:45 10:42:39 00:00:05 62.75 62.75 5000 5000 16/05 10:44:01 5000 62.65 Praveen PTM 10:44:00 10:43:59 00:00:01 62.65 62.65 5000 5000 16/05 10:56:42 5655 63.2 Praveen PTM 10:56:40 10:56:41 00:00:01 63.2 63.2 6000 6000 17/05 10:10:41 4968 60.9 PTM ISF 10:10:40 10:10:28 00:00:12 60.9 60.9 5000 5000 17/05 14:19:15 4999 58.4 Mefcom PTM 14:19:06 14:19:14 00:00:08 58.4 58.4 5000 5000 17/05 11:35:36 3890 57.8 Cosmo PTM 11:35:35 11:34:43 00:00:52 57.85 57.85 5000 5000 18/05 10:27:32 1985 55.35 Mefcom PTM 10:27:26 10:27:32 00:00:06 55.35 55.35 2000 2000 18/05 10:29:39 1999 55.35 Mefcom PTM 10:29:33 10:29:38 00:00:04 55.35 55.35 2000 2000 18/05 10:31:04 2000 55.15 Mefcom PTM 10:31:02 10:31:03 00:00:01 55.15 55.15 2000 2000 18/05 10:50:56 1999 55.15 Mefcom PTM 10:50:51 10:50:55 00:00:04 55.15 55.15 2000 2000 18/05 10:06:59 200 55.7 Sunita PTM 10:06:53 10:06:58 00:00:05 55.7 55.7 2000 2000 18/05 10:14:36 4905 55.45 ISF PTM 10:14:32 10:14:35 00:00:04 55.45 55.45 5000 5000 18/05 10:15:12 4999 55.45 ISF PTM 10:15:11 10:15:09 00:00:02 55.45 55.45 5000 5000 4999 Avisha 18/05 15:24:55 9 55.15 Credit PTM 15:24:48 15:24:54 00:00:05 55.15 55.15 50000 50000 19/05 9:56:45 1 57.85 PTM PTM 09:56:32 09:56:44 00:00:13 57.85 57.85 1 1 Mefc 19/05 10:13:43 1000 55.65 PTM om 10:13:42 10:13:31 00:00:11 55.65 55.65 1000 1000 19/05 15:09:12 4999 55.05 PTM ISF 15:09:12 15:09:04 00:00:07 55.05 55.05 5000 5000 19/05 15:10:20 3000 55.1 PTM ISF 15:10:19 15:10:07 00:00:12 55.1 55.1 3000 3000 19/05 11:51:19 5000 55.55 Mefcom PTM 11:51:19 11:51:07 00:00:12 55.55 55.55 5000 5000

Trad Sell Buy Sell Order Buy Sell Buy Sell Trade Trade Trad e Clien Order Order Time Ordr Ordr Order Order Date Time e Qty Price Buy Client t Time Time Diff price price qty qty 19/05 9:56:45 1 57.85 PTM PTM 09:56:32 09:56:44 00:00:13 57.85 57.85 1 1 19/05 10:59:03 5000 55.4 ISF PTM 10:59:02 10:58:52 00:00:10 55.4 55.4 5000 5000 22/05 10:21:14 5000 55.1 Mefcom PTM 10:21:13 10:21:11 00:00:02 55.1 55.1 5000 5000 22/05 10:04:08 1949 55.45 Cosmo PTM 10:04:07 10:04:06 00:00:01 55.45 55.45 2500 2500 Prave 23/05 10:51:40 5000 50.65 PTM en 10:51:39 10:51:34 00:00:05 50.65 50.65 5000 5000 Prave 23/05 10:58:11 5000 50.25 PTM en 10:58:11 10:58:04 00:00:06 50.25 50.25 5000 5000 Prave 23/05 11:20:44 5000 50.1 PTM en 11:20:43 11:20:34 00:00:09 50.1 50.1 5000 5000 Mefc 23/05 12:55:31 5000 50.45 PTM om 12:55:30 12:55:23 00:00:07 50.45 50.45 5000 5000 Mefc 23/05 15:17:14 3216 50.7 PTM om 15:17:13 15:17:04 00:00:08 50.7 50.7 5000 5000 23/05 14:56:41 2000 50.1 Mefcom PTM 14:56:40 14:56:32 00:00:08 50.1 50.1 2000 2000 23/05 15:18:52 5000 50.6 Mefcom PTM 15:18:51 15:18:50 00:00:01 50.6 50.6 5000 5000 1000 23/05 9:59:28 0 49.85 Praveen PTM 09:59:21 09:59:28 00:00:07 49.85 49.85 10000 10000 23/05 10:33:32 5000 49.9 Praveen PTM 10:33:31 10:33:26 00:00:05 49.9 49.9 5000 5000 Mefc 24/05 13:24:13 2500 49.8 PTM om 13:24:12 13:24:06 00:00:06 49.8 49.8 2500 2500 24/05 13:24:33 2500 49.75 Cosmo PTM 13:24:32 13:24:26 00:00:06 49.75 49.75 2500 2500 Mefc 25/05 15:27:10 3820 46.2 PTM om 15:27:09 15:26:51 00:00:19 46.2 46.2 4000 4000 Mefc 25/05 15:27:46 500 46.2 PTM om 15:27:45 15:27:42 00:00:03 46.2 46.2 500 500 Mefc 25/05 15:27:59 200 46.2 PTM om 15:27:59 15:27:55 00:00:04 46.2 46.2 200 200 Mefc 25/05 15:28:48 300 46.2 PTM om 15:28:47 15:28:43 00:00:04 46.2 46.2 300 300 25/05 10:18:37 2000 47.1 Mefcom PTM 10:18:36 10:18:37 00:00:00 47.1 47.1 2000 2000 25/05 10:18:50 500 47.15 Mefcom PTM 10:18:49 10:18:45 00:00:04 47.15 47.15 500 500 25/05 10:19:13 1000 47.2 Mefcom PTM 10:19:12 10:19:09 00:00:03 47.2 47.2 1000 1000 25/05 10:19:22 500 47.15 Mefcom PTM 10:19:21 10:19:20 00:00:01 47.15 47.15 500 500 26/05 15:05:37 2000 46.45 PTM ISF 15:05:36 15:05:31 00:00:05 46.45 46.45 2000 2000 Prave 26/05 15:25:19 2112 46.45 PTM en 15:25:17 15:25:06 00:00:12 46.45 46.45 2500 2500 Prave 26/05 15:29:48 4804 46.8 PTM en 15:29:47 15:29:44 00:00:03 46.8 46.8 5000 5000 26/05 10:58:00 207 46.65 Mefcom PTM 10:57:47 10:57:59 00:00:12 46.65 46.65 2000 2000 26/05 12:55:30 1000 46.45 Praveen PTM 12:55:23 12:55:29 00:00:06 46.45 46.45 1000 1000 29/05 15:15:30 1000 45.6 Mefcom PTM 15:15:29 15:15:27 00:00:02 45.6 45.6 1000 1000 29/05 11:23:59 985 46.75 Sunita PTM 11:23:58 11:23:48 00:00:10 46.75 46.75 1000 1000 29/05 14:08:41 2500 45.95 Praveen PTM 14:08:38 14:08:39 00:00:02 45.95 45.95 2500 2500 Sunit 30/05 9:59:16 4965 46.75 PTM a 09:59:15 09:59:07 00:00:07 46.75 46.75 5000 5000 30/05 15:17:35 1000 45.95 Mefcom PTM 15:17:34 15:17:31 00:00:03 45.95 45.95 1000 1000 Mefc 31/05 10:35:30 2494 45.85 PTM om 10:35:29 10:35:07 00:00:22 45.85 45.85 2500 2500 31/05 15:25:53 1000 44.35 Mefcom PTM 15:25:52 15:25:34 00:00:18 44.35 44.35 1000 1000

Trad Sell Buy Sell Order Buy Sell Buy Sell Trade Trade Trad e Clien Order Order Time Ordr Ordr Order Order Date Time e Qty Price Buy Client t Time Time Diff price price qty qty 31/05 10:30:56 2355 44.85 Cosmo PTM 10:30:55 10:30:46 00:00:09 44.85 44.85 2500 2500 31/05 10:36:16 2500 45.8 Sunita PTM 10:36:15 10:36:08 00:00:07 45.8 45.8 2500 2500

The table above indicates that 133 synchronised orders were placed by Purshottam within a span of 24 trading days between April 25, 2006 and May 31, 2006.

10.2 Circular Trades Analysis: It was observed that on certain days, whatever quantity of shares were bought by Purshottam, from other Vishvas Group entities, were sold back to Vishvas Group entities on the same day.

Instances of circular trades done on BSE involving Purshottam may be observed from the below table:

TABLE 6 Buy Qty by Seller Name Buyer Name Purshotta Sell Qty by Date m Purshottam 21/04/2006 15,825 Sunita, Praveen, Purshottam 16,223 Purshottam, ISF 24/04/2006 18,424 Purshottam, Cosmo, ISF 25,765 Purshottam, Cosmo, ISF Sunita, Praveen, Purshottam, 41,592 Praveen, Purshottam, Mefcom, 25/04/2006 40,033 Cosmo, ISF, Mefcom Cosmo, Sunita Praveen, Purshottam, Cosmo, 9,866 Praveen, Purshottam, Cosmo 26/04/2006 17,827 Master Finlease 27/04/2006 4,638 Purshottam, Cosmo, ISF, Mefcom 66,401 Praveen, Purshottam, Cosmo, ISF, Mefcom 28/04/2006 59,623 Sunita, Purshottam, ISF, Mefcom 65,822 Praveen, Purshottam, Cosmo, ISF, Mefcom 29/04/2006 8,237 Mefcom, Purshottam 42,268 Sunita, Purshottam, Cosmo, ISF, Mefcom 02/05/2006 15,732 Mefcom, Purshottam, Praveen, 1,08,751 Vishvas, Purshottam, Cosmo, ISF, Cosmo, ISF Mefcom, Praveen 03/05/2006 3,377 Purshottam, Cosmo 1,728 Purshottam 04/05/2006 5,730 Purshottam 1,69,516 Sunita, Purshottam, Cosmo, ISF, Mefcom, Praveen 05/05/2006 25,946 Praveen, Purshottam 16,846 Praveen, Purshottam 08/05/2006 152 Purshottam 19,124 Praveen, Purshottam, Mefcom 09/05/2006 36,089 Praveen, Purshottam, ISF 50,363 Praveen, Purshottam, Mefcom, ISF, Vishvas 10/05/2006 74,943 Praveen, Purshottam, ISF, Sunita, 63,626 Praveen, Purshottam, Sunita, Mefcom Mefcom, ISF, Cosmo 11/05/2006 52,040 Praveen, Purshottam, ISF, Sunita, 85,940 Purshottam, Sunita, ISF, Vishvas Mefcom, Cosmo Projects Ltd, Cosmo 12/05/2006 62,484 Praveen, Purshottam, ISF, Sunita, 73,670 Praveen, Purshottam, Sunita,

Buy Qty by Seller Name Buyer Name Purshotta Sell Qty by Date m Purshottam Mefcom, Cosmo Mefcom, ISF, Cosmo 15/05/2006 30,884 Praveen, Purshottam, Mefcom, 75,526 Praveen, Purshottam, Sunita, Cosmo Mefcom, Master, Cosmo, Vishvas Projects Ltd 16/05/2006 48,810 Praveen, Purshottam, Sunita, 55,544 Praveen, Purshottam, Sunita, Cosmo Mefcom, Cosmo 17/05/2006 19,726 Purshottam, ISF, Sunita, Mefcom, 13,574 Purshottam, Mefcom, Master, Cosmo Cosmo 18/05/2006 10,347 Purshottam, ISF 98,329 Mefcom, ISF, Cosmo, Purshottam, Sunita, Avisha 19/05/2006 56,753 Purshottam, ISF, Sunita, Mefcom 17,482 Mefcom, ISF, Purshottam 22/05/2006 5,266 Praveen, Purshottam, Mefcom 7,176 Mefcom, Purshottam, Cosmo 23/05/2006 34,061 Praveen, Purshottam, Mefcom 26,535 Mefcom, Purshottam, Praveen 24/05/2006 7,260 Mefcom 2,500 Cosmo 25/05/2006 15,931 Purshottam, Sunita, Mefcom, 11,224 Mefcom, Purshottam, Cosmo, Sunita Cosmo 26/05/2006 23,224 Purshottam, ISF, Sunita, Cosmo, 12,631 Mefcom Purshottam, Praveen Praveen 29/05/2006 12,945 Purshottam, ISF, Sunita, Cosmo, 9,943 Mefcom, Purshottam, Praveen, Praveen, Mefcom, Sunita 30/05/2006 5,098 Purshottam, Sunita, Mefcom 6,126 Mefcom, Purshottam 31/05/2006 5,246 Purshottam, Sunita, Mefcom 6,356 Mefcom, Purshottam, Sunita, Cosmo 7,16,651 12,00,447

11. It was observed during investigation that the day from when members of the Vishvas Group started trading, the average trading volume of the scrip at BSE / NSE had gone up significantly from 70,713/68,005 shares (during April 07, 2006 to April 20, 2006) to 3,38,391/2,13,738 shares (during April 21, 2006 to May 05, 2006) and 2,58,554/2,17,866 shares (during May 08, 2006 to May 31, 2006). Similarly price of the scrip in BSE/NSE increased from `43 / `41.25 on April 19, 2006, touched a high to `70.95 / `71.05 on May 05, 2006 and then decreased to `44.35 / `45.40 on May 31, 2006 within a period of one and half months.

12. Summary of the written and oral submissions made by SIC is as follows: (i) SIC is fully focused on retail clients. No proprietary trading is carried out. (ii) The trades in question were carried out for Mr. Purshottam Khandelwal in the normal course of business. Though trades were carried out for him from beginning of April 2006, by April 2007 SIC stopped executing his trades. (iii) In the context of the alleged connection between other members of the Vishvas Group (i.e. VSL, Mefcom and Avisha), SIC stated as follows:

(a) Vishvas Securities Ltd. (VSL): The off-market transfer of 50,000 shares of Gangotri scrip from VSL’s demat account to SIC's beneficiary account on 08.07.2006 was in the context of margin/collateral payable to SIC. (b) Mefcom Agro Industries Ltd. (Mefcom) : SIC 's shareholding of 10.7 % shares in Mefcom were held for and on behalf of various constituents who were the beneficial owners of the aforesaid shares. The same were held in SIC's account for a number of reasons including where dues of clients had not been cleared or where there were specific instructions of the client so that securities could be sold in short span of time considering volatility of the scrip. (c) Avisha Credit Capital Ltd. (Avisha) : SIC maintained Avisha’s account in the context of its trading at BSE and in the ordinary course of business.

(iv) SIC did not have any knowledge of counter party broker or client's connections and inclusion of SIC in the Vishvas group on the basis of synchronized trading would amount to penalising SIC for wrongs committed by other persons. (v) The percentage of synchronised trades and circular/reversal trades to the total number of trades on BSE is insignificant. Total number of self trades alleged to be carried out by Purshottam is only 2.73% of the total trades at BSE during the investigation period, which is a miniscule percentage and cannot be treated as manipulative. Presently BSE has improved its surveillance system and has introduced self trade prevention check. (vi) During the period April 21 to May 31, 2006, the price has risen by around 54%, however as per the LTP analysis carried out by DA the price had risen by around 1464%. (vii) Purshottam authorised Mr. K.K. Modi for the trading and he was carrying out the trading on behalf of Purshottam, however no action has been taken/proposed against Mr. Modi. (viii) With regard to the allegation of incorrect KYC, SIC submitted that KYC information of Purshottam was updated and old KYC was replaced with new KYC. However date of KYC was kept the same as date of account opening. As information was sought by SEBI after 5 to 6 years of the incident, copy of the new KYC was provided. It was only a clerical mistake. (ix) Purshottam had opted for consolidated statement of contract notes. Some of the acknowledgement receipts for such consolidated statements is submitted as proof.

(x) The present proceedings may be dropped owing to the delay in initiation of proceedings.

13. I have considered the documents on record, the findings of the DA in his Report and the submissions made by SIC in this regard. I have identified the following issues as being relevant for my determination: I. Whether SIC was involved in synchronised, circular and reversal of trades in the Gangotri scrip and thereby violated sections 12A (a), 12A(b) and 12A(c) of the SEBI Act, 1992 read with regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(e) and 4(2)(g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003? II. Whether SIC violated regulation 7 read with clauses A and B(2) of Schedule II of the Stock Broker Regulations dealing with Code of Conduct for Stock Brokers? III. Whether the recommendation of the Designated Authority submitted vide Report dated November 25, 2014 must be accepted?

14. In the context of the allegations of fraud against SIC, the following provisions of SEBI Act i.e. section 12A(a), (b) and (c), read as follows: Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. Section 12A. 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;

Further relevant provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices in Securities Market) Regulations, 2003 (hereinafter referred to as "PFUTP Regulations") i.e. regulations 3, 4(1) and 4(2)(a), (e) & (g) read as follows: "Regulation 3: - 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:-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; … (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security;" 15. In the context of the allegations of non-compliance with Code of Conduct by SIC, the relevant provisions of the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 ("Stock Brokers Regulations") are reproduced as under: Regulation 7: "Stock brokers to abide by Code of Conduct. 7. The stock broker holding a certificate shall at all times abide by the Code of Conduct as specified in Schedule II."

SCHEDULE II Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 CODE OF CONDUCT FOR STOCK BROKERS [Regulation 7] A. General.

1) Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. 2) Exercise of due skill and care: A stock-broker shall act with due skill, care and diligence in the conduct of all his business. 3) Manipulation: A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. 4) Malpractices: A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market. A stockbroker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness. 5) Compliance with statutory requirements: A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the Stock Exchange from time to time as may be applicable to him.

B. Duty to the Investors. 1) …………….. 2) Issue of Contract Note: A stock-broker shall issue without delay to his client or client of the sub-broker, as the case may be, a contract note for all transactions in the form specified by the stock exchange.

16. As is evident from the extracts of section 12A of the SEBI Act and regulation 3 of the PFUTP Regulations, it is clear that the scope of the prohibition against fraudulent trades is wide enough to cover illegal synchronised/circular/reversal of trades. It is also well accepted that synchronised trading on the anonymous trading platform of stock exchanges is not per se illegal. The circumstances surrounding synchronised transactions and the inferences drawn thereof provide guidance in arriving at a conclusion as to the legality of the transactions. This legal position was laid down by the Securities Appellate Tribunal (SAT) in the case of Ketan Parekh v. SEBI (Appeal No. 2/2004) in its order dated July 14, 2006, extracts of which are reproduced as follows: “.......... A synchronised transaction will, however, be illegal or violative of the Regulations if it is executed with a view to manipulate the market or if it results in circular trading or is dubious in nature and is executed with a view to avoid regulatory detection or does not involve change of beneficial ownership or is executed to create false volumes resulting in upsetting the market equilibrium. ... Whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of the parties which could be inferred from the attending circumstances because direct evidence in such cases may not be available. The nature of the transaction executed, the frequency with which such transactions are undertaken, the value of the transactions, whether they involve circular trading and whether there is real change of beneficial ownership, the conditions then prevailing in the market are some of the factors which go to show the intention of the parties. This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn.”

17. The recent order of the Supreme Court in the case of SEBI v. Kishore R. Ajmera, dated February 23, 2016 (hereinafter referred to as "the SC Order"), has elaborately discussed the law on the degree of proof required in non-criminal proceedings to determine whether or not a broker is liable for executing illegal synchronised/circular trades. The fundamental premise of the latest decision of the Hon'ble Supreme Court rests on the inevitability of relying on circumstantial evidence to prove allegations of synchronised/circular trading. In this regard, the SC order reads as follows: "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... While the screen based trading system keeps the identity of the parties anonymous it will be too naive to rest the final conclusions on said basis which overlooks a meeting of minds elsewhere. Direct proof of such meeting of minds elsewhere would rarely be forthcoming. The test, in our considered view, is one of preponderance of probabilities so far as adjudication of civil liability arising out of violation of the Act or the provisions of the Regulations framed thereunder is concerned...." (emphasis supplied)

In relation to the circumstantial evidence relevant for proving alleged illegal synchronisation of trades, the following observations in the SC Order are pertinent: ""...knowledge of who the 2nd party/client or the broker is, is not relevant at all." (para 26 of the SC Order)

While it is correct that trading in such illiquid scrips is per se not impermissible, yet, voluminous trading over a period of time in such scrips is a fact that should attract the attention of a vigilant trader engaged/engaging in such trades." (para 23 of the SC Order)

"When over a period of time such transactions had been made between the same set of brokers or a group of brokers a conclusion can be reasonably reached that there is a concerted effort on the part of the concerned brokers to indulge in synchronized trades the consequence of which is large volumes of fictitious trading resulting in the unnatural rise in hiking the price/value of the scrip(s)." (Para 25 of the SC Order) "The conclusion has to be gathered from various circumstances like that volume of the trade effected; the period of persistence in trading in the particular scrip; the particulars of the buy and sell orders, namely, the volume thereof; the proximity of time between the two and such other relevant factors." (Para 26 of the SC Order)

18. The allegations against SIC will need to be examined in light of the aforestated principles laid down by the Hon'ble Supreme Court. I note that in the context of trade concentration, Purshottam through SIC contributed the highest percentage to gross buy (32.47%) and gross sell (32.24%) transactions to the total quantity of shares of Gangotri traded on BSE. In the context of synchronised trades SIC's contribution was highest among other members of the Vishvas Group i.e. 133 trades for 7, 89, 063 shares. During the 24 days during which synchronised trades were placed by SIC for Purshottam, there have been large number of such transactions on each of such days. For instance on May 02, 05, 10 and 12 of 2016, there were 8, 7, 13 and 9 synchronised trades respectively executed by SIC for Purshottam. Similarly circular trades carried out by Purshottam through SIC in coordination with nine other members of the Vishvas Group created an artificial volume that amounted to 30.08% of the total volume. The number of self trades executed by SIC on behalf of Purshottam, numbering 711 for trades in 65,025 shares, are also abnormally large. Even from a price manipulation perspective, SIC trading for Purshottam contributed to total positive cumulative Last Traded Price (LTP) of `241.8. Thus the figures from all angles, such as trade concentration, synchronised trades, circular/reversal trades, self trades and LTP analysis overwhelmingly present a picture of wanton manipulation by Purshottam.

19. In exercise of its powers under section 11B of the SEBI Act, SEBI has already passed an order dated April 13, 2016 against Purshottam Khandelwal restraining him from accessing the securities market, dealing in securities and prohibiting from being associated with the securities market in any manner for a period of 5 years. The said directions were passed against Purshottam for having indulged in illegal synchronised trades, circular trades and self trades and thereby having violated section 12A(a), (b), (c) of the SEBI Act read with regulations 3 and 4(1) and clauses (a), (e) and (g) of regulation 4(2) of the PFUTP Regulations. The role of Purshottam has therefore already been evaluated in a separate quasi judicial proceeding on the basis of the trades executed by him through SIC. The figures quoted in the foregoing paragraphs do not lend credence to SIC's arguments that its trades were negligible or insignificant enough to impact volumes and prices. I am also not convinced with the contention of SIC that its relationship with other members of the Vishvas Group were only in the course of normal business transactions. Its circular trades, with some of the entities with which its relationship has been demonstrated by SEBI, further strengthens SEBI 's argument that they were functioning in unison. I therefore find it difficult to appreciate SIC's suggestion that in the backdrop of an anonymous trading system, it could not have known that Purshottam was engaging in manipulative trades. In any case, as held in the SC order, demonstrating direct connection between parties alleging to have synchronised/circular trades is not necessary. A stock broker is expected to play the role of a gatekeeper and not just place trades in a mechanical manner solely with profit objectives. The instant case goes beyond the realm of lack of due diligence, and quite clearly is an instance of aiding the commission of fraudulent and manipulative trades. The large scale of transactions and repetitive nature of the same coupled with its impact on volume and price on securities which are otherwise illiquid, lead to the inference that illegal synchronisation had infact taken place.

20. With regard to the DA Report findings on false KYC relating to Purshottam, SIC has submitted that it was a case of clerical error which happened at the time of updation of KYC. They also claim to be unable to find a copy of the earlier KYC. This appears to be a very weak and evasive reply on the part of SIC. Monitoring and maintaining KYC is a very important aspect of a registered intermediary's functions having wide ramification in the financial markets. If KYC details were updated/modified, without submitting adequate proof to demonstrate the clerical error, one cannot but take an adverse view of the same. Similarly the argument that delivery of contract notes to its client was done in a consolidated manner as per the request of its client, without submitting any proof of such request does not aid the defence of SIC. Submitting some copies of acknowledgement receipts for some of such consolidated reports only proves receipt of those contract notes and does not serve as proof of the request for consolidated reports from the clients. Clause A of Schedule II to the Stock Brokers Regulations mandates compliance with general principles of good practices inter alia vis-a-vis its clients and the securities market in general. Not maintaining proper KYC records is a serious violation of the good conduct mandate expected from a stock broker. Further there has been a clear violation of clause B(2) of Schedule II since contract notes were not issued in a timely manner to SIC's client. As a stock broker, SIC is obliged to issue contract notes to its client within 24 hours of the execution of the contract. I am therefore convinced of the merit of the DA Report findings of SIC having violated regulation 7 read with clauses A and B(2) of Schedule II of the Stock Broker Regulations (Code of Conduct for Stock Brokers).

21. Considering my findings above, the next question to be addressed is whether the DA's recommendation to suspend the certificate of registration of SIC as a stock broker for a period of 6 months be accepted or not. In this regard, I take note of SIC's submission relating to delay in proceedings. I observe that the subject transactions took place more than a decade back and it may have in some way affected the noticees defence adversely. Considering the above factors and applicable legal provisions, I am of the view that the penalty proposed by the DA in his Report may be disproportionate to the violations in the instant case. Hence, in exercise of my powers under section 12 (3) of the SEBI Act read with regulation 28 (2) and regulation 27, I hereby direct that the certificate of registration as a stock broker, of the Noticee i.e. SIC Stocks and Services Pvt. Ltd., shall be suspended for a period of three months. 22. This Order shall come into force on the expiry of 21 days from the date of this Order.

23. A copy of this order shall be served upon the Noticee and also on the relevant stock exchanges in accordance with regulation 30 of the SEBI (Intermediaries) Regulations, 2008.

Place: Mumbai G. MAHALINGAM Date: April 28, 2017 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA