Order in the respect of Shamken Multifab Limited and Ors

WTM/RKA/IVD/NRO/ 143 /2014 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AGAINST SHAMKEN MULTIFAB LIMITED, MR. H. B. CHATURVEDI AND MR. PRAVIN JUNEJA IN THE MATTER OF SHAMKEN MULTIFAB LIMITED. 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI’) carried out an investigation into the trading in the shares of Shamken Multifab Limited (hereinafter referred to as “SML”) for the period February 23, 2000 to July 18, 2000 (hereinafter referred to as "the investigation period") in order to ascertain whether any provisions of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") and Rules and Regulations made thereunder have been violated. During the investigation period, the shares of SML were listed on Bombay Stock Exchange Ltd. ('BSE'), Delhi Stock Exchange Ltd. ('DSE'), Calcutta Stock Exchange Ltd. ('CSE') and Ahmedabad Stock Exchange Ltd. ('ASE'). 2. During the investigation period the shares of SML were largely traded on NSE whereas the trading on the other stock exchanges was miniscule.

On NSE, there was an unusual rise in the price of the scrip of SML from ₹ 6/- on February 23, 2000 to ₹ 25.55/- on July 20, 2000. Along with the price rise, there was also an unusual rise in the average traded volume of the scrip of SML from 9,800 shares during the period May-June 2000 to 92,400 shares during the period June-July 2000. Under the investigation, the analysis of trading was carried out in respect of two different trading periods, i.e. February 23, 2000 to June 20, 2000 ("1st period") and June 21, 2000 to July 18, 2000 ("2nd period"). 3. Pursuant to the investigation, a Show Cause Notice dated October 19, 2004 ("SCN") was issued by SEBI to SML and its directors namely, Mr. H. B. Chaturvedi and Mr. Pravin Juneja (hereinafter collectively referred to as the 'Noticees' and individually by their respective names) calling upon them to show cause as to why directions under sections 11(4)(b) and 11B of the SEBI Act should not be issued against them including restraining them from associating with the securities market in any capacity whatsoever and associating with any of the intermediaries in the securities market for an appropriate period.

It was alleged in the SCN that the Noticees have violated regulation 4 (a), (b), (c) and (e) of SEBI (Prohibition of Order in the respect of Shamken Multifab Limited and Ors.

Fraudulent and Unfair trade Practices relating to Securities Market) Regulations, 1995 (hereinafter referred to as the "PFUTP Regulations, 1995") read with regulations 4(2) (a), (d) and (e) of SEBI (Prohibition of Fraudulent and Unfair trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as the "PFUTP Regulations, 2003"). The findings of the investigation on the basis of which the allegations leveled in the SCN were made are as under:- a) Shamken Group consisted of SML, Lotus Garments Pvt. Ltd., Right Credit & Sec Pvt. Ltd., Shamken Spinners Ltd., Kotwan Traders Pvt. Ltd., Angel Textiles Pvt. Ltd. and Sohit Investments Pvt. Ltd. b) P K Aggarwal group consisted of Dhanvarsha Investments ("Dhanvarsha") and Prasneeta Constructions Pvt Ltd. ("Prasneeta"). Mr. Jeev Narayan Mishra was the proprietor of Dhanvarsha. Dhanvarsha and Prasneeta were acting as unregistered sub-brokers. c) Two brokers of NSE namely, Maheshwari Technical & Financial Services Ltd. ("Maheshwari") and Adroit Financial Services Ltd. ("Adroit") accounted for approx. 95% of the net traded quantity during the relevant period and both the brokers mainly traded on behalf of a common client namely, Vandana Securities Ltd. ("Vandana") who was allegedly acting as an unregistered sub-broker. d) Vandana, in the capacity of an unregistered sob-broker had traded on behalf of Dhanvarsha and Prasneeta.

