Order with respect to Eversight Tradecomm P. Ltd.

WTM/RKA/IVD/ID-4/35/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGARWAL, WHOLE TIME MEMBER ORDER Under Sections 11, 11(4) and 11 B of the Securities and Exchange Board of India Act, 1992 read with Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. In the matter of Temptation Foods Limited. In respect of Eversight Tradecomm Pvt. Ltd. (PAN AAACE7667E) Date of hearing: March 5, 2012 Appearances: For Eversight Tradecomm Pvt. Ltd. : Mr. Balveer Singh, and Mr. Ashok Kumar Sharma For SEBI: Mr. Santosh Kumar Shukla, Joint Legal Advisor Ms. Neelam Bhardwaj, General Manager Mr. Siddhesh Lotlikar, Assistant General Manager Mr. Benoy Melshiyar, Assistant Legal Advisor, and Mr. Durgesh Kumar Thakur, Assistant Legal Advisor. 1. Securities and Exchange Board of India (‘SEBI’) during routine market surveillance observed synchronized deals in scrips namely Cals Refineries Limited, Confidence Petroleum India Limited, Bang Overseas Limited, Shree Precoated Steels Limited (presently known as Ajmera Realty & Infra India Limited) and Temptation Foods Limited (‘Temptation’) (hereinafter collectively referred to as ‘the five scrips’).

On examination of the trade data relating to these five scrips, inter-linkages among certain entities (hereinafter collectively referred to as the ‘connected clients’) dealing in those five scrips were noticed in the form of off-market transactions and market transactions including synchronized deals. Eversight Tradecomm Pvt. Ltd. (‘Eversight’/ ‘noticee’) is one of those connected clients. 2. During the preliminary investigation, 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 of those five scrips. In view of the same, SEBI, vide an ad interim ex-parte order dated June 04, 2009 restrained, inter-alia, the Eversight from accessing the securities market and further prohibited it from buying, selling or dealing in the securities market, directly or indirectly, till further directions. SEBI passed an order dated January 25, 2010 confirming its earlier order dated June 04, 2009. 3. SEBI completed the investigation relating to trading in the scrip of Temptation for the period August 1, 2007 to February 28, 2009 (‘investigation period’) and thereafter, issued a show cause notice dated August 1, 2011 (‘SCN’) to Eversight 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 (‘PFUTP Regulations’) with respect to its trading in the scrip of Temptation.

The SCN alleged that the noticee had executed reversal of trades and synchronized transactions in the scrip of Temptation with connected clients, which resulted in the creation of artificial volumes in the scrip of Temptation. The acts of the noticee were, thus, alleged to be in violation of Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2) (a) and (g) of the PFUTP Regulations read with Section 12A(a), (b) & (c) of SEBI Act, 1992. 4. The noticee, vide letter dated October 31, 2011 replied to the SCN and sought an opportunity for personal hearing. Accordingly, an opportunity for personal hearing was granted to the noticee on March 5, 2012, when the authorized representatives of the noticee appeared before me and made oral submissions. 5. The submissions of the noticee inter alia are as under: a. During the relevant period they had traded in several scrips including Temptation. All the transactions carried out by them were genuine and in the ordinary course of business of NBFC. All the transactions were carried out on the screen based order matching system of the exchange. They had not carried out any 'off market transaction.'

They have taken delivery in their demat account in respect of their purchases and given delivery from their demat account in respect of their sales. Further, transactions in the scrip of Temptation were done at market price without acting in concert with anybody including the alleged connected clients. b. The charges in the SCN are erroneously based on the assumption that they were part of the alleged 'connected clients'. They are not part of the alleged ‘connected clients’. Simply based on the observation that their directors are distant relative of Mr. Sudhir Jain does not indicate that they are connected clients as alleged and any inference of connection on this basis is wrong. They were not aware of any entities of the Maniar Group and had absolutely no relationship with them. Further, based on the same, the trades of other entities have been erroneously clubbed with their trades in order to draw adverse inferences against them. c. Since there were no off market transfer of shares to the alleged connected clients through them and vice versa, the allegation that the shares were transferred in off market to the connected clients for the purpose of entering into reversal transactions through online market is baseless. d. They had traded during January 03, 2008 to January 05, 2009. Out of the said period of 26 months, their trades were limited to just 30 days with a very insignificant quantum i.e. their purchase quantity constituting mere 2.95% and sales 4.39% of the BSE volume during the investigation period.

All their trades were delivery based and were on the market and were not in the nature of intra-day square of trades. Further, there was a time gap between their trades and trades were not continuous in nature. e. The trades in respect of 73,469 shares of Temptation which allegedly matched with Beejay Financial Services P. Ltd. were in ordinary course and executed only on 2 days i.e. July 14, 2008 and September 01, 2008. In all these trades there was time difference spanning from 3 seconds to 10 minute 11 seconds. In almost all these trades, there was quantity difference and in 3 instances there was also price difference. There is nothing in the SCN to show that these trades were reversal trades. These trades were part of their sale of 10,13,493 shares and represent 7.24% of their sale. f. Similarly, in the transactions executed with Mr. Sudhir Jain, there was quantity difference and time difference in almost all the trades spanning from 1 second to 3 hours 45 minutes. In four instances there was also price difference. These trades were part of their total purchase of 6,76,978 shares and represent 28% of their purchase. g. Their total trade during the relevant period were 6,76,978 shares in respect of their buy trade and 10,13,493 shares in respect of their sale trade whereas the shares involved in the impugned trades were only 2,40,938 in respect of their buy trades and only 74,449 in respect of their sale trade.

Thus, majority of their trades matched with persons other than the alleged connected clients. The same demonstrates that the alleged matching of the trades with the connected clients was coincidental and was not designed as insinuated. h. In the said factual scenario where in part quantities of shares have been picked up by others in the market and the alleged trades were but a part of the total trades carried out in the particular scrip on a particular day, it is clear that they had not indulged in any synchronization of trades as alleged. These trades had matched coincidentally in ordinary course and not by design. The transactions alleged to be synchronized were isolated transactions spread over a long period of time and were minuscule quantities of the total trading done by them. i. As on date as a result of ex-parte order, they have undergone a ban of more than 875 days and suffered erosion in the valuation of their portfolio. Any further continuance of the directions in the circumstances would be hugely detrimental. 6. I have carefully considered the SCN, the reply, the submissions made during the hearing and all the material available on record.

7. It is observed that for the trades of Eversight, the major counterparties were Mr. Sudhir Jain, Beejay Financial Services P. Ltd. ('Beejay'), Flex Trade P. Ltd. ('Flex'), Ms. Samta Jain, Ms. Surabhi Jain, and Stupendors Traders P. Ltd. ('Stupendors'). I find that these clients and Eversight are connected to each other. The following facts support the connection amongst them:- (a) Mr. Adish Jain and Mr. Peeyush Jain are directors of Eversight and also distant relatives of Mr. Sudhir Jain. (b) Mr. Sudhir Jain and his wife Ms. Rashmi Jain are directors of Beejay and Flex. (c) Ms. Samta Jain and Ms. Surabhi Jain are sister and niece of Mr. Sudhir Jain, respectively. (d) Mr. Vicky Kothari, director of Stupendors is brother-in-law of Mr. Sudhir Jain. 8. In the SCN, it is alleged that the noticee had bought 6,76,978 shares and sold 10,13,493 shares in the scrip of Temptation during the investigation period. The noticee has not disputed its transactions that are relied upon in the SCN in support of the charges in the SCN. From the trading details of the noticee in the scrip of Temptation during this period, it is observed that the major counterparty selling clients for the buy trades of Eversight were Mr. Sudhir Jain (1,89,598 shares), Ms. Samta Jain (30,800 shares) and Ms. Surabhi Jain (20,000 shares).

Further, the major counterparty buying clients for the sell trades of Eversight were Beejay (73,469 shares) and Mr. Sudhir Jain (1,030 shares). I note that as Eversight had repeatedly done trading with these connected clients, it cannot be believed to be mere coincidence. Thus, it will be appropriate to infer that Eversight had executed several trades with connected clients to create artificial volume in the scrip of Temptation. 9. I further note that in the SCN it is alleged that noticee had indulged in the following synchronized transactions in the scrip of Temptation:-

Trade Trad Trade Trade Order Order Order Buy Buy Sell Sell Client Trade CP CP CP Time Qty Rate Date e No Rate Time Time Qty Rate Client Member Member Name Qty Order Order Order diff dDiffi fdiff Name Name Name Time Qty Rate 19-Jun- 08 293 344.50 15:10:15 15:10:14 10000 344.5 Eversight Microsec B Lodha Sudhir 9191 15:10:07 10000 344.50 0:00:07 0 0 1-Jul-08 42 310.00 12:36:53 12:36:38 10000 310 Eversight Microsec B Lodha Surabhi 9838 12:36:52 10000 310.00 0:00:14 0 0 11-Jul-08 40 304.00 12:10:08 12:10:07 50000 304 Eversight Microsec B Lodha Sudhir 50000 12:10:06 50000 304.00 0:00:01 0 0 14-Jul-08 89 297.00 15:14:26 15:14:22 7000 297 Beejay Indiabulls Religare Eversight 7000 15:14:25 7000 297.00 0:00:03 0 0

10. From the above table, it is observed that on June 19, 2008 Mr. Sudhir Jain placed a sell order of 10,000 shares at 15:10:07 hrs. and Eversight placed a buy order of 10,000 shares at 15:10:14 hrs. In this order, trade for 9,191 shares got executed in a time difference of 0:00:07 seconds between sell and buy order. Further, on July 1, 2008 Eversight placed a buy order of 10,000 shares at 12:36:48 hrs. and Ms. Surabhi Jain placed a sell order of 10,000 shares at 12:36:52 hrs. Thus, trade of 9,838 shares got executed in a time difference of 0:00:14 seconds between buy and sell order. On July 11, 2008 Mr. Sudhir Jain placed a sell order of 50,000 shares at 12:10:06 hrs which matched in a time difference of 0:00:01 second with the buy trades of 50,000 shares of Eversight. I therefore, find that these trades were synchronised in term of price, quantity and time wherein the time difference between the buy and sell orders was almost negligible. 11. I note that the noticee has submitted that there were several instances where the orders were placed with a considerable time gap and they were not continuous in nature. I, however, note from the trading details of the noticee that it has continuously placed orders in the scrip of Temptation which got executed with the connected clients. Moreover, in illiquid scrips, even when the trades are executed on the floor of the exchange on a price-time priority of orders, one cannot rule out the possibility of manipulative deals, particularly when the transactions are done amongst the connected clients. Further, when manipulators operate in large group, the individual contribution could be small, but the group as a whole has a larger impact on the securities market. 12. In this case, the noticee is part of group of connected clients and had dealt in the shares of Temptation with other connected clients. The trades of the noticee have to be considered as part of overall plan of manipulative trading in the five scrips amongst the connected clients. I note that the noticee's trades are also significant and have contributed to the creation of artificial volume in the scrip of Temptation which led to creation of false and misleading appearance of trading in the scrip without intention of change of beneficial ownership. I, therefore, find that the noticee violated Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(a) and (g)

of the PFUTP Regulations and 12A(a), (b) and (c) of the SEBI Act. I, however, 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. In facts and circumstances of the case of the noticee, I find that the restraint/debarments imposed upon the noticee vide orders dated June 04, 2009 and January 25, 2010 need not continue further. 13. In view of the foregoing, I, hereby dispose of the Show Cause Notice dated August 01, 2011 issued to the noticee without passing any further direction against the noticee. 14. This Order shall come into force with immediate effect.

15. A copy of this Order shall also be sent to all recognized stock exchanges and depositories.

RAJEEV KUMAR AGARWAL DATE: SEPTEMBER 07, 2012 WHOLE TIME MEMBER PLACE: MUMBAI SECURITIES AND EXCHANGE BOARD OF INDIA