Order with respect to M/s Mavi Investment Fund Limited in the matter of market Manipulation Using GDR Issues

ORDER Under sections 11, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 read with Regulation 11(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, in the proceedings against M/s Mavi Investment Fund Limited (PAN No. AAECM5148A).

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) had received alerts about large scale off-market transactions in its Integrated Market Surveillance System regarding trading in scrips of certain companies during the year 2009.

2. Preliminary Investigations revealed that one Shri Arun Panchariya (hereinafter referred to as “AP”) had used certain Foreign Institutional Investors (FIIs)/Sub-Accounts along with a few other entities to defraud Indian investors by facilitating issuance of Global Depository Receipts (hereinafter referred to as “GDRs”) by certain listed Indian Companies. Later, the GDRs were converted into equity shares and were sold in the Indian securities market. The Issuer Companies where AP was observed to be involved in fraudulent activities were Asahi Infrastructure & Projects Ltd(Asahi), IKF Technologies Ltd. (IKF), Avon Corporation Ltd (Avon), K Sera Sera Ltd (K Sera), CAT Technologies Ltd (Cat), Maars Software International Ltd (Maars) (hereinafter collectively to as "Issuer Companies").

3. As prima facie manipulative practices were suspected, SEBI, vide an ad–interim ex – parte Order dated September 21, 2011 (hereinafter referred to as “Interim Order”), had inter alia issued directions against AP and his company viz. Pan Asia Advisors Ltd. (hereinafter referred to as “Pan Asia”) barring them from rendering services in connection with instruments that are defined as securities (as in section 2(h) of SCRA, 1956) in the Indian market or in any way dealing with them.

4. The primary observations made in the Interim Order are:

a. Issuer Companies were having unimpressive financials yet they were able to successfully issue GDRs in much larger quantities than their existing equity capital. The lead manager in all the cases was Pan Asia. b. The initial investors in all the GDR issues of Issuer Companies were common set of foreign entities. The addresses of these entities prima facie appeared to be non-existent. c. A group of Sub-Accounts with prima facie connections with AP were observed to be converting GDRs of Issuer Companies and selling it in India within a short period of issuance of GDRs. d. The sale of shares of Issuer Companies by Sub-Accounts was matching on a consistent basis with certain Indian entities which were also connected to AP. e. During the aforesaid preliminary examination alongwith certain other FIIs/sub-accounts, it was prima-facie observed that M/s Mavi Investment Fund Limited (hereinafter referred to as "Mavi"), was converting the GDRs held by it in one of the Issuer Companies viz. Maars Software International Limited (hereinafter referred to as "Maars") into underlying shares to sell in the Indian markets. f. It was observed that around 96.1 % of shares of Maars sold by Mavi were purchased by three Indian clients connected to AP, viz. Basmati Securities Private Limited, Alka India Limited and SV Enterprises (hereinafter referred to as "CP Group"). From the preliminary examination, it prima facie appeared that Mavi was acting in concert with AP to offload the GDRs of companies mentioned in paragraph 2 above.

5. Subsequently, SEBI completed the investigation against AP. Investigation revealed that AP had used fraudulent means through various entities to defraud the Indian investors. After concluding the investigation in respect of the roles of AP and Pan Asia, SEBI vide Order dated June 20, 2013 debarred AP and Pan Asia for a period of ten years.

6. As stated earlier in Para 4(f), Mavi was observed to have traded with counterparties connected with AP in Maars. It was observed in the Interim Order that for certain trades, the buy and sell orders were placed at exactly or nearly same price and the that the buy and sell order size was also nearly same in four trades (Details given in paragraph 22.1(ii) of this Order).

7. As prima facie manipulative practices were suspected, SEBI vide the Interim Order, pending investigation and passing of further orders, inter alia directed that Mavi “shall not deal in securities or instrument with Indian securities as underlying, in any manner whatsoever, until further orders”, in view of the irregularities observed in the issuance of GDRs of Maars.

8. The abovementioned Interim Order was confirmed on January 25, 2012 (hereinafter referred to as “Confirmatory Order”). Vide the aforesaid Confirmatory Order, the directions against Mavi as contained in the Interim Order dated September 21, 2011, were modified to the limited extent of allowing it to sell the securities held by it in its demat accounts. In that regard, it was directed that: "Mavi Investment Fund Limited shall deposit sale proceeds, in case of any sale, in a bank fixed deposit earning interest and it shall not be allowed to withdraw monies from the said account including interest without the prior permission of the Securities and Exchange Board of India. In case, Mavi Investment Fund Limited intends to utilize any or whole of the sale proceeds, it shall seek prior permission of the Securities and Exchange Board of India."

9. While the Confirmatory Order was in force, Mavi filed appeals (Appeal No. 169 and 170 of 2012) before the Hon’ble Securities Appellate Tribunal (hereinafter referred to as "SAT") inter alia with a prayer for setting aside the Interim Order and Confirmatory Order passed by SEBI and also a further prayer to permit it to sell shares which were not the subject matter of the investigation and to permit repatriation of the sale proceeds in accordance with law. The Hon'ble SAT vide its Order dated August 10, 2012, directed SEBI to consider the representation made by Mavi and to pass an order on such representation within a period of two weeks from the date of the aforesaid Order.

10. In compliance with the abovementioned Order of the Hon'ble SAT dated August 10, 2012, SEBI considered the representation made by Mavi. Vide letter dated August 24, 2012, granted further relaxation to Mavi and allowed it to repatriate and utilise funds generated out of shares held by it except for the scrips of the Issuer Companies and Cals Refineries Limited, which were under investigation.

11. Mavi filed an appeal (Appeal No. 63 of 2013), before the Hon’ble SAT against the Interim Order and Confirmatory Order issued by SEBI. The aforesaid appeal was disposed of by the Hon’ble SAT vide its Order dated July 17, 2013, wherein it observed:

"3.Learned counsel for the respondent (SEBI) on instruction states that the respondent would complete the investigation and issue a show cause notice within a period of six weeks and pass a final order within a period of four weeks thereafter, provided the appellant cooperates in the matter. He further states on instruction that the respondent would not seek any extension of time for passing the final order. 4. Learned Counsel for the appellant (Mavi) on instruction states that the appellant would co-operate in the matter and would not seek any adjournment. 5. The statement made by the learned counsel for the parties is accepted. It is made clear that if the respondent fails to issue a final order within the time stipulated hereinabove the ad-interim order and interim order passed on September 21, 2011 and January 25, 2012 respectively shall stand vacated against the appellant."

12. In compliance with the abovementioned Order of the Hon'ble SAT dated July 17, 2013, SEBI completed its investigation as against Mavi, in the matter of market manipulation using GDR Issues. Consequently, a Show Cause Notice dated August 28, 2013 (hereinafter referred to as "SCN"), was issued to Mavi under Sections 11, 11(4) and 11B of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act") read with Regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as "PFUTP Regulations, 2003") calling upon it to show cause as to why suitable directions should not be issued, for the violations alleged in the SCN.

13. Mavi filed their reply to the abovementioned SCN dated August 28, 2013 vide letter September 16, 2013. Further, an opportunity for personal hearing was granted to Mavi on September 23, 2013. Pursuant to the personal hearing, Mavi submitted additional written submissions to the SCN vide letter dated September 24, 2013.

14. As per the findings contained in the Investigation Report (against AP and other entities) and Supplementary Investigation Report (specifically with respect to Mavi), I note that:

16.1 During the period January 01, 2009 to September 21, 2011 (hereinafter referred to as "Investigation Period"), out of the six scrips where AP was found to have indulged in manipulation, Mavi had purchased and cancelled GDRs and sold resultant shares of two listed companies, viz. Cat Technologies Limited (hereinafter referred to as "CAT") and Maars.

16.2 The day wise table for sale of shares of Maars and CAT, is given below:

Name of Scrip Date of Sale No. of shares sold Value of shares sold (₹)

02-03-2009 1,50,000 3,81,000 03-03-2009 3,00,000 7,83,000 06-03-2009 3,00,000 8,37,000 CAT 09-03-2009 3,00,000 7,41,000 17-03-2009 2,10,000 5,31,300 Total 12,60,000 32,73,300

18-09-2009 13,00,000 52,66,754 Maars 22-09-2009 13,00,000 53,36,525 Total 26,00,000 1,06,03,279

Grand Total 38,60,000 1,38,76,579

16.3 In total, Mavi sold 12,60,000 shares of CAT worth ₹32,73,300 on five trading days. Similarly, Mavi sold 26,00,000 shares of Maars worth ₹1,06,03,279 in two trading days.

16.4 The counterparties to the shares sold by Mavi were either CP Group entities or connected to the promoters of the Issuer Companies. Following are the details of the counterparties of the shares sold by Mavi in Maars and CAT.

Sell Sell Value % to total Scrip FII CP PAN CP NAME Volume (₹) Sale Espirit Technologies 5,31,732 13,32,932 42.20 Mavi AACCE0781B Pvt. Ltd Dinesh Kumar 3,62,695 9,66,131 28.80 Mavi ABSPJ3747J Jaiswal Laxmipershad CAT 3,21,076 8,58,100 25.50 Mavi ADTPB3843L Jaiswal 44,497 1,16,137 3.50 Mavi Others Mavi Total sale in CAT 12,60,000 32,73,300 100.00

Basmati Securities Pvt. 16,59,858 67,52,550 63.80 Mavi AAACB4324K Ltd. Mavi AABCA6702F Alka India Ltd 6,47,500 26,61,225 24.90 Maars Mavi ACRPP5552H SV Enterprises 1,92,318 7,82,707 7.40 1,00,324 4,06,797 3.90 Mavi Others Mavi Total sale in Maars 26,00,000 1,06,03,279 100.00

16.5 Around 96.5% of shares sold by Mavi in CAT were purchased by Espirit Technologies Ltd, Dinesh Kumar Jaiswal and Laxmipershad Jaiswal. All the three entities are promoters of CAT.

16.6 In the case of Maars, 96.1% of shares sold by Mavi were purchased by Basmati Securities Pvt. Ltd), Alka India Ltd and SV Enterprises. All the three entities are members of CP Group connected to AP.

16.7 Summons was issued to Mavi on December 05, 2011 and December 24, 2012. In the said summons, Mavi was inter-alia asked to submit details of its beneficial owners. It was explained in the summons that SEBI was seeking information regarding its beneficial owners as defined in Circular No. CIR/ISD/AML/3/2010 dated December 31, 2010 of SEBI on Anti Money Laundering (AML) Standards/Combating the Financing of Terrorism (CFT), Prevention of Money Laundering Act, 2002 and the Prevention of Money Laundering Rules. Beneficial owner is defined therein as follows: "The beneficial owner is the natural person or persons who ultimately own, control or influence a client and/or persons on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement."

16.8 Following is the list of documents that were provided by Mavi and were examined by SEBI to establish any connection that Mavi might have with AP, CP Group or promoters of CAT: i. Details of ownership structure and management structure of Mavi during the period January 01, 2009 to May 31, 2010. ii. Details of fund managers/investment managers for each Class, of Mavi. iii. Details of persons who were part of the controlling group of Mavi. iv. Details of source of funds and use of sale proceeds with regard to transactions done by Mavi in shares of Maars and CAT. v. Details of acquisition of all the GDRs of Indian companies by Mavi vi. Details of sale of all the shares corresponding the conversion of GDRs. vii. Details of any agreement like loan for the purchase, market risk of GDRs being covered by any entity or for any other similar arrangement, Mavi had with any entity regarding the Purchase and sales of GDRs. viii. Bank Account Statement of Mavi

16.9 While Mavi complied with the aforesaid summons issued by SEBI and provided some information to SEBI, it failed to provide the information regarding beneficial owners to SEBI. Mavi provided names of legal entities who were investors/founders of Mavi; however, it did not provide details of the ultimate beneficial owners in the form of natural persons as required by SEBI.

16.10 SEBI also sought information from the Financial Services Commission, Mauritius (FSC). The documents provided by FSC, Mauritius concerning Mavi, that were examined by SEBI were as follows:

i. The details regarding incorporation of Mavi. ii. Details of Ownership Structure of Mavi iii. Details of shareholder of Mavi. iv. Details regarding Investors in Mavi v. Details regarding Memorandum and Article of Association of Mavi vi. Details of filing that Mavi had done with Financial Services Commission – Mauritius

16.11 None of the documents sent by the FSC, Mauritius as well as the documents furnished by Mavi itself to SEBI established any connection between Mavi and AP/CP Group or the promoters of CAT.

16.12 SEBI also sought information certain information regarding the transactions executed by Mavi from Financial Conduct Authority of UK under IOSCO MMoU. However, on July 29, 2013, FCA informed SEBI that as the concerned deals in GDRs was dealt in Switzerland, SEBI may request Swiss Financial Market Supervisory Authority (hereinafter referred to as "FINMA") to seek the desired information.

16.13 Thereafter, SEBI made a formal request to FINMA for the aforesaid information. Reply in this regard is still awaited.

17 Show Cause Notice issued to Mavi –

17.1 On the basis of findings made in the aforesaid Investigation Report, SCN was issued to Mavi. In the SCN, the following charges were mainly made against Mavi:

17.2 In the case of certain trades executed by Mavi in Maars, as described in the Interim Order, it was inter alia observed that Mavi sold 26,00,000 shares during 1st January, 2009 to 31st May, 2010, out of which 25,24,676 shares (97.10% of shares sold by Mavi) were purchased by entities related to AP viz. Basmati Securities Private Limited, Alka India Limited and SV Enterprises. Further, the Interim Order observed certain trades executed by Mavi on September 18, 2009 and September 22, 2009 wherein the buy and sell orders are placed at exactly same or nearly same price. The buy and sell order size is also nearly same in four trades. Further in all the cases the buy order by the group entities had been placed a few minutes before large sell order of Sub- Accounts, as mentioned in the said order.

17.3 It has been observed that during March 2009, Mavi converted GDRs of CAT and sold 12,60,000 shares of the said scrip. It is observed that 96.5% of the shares sold by Mavi in the said scrip were purchased by Espirit Technologies Ltd, Mr. Dinesh Kumar Jaiswal and Mr. Laxmipershad Jaiswal, who are Promoters of CAT.

17.4 It was alleged that the trading conduct of Mavi strongly suggested that Mavi is associated/connected with AP/AP connected entities/ Promoters of the Issuer Companies.

17.5 SEBI vide summons dated December 5, 2011 and December 24, 2012 inter-alia sought details of beneficial owners(as defined in SEBI Circular No. CIR/ISD/AML/3/2010 dated December 3, 2010) of investors of Mavi. Mavi denied any relationship between itself and the promoters of the Issuer Companies/Mr. Arun Panchariya/other entities. It was alleged that Mavi failed to provide details of beneficial owners of its investors.

17.6 Under the above circumstances, a conclusion was drawn that the beneficial owners of investors of Mavi were associated with the promoters of the Issuer Companies including CAT and Maars/Mr. Arun Panchariya/other entities as mentioned in the aforesaid summons and hence Mavi has sought to conceal the identity of the beneficial owners of its investors from SEBI.

17.7 In view of the above, Mavi was asked to show cause as to why suitable directions should not be passed under sections 11, 11B and 11(4) of the SEBI Act read with regulation 11 of the PFUTP Regulations, calling upon it to show cause as to why suitable directions should not be passed for the aforesaid alleged violations.

18. Mavi filed their reply to the SCN vide letter dated September 16, 2013. Subsequent to the filing of replies to the SCN by Mavi, an opportunity of personal hearing was granted to Mavi on September 23, 2013. In their aforementioned replies and during the aforesaid hearing, the authorised representative of Mavi, inter alia made the following submissions:

19. Salient Submissions made by Mavi a. SEBI's allegation against Mavi that it is part of AP Group is merely based on surmise and suspicion and the suspicion is unfounded. There is no nexus between AP and Mavi as alleged in the SCN b. Mavi purchased 260,000 GDRs of Maars on 24 Jan 2008 on the Luxemburg Stock Exchange and held these GDRs for around 20 months and finally sold at a loss; the transaction in Maars is insignificant in comparison to Mavi's investments in India. Admittedly, Mavi was not an initial investor of the GDRs and was not part of the set of FII/ Sub-Accounts repeatedly cancelling GDRs. c. The allegations regarding "matched trades" on Sept 18, 2009 and September 22, 2009 in Maars are not supported by the record. The Sell Orders placed by Mavi matched the pre-existing Buy Orders with a time lag of upto 24-25 minutes on Sept 18, 2009 and around 30- 35 minutes on September 22, 2009. In light of the trading patterns of Alka India, Basmati Securities and SV Enterprises, which was to constantly buy and sell shares of Maars in large numbers over a period of six months, any matching of trades is mere coincidence and is of no consequence. There is no similarity between trading conduct of Mavi and CP Group's trading pattern.

d. Mavi bought the GDRs of CAT and held them for around 15 months. The trades were done through the order-matching mechanism of BSE during regular trading hours. Mavi sold all its shares in CAT for Rs 32.73 lakhs at a loss of about Rs 70 lakhs. e. The transactions in Maars and CAT were done through BSE during regular trading hours and Sell Orders were matched by the computerized system of BSE against available Buy Orders. No inference of collusion can be drawn on the basis of this data. f. Mavi's Investors are banks and financial institutions from FATF acknowledged jurisdictions. Mavi has provided detailed names and full addresses of all its investors. As a matter of principle, Mavi only accepts qualified investors such as regulated financial institutions/banks, licensed intermediaries and institutional investors domiciled and licensed in FATF acknowledged jurisdictions as investor-shareholders but no natural persons. g. Since such institutional investors have a large number of investors who keep changing on day-to-day basis, it was impossible for it to get the information related to their beneficial owners. h. Mavi approached its investors and got clarifications from them regarding their relationship, if any, with AP/AP Entities. Each of the current investors has given specific written clarification to Mavi that it has no relationship with AP/AP Entities (20 persons/entities). i. It is denied that Mavi is trying to conceal the identity of the beneficial owners of its investors as the beneficial owners are associated with the promoters of the Issuer Companies, including CAT and Maars /AP/ Other entities as mentioned in the Summons. It denied that the beneficial owners of Mavi's investors are associated with the promoters of the Issuer Companies, including CAT and Maars/ AP/ Other entities connected with AP. j. In support of its contentions, Mavi referred to various judgments of the Hon'ble Supreme Court of India such as Nandkishore Prasad vs. State of Bihar, (1978) 3 SCC 366, Bank of India vs. PS Naravana, AIR 1999 SC 2407 and also Orders of the Hon'ble SAT in Videocon International, Nirmal Bang Securities Limited, Bipin Vora, etc.

Consideration of Issues and Findings –

20. I have considered the material available on record i.e. Investigation Report and Supplementary Investigation Report, Summons and SCN issued to Mavi; its replies to the Summons and SCN alongwith the submissions made during the personal hearing before me. In light of the same, I shall now proceed to deal with the charges levelled against Mavi in the SCN.

21. As per the SCN, Mavi was primarily alleged – i. To be connected to AP/CP Group entities/Promoters of CAT; ii. To have failed to provide details of beneficial owners of investors in Mavi, to SEBI;

22. As regards the charge that Mavi was connected to AP/CP Group entities/Promoters of CAT, I note as follows –

22.1 Trades executed by Mavi in Maars – i. Mavi submitted that it had purchased 260,000 GDRs of Maars on January 24, 2008, which were converted to equity shares and credited to its demat account on January 30, 2008. Mavi further submitted that the aforesaid equity shares were sold on September 18, 2009 and September 22, 2009, after holding them for a period of 20 months, in order to avoid further monetary loss. ii. Mavi sold 2,600,000 shares of Maars on 2 trading days i.e. September 18, 2009 and September 22, 2009, respectively. The details of day-wise trades by Mavi in Maars alongwith the counterparties to such trades are illustrated in the following tables: Table 1A Name of Scrip Date of Sale No. of shares sold Value of shares sold (₹)

18-09-2009 13,00,000 52,66,754 Maars 22-09-2009 13,00,000 53,36,525 Total 26,00,000 1,06,03,279

Table 1B CP Trade CP Order CP Counterparty Trade Order Order Order Name Value Order Rate Order Name Qty Qty Rate Time (₹) Qty (₹) Time (₹) MAVI BASMATI 650,000 2,632,500 650,000 700,000 4.05 4.05 14:53:35 14:17:53 MAVI ALKA 647,500 2,661,225 650,000 700,000 4.10 4.11 13:41:54 13:14:28 MAVI BASMATI 602,510 2,470,291 650,000 700,000 4.10 4.10 13:43:12 13:42:55 MAVI BASMATI 407,348 1,649,759 650,000 725,000 4.05 4.05 14:51:54 14:17:46 MAVI SV 144,930 588,416 650,000 163,513 4.05 4.06 14:51:54 14:40:04 MAVI SV 47,388 194,291 650,000 50,000 4.10 4.10 13:43:12 13:08:46 iii. Upon a consideration of the trades executed by Mavi in Maars with specific reference to Tables 1A and 1B above, I note as follows – a. For five out of six trades executed between Mavi and CP Group entities, the same were executed within a time gap of approximately 20–35 minutes. b. It is in one trade where the time gap was less than 1 minute. The traded quantity was 602,510 shares. c. While it is an undisputed fact that 96.1% of shares sold by Mavi in Maars were purchased by Basmati Securities Pvt. Ltd., Alka India Ltd and SV Enterprises, all of whom were members of the CP Group, which was connected to AP, no other evidence has been brought on record to establish the connection between Mavi and AP/CP Group entities in respect of such trades executed in Maars to substantiate the allegation made in the SCN. d. The shares forming part of the trades executed between Mavi and AP/CP Group entities in Maars had been held by Mavi for a period of 20 months.

22.2 Trades executed by Mavi in CAT – iv. Mavi submitted that it purchased 225,000 GDRs on January 24, 2008, of which 210,000 GDRs were immediately converted to equity shares and were credited to its demat account on January 30, 2008. Mavi further submitted that it sold all its shares in CAT over a 15-day period in March 2009, after holding them for 15 months, in order to avoid further monetary loss. v. Mavi sold 12,60,000 shares of CAT worth ₹32,73,300 on 5 trading days i.e. between March 2, 2009–March 17, 2009, respectively. The details of day-wise trades by Mavi in CAT is provided below –

Table 2A Name of Scrip Date of Sale No. of shares sold Value of shares sold (₹)

02-03-2009 1,50,000 3,81,000 03-03-2009 3,00,000 7,83,000 CAT 06-03-2009 3,00,000 8,37,000 09-03-2009 3,00,000 7,41,000 17-03-2009 2,10,000 5,31,300 Total 12,60,000 32,73,300 vi. Upon a consideration of the trades executed by Mavi in CAT with specific reference to Table 2A, I note as follows – a. While it is an undisputed fact that 96.5% of shares sold by Mavi in CAT were purchased by Espirit Technologies Ltd, Dinesh Kumar Jaiswal and Laxmipershad Jaiswal, who are promoters of CAT, no other evidence has been brought on record to establish the connection between Mavi and the promoters of CAT in respect of trades executed in CAT to substantiate the allegation made in the SCN. b. The shares forming part of the trades executed between Mavi and promoters of CAT had been held by Mavi for a period of 15 months.

22.3 From the details of trades executed by Mavi in the scrips of Maars and CAT, it cannot be conclusively determined that such trades were synchronized by it with the CP Group/promoters of CAT. For example, five out of six trades executed in Maars between Mavi and the CP Group was executed within a time gap of approximately 20–35 minutes. Further, since such trades were screen-based trades and took place on the trading platforms of recognised stock exchanges, there is a possibility, however remote, that the entities executing the said trades i.e. Mavi and CP Group/promoters of CAT, were not known to each other. It is also pertinent to note that the CP Group was actively trading in the scrips of Maars and CAT during the investigation period. Further, as brought out in the preceding paragraphs, even after a detailed investigation, apart from the fact that a substantial amount of shares of Maars and CAT sold by Mavi were bought by CP Group/promoters of CAT, no other compelling corroborative evidence has been brought on record to establish connection between Mavi and AP/CP Group/promoters of CAT. In view of the aforesaid, I find it difficult to arrive at a definite conclusion that a connection between Mavi and AP/CP Group entities/Promoters of CAT has been well and truly established on the basis of material available on record.

23. As regards the charge against Mavi of failing to provide details of beneficial owners of investors to SEBI, I note as follows:

23.1 SEBI issued summons dated December 5, 2011 and December 24, 2012, to Mavi seeking details of the beneficial owners of investors in Mavi. Mavi submitted that it only accepts qualified investors such as regulated financial institutions/banks, licensed intermediaries and institutional investors domiciled and licensed in FATF acknowledged jurisdictions as investor-shareholders but no natural persons. Mavi also submitted that since such institutional investors have a large number of investors who keep changing on day-to-day basis, it was impossible for it to get the information related to their beneficial owners. In this regard, Mavi forwarded to SEBI the names of such investors alongwith a Special Confirmation Undertaking from its current investors denying any direct linkage or formal relationship with AP or AP controlled entities.

23.2 Although information in respect of investors in Mavi was provided to SEBI, the same did not contain relevant details regarding the beneficial owners in respect of such investors, as