During the 1st period, when the price of the scrip of SML increased from ₹6 to ₹18 the gross buying by these clients of Vandana was 6,95,200 shares (53% of the total buy volume at NSE) and the net buying by these clients was 4,68,200 shares (68.50% of the total net buying on NSE). Further during the 2nd period, the entire trading by Vandana was done for Dhanvarsha. The gross trading by Dhanvarsha (through Vandana) was 89.30% of the total trading of 3,79,600 shares, whereas the net buying was 96.83 of the total buying of 1,13,800 shares. e) Further, Adroit had also dealt for certain other entities namely, Mrs. Sonali Bansal, Shiv Vani Associates and Mr. Moti Ram, who in turn were dealing for Mr. I. C. Jindal, director of Vandana. f) It was observed that both the brokers had entered into a number of cross deals, structured deals and synchronized transactions on behalf of their clients. g) Gross trading by Maheshwari and Adroit was 44.79% and 75.87%, respectively of the total trading in the scrip at NSE during 1st and 2nd period under investigation. Further their combined gross buying during 1st and 2nd period under investigation was 66.06% and 90.25%, respectively, of the total buying at NSE.

Also, during the 1st period under investigation, their net buy was 5,61,500 shares, i.e. 81,15% of the total net buy of 6,83,500 shares at NSE. During the 2nd period under investigation, their net buy was 1,09,600 shares, i.e. 96.30% of the total net buy of 1,13,800 shares at NSE. h) The funds flow revealed that Shamken Group was the ultimate client of Maheshwari and Adroit who had traded through two entities namely, Dhanvarsha and Prasneeta. Vandana acting as an unregistered sub-broker had traded on behalf of Dhanvarsha and Prasneeta. i) Mr. Jeev Narayan Mishra, proprietor of Dhanvarsha stated in his statement that all his dealings in SML shares were on behalf of Shamken Group only and no dealings were done in his own account. He also stated that the orders were mostly placed by Mr. Pravin Juneja (director of SML) and sometimes by Mr. V. R. Rao (Senior. Manager of Shamken Group, and a subordinate of Mr. Pravin Juneja). j) Mr. Ajay Kumar Agarwal, director of Prasneeta, in his statement also admitted that Prasneeta was introduced to trading in the scrip of SML by Mr. Pravin Juneja for a commission and all the orders for purchase were given to Prasneeta either by Mr. Pravin Juneja himself or his representative and that whatever trading in SML shares was done by Prasneeta, it was at the instance of Mr. Pravin Juneja. k) The purchases were made by four group companies, viz. Sohit Investments Pvt. Ltd., Angel Textiles Pvt. Ltd., Kotwan Traders Pvt. Ltd. and Lotus Garments Pvt. Ltd. and the payment in respect thereof was made by Shamken Spinners Ltd. l) The information obtained from Citibank indicated that payment in respect of the purchases was also being made directly by SML through its account no. 0417964223 with Citibank.

Further, funds were also transferred from the account of Rights Credits & Securities Pvt. Ltd., a group concern of SML. m) It was observed that current account no 50320 in the name of Mr. Jeev Narayan Mishra with Nedungadi Bank (now merged with PNB), Mayur Vihar, Phase II, Delhi was opened specifically for the purpose of executing trading in the scrip of SML. The account was opened on June 1, 2000 and it remained operational till April 2001 The account statement showed that more than 90% of the payments had been made to Vandana, and 80% of credit entries revealed that all the payments had been made by Shamken Group. It was noted from the bank account of Vandana that some of the cheques were received by it from the account of Prasneeta and some of the cheques were received by it directly from the account of SSL which were duly signed by Mr. Praveen Juneja. n) Scrutiny of account of Dhanvarsha revealed that an amount of ₹1,72,20,746 was deposited in its account no. 50320 during the period June 2000 to April 2001. Further, an amount of ₹1,01,19,133 was deposited in account no. 2116 in the name of Mr. Jeev Narayan Mishra during the period September 2000 to July 2001. Mr. Jeev Narayan Mishra (proprietor of Dhanvarsha) in his statement claimed that all the money credited into account no. 2116 and 50320 came from Shamken Group. o) The flow of transactions that created the artificial volume and made possible the sharp rise in price in SML were as under: Maheshwari Shamken group P K Agarwal group Vandana Adroit p) It was observed that SML along with its group companies traded and financed the trading of the shares of SML with an intention to create a false market in the scrip of SML and contributed to the artificial increase in its share price.

4. SML and its Managing Director, M. H. B. Chaturvedi replied to the SCN vide letter dated February 11, 2005, through their legal representative, inter alia, submitting the following: 1) In the present case, investigation was initiated in February, 2001, and therefore any alleged violation can be of FUTP Regulations, 1995 and not of FUTP Regulations, 2003, which were notified in 2003. Thus, the instant proceedings in so far as they relate to regulation 4 of the FUTP Regulations, 2003 are not maintainable in law. 2) In February 2000, the Shamken Group decided to increase its holding in SML and also in another group company, i.e. Shamken Cotsyn Ltd. in batches beginning from March 9, 2000. The Shamken Group transacted through Dhanvarsha and Prasneeta for buying the shares of SML and Shamken Cotsyn Ltd. for which they were paid their due brokerage. The shares were actually purchased and deliveries were obtained. None of the shares were subsequently sold. 3) Between the period March 9, 2000 and May 23, 2000, the Shamken Group purchased 5,29,020 shares of SML through Dhanvarsha and Prasneeta for ₹90,03,550.

None of these shares were purchased by SML itself, nor were any monies advanced by SML for the purchase of its own shares. 4) Between the period March 9,.2000 and May 23, 2000, the Shamken Group purchased 5,29,020 shares of SML through Dhanvarsha and Prasneeta for ₹90,03,550. None of these shares were purchased by SML itself, nor any money advanced by SML for the purchase of its own shares. 5) Between the period May 31, 2000 and August 5, 2000, four of the Shamken Group concerns namely, Sohit Investments Pvt. Ltd., Angel Textiles Pvt. Ltd., Kotwan Traders Pvt. Ltd. and Lotus Graments Pvt. Ltd. purchased 2,60,600 shares of SML for ₹55,25,104.90 through Dhanvarsha. Further, 1,09,000 shares of Shamken Cotsyn Ltd.

were purchased by Sohit Investments Pvt. Ltd. between July 10, 2000 and Nov 25, 2000 for ₹11,36,777 for which payment to Dhanvarsha was made by Shamken Spinners Ltd. 6) Allegation by SEBI that SML shares were sold by the Shamken Group is completely false and baseless and there is no evidence to support the said allegation. 7) The accounts of SML or any of its group entities do not show any payments made by Dhanvarsha or Prasneeta. 8) SEBI has failed to consider that the Shamken group has not made any profit out of the investments in SML shares. 9) SML had filed information with the Stock Exchanges in compliance with the Takeover Regulations in respect of the purchases made by the Shamken Group. 10) Neither Dhanvarsha nor Prasneeta were ever authorized by the Shamken Group to trade in the shares of SML to create artificial volumes. SML, its promoters and directors and the Shamken Group were not in any other way connected to Dhanvarsha or Prasneeta except to the limited manner of purchase of shares as stated above. 11) The Shamken Group had no direct nexus / contact with either Maheshwari or Adroit.

The allegation that Maheshwari and Adroit have entered into structured deals, cross deals or synchronized deals is totally unconnected to the Shamken Group. SEBI has not initiated any action against the intermediaries whom it has claimed were engaging in cross and structured deals. 12) None of the Shamken Group directors/officers/employees was ever mandated by the Board of any Shamken Group company to trade in the shares of SML or to authorize any broker to trade in shares of SML at any point of time. 13) There is no allegation in the SCN that orders to sell securities came from Mr. Pravin Juneja or anyone else connected to the Shamken Group. 14) Shamken Group cannot be held liable for the nature and manner in which Dhanvarsha and Prasneeta dealt in the shares of SML. Their dealings and relationships with Vandana, Maheshwari and Adroit is not in any way connected to Shamken Group and therefore no liability can be fastened on SML for their actions. SML has not received any money from Maheshwari or Adroit. 15) Tracking of flow of funds revealing that Shamken Group was the ultimate client of Maheshwari and Adroit is completely wrong and baseless.

16) The allegation that certain payments were made by the Shamken Group to current account no. 50320 of Dhanvarsha with Nedungadi bank and that this account was opened with the specific purpose of trading in the scrip of SML, is completely false. There is no proof to support this allegation. The fact that 80% of the credit entries in the said account were made up of cheques from the Shamken Group does not prove that the account was specially opened only for the purpose of dealing in scrip of SML and further does not amount to an offence. The account was opened by Dhanvarsha and not any officer of the Shamken Group. 17) The allegation by SEBI that payments for SML shares were made by funds provided by SML is wrong and denied. None of the payments for SML shares came from SML’s account no. 0417964223 with Citibank as alleged by SEBI. The fact that certain payments were made from this account to Dhanvarsha or to Mr. J N Mishra directly does not show that the payment was made for the purchase of SML shares. There are no purchases of SML shares corresponding to the dates of payment to Dhanvarsha or Mr. J N Mishra.

18) Shamken Group had made payments to Dhanvarsha for the purpose of purchasing SML shares. No offence is made out under regulation 4 of the FUTP regulations if a group company buys the shares of its flagship company. 19) Appointment of Dhanvarsha was merely by way of administrative convenience and by way of introduction by Mr. P K Aggarwal, who assured the Shamken Group that Dhanvarsha was an entity already dealing in securities. Just because an unregistered sub-broker is appointed for purchase of shares does not mean that the appointment was for the purpose of creating a false market in the SML scrip. 20) A scrutiny of Dhanvarsha’s account and Mr. Mishra’s account with Nedungadi bank indicates that amounts of ₹1,72,20,746 and ₹1,01,19,133, respectively were deposited into the said accounts. SEBI has relied on a period that is wholly different from the one under investigation, i.e. SEBI has taken into account the period of June 2000 to July 2001, whereas its investigation pertains to February 2000 to July 2000. 21) Mr. H B Chaturvedi was SML's Managing Director at the relevant time and none of the brokers have stated that the directions to create artificial volumes came from him.

22) Mr. Pravin Juneja was the Director (Corporate Finance) and the Company Secretary of SML, Shamken Cotsyn Ltd., Shamken Spinners Ltd. If Mr. Pravin Juneja is found to have given the directions to artificially create volumes, Mr. Pravin Juneja had no authority, express, implied or ostensible to do so. The Shamken Group cannot be held liable for the fraud, if any, committed by Mr. Pravin Juneja. 23) Pursuant to investment decisions having been taken by Mr. Chaturvedi and SML, Mr. Juneja was the person in charge of placement of orders, appointing and dealing with brokers and making payments. Mr. Juneja appointed Dhanvarsha, engaged Mr. J N Mishra and placed the orders to buy SML shares and also made payments for the same. 24) Mr. J N Mishra and Mr. A K Aggarwal, Director of Prasneeta have stated on record that all orders to deal in SML shares came from Mr. Pravin Juneja. Mr. Chaturvedi did not know of Mr. Juneja’s dealings with Mr. P K Aggarwal, Mr. JN Mishra or Mr. AK Aggarwal. 25) The scheme as elaborated by SEBI in the SCN, if true, was conceived and executed solely by Mr. Juneja with the intention of enriching himself.

26) Payments made to Vandana had no connection to purchases of SML shares. Further, the fact that certain payments were made by Shamken Spinners Ltd. to Vandana does not show that these were for the trading in the scrip of SML. 27) It is not established by SEBI that the Shamken Group had indulged in acts to mislead persons. The fact that Shamken Group did not sell any of the shares of SML that had been purchased and is still holding them clearly establishes its stance that the only intention was to increase its shareholding. Shamken Group has taken delivery of all shares and is still holding them clearly shows that the transactions were genuine transactions. 28) The prerequisite for an offence of fraud (defined in regulation 2(1)(c) of the PFUTP Regulations, 1995) is intention to deceive, which has not been alleged or established in the present case by SEBI. The price of a share can be manipulated by both buying and selling of shares. In this case, the Shamken Group has bought the shares of SML and has held on to them. 29) There is absolutely nothing on record to show that any person has been deceived by the alleged dealings in the scrip of SML.

There has not been a single complaint made by any investor nor have the investors been induced into purchasing or selling any shares of SML. No investor has suffered any loss on account of any transaction or purchase of shares of SML by the Shamken Group. 30) The Securitas Appellate tribunal has clearly held in Nirmal Bang Securities Pvt. Ltd. v. SEBI that four essentials are required to be proved for a charge to be maintained under regulation 4 of the FUTP Regulations, 1995. They are: a. That the respondents' transactions resulted in a rise in the price of the shares b. That such price rise was artificial c. That the intention behind affecting such transactions was to manipulate the prices. d. That they induced the sale or purchase of securities by any person. SEBI has not brought forward anything on record to show that these requirements are met in the present case.

5. Mr. Pravin Juneja filed a separate reply to the SCN vide letter dated January 17, 2005, inter alia, submitting the following: 1) I have resigned from the services of SML with effect from the October 1, 2003. Consequently, I have no access to the records of SML or its associate companies. 2) Even while in service of SML, I, as a Professional was the Director, Corporate Finance-cum-Company Secretary of SML and was looking after its accounting, secretarial and finance functions. In that capacity I was on the Board of directors of SML. As a professional employee director, I had to carry out the orders of those in control of SML and I had no personal stake or benefit in the transactions of SML. I was not in charge of SML and was responsible to SML for the conduct of its business. In fact, I was not holding any shares during the said period and do not hold any shares at present in SML. I did not endeavour to create a false market in the scrip of SML. I had also no role to play in regard to the dealing in securities as set out in the SCN except signing and issuing cheques as an authorized signatory.

All the payments/transactions made by SML were duly approved/authorized by the persons in control of SML and I was merely acting as a Professional Executive. 3) The said dealings were for the purposes of investment and for enhancing the holding of those in control of the affairs of SML. Further, as per my knowledge, because of the appreciation in prices neither SML had benefited nor had any investor suffered. This would be borne out by the fact that SML did not make any rights or public issue to take advantage of the increase in the price of its shares nor there has been any other significant transfer of share during the said period in favour of any other investors. Thus, because of the increase no one reaped any monetary gain nor any one suffered or was put to loss monetarily. In other words, the said dealings have not impacted any one adversely. 4) I am also not in the securities market in any capacity except occasionally I make investments of my surplus earnings. 5) If at all any punishment should be meted to me, the factors set out in section 15J of the SEBI Act, 1992 should be borne in mind.

6) The dealings in securities were made in the year 2000 and the power to issue directors debarring persons and intermediaries from accessing the securities market was conferred on SEBI by the amending Act in 2002 and as such issuance of such directions would be entirely in excess of the powers and without jurisdiction. Such drastic powers were not contemplated under section 11B and 11(4) before amendment in 2002. 6. Opportunities of personal hearing were granted by the then Whole Time Member to the Noticees on November 7, .2008, December 12, 2008, June 24, 2009 and May 21, .2010.

However, Noticees sought adjournments and did not appear on any of the aforesaid dates. Further, opportunity of personal hearing was also afforded to the Noticees before me on March 13, 2012, when Mr. Pravin Juneja again requested for adjournment. Subsequently, another opportunity was provided on November 23, .2012 but the Noticees again failed to appear. 7. I have considered the SCN and other material on record. I note that the Noticees have made their written submissions but have not utilized the opportunities given for personal hearing. I conclude that they do not have to submit anything beyond what has been submitted by them in their written submissions. I, therefore, proceed to decide the matter on merits considering such written submissions made by the Noticees. 8. Before dealing with allegations and charges, I deem it necessary to refer to the provisions of alleged to have been violated by the Noticees in this case. Those provisions are reproduced as under:- SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 " 4. No person shall - (a) effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person; (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market; (c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions; (e) pay, offer or agree to pay or offer, directly or indirectly, to any person any money or money's worth for inducing another person to purchase or sell any security with the sole object of inflating, depressing, or causing fluctuations in the market price of securities." SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 "4. Prohibition of manipulative, fraudulent and unfair trade practices (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;

(d) paying, offering or agreeing to pay or offer, directly or indirectly, to any person any money or money’s worth for inducing such person for dealing in any security with the object of inflating, depressing, maintaining or causing fluctuation in the price of such security; (e) any act or omission amounting to manipulation of the price of a security;" 9. The question for consideration before me in the present case is whether SML along with its group companies traded and financed the trading of the shares of SML with an intention to create a false market in the scrip of SML and contributed to the artificial increase in its share price. 10. The Noticees have contended that since the transactions under consideration pertain to the year 2000, the present proceedings are not maintainable in so far as they relate to regulation 4 of the PFUTP Regulations, 2003 because the regulations relating to "Repeals and savings" only draw reference to the procedure to be followed under the PFUTP Regulations 2003. In this regard, I note that regulation 13(2) of the PFUTP Regulations 2003 provides that notwithstanding repeal of the PFUTP Regulations 1995, any violation of regulations 3, 4, 5 and 6 thereof shall be investigated and proceeded against in accordance with the procedure laid down in these regulations.

The SCN alleges violations of regulations 4 (a), (b), (c) and (e) of PFUTP Regulations, 1995 read with regulations 4(2) (a), (d) and (e) of the PFUTP Regulations, 2003 against the Noticees. It is pertinent to note that the charge of violation of the provisions of regulation 4 of the PFUTP Regulations, 2003 has not been independently leveled in the present case rather it is read with the corresponding provisions of PFUTP Regulations, 1995. The violations of regulation 4 of the PFUTP Regulations,1995 would have been proceeded against the Noticees even if the provisions of regulation 4 of the PFUTP Regulations, 2003 were not mentioned in the SCN. Therefore, I do not find any fault with the inclusion of provisions of regulation 4 of PFUTP Regulations, 2003 in the SCN and reject the contentions of the Noticees in this regard. 11. SML has also contended that no action has been taken by SEBI against the brokers (i.e. Maheshwari and Adroit) who had entered into cross deals and synchronized deals in the scrip of SML during the period under investigation. In this regard, it is pertinent to note that Enquiry Proceedings under the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations 2002 were initiated by SEBI in the matter of SML against Maheshwari and Adroit, which were subsequently settled through consent orders dated August 12, 2010 and November 1, 2012, respectively as per the applicable legal framework.

In view of the above, I do not find any merit in the said contention of the Noticees.

12. In the present case, the following facts are undisputed:-  In February 2000, the Shamken Group decided to increase its holding in SML and Shamken Cotsyn Ltd.  The Shamken Group transacted through Dhanvarsha and Prasneeta for buying the shares of SML and Shamken Cotsyn Ltd.  Between the period March 9, 2000 and May 23, 2000, the Shamken Group purchased 5,29,020 shares of SML through Dhanvarsha and Prasneeta for ₹90,03,550.  Dhanvarsha and Prasneeta were not registered with SEBI as sub-brokers. 13. I note that from February 23, 2000 to July 20, 2000, on NSE, the price of the scrip of SML increased from ₹ 6/- to ₹ 25.55/-. Along with the price rise, there was also an increase in the average traded volume of the scrip of SML from 9,800 shares during the period May-June 2000 to 92,400 shares during the period June-July 2000. Two brokers viz., Adroit and Maheshwari accounted for approx. 95% of the net traded quantity during the relevant period and both the brokers mainly traded on behalf of a common client, Vandana. Vandana, acted as an unregistered sob-broker and traded mainly on behalf of Dhanvarsha and Prasneeta. 14. It is also noted that cross deals through Maheshwari and Adroit constituted 13.69% and 17.11% of the gross traded quantity for the market in this scrip. Further, during the 2nd period of investigation 363 structured deals amounting to 2,17,800 shares were executed by Maheshwari and Adroit on behalf of Vandana / Dhanvarsha which constituted 28.69% of the gross traded quantity at NSE in SML shares. Also, Vandana has traded for its clients Dhanvarsha and Prasneeta. Gross buying and net buying by these two clients constituted 53.08% and 35.75%, respectively of the total buying at NSE. 15. During the investigation period on behalf of Vandana, Maheshwari bought 8,71,000 shares and sold 3,00,700 shares whereas Adroit bought 2,17,800 and sold 1,55,500 shares on its behalf. Maheshwari and Adroit also executed on behalf of Vandana 363 structured deals for 2,17,800 shares which constituted 28.69% of the gross traded quantity at NSE in SML shares. 16. I note that Vandana purchased 6,95,200 shares (gross) which constituted 53.08% of total quantity traded volume during the investigation period on behalf of Dhanvarsha and Prasneeta. Further, its net purchase on their behalf was 68.50% (4,68,200 shares) of the total net quantity of 6,83,500 shares at NSE.

17. Admittedly, in the present case, the Shamken group had traded through Dhanvarsha and Prasneeta in the scrip of SML. I note that Mr. Jeev Narayan Mishra, proprietor of Dhanvarsha stated in his statement that all his dealings in SML shares were on behalf of Shamken Group only and no dealings were done in his own account. He also stated that the orders were mostly placed by Mr. Pravin Juneja (director of SML) and sometimes by Mr. V. R. Rao (Senior. Manager of SML, and a subordinate of Mr. Pravin Juneja). I further note that Mr. Ajay Kumar Agarwal, director of Prasneeta, in his statement admitted that Prasneeta was introduced to trading in the scrip of SML by Mr. Pravin Juneja for a commission and all the orders for purchase were given to Prasneeta either by Mr. Pravin Juneja himself or his representative and that whatever trading in SML shares was done by Prasneeta, it was at the instance of Mr. Pravin Juneja. 18. I note that purchases were made by four group companies of SML viz. Sohit Investments Private Limited, Angel Textiles Private Limited, Kotwan Traders Private Limited and Lotus Garments Private Limited and that the payment was made by Shamken Spinners Limited. I further note that from the information obtained from Citi Bank the payment was also being made directly by SML through its account no. 0417964223 with Citi Bank. Further, funds were also received from the account of Right Credits & Securities Private Limited and Lotus Garments Private Limited, both group concerns of SML.

19. It is alleged in the SCN that the firm Dhanvarsha was opened with a specific purpose of executing transactions in the scrip of SML. In this regard, the Noticees have submitted that appointment of Dhanvarsha was merely for administrative convenience. They further submitted that Dhanvarsha was introduced to the Shamken group by Mr. P K Aggarwal who had assured the Shamken Group that Dhanvarsha was an entity already dealing in securities. I note from the material on record that Mr. P K Aggarwal was a good friend of Mr. Praveen Juneja and was also related to Mr. I C Jindal (director of Vandana) and Mr. Ajay Kumar Agarwal director of Prasneeta). I also note that Mr. Jeev Narayan Mishra (proprietor of Dhanvarsha) was not even a graduate and had no prior experience of dealing in securities market. Mr. Jeev Narayan Mishra in his statement admitted that he was an employee of Prasneeta. a company of Mr. Ajay Kumar Agarwal who had introduced him to Mr. Praveen Juneja, one of the directors of SML. He further stated that. whenever Mr. Juneja and Mr. V R Rao asked him to purchase shares of SML, buy orders were placed with Vandana.

SML used to give money through cheques and the same were deposited in the account of Dhanvarsha. He also stated that all the money credited into accounts no. 2116 and 50320 came from Shamken Group. It is further noted that Mr. Ajay Kumar Agarwal was also new to securities market. It is also pertinent to mention that Dhanvarsha was not registered with SEBI as a sub-broker while was trading in the scrip of SML on behalf of the Shamken group in the capacity of a sub-broker. In view of the above, I find that Dhanvarsha was merely opened for the purpose of trading in the scrip of SML and was used as a conduit by the Shamken group for the purpose of manipulating the price and volume in the scrip of SML. 20. I note that Mr. Ajay Kumar Agarwal, director of Prasneeta has stated that they were induced to trade in the shares of SML by Mr. Praveen Juneja and were offered an incentive of 10 paisa in the form of commission for acquiring the shares of SML. I further note from the statement that all the orders for purchase were given by Mr. Praveen Juneja or his representative. Accordingly, orders were placed for dealing in SML through Vandana.

21. In this case, it is also noted that several payments have been made by Shamken Spinners Ltd. to Prasneeta, Dhanvarsha and Vandana. Further, Shamken Spinners Ltd. has bought 2,66,920 shares of SML from Prasneeta who had purchased through Vandana during March-May 2000. Furthermore, payment of ₹49.21 lacs was made by Shamken Spinners Ltd. to Prasneeta for the said purchase. Payments were also made by Shamken Spinners Ltd. to Vandana at the instance of Dhanvarsha.

22. I further note that SML had issued 8 cheques amounting to ₹25,87,751/- to Mr. Jeev Narayan Mishra, which were credited in the account no. SB 2116 maintained with Nedungadi Bank Ltd. (presently PNB), Mayur Vihar branch, New Delhi. Details of the credits are tabulated below-

S. Cheque Date Amount Issuing Credited in the account No. no. Bank of Jeev Narayan Mishra a/c on 1 017480 2.5.2001 250220 Citibank 04.5.2001 2 017500 9.5.2001 848846 Citibank 11.5.2001 3 071612 14.5.2001 318618 Citibank 16.5.2001 4 071616 21.5.2001 190500 Citibank 23.5.2001 5 071629 24.5.2001 562373 Citibank 26.5.2001 6 071652 4.6.2001 63000 Citibank 7.6.2001 7 071662 7.6.2001 41000 Citibank 11.6.2001 8 071678 14.6.2001 313194 Citibank 16.6.2001 25,87,751 23. In light of the aforesaid, it is clear that the Shamken Group was the ultimate client of brokers Maheshwari and Adroit.

24. It is surprising to note that the Shamken Group, which wanted to consolidate its holding in SML, chose to purchase shares of SML through two unregistered sub-brokers i.e. Dhanvarsha and Prasneeta, which in turn purchased shares from another unregistered sub-broker i.e. Vandana. As already noted, Vandana purchased shares only through two brokers, who had accounted for majority of the trading volume in the scrip of during the investigation period. Further, the payments in respect of the purchase of shares by the Shamken group were made by SML directly to Dhanvarsha and Vandana. In my view, if the intention of the Shamken group genuinely had been consolidation of its holding in SML, it would have transacted through registered intermediaries and SML itself would not have been a party to any of the payments. 25. In addition to the above, the fact that the directors of SML i.e. Mr. H. B. Chaturvedi and Mr. Pravin Juneja did not furnish the information sought by SEBI despite service of summons, issued to them in that regard, also corroborates the mala fide of the Noticees. 26. I note that Mr. H.B.

Chaturvedi and Mr. Pravin Juneja, being in control of the day to day affairs of SML, had the knowledge of its acts and omissions. They were also under an obligation to ensure that acts and transactions of SML were not in violation of any of the applicable provisions of SEBI Regulations or other applicable laws. I, therefore, find that Mr. H.B. Chaturvedi and Mr. Pravin Juneja were responsible for SML's acts and omissions in this case. 27. In view of the facts and circumstances of this case discussed hereinabove, I do not find any material to differ from the allegations and charges in the SCN and find that SML and its directors Mr. H.B. Chaturvedi and Mr. Pravin Juneja have violated regulation 4(a), (b) (c) and (e) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with regulation 4 (2)(a)(d) and (e) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 28. I am of the considered view that such fraudulent activities pose prudential threat to the market integrity and orderly development of securities market.

I, however, note that the transaction in question had taken place long back i.e. in the year 2000. Further, the SCN that had been issued in the year 2004 does not clearly bring out the magnitude of contribution of the Noticees in the alleged price and market manipulation in the scrip of SML.

29. Considering the facts and circumstances of this case and the abovementioned mitigating factors, I, in exercise of powers conferred upon me under section 19 read with section 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 and regulation 11 of the PFUTP Regulations, 1995 read with regulation 13 of the PFUTP Regulations, 2003 hereby restrain Shamken Multifab Ltd. and its directors, namely, Mr. H.B. Chaturvedi and Mr. Pravin Juneja from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for a period of three years from the date of this order. 30. This order shall come into force with immediate effect. A copy of the order shall be served on the Noticees and the stock exchanges for ensuring due compliance with the above directions.

Sd/-

DATE: DECEMBER 9th, 2014 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA