Order with respect to Krishvi Securities P. Ltd

WTM/RKA/IVD/ID-4/ 26/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGARWAL, WHOLE TIME MEMBER ORDER Under section 12(3) of the SEBI Act and regulation 28(2) of the SEBI(Intermediaries) Regulations, 2008 against Krishvi Securities P. Ltd. - A Stock Broker, BSE (SEBI Registration No. INB 011202737) In the matter of Temptation Foods Limited, Bang Overseas Limited, Confidence Petroleum India Limited, Cals Refineries Limited and Shree Precoated Steels Limited (now known as Ajmera Realty & Infra India Limited) Appearances: For Noticee Mr. Rajesh Khandelwal, Advocate For SEBI: Mr. Santosh Kumar Shukla, Joint Legal Adviser Mr. Sharad Krishna Sharma, General Manager Mr. Siddhesh Lotlikar, Assistant General Manager, and Mr. Gautam Kumar, Assistant Legal Adviser 1. Securities and Exchange Board of India (SEBI) during routine market surveillance observed synchronized deals in the scrips of Temptation Foods Limited (‘Temptation’), Bang Overseas Limited (‘Bang’), Confidence Petroleum India Limited (‘Confidence’), Cals Refineries Limited (‘Cals’) and Shree Precoated Steels Limited (‘SPSL’) (presently known as Ajmera Realty & Infra India Limited). These scrips, hereinafter, have been collectively referred to as 'five scrips'. It was observed that a group of related/connected clients were having unusual large trading concentration in said five scrips. SEBI, therefore, conducted investigation into the trading in the aforesaid five scrips for the following periods- (a) 'Temptation'- for the period August 01, 2007 to February 28, 2009, (b) 'Bang' - for the period March 01, 2008 to February 28, 2009, (c) 'Confidence'- for the period January 01, 2008 to February 28, 2009, (d) 'Cals' - for the period June 01, 2008 to February 28, 2009; and (e) 'SPSL' -for the period October 01, 2007 to February 29, 2008.

2. The investigation revealed that a group of related/connected clients including Chandra Financial Services P. Ltd. (‘Chandra’), Kundan Leasing & Finvest P. Ltd. (‘Kundan’), Jay Investrade P. Ltd. (‘Jay’), HSM Financial Services P. Ltd. (‘HSM’), Shanti Financial Services P. Ltd. (‘Shanti’) and Mr. Harsh Shirish Maniar and Mr. Jay Shirish Maniar who are directors in these companies (‘hereinafter collectively referred to as 'Maniar group’), Maruti Securities Ltd. ('Maruti') and Acme Craft P. Ltd. ('Acme') ('hereinafter referred to as connected clients') had dealt in the said five scrips during the relevant investigation periods and they had traded amongst themselves and contributed significantly to the market volumes of the said five scrips. A number of trades executed by them were synchronised/fictitious/manipulative in nature. Krishvi Securities Pvt. Ltd. ('the Noticee'), a stock broker and member of the Bombay Stock Exchange Ltd. ('BSE') having SEBI registration No. INB011202737, had traded on behalf of some of those connected clients in the scrips of Temptation, Bang, Confidence and Cals out of the aforesaid five scrips during the relevant investigation periods.

These clients of the Noticee were also clients of other stock brokers namely; M/s Chandravadan J. Dalal ('CJ Dalal'), Proprietor: Mr. Deepak C. Dalal and Lalkar Securities Pvt. Ltd. ('Lalkar'). 3. Based on the findings of the investigation, SEBI initiated proceedings under SEBI (Intermediaries) Regulations, 2008 ('Intermediaries Regulations') against the Noticee and appointed the Designated Authority ('DA') to enquire into the alleged violation of the provisions of section 12A (a), (b) and (c) of the SEBI Act ('the Act') read with regulations 3 (a) to (d), 4 (1), (2) (a), (b), (e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 ('PFUTP Regulations'), clauses A(1) to (5) of the Code of Conduct for stock brokers specified under Schedule II read with regulation 7 of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 ('Stock Brokers Regulations'). 4. The DA conducted proceedings to enquire into the allegations that the Noticee, alongwith/in collusion with CJ Dalal and Lalkar and its connected clients had indulged into or aided/abetted its clients in executing synchronized/circular/fictitious/manipulative trades in order to artificially create volumes/price in the scrips of Temptation, Bang, Confidence and Cals ('the scrips').

The names of those connected clients and relevant factors/details on the basis of which the relation/connection amongst them was alleged was also provided by the DA to the Noticee alongwith the notice dated June 15, 2011. After completion of the proceedings, the DA submitted the Report dated August 30, 2012 ('the Report') in terms of regulation 27 of the Intermediaries Regulations. 5. In the Report, the DA inter alia found that the Noticee is related/connected to the counter party stock broker, CJ Dalal. Further, it failed to exercise due care, skill, diligence, etc. and assisted/abetted some of the connected clients while dealing in the scrip of Temptation, Bang, Confidence and Cals with an intent to artificially raise the volume of the scrips by way of manipulative trade practices and thereby violated provisions of section 12A (a), (b) and (c) of the SEBI Act ('the Act') read with regulations 3 (a), (b), (c) & (d), 4 (1), (2) (a), (b), (e) & (g) of the PFUTP Regulations, clauses A(1), (2), (3), (4) & (5) of the Code of Conduct for stock brokers specified under Schedule II read with regulation 7 of the Stock Brokers Regulations.

The DA recommended that the certificate of registration of the Noticee be suspended for a period of 15 days. 6. After considering the Report, a show cause notice (SCN) dated October 4, 2012 under regulation 28 of the Intermediaries Regulations was issued to the Noticee calling upon it to show cause as to why a penalty as recommended by the DA or as deemed fit by the Board should not be imposed on it. A copy of the Report was also forwarded to the Noticee alongwith the SCN. The Noticee replied to the SCN vide its letter dated October 29, 2012 and requested for an opportunity of personal hearing which was granted to it on December 13, 2012. The learned Advocate Mr. Rajesh Khandelwal appeared on the scheduled date and made submissions on behalf of the Noticee. The Noticee, vide letter dated December 18, 2012, also filed its written submissions. The submissions of the Noticee inter alia are as under:- a. Out of the connected clients, only 6 entities namely Acme, Chnadra Jay, Kundan Maruti and Rakhi are its clients. It is not aware about other alleged connected clients. b. The only basis of its alleged association or being sister concern of CJ Dalal (Proprietor: Mr. Deepak C. Dalal) is that one of the Noticee's erstwhile director Ms. Anita Deepak Dalal is the wife of Mr. Deepak Dalal.

It is denied that the Noticee and CJ Dalal are sister concerns. c. It has never carried out any proprietary trades. All the trades carried out through it were for its clients backed up with appropriate deliveries and payment obligations. d. There is nothing to substantiate the allegation of price manipulation against the Noticee. e. The DA has confirmed that the trades of the Noticee executed in the respective scrips under post closing session were not synchronized/manipulated. f. The Noticee has not violated the Code of Conduct of an intermediary and, therefore, no suspension of certificate of its registration be levied against it. g. With respect to the allegations that the Noticee indulged in circular trades in the scrip with CJ Dalal and Lalkar by trading amongst themselves to create artificial volume and to manipulate the price of the scrip, the Noticee submits that it may be treated in the same manner as Lalkar. Since Lalkar, being counter party for majority of the transactions of the Noticee, had been exonerated vide order dated October 9, 2012, thus the Noticee should also be exonerated. h. With regard to findings of the DA on its transactions in the respective scrips, the Noticee has inter alia made following submissions:- A. With regard to the scrip of Temptation: i. The Report refers to single sell order no. 92700100020122177 entered by the Noticee in the system on November 07, 2008 at 15:40:16 for 8500 shares at the price of Rs. 241.15 per share under instructions of Acme in the post closing session.

The allegation that the Noticee entered 182 orders on November 07, 2008 is absolutely false and baseless. The allegation that the trades were motivated artificially to raise the volume and create interest in the scrip is false. Therefore, the allegation of abetting the clients to carry out synchronized/ manipulative trades does not hold ground. ii. The allegation that Noticee along with CJ Dalal had indulged in synchronized trades is denied. The Noticee has never indulged nor assisted any of the clients in raising the volume of the scrip artificially. iii. As found by the DA, the Noticee had not done any circular trading in the scrip. B. With regard to the scrip of Bang: i. Only because the quantity and price matched with CJ Dalal who was counterparty buyer in 24 sale transactions and counter party seller in 86 buy transactions out of 207 total trades in the scrip of Bang for period October 01, 2008 to December 31, 2008, no adverse inference from the same may be drawn as the trades were executed on the instructions from clients. ii. The DA has rightly concluded that the trades of the Noticee have not led to the price manipulation in the scrip. iii.

The Noticee was only the selling counterparty to all trades, therefore, the allegation of circular trades does not hold true against it. CJ Dalal was not always counterparty for the transactions done by it, other stock brokers were also counterparties to its transactions. Moreover, it is not possible to know the counterparty in an automated mechanism of the stock exchange. C. With regard to the scrip of Confidence: i. During the period from May to July 2008, the scrip of Confidence was under trade to trade (T2T) settlement where every trade had to be settled by giving and taking delivery of shares which implies that all trades were backed by change of beneficial ownership. ii. The Noticee had traded in 11,22,668 shares which is less than 1% of the total 15,27,32,567 shares traded in the market and therefore, it cannot amount to synchronized trades. Considering this miniscule numbers of transactions (three), the DA has exonerated the Noticee from the allegations of synchronised trading in the scrip. Further, as found in para. 75 of the Report, none of the transactions allegedly done by Ms. Anita Dalal were self trades.

In view of the same, the DA in the Report has not given any adverse finding with regard to the allegation of self trades. iii. With regard to allegation of circular trading, the Noticee has submitted that it was merely following the instructions of its clients and was only selling broker in all the trades described in para. 76 of the Report. D. With regard to the scrip of Cals: i. The paid up capital of Cals in September 2007 was only 50,28,100 shares and in March 2008, the total paid up capital of Cals increased to 79,40,00,000 shares which is a huge increase. However, the DA had failed to consider the said fact and simply observed that there was a spurt in volume of the scrip of Cals. ii. With respect to self trades executed by Maruti for which the Noticee was the buying broker and the selling broker was SPS Shares Brokers Ltd. ('SPS'), it is submitted that in the BOLT trading system, the Noticee would not know the counterparty broker or the client of the counterparty broker. The Noticee was only following instructions of the client and thus holding it liable for clients' actions would be unjust. iii.

In para. 59 of the Report itself the DA has held that the transactions were not synchronised and were not executed to artificially create the volume in the scrip. iv. The Noticee was the selling broker in all the circular trades described in the Report and was just following clients' instruction. v. As regards the allegation that the Noticee and CJ Dalal were the only stock brokers involved in the trades, the Noticee submits that the trades were executed with other stock brokers as well. Therefore, the allegations that the Noticee abetted the clients and was deemed to be aware of the intentions of the clients in dealing in the scrip does not hold good. 7. I have carefully considered the Report, SCN, the replies and submissions of the Noticee and relevant material available on record. I note that during the preliminary investigation, certain 'connected clients' including Maniar group entities, Maruti and Acme were found to be having large trading concentration in the above said 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 in the respective scrips during the relevant investigation period.

In view of the same, SEBI vide an ad interim ex-parte order dated June 04, 2009 restrained those 'connected clients' from accessing the securities market and further prohibited them from buying, selling or dealing in the securities market, directly or indirectly, till further directions. The ad-interim order dated June 04, 2009 was confirmed vide orders dated September 18, 2009, September 30, 2009 and September 30, 2009 in respect of Maniar group, Maruti and Acme, respectively. While the proceedings commenced against Maniar group and Maruti pursuant to the said interim order have culminated in the final order dated September 25, 2012, the proceedings against Acme are pending. 8. On completion of the investigations, it was also revealed that Ms. Anita Deepak Dalal, director of the Noticee and wife of the Proprietor of CJ Dalal, Mr Deepak C. Dalal, was involved in creating artificial volumes in the scrips of ‘Bang’, ‘Confidence’ and ‘Cals’ during the relevant investigation period. The separate proceedings initiated against Ms. Anita Dalal have also being concluded by an order dated September 25, 2012. I note that in the appeal no. 211/2012 filed by Ms. Anita Dalal, Hon'ble SAT, vide order dated December 03, 2012 upheld the findings of the impugned order dated September 25, 2012 but reduced the period of restraint to 3 months as against 18 months.

9. It is admitted fact that Chandra, Jay and Kundan (i.e. the entities belonging to Maniar group), Maruti and Acme had traded in the scrips of Temptation, Bang, Confidence and Cals during the relevant investigation period through the Noticee. I note that Mr. Harsh Shirish Maniar and Mr. Jay Shirish Maniar are the only directors in Chandra, Kundan and Jay and these companies have common address at Achal Bhuvan, 3rd floor, 21 Modi Street, Fort, Mumbai. Thus, they are connected to each other. Further, Maniar group, Maruti and Acme had financial dealings and 'off-market' transfer of shares with each other leading to the credence that they were connected to each other. I note that for the trades executed by the Noticee for these entities the counter parties were from amongst the connected clients who placed orders through CJ Dalal and Lalkar. The Noticee and CJ Dalal both are members of BSE. Mr. Deepak C. Dalal (proprietor of CJ Dalal) is husband of Ms. Anita Deepak Dalal, a director of the Noticee during the relevant period. Further, CJ Dalal has trading terminals at two places i.e. at 18-B, Raja Bahadur Mansion, 8 Hamam Street, Fort Mumbai – 400001 and 408, Maker Chamber V, 221, Nariman Point, Mumbai – 400020. While the Noticee has its trading terminal at 407, Maker Chamber V, 221, Nariman Point, Mumbai – 400021, as evident from the contract note issued by the Noticee to its client i.e., Rakhi Trading P. Ltd., the Noticee was doing its business at the addresses where the trading terminals of CJ Dalal were located.

In view of these facts, it can be safely inferred that the Noticee and CJ Dalal are connected to each other. 10. I note that there is no material on record to suggest connection/relation of Lalkar with the connected clients and the counter party stock brokers. The facts and circumstances and pattern of transactions as examined in the order dated October 09, 2012 in respect of Lalkar do not suggest such connection/relation. In the present matter the transactions under examination are those transactions where the counterparty brokers are only the Noticee and CJ Dalal who, as noted above, are connected with each other. Moreover, the trades done by Lalkar which were examined in the order dated October 09, 2012 were only sell orders and are miniscule as compared to the number of transactions done by the Noticee alongwith CJ Dalal in the current matter. In view of these facts, I do not agree with the contention of the Noticee that since Lalkar, being a counter party broker to Noticee's trades, has been exonerated, the Noticee should also be treated on the same parlance and be exonerated and hold that the present case has to be examined from its own facts and circumstances which are substantially different from the facts and circumstances examined in the order dated October 09, 2012 in respect of Lalkar.

11. I, further, note that there is no dispute as to the details of the trades of the Noticee as described in the SCN. However, the Noticee has contended that only selected trades were taken into account in the SCN and not all its trades during the respective investigation period. In this regard, I note from the Report that the DA had, vide letter dated August 25, 2011, informed the Noticee that only those transactions that were manipulative in nature were taken into account in the proceedings. I further note that, as requested by it during the hearing before the DA on August 11, 2011, the Noticee was given an opportunity of inspection of documents relied upon by the DA. However, the Noticee did not avail the opportunity of inspection of documents and vide its letter dated September 05, 2011, informed the DA that it did not want the inspection of documents. In view of clarification given by the DA and procedure followed by him as recorded in detail in the Report, I do not find any procedural infirmity in the proceedings conducted by the DA and reject the contentions of the Noticee. 12. I, now, proceed to examine those trades of the Noticee (executed by it during the investigation period of the respective scrip) which are the basis of the findings of the DA that the Noticee has failed to exercise due care, skill, diligence, etc. and also assisted/abetted some of the connected clients while trading/dealing in the scrip of Temptation, Bang, Confidence and Cals with intent to artificially raise the volume of these scrips.

In the scrip of Temptation 13. I note that on November 07, 2008 Acme (through the Noticee) placed a sell order for 8,500 shares of 'Temptation' which matched with 182 buy orders of Chandra wherein Chandra trading through CJ Dalal continuously placed the substantial number (182) of buy orders for one share and more, repeatedly. These trades were executed by the Noticee at the same price with the same counter party ‘connected clients’ through connected counter party broker i.e. CJ Dalal in synchronized manner within a span of 18 minutes during 15:40:16 to 15:59:38. 14. The pattern of trading in this case clearly suggests that these trades, wherein the buy and sell transactions happened at the same price with the same counter party ‘connected clients’ through the connected stock brokers within a span of 18 minutes at the same price, though after the closing hours was synchronized, were abnormal and non-genuine. I, therefore, reject the argument of the Noticee that allegations against it with regard to these trades are false and baseless. In view of this, I do not find any reason to differ with the observations of DA in para 44 of his report and his findings that the Noticee along with CJ Dalal indulged in synchronized trades in this scrip and there by indulged and assisted the connected clients in artificially raising the volumes of the scrip.

In the scrip of Bang 15. The total market volume during the investigation period (March 01, 2008 to February 28, 2009) in the scrip of Bang was 2,65,28,074 shares wherein the top 10 stock brokers contributed 52.22% and 48.41% of the gross purchases and gross sales respectively. CJ Dalal had the highest concentration of 29.54% and 17.75% of the gross purchases and gross sales, respectively. The major counterparty brokers for the buy trades of CJ Dalal were the Noticee (31.40%), Lalkar (12.36%) and CJ Dalal (6.33%). Further the major counterparty brokers for the sell trades of CJ Dalal were the Noticee (17.64%), CJ Dalal (10.53%) and SPS. (8.63%). The Noticee, CJ Dalal and Lalkar had mostly traded on behalf of the connected clients. 16. In the scrip of Bang, I note that during the period March 17, 2008 to June 17, 2008 a series of synchronized trades have been executed by the Noticee as following:- Table I - Synchronised Trades Buy Buy Buy Buy Sell Sell Sell Trade Trade Trade Trade Ord Ord Ord Buyer Member Member Seller Trade Ord Ord Sell Ord Time QtyRate Date No Rate Time Time Qty Rate Name Name Name Name Qty Time Qty Rate Diff DiffDiff 30-Apr-08 1463 217.50 14:59:15 14:59:15 3000 217.50 Maruti CJ Dalal Krishvi Chandra 2806 14:59:09 3000 217.5 0:00:06 0 0.00 6-Jun-08 418 243.00 14:53:24 14:53:02 5000 243.00 Kundan Krishvi CJ Dalal Maruti 4896 14:53:24 5000 243 0:00:22 0 0.00 6-Jun-08 419 243.00 14:53:24 14:53:09 5000 243.00 Kundan Krishvi CJ Dalal Maruti 104 14:53:24 5000 243 0:00:15 0 0.00 6-Jun-08 426 243.00 14:53:49 14:53:26 5000 243.00 Kundan Krishvi CJ Dalal Maruti 4850 14:53:49 5000 243 0:00:23 0 0.00 9-Jun-08 844 244.00 15:17:02 15:16:54 1000 244.00 Chandra CJ Dalal Krishvi Kundan 1000 15:17:02 1000 244 0:00:07 0 0.00 9-Jun-08 847 244.50 15:17:17 15:17:09 2000 244.50 Chandra CJ Dalal Krishvi Kundan 2000 15:17:17 2000 244.5 0:00:08 0 0.00 9-Jun-08 849 244.50 15:17:39 15:17:33 2000 244.50 Chandra CJ Dalal Krishvi Kundan 2000 15:17:38 2000 244.5 0:00:05 0 0.00 9-Jun-08 851 244.50 15:17:53 15:17:51 2000 244.50 Chandra CJ Dalal Krishvi Kundan 1000 15:17:43 2000 244.5 0:00:08 0 0.00 9-Jun-08 853 244.25 15:17:55 15:17:42 2000 244.25 Chandra CJ Dalal Krishvi Kundan 1000 15:17:55 2000 244.25 0:00:12 0 0.00 9-Jun-08 854 244.50 15:18:01 15:17:56 2000 244.50 Chandra CJ Dalal Krishvi Kundan 2000 15:18:00 2000 244.5 0:00:05 0 0.00 9-Jun-08 855 244.25 15:18:11 15:17:42 2000 244.25 Chandra CJ Dalal Krishvi Kundan 1000 15:18:10 2000 244.25 0:00:28 0 0.00 9-Jun-08 876 244.25 15:19:23 15:19:22 5000 244.25 Chandra CJ Dalal Krishvi Kundan 1000 15:19:05 5000 244.25 0:00:17 0 0.00 9-Jun-08 887 244.00 15:20:49 15:20:49 7500 244.00 Chandra CJ Dalal Krishvi Kundan 7500 15:20:39 7500 244 0:00:10 0 0.00

17. Further, during the period January 1, 2009 and February 28, 2009 a series of synchronized trades had been executed by the Noticee as under:- Table II - Synchronized Trades Buy Sell CP CP CP Trade Trade Trade Trade Order Order Order Buyer Member Member Seller Trade Order Order Order Time Qty Rate Date No Price Time Time Qty Rate Name Name Name Name Qty Time Qty Rate Diff Diff Diff 23-01-09 399 140.50 12:48:05 12:48:05 4000 140.50 Chandra CJ Dalal Krishvi Acme 4000 12:47:58 4000 140.5 0:00:07 0 0.00 23-01-09 1686 150.00 15:03:21 15:03:21 15000 150.00 Kundan CJ Dalal Krishvi Acme 12907 15:03:10 15000 150 0:00:11 0 0.00 23-01-09 1692 150.00 15:03:29 15:03:29 15000 150.00 Kundan CJ Dalal Krishvi Acme 2089 15:03:10 15000 150 0:00:18 0 0.00 23-01-09 1693 150.00 15:03:29 15:03:29 15000 150.00 Kundan CJ Dalal Krishvi Acme 12411 15:03:22 15000 150 0:00:06 0 0.00 02-02-09 249 135.50 13:04:40 13:04:39 6635 135.50 Kundan CJ Dalal Krishvi Jay 6635 13:04:30 6635 135.5 0:00:09 0 0.00 06-02-09 640 143.50 15:15:12 15:15:06 19524 143.50 Kundan CJ Dalal Krishvi Jay 19517 15:15:11 19524 143.5 0:00:05 0 0.00 10-02-09 360 136.25 15:22:59 15:22:59 17324 136.25 Jay CJ Dalal Krishvi Kundan 17324 15:22:59 17324 136.25 0:00:00 0 0.00 18. From the above Tables, it is observed that the aforesaid trades were synchronized in terms of price, quantity and time wherein the time difference between buy and sell orders was negligible.

For instance, on February 10, 2009 the Noticee placed a sell order for 17,324 shares at 15:22:29 hrs. This matched in a time difference of 00:00:00 second with the buy order of CJ Dalal. In my view, such frequent and perfect matching of trades among same set of connected clients especially through two related stock brokers on either side of the trades cannot be merely a coincidence but were possible due to a pre planned device involving the Noticee so as to create artificial volumes. Such repeated matching of trades on several dates between the connected clients through the connected stock brokers cannot be brushed aside as casual or coincidental. In the facts and circumstances as found by the DA, I do not find merits in the contention of the Noticee. 19. I also note that the Noticee along with connected stock broker CJ Dalal had indulged in reversed trades as following:- Table III: Reversed Trades Trade Date Trade Trade Trade Buy Buy Buy Buyer Buy Sell Seller Trade Sell Order Sell Sell Order Time Qty Rate No Price Time Order Order Order Name Member Member Name Qty Time Order Rate Diff Diff Diff Time Qty Rate Name Name Qty 26-11-2008 9 202.95 15:04:53 15:04:5253000 203.00 Maruti CJ Dalal Krishvi Kundan 29473 15:04:35 29473 203 0:00:17 23527 0.05 26-11-2008 10 202.95 15:04:53 15:04:5253000 203.00 Maruti CJ Dalal Krishvi Jay 21000 15:04:46 21000 203 0:00:06 32000 0.05 26-11-2008 12 203.95 15:05:48 15:05:48 2000 204.00 Maruti CJ Dalal Krishvi Chandra 1962 15:05:28 1962 203 0:00:20 38 1.05 28-11-2008 9 208.95 15:04:06 15:04:05 2000 208.95 Jay CJ Dalal Krishvi Maruti 365 15:02:57 365 209 0:01:08 1635 0.00 01-12-2008 4 217.95 15:02:32 15:02:3152550 218.00 Chandra CJ Dalal Krishvi Maruti 52538 15:02:25 52545 218 0:00:06 5 0.05 01-12-2008 5 217.95 15:02:42 15:02:42 7 217.95 Chandra CJ Dalal Krishvi Maruti 7 15:02:25 52545 218 0:00:16 -52538 0.00

20. From the above Table, it is observed that in the above trades executed through the Noticee and CJ Dalal the shares sold by the Maniar group entities to Maruti was received back by the Maniar group entities from Maruti thereby those trades were reversed. For instance, on November 26, 2008 Kundan (29,473 shares), Jay (21,000 shares) and Chandra (1,962) sold a total of 52,435 shares to Maruti. Thereafter, on November 28, 2008 and December 01, 2008 Maruti sold 365 and 52545 shares to Jay and Chandra respectively amounting to 52, 910 shares. In these facts and circumstances I do not have any reason to differ with the findings of the DA in this regard. 21. I further note that the Noticee along with CJ Dalal had indulged in circular trades in the scrip of Bang as under:- Table IV: Circular Trades Trade Trade Trade Trade Buy Buy Buy Buyer Buy Sell Seller Trade Sell Order Sell Sell Time Qty Rate Date No Price Time Order Order Order Name Member Member Name Qty Time Order Order Diff Diff Diff Time Qty Rate Name Name Qty Rate 24-Dec-08 5 151.95 12:35:52 12:35:52 61500 152.00 Acme CJ Dalal Krishvi Chandra 61399 12:35:28 61402 152.00 0:00:23 98 0.05 24-Dec-08 6 151.95 12:36:04 12:36:04 3 151.95 Acme CJ Dalal Krishvi Chandra 3 12:35:28 61402 152.00 0:00:36 -61399 0.00 24-Dec-08 36 155.50 15:17:23 15:17:23 7000 155.50 Acme CJ Dalal Krishvi Jay 5000 15:17:12 5000 155.50 0:00:10 2000 0.00 24-Dec-08 37 155.50 15:17:23 15:17:23 7000 155.50 Acme CJ Dalal Krishvi Maruti 1945 15:17:20 2000 155.50 0:00:03 5000 0.00 24-Dec-08 38 155.50 15:17:33 15:17:32 55 155.50 Acme CJ Dalal Krishvi Maruti 55 15:17:20 2000 155.50 0:00:12 -1945 0.00 26-Dec-08 45 160.80 15:00:33 15:00:33 25000 161.00 Maruti CJ Dalal Krishvi Acme 23021 14:59:33 68558 160.80 0:01:01 -43558 0.20 26-Dec-08 47 160.80 15:00:43 15:00:43 35000 161.00 Maruti CJ Dalal Krishvi Acme 34500 14:59:33 68558 160.80 0:01:10 -33558 0.20 26-Dec-08 53 160.80 15:01:25 15:01:24 11500 161.00 Maruti CJ Dalal Krishvi Acme 11037 14:59:33 68558 160.80 0:01:52 -57058 0.20 30-Dec-08 62 162.00 15:10:10 15:10:09 75000 162.00 KundanCJ Dalal Krishvi Maruti 67754 15:03:44 70996 162.00 0:06:26 4004 0.00 30-Dec-08 68 162.00 15:10:22 15:10:22 5000 162.00 KundanCJ Dalal Krishvi Maruti 3242 15:03:44 70996 162.00 0:06:38 -65996 0.00 22. The circular trades are pictorially presented as under:-

23. It is seen from the above that the shares received from Chandra (i.e. Maniar group entity) had been transferred back to Kundan (i.e. Maniar group entity) through Acme and Maruti. Though in these instances of circular trades of the connected clients of Maniar Group, the Noticee was a selling broker, the counterparty broker was CJ Dalal a connected entity of the Noticee. In all these circular trades the connected clients repeatedly dealt only through these connected stock brokers.

24. It is also noted that there were more instances of circular trades in this scrip between the Noticee and CJ Dalal as following:

Table V: Circular Trade Trade Date Trade Trade Trade Buy Buy Buy Buyer Buy Sell Seller Trade Sell Order Sell Order Sell Time Qty Rate No Price Time Order Order Order Name Member Member Name Qty Time Qty Order Diff Diff Diff Time Qty Rate Name Name Rate 07-10-2008 39 269.00 16:30:34 16:30:33 10000 269.00 Acme CJ Dalal Krishvi Jay 9625 16:27:58 16629 269 0:02:35 -6629 0.00 07-10-2008 40 269.00 16:30:42 16:30:42 25000 269.00 Acme CJ Dalal Krishvi Jay 7004 16:27:58 16629 269 0:02:43 8371 0.00 07-10-2008 41 269.00 16:30:42 16:30:42 25000 269.00 Acme CJ Dalal Krishvi Maruti 17996 16:28:13 51899 269 0:02:29 -26899 0.00 07-10-2008 42 269.00 16:30:54 16:30:54 10000 269.00 Acme CJ Dalal Krishvi Maruti 10000 16:28:13 51899 269 0:02:41 -41899 0.00 07-10-2008 43 269.00 16:32:00 16:31:59 5000 269.00 Acme CJ Dalal Krishvi Maruti 5000 16:28:13 51899 269 0:03:46 -46899 0.00 07-10-2008 44 269.00 16:33:14 16:33:14 10000 269.00 Acme CJ Dalal Krishvi Maruti 10000 16:28:13 51899 269 0:05:01 -41899 0.00 07-10-2008 45 269.00 16:33:32 16:33:32 5000 269.00 Acme CJ Dalal Krishvi Maruti 5000 16:28:13 51899 269 0:05:19 -46899 0.00 10-10-2008 23 275.00 15:08:28 15:08:28 70000 276.00 KundanCJ Dalal Krishvi Acme 65200 15:07:57 65200 275 0:00:30 4800 1.00 10-10-2008 24 275.00 15:08:28 15:08:28 70000 276.00 KundanCJ Dalal Krishvi Maruti 3125 15:08:11 3907 275 0:00:17 66093 1.00 10-10-2008 26 275.00 15:08:56 15:08:56 400 275.00 KundanCJ Dalal Krishvi Maruti 385 15:08:11 3907 275 0:00:45 -3507 0.00 10-10-2008 29 273.00 15:10:20 15:10:20 500 273.00 KundanCJ Dalal Krishvi Maruti 395 15:08:11 3907 275 0:02:09 -3407 -2.00 16-10-2008 14 264.95 15:12:48 15:12:48 71000 265.00 Maruti CJ Dalal Krishvi Kundan 68555 15:12:25 70880 264.95 0:00:23 120 0.05 16-10-2008 15 264.95 15:13:06 15:13:05 2000 264.95 Maruti CJ Dalal Krishvi Kundan 2000 15:12:25 70880 264.95 0:00:41 -68880 0.00 16-10-2008 16 264.95 15:13:30 15:13:29 325 264.95 Maruti CJ Dalal Krishvi Kundan 325 15:12:25 70880 264.95 0:01:04 -70555 0.00 20-10-2008 5 239.00 15:54:24 15:54:24 10000 239.00 Jay CJ Dalal Krishvi Maruti 9951 15:40:10 73328 239 0:14:14 -63328 0.00 20-10-2008 6 239.00 15:55:15 15:55:15 10000 239.00 Jay CJ Dalal Krishvi Maruti 10000 15:40:10 73328 239 0:15:05 -63328 0.00 20-10-2008 7 239.00 15:55:34 15:55:34 10000 239.00 Jay CJ Dalal Krishvi Maruti 10000 15:40:10 73328 239 0:15:24 -63328 0.00 20-10-2008 8 239.00 15:56:12 15:56:12 10000 239.00 Jay CJ Dalal Krishvi Maruti 10000 15:40:10 73328 239 0:16:02 -63328 0.00 20-10-2008 9 239.00 15:59:56 15:59:56 5000 239.00 Jay CJ Dalal Krishvi Maruti 5000 15:40:10 73328 239 0:19:46 -68328 0.00 24-10-2008 3 229.95 15:43:42 15:43:42 10000 229.95 Acme CJ Dalal Krishvi Jay 9985 15:42:15 45000 229.95 0:01:26 -35000 0.00 24-10-2008 4 229.95 15:44:01 15:44:00 10000 229.95 Acme CJ Dalal Krishvi Jay 10000 15:42:15 45000 229.95 0:01:45 -35000 0.00 24-10-2008 5 229.95 15:44:15 15:44:15 10000 229.95 Acme CJ Dalal Krishvi Jay 10000 15:42:15 45000 229.95 0:02:00 -35000 0.00 24-10-2008 6 229.95 15:44:30 15:44:30 10000 229.95 Acme CJ Dalal Krishvi Jay 10000 15:42:15 45000 229.95 0:02:14 -35000 0.00 24-10-2008 7 229.95 15:44:59 15:44:59 5000 229.95 Acme CJ Dalal Krishvi Jay 5000 15:42:15 45000 229.95 0:02:43 -40000 0.00 24-10-2008 8 229.95 15:46:16 15:46:16 5000 229.95 Acme CJ Dalal Krishvi Jay 15 15:42:15 45000 229.95 0:04:00 -40000 0.00 24-10-2008 9 229.95 15:46:16 15:46:16 5000 229.95 Acme CJ Dalal Krishvi Maruti 4985 15:42:29 20377 229.95 0:03:46 -15377 0.00 24-10-2008 10 229.95 15:46:33 15:46:33 2500 229.95 Acme CJ Dalal Krishvi Maruti 2500 15:42:29 20377 229.95 0:04:04 -17877 0.00 24-10-2008 11 229.95 15:46:54 15:46:53 2500 229.95 Acme CJ Dalal Krishvi Maruti 2500 15:42:29 20377 229.95 0:04:24 -17877 0.00 24-10-2008 12 229.95 15:47:22 15:47:22 2500 229.95 Acme CJ Dalal Krishvi Maruti 2500 15:42:29 20377 229.95 0:04:53 -17877 0.00 24-10-2008 14 229.95 15:48:55 15:48:54 400 229.95 Acme CJ Dalal Krishvi Maruti 392 15:42:29 20377 229.95 0:06:25 -19977 0.00 24-10-2008 10 229.95 15:46:33 15:46:33 2500 229.95 Acme CJ Dalal Krishvi Maruti 2500 15:42:29 20377 229.95 0:04:04 -17877 0.00 25. The circular trades are pictorially presented as under:-

26. Thus, I find that the shares received from Acme have been transferred back to Acme through Kundan, Maruti and Jay. The common thread running through all the above mentioned circular trades is that the Noticee and CJ Dalal are the only stock brokers executing those trades on behalf of the connected clients. Such repeated circular trades cannot be merely a coincidence. Further, the argument that other stock brokers were counterparty for the trades executed by the Noticee for certain connected clients cannot help the Noticee as those trades are not subject matter of inquiry in this case and it is only the trades of the Noticee along with its connected stock broker CJ Dalal that are in question in this matter. In the scrip of Confidence 27. I note that the total quantity traded during the investigation period (January 01, 2008 to February 28, 2009) was 15,27,32,567 shares and the top 10 stock brokers contributed 47.73% and 43.31% of the gross purchases and gross sales, respectively. CJ Dalal had the highest concentration of 20.86% and 11.86% in gross purchases and gross sales respectively.

The major counterparty broker for the gross purchases of CJ Dalal were Lalkar (21.55%), the Noticee (17.89%) and CJ Dalal (8.30%) and for the gross sales of CJ Dalal the counterparty broker was CJ Dalal (14.60%), the Noticee (6.58%) and BP Equities (5.44%). 28. During the investigation period, the Noticee along with CJ Dalal had indulged in circular trades as under:- Table VI - Circular Trades Trade Trade Trade Trade Buy Buy Buy Buyer Buy Sell Seller Trade Sell Sell Sell Tim Date No Price Time Order Order Order Name Member Member Name Qty Order Order Order e Time Qty Rate Name Name Time Qty Rate Diff 01-10-08 465 12.73 16:04:16 16:04:16 100000 12.73 Kundan Krishvi CJ Dalal Maruti 90649 16:04:01 119700 12.73 00:00:15 07-10-08 216 12.50 15:51:44 15:51:43 500000 12.50 Acme CJ Dalal Krishvi Maruti 178128 15:50:27 178128 12.50 00:01:16 07-10-08 217 12.50 15:51:44 15:51:43 500000 12.50 Acme CJ Dalal Krishvi Kundan 100000 15:50:35 100000 12.50 00:01:08 07-10-08 218 12.50 15:51:44 15:51:43 500000 12.50 Acme CJ Dalal Krishvi Chandra 159321 15:50:45 159321 12.50 00:00:58 14-10-08 281 10.90 15:29:49 15:29:49 550000 11.00 Maruti CJ Dalal Krishvi Acme 533662 15:29:39 542436 10.90 00:00:10 17-10-08 63 9.31 10:42:46 10:42:46 200000 9.31 Kundan CJ Dalal Krishvi Maruti 200000 09:56:03 817062 9.31 00:46:43 17-10-08 388 10.15 15:20:37 15:20:37 500000 10.25 Kundan CJ Dalal Krishvi Maruti 100000 10:46:33 100000 10.15 04:34:04 17-10-08 389 10.15 15:20:37 15:20:37 500000 10.25 Kundan CJ Dalal Krishvi Maruti 50000 10:47:43 50000 10.15 04:32:54 17-10-08 404 10.20 15:20:37 15:20:37 500000 10.25 Kundan CJ Dalal Krishvi Maruti 11823 10:46:51 100000 10.20 04:33:46 17-10-08 430 10.20 15:21:56 15:21:56 500000 10.25 Kundan CJ Dalal Krishvi Maruti 88175 10:46:51 100000 10.20 04:35:05 17-10-08 431 10.20 15:21:56 15:21:56 500000 10.25 Kundan CJ Dalal Krishvi Maruti 50000 10:48:04 50000 10.20 04:33:52 17-10-08 443 10.25 15:21:56 15:21:56 500000 10.25 Kundan CJ Dalal Krishvi Maruti 27101 10:47:32 100000 10.25 04:34:24 29. These circular trades are pictorially presented as following:-

30. It is noted that through the above circular trades involving the connected clients of Maniar group, the Noticee and CJ Dalal acting as a stock brokers for them, the shares received from Chandra and Kundan (Maniar group entity) through Acme and Maruti were transferred back to Kundan (Maniar group entity). 31. There are other instances also where the Noticee alongwith CJ Dalal has entered into circular trades: Table VII - Circular Trades Trade Trade Trade Trade Buy Buy Buy Buyer Buy Sell Seller Trade Sell Sell Sell Time Date No Price Time Order Order Order Name Member Member Name Qty Order Order Order Diff Time Qty Rate Name Name Time Qty Rate 25-11-08 463 7.29 15:19:4415:19:44 50000 7.30 Maruti CJ Dalal Krishvi Chandra 44214 15:16:38 295308 7.45 00:03:06 02-12-08 274 8.39 15:19:5815:19:57 110000 8.40 Maruti CJ Dalal Krishvi Jay 79446 15:19:51 100000 8.39 00:00:06 02-12-08 320 8.00 15:29:4815:29:48 5500 8.00 Maruti CJ Dalal Krishvi Jay 5290 15:29:35 100000 8.39 00:00:13 03-12-08 153 7.99 14:53:2814:53:28 138000 8.00 Kundan CJ Dalal Krishvi Maruti 133695 14:53:14 136000 7.99 00:00:14 03-12-08 154 7.99 14:53:3614:53:36 2400 7.99 Kundan CJ Dalal Krishvi Maruti 2305 14:53:14 136000 7.99 00:00:22 03-12-08 155 7.99 14:53:4014:53:36 2400 7.99 Kundan CJ Dalal Krishvi Maruti 95 14:53:39 500 7.99 00:00:03 04-12-08 187 7.80 15:19:4315:19:42 100000 7.80 Acme Krishvi CJ Dalal Kundan 75453 15:19:38 115000 7.80 00:00:04 04-12-08 227 7.68 15:52:0515:52:05 9000 7.68 Acme Krishvi CJ Dalal Kundan 8416 15:40:50 9692 7.68 00:11:15 04-12-08 228 7.68 15:52:2715:52:27 1300 7.68 Acme Krishvi CJ Dalal Kundan 1276 15:40:50 9692 7.68 00:11:37 08-12-08 166 7.49 15:07:0515:07:05 100000 7.50 Maruti Krishvi CJ Dalal Acme 98054 15:06:28 110000 7.49 00:00:37 08-12-08 168 7.49 15:07:2215:07:22 10000 7.50 Maruti Krishvi CJ Dalal Acme 7500 15:06:28 110000 7.49 00:00:54 10-12-08 320 7.00 15:50:5615:50:56 5000 7.00 Chandra CJ Dalal Krishvi Maruti 98 15:40:12 114000 7.00 00:10:44 10-12-08 322 7.00 15:51:3715:51:37 100000 7.00 Chandra CJ Dalal Krishvi Maruti 100000 15:40:12 114000 7.00 00:11:25 32. The circular trades are pictorially presented as under:-

33. It is seen that in the above circular trades involving the entities of Maniar group, the Noticee and CJ Dalal the shares received from Jay and Chandra (Maniar group entities) through Maruti, Kundan and Acme were transferred back to Chandra ( Maniar group entity). All these circular trades were done by the connected clients through the Noticee and CJ Dalal. In my view, such repeated circular trading is not possible without the active role and involvement of the Noticee alongwith CJ Dalal. Further, from the above trades, I find that the Noticee was also a buying broker for certain trades. I, therefore, do not agree with the contention of the Noticee that it was only a selling broker in these circular trades in the scrip of Confidence. It is settled position that in such circular trading, there is no change of beneficial ownership. The Noticee has contended that during the period from May to July 2008, the scrip of Confidence was in T2T segment wherein all trades were backed by change of beneficial ownership. I find this contention incorrect as the transaction in question relate to period October 2008 to December 2008 when the scrip was not in T2T segment.

Even if it is assumed that the trades in question were backed by delivery of shares, the position would not change as in this case, the shares traded amongst connected clients through the connected stock brokers remained in the same group of connected clients and there was, effectively, no change of beneficial ownership of traded shares. In the facts and circumstances of this case, I agree with the findings of the DA that the main motive of circular trades was to create an artificial interest in the scrip with intent to artificially inflate the volumes thereof. Trading in the scrip of Cals 34. The total traded quantity in this scrip during the investigation period (June 01, 2008 to February 28, 2009) was 85,78,47,441 shares. The Noticee and CJ Dalal were amongst the top trading stock brokers in the scrip. CJ Dalal had highest concentration of 28% in gross purchases and the Noticee had highest concentration of 20.13% in gross sales. The major counterparty seller for the purchases of the Noticee was CJ Dalal constituting 64.13% of gross purchases of the Noticee. Also, CJ Dalal was the major counterparty buyer for the sales of the Noticee constituting 76.45% of its gross purchases.

Further, the Noticee and CJ Dalal had traded amongst themselves for 16,69,78,343 shares in 434 trades in 79 trading days constituting 19.47% of the total traded volumes during the investigation period. 35. The Noticee alongwith CJ Dalal had indulged in synchronized trades in this scrip as following: Table VIII - Synchronized trades Trade Trade Trade Trade Order Order Order Buyer Buy Sell Seller Traded CP CP CP Time QtyR ate Date No Rate Time Time Qty Rate Name MemberMember Name Qty Order Order Order Diff DiffDiff Name Name Time Qty Rate 9-Jul-08 136 4.19 15:29:59 15:29:52 800000 4.19 Chandra Krishvi CJ Dalal Maruti 796501 15:29:58 800000 4.19 0:00:06 0 0.00 11-Jul-08 254 4.17 15:51:38 15:51:34 300000 4.17 Acme Krishvi CJ Dalal Maruti 299500 15:51:38 300000 4.17 0:00:03 0 0.00 30-Jul-08 248 4.04 15:47:30 15:47:29 600000 4.04 Chandra Krishvi CJ Dalal Maruti 589800 15:47:23 600000 4.04 0:00:06 0 0.00 14-Aug-08 287 3.90 14:21:56 14:21:56 500000 3.90 Kundan Krishvi CJ DalalChandra 300251 14:21:35 500000 3.9 0:00:21 0 0.00 14-Aug-08 291 3.90 14:22:01 14:21:56 500000 3.90 Kundan Krishvi CJ DalalChandra 199746 14:22:00 500000 3.9 0:00:05 0 0.00 14-Aug-08 315 3.90 14:28:12 14:28:11 100000 3.90 Kundan Krishvi CJ DalalChandra 87743 14:28:05 100000 3.9 0:00:06 0 0.00 26-Aug-08 89 3.84 13:32:44 13:32:44 100000 3.84 Jay CJ Dalal Krishvi Maruti 100000 13:32:44 100000 3.84 0:00:00 0 0.00 26-Aug-08 90 3.84 13:32:58 13:32:57 50000 3.84 Jay CJ Dalal Krishvi Maruti 50000 13:32:57 50000 3.84 0:00:00 0 0.00 26-Aug-08 91 3.84 13:33:08 13:33:08 75000 3.84 Jay CJ Dalal Krishvi Maruti 75000 13:33:08 75000 3.84 0:00:00 0 0.00 26-Aug-08 92 3.84 13:33:19 13:33:19 80000 3.84 Jay CJ Dalal Krishvi Maruti 80000 13:33:19 80000 3.84 0:00:00 0 0.00 26-Aug-08 93 3.84 13:33:31 13:33:31 60000 3.84 Jay CJ Dalal Krishvi Maruti 60000 13:33:30 60000 3.84 0:00:01 0 0.00 26-Aug-08 94 3.84 13:33:44 13:33:44 100000 3.84 Jay CJ Dalal Krishvi Maruti 100000 13:33:43 100000 3.84 0:00:01 0 0.00 26-Aug-08 95 3.84 13:33:52 13:33:52 35000 3.84 Jay CJ Dalal Krishvi Maruti 35000 13:33:52 35000 3.84 0:00:00 0 0.00 28-Aug-08 287 3.49 15:17:59 15:17:59 1000000 3.49 ChandraCJ Dalal Krishvi Maruti 100000015:17:53 1000000 3.49 0:00:06 0 0.00 06-Oct-08 232 5.00 16:11:49 16:11:48 2000000 5.00 Maruti CJ Dalal Krishvi Chandra192321116:11:08 2000000 5.00 0:00:41 0 0.00 22-Jan-09 402 0.67 13:10:11 13:10:11 2500000 0.67 Jay CJ Dalal Krishvi Kundan244480913:09:53 2500000 0.67 0:00:17 0 0.00 19-Feb-09 578 0.44 13:43:39 13:43:39 1100000 0.44 KundanCJ Dalal Krishvi Chandra106685013:43:27 1100000 0.44 0:00:12 0 0.00 24-Feb-09 569 0.45 12:56:01 12:55:54 500000 0.45 ChandraCJ Dalal Krishvi Acme 240500 12:56:00 500000 0.45 0:00:06 0 0.00 26-Feb-09 18 0.42 10:00:45 10:00:44 2496450 0.42 Jay CJ Dalal Krishvi Chandra248594010:00:45 2496450 0.42 0:00:01 0 0.00 27-Feb-09 102 0.43 10:13:35 10:13:16 1000000 0.43 ChandraCJ Dalal Krishvi Jay 801900 10:13:34 1000000 0.43 0:00:18 0 0.00 36. From the above trades that were shared with the Noticee and as shown in the above Table, I note that the difference in the quantity and order price of traded shares was zero and difference in time between buy and sell orders was almost negligible, maximum being 41 seconds.

These trades were, thus, synchronized with respect to quantity, price and time of trade. I find that reliance of the Noticee on the findings of the DA in para 59 of the Report is misplaced since, the trades described in that said para 59 of the report are not in question. It is only the trades described in the above mentioned Table for which the Noticee has been charged in the SCN. Those trades, as found by the DA in para 56 of the Report, are clearly synchronised with respect to quantity, price and time. I find that such synchronised trading by the connected clients within a period of few seconds for huge number of shares, through the common and connected stock brokers shows that the same were intentionally placed in the system by the clients and assisted/abetted by the Noticee to artificially raise the volumes in the scrip. I, therefore, agree with findings of the DA in para 56 of the Report with regard to the above trades. 37. Further, the Noticee along with CJ Dalal had indulged in circular trades in this scrip as under:- Table IX - Circular Trades Trade Date Buy Client Name Buy Member Sell Member Sell Client Name Traded Quantity Name Name 22-Jan-09 Jay CJ Dalal Krishvi Kundan 24,44,809 23-Jan-09 Maruti CJ Dalal Krishvi Jay 24,89,946 27-Jan-09 Acme CJ Dalal Krishvi Chandra 24,69,551 27-Jan-09 Acme CJ Dalal Krishvi Maruti 23,43,973 29-Jan-09 Jay CJ Dalal Krishvi Acme 48,03,559 29-Jan-09 Jay CJ Dalal Krishvi Chandra 28,22,998 02-Feb-09 Kundan CJ Dalal Krishvi Jay 81,10,574 38. The above trades can be pictorially presented as under:-

81,10,574 shares on Jay Kundan 02/02/09

24,44,809 sh on 22/01/09 28,22,998 sh on 48,03,559 sh on 29/01/09 29/01/09 Jay

24,89,946 sh on 23/01/09 23,43,972 sh on 27/01/09 Maruti Chandra Acme 24,69,551 Chandra sh on 27/01/09 39. From the above, I find a clear pattern of circular trading amongst the clients where the stock brokers involved into these trades were the Noticee and CJ Dalal only. 40. I also note from the below-mentioned table that Chandra and Kundan have executed reversed trades. Further, the trading members for these transactions are again CJ Dalal and the Noticee.

Table X - Reversed Trades

Trade Date Buy Client Buy Member Sell Member Name Sell Client Name Quantity Name Name 4-Feb-09 Chandra CJ Dalal Krishvi Kundan 74,14,942 6-Feb-09 Kundan CJ Dalal Krishvi Chandra 65,00,000 10-Feb-09 Chandra CJ Dalal Krishvi Kundan 52,96,814 12-Feb-09 Kundan CJ Dalal Krishvi Chandra 60,00,000 41. According to the DA, the Noticee has executed circular/reversed trades where the counterparty was CJ Dalal, its connected entity. Such frequent execution of circular and reversed trades cannot be a mere coincidence but has been done with preplanned manner with a view to artificially raise the volume of the said scrips. The Noticee has contended that DA had failed to consider the fact that during March 2008 the paid up capital of Cals had substantially increased to 79,40,00,000 shares which could be reason for spurt in volume of the scrip of Cals. I do not find merit in this contention of the Noticee because the trades in question in this scrip relate to the period June 01, 2008 to February 28, 2009 i.e. much after the increase in paid-up capital of Cals during March 2008. In the facts and circumstances found in the Report, I do not find any reason to differ with findings of the DA.

42. I further note that Maruti had executed self trades wherein the Noticee was the buying broker and SPS was the selling broker. These self trades are as under:- Table XI Self Trades Trade Trade Trade Trade Order Order Order Buyer Buy Sell Seller TradedCP Order CP CP Time Qty Diff Rate Date No Rate Time Time Qty Rate Name MemberMember Name Qty Time OrderO rder Diff Diff Name Name Qty Rate 7-Jul-08 130 4.03 15:11:1615:11:15 500000 4.05 Maruti Krishvi SPS Maruti 5000 15:08:14 5000 4.03 0:03:01 495000 0.02 7-Jul-08 131 4.05 15:11:1615:11:15 500000 4.05 Maruti Krishvi SPS Maruti 5000 15:08:19 5000 4.05 0:02:57 495000 0.00 7-Jul-08 132 4.05 15:11:1615:11:15 500000 4.05 Maruti Krishvi SPS Maruti 25000 14:57:33 5000 4 0:13:43 495000 0.05 7-Jul-08 133 4.07 15:11:2515:11:25 500000 4.1 Maruti Krishvi SPS Maruti 5000 15:09:57 5000 4.07 0:01:28 495000 0.03 7-Jul-08 134 4.09 15:11:2515:11:25 500000 4.1 Maruti Krishvi SPS Maruti 5000 14:57:29 5000 4.09 0:13:56 495000 0.01 7-Jul-08 137 4.10 15:11:2515:11:25 500000 4.1 Maruti Krishvi SPS Maruti 5000 14:57:23 5000 4.1 0:14:02 495000 0.00 7-Jul-08 140 4.05 15:11:4115:11:15 500000 4.05 Maruti Krishvi SPS Maruti 50000 15:11:40 50000 4.05 0:00:25 450000 0.00 7-Jul-08 142 4.10 15:11:4515:11:15 500000 4.05 Maruti Krishvi SPS Maruti 25000 15:11:45 25000 4.05 0:00:29 475000 0.00 7-Jul-08 143 4.10 15:11:4715:11:15 500000 4.05 Maruti Krishvi SPS Maruti 25000 15:11:47 25000 4.1 0:00:32 475000 -0.05 7-Jul-08 144 4.10 15:11:5215:11:15 500000 4.05 Maruti Krishvi SPS Maruti 25000 15:11:52 25000 4.1 0:00:37 475000 -0.05 7-Jul-08 146 4.13 15:11:5415:11:53 500000 4.2 Maruti Krishvi SPS Maruti 25000 15:08:25 5000 4.13 0:03:28 495000 0.07 7-Jul-08 147 4.14 15:11:5415:11:53 500000 4.2 Maruti Krishvi SPS Maruti 25000 14:57:37 5000 4.14 0:14:16 495000 0.06 7-Jul-08 148 4.19 15:11:5415:11:53 500000 4.2 Maruti Krishvi SPS Maruti 50000 14:54:39 50000 4.19 0:17:14 450000 0.01 7-Jul-08 150 4.10 15:11:5615:11:15 500000 4.05 Maruti Krishvi SPS Maruti 50000 15:11:55 50000 4.10 0:00:40 450000 -0.05

43. I note from above trades that Maruti has executed self trades for 3,25,000 shares on July 07, 2008 where the Noticee was the buying broker and SPS was selling counter party broker. It is a clear case of manipulative trading by the Maruti, as it had traded in huge number of shares of this scrip as buyer and seller both for same transaction itself without effecting any change in beneficial ownership of these shares on a single day under 14 transactions within a gap of few minutes only.

Such transaction by Maruti was undoubtedly fictitious and meant to only create false appearance of trading in the scrip and to create artificial and false volume. I note that in the case of appeal filed by Ms. Anita Dalal in respect of Order dated September 25, 2012 passed against her, Hon'ble Securities Appellate Tribunal (SAT) in its order dated December 03,2012 held as under:- "……Self trades admittedly are illegal. This Tribunal has held in several cases that self trades call for punitive action since they are illegal in nature. In M/s. Jayantilal Khandwala & Sons Pvt. Ltd. vs. Securities and Exchange Board of India (Appeal no. 24 of 2011 decided on June 8, 2011) this Tribunal has held that “one cannot buy and sell shares from himself. Such transactions are obviously fictitious and meant only to create false volumes on the trading screen of the exchange”. 44. In this case, although there is no allegation that SPS and the Noticee are connected/related to each other, in the facts and circumstance wherein same client repeatedly and continuously placed manipulative orders, in my view, the Noticee should have got alerted and exercised due diligence.

45. I find that from the facts and circumstances and trading pattern of the Noticee in the four scrips as described above, the allegations against the Noticee as found in the Report are established. In this case, the Noticee indulged in several synchronized, reversed and circular trades in the said four scrips for the connected clients and CJ Dalal whose proprietor is the husband of the director (Ms. Anita Dalal) of Noticee was counter party in all the trades as discussed hereinabove. I note that in the case of M/s. Galaxy Broking Ltd. vs. SEBI (Appeal no. 3 of 2010 dated January 29, 2010) Hon'ble Securities Appellate Tribunal (SAT) held that " reverse trades happen on the trading system when the client and broker are in league with each other." 46. With regard to the contentions of the Noticee that its trades were insignificant compared to the market volume and it traded on instructions of the client, I find that Noticee's trades were not on few occasions but were repeatedly and continuously. It was possible because trades were put through the Noticee and its connected stock broker CJ Dalal being counter party stock broker.

Further, it was not a case of few shares getting matched but was a process of continuous, periodical and conscious matching in several trades in selective scrips over a period of time. I note that in the case of appeal filed by Ms. Anita Dalal in respect of Order dated September 25, 2012 passed against her, Hon'ble SAT in its order dated December 03,2012 held as under:- "……. The appellant’s consistent participation in the synchronized trades along with the group entities has surely contributed to the creation of artificial volumes. The argument of the learned counsel that the appellant’s role in the scheme of manipulation has to be viewed in the background of her overall trades does not merit consideration. The relationship of the parties, the continuous and consistent matching of trades and the transactions in the same scrips by all the group entities through a central broker would amply illustrate the game plan of the entities involved." 47. In my view, repeated synchronised, circular and reversal trading among the same set of clients that too through the connected stock broker, cannot be a coincidence.

Further, such trades cannot happen without the assistance of the stock broker, who places the orders of their clients in such manner and at such time, that the orders are most likely to match in the system. Even if as argued by the Noticee, the trades were delivery based, such pattern of trading cannot be accepted as genuine and legal trading. 48. Synchronization in market parlance refers to synchronization with regard to price, quantity and time of trades between the two parties. In the screen based order matching system the synchronised trades may occur. However, any attempt to manipulate the price or volume through pre-meditated and coordinated trading between connected parties through synchronized trades would be illegal being covered under the prohibitions of section 12A of the SEBI Act and provisions of regulations 3 and 4 of the PFUTP Regulations. I note that in the matter of Ketan Parekh vs. Securities and Exchange Board of India decided on July 14, 2006, Hon'ble SAT held as under- " 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.

Any transaction executed with the intention to defeat the market mechanism whether negotiated or not would be illegal. 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….." 49. Further, in M/s Grishma Securities Pvt. Ltd. Appeal No. 117 of 2006 Date of Decision: 4.08.2010, Hon'ble SAT held as under- "Synchronized trades per se are not illegal and they have been sanctified by the respondent Board as per its circular dated September 14, 1999 provided the trades are executed in the manner specified therein. Synchronized trades, however, can be executed with a view to manipulate the price or the volumes of the traded scrip or both or with some other ulterior purpose and whether a synchronized trade has been executed with a manipulative intent or not will have to be gathered from the intention of the parties for which there would seldom be any direct evidence. Their intention will have to be gathered from the surrounding circumstances including the pattern of trading, the frequency of the trades and their volumes, the explanations furnished by the parties and brokers etc." 50. Showing foolproof evidence in such cases would not be possible as the intention of the parties concerned would be within their special knowledge.

In the screen based trading the manipulative or fraudulent intent can be inferred from various factors such as conduct of the party, pattern of transactions, etc. Such intention may be demonstrated from the attending circumstances as observed by Hon'ble SAT in the above mentioned Ketan Parekh case as following :- "The nature of transactions executed, the frequency with which such transactions are undertaken, the value of the transactions, ........., 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." 51. Thus, when the transactions are undertaken between the connected clients through connected stock brokers repeatedly and continuously involving considerable amount of shares, the intention can be inferred from such pattern of trades. In such transactions the intention is implicit. This view is also supported by the following findings of Hon'ble SAT in Nirmal Bang Securities (P) Ltd. v. SEBI Appeal No. 54-57/2002 decided on September 12, 2002:

" ……… As the Respondent rightly stated it is too much of a coincidence over too long a period in too many transactions when both parties to the transaction had entered buy and sell orders for the same quantity of shares almost simultaneously. ….……... In a synchronized trading intention is implicit." 52. The pattern of the synchronized trading in this case as discussed above and also in the Report, clearly suggests the design of the Noticee and its active involvement in the plan/ device and artifice of the 'connected clients' to create artificial volume and suggest false appearance of trading in the above scrips. I am unable to accept the argument that there cannot be synchronization and consequent manipulation in volume through trades after the closing hours as sought to be argued by the Noticee. In my view, synchronization of trade with regard to quantity, price and time is possible in the post closing session also though the trades may happen at the same price during the post closing session. In fact, as trading takes place at one price only i.e. the closing price, in the post closing session the chance of synchronization could be more during this period.

I note that the Noticee has relied upon the statement of DA in that regard out of context. I note that the DA has not given any conclusive findings in that regard. Therefore, I do not agree with the contentions of the Noticee in this regard. 53. In the facts and circumstances of the case and the pattern of trading of the connected clients through the Noticee and its connected counter party broker, the fact that the Noticee executed transactions on the screen based trading system and did not indulged in any proprietary trades cannot be of any defense to the Noticee. In this regard, the following observations of Hon'ble SAT in its order dated December 13, 2010 in Appeal no. 190/2010-Ajmera Associates Ltd. Vs. SEBI is worth mentioning: "... It is not in dispute that the trading system that we have on the stock exchanges is a blind trading system which maintains complete anonymity of the persons trading. The broker while executing an order (buy or sell) cannot possibly know at the time of placing the order through the system as to who the counter party is or even the counter party broker.

In other words, the trading system does not permit the buyers and the sellers to have any interaction between them except through the trading system. A buy order placed on the system matches with a sell order and a trade comes to be executed and this matching is done by the system on a price time priority basis. Despite the anonymity of the system, we have seen market players and the intermediaries like the brokers executing manipulative trades by defeating the system and this is usually done by placing the buy and sell orders simultaneously for the same amount and at the same price. Such matching orders usually result in trades in comparatively less liquid scrips. This being the system, it sometimes becomes difficult to find out whether the brokers who execute the trades of their clients and who are expected to carry out their directions are also a party to the mischief. If the broker knew at the time of executing the trade what the client was upto, then obviously he is a party to the mischief. Since the trading system maintains complete anonymity, brokers always plead that they were ignorant about the counter party or his broker.

In such a situation one has to look to the trading pattern and if the trades match too often or if the matching of the trades is noticed day after day and trade after trade, one can infer that the matching was done not by the system but by manipulating the same....." 54. From the above transactions of the Noticee, it can be inferred that the Noticee executed several trades for the connected clients in the scrip of Temptation, Bang, Confidence and Cals with intent to artificially raise the volume of the scrips by indulging in manipulative trade practices. The trades of the Noticee have to be considered as part of overall plan of manipulative trading in the four scrips amongst the connected clients. In the facts and circumstances of this case, I find that the Noticee has violated section 12A(a), (b) and (c) of the SEBI Act read with regulations 3 (a), (b), (c) & (d), 4(1), 4(2) (a) & (g) of the PFUTP Regulations, Clause A(1), (2), (3), (4) and (5) of the Code of Conduct for stock brokers as specified in Schedule II read with provisions of regulation 7 of the Stock Brokers Regulations. 55. I note that there was no allegation of price manipulation by the Noticee during inquiry before DA except with regard to its trades in the scrip of Bang.

Further, the DA has exonerated the Noticee from this charge and has found that the Noticee has not violated regulation 4 (2) (b) and (e) of PFUTP Regulations. I do not find any material to differ with this finding of the DA with regard to trades of the Noticee in the scrip of Bang. 56. I am of the considered view that the acts of serious irregularities as found in this matter definitely have potential to disturb the market integrity and disturb the fair, equitable and efficient functioning of securities market. These types of transactions pose prudential threat to the market integrity and orderly development of security market. I am satisfied that it is necessary to secure the proper management of the activity of the stock broker. In my view, in the facts and circumstances of this case and taking into account the interests of the investors, the action as recommended by the Designated Authority in his Report is commensurate with the violations committed by the Noticee. 57. I, therefore in exercise of the powers conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 28(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby suspend the certification of registration of Krishvi Securities P. Ltd., member of BSE (SEBI registration No. INB011202737) for a period of 15 days.

58. This order shall come into force immediately on expiry of twenty one days from the date of this order. 59. A copy of this order shall also be forwarded to BSE to ensure compliance with order in Para 57 above.

DATE : July 5th, 2013 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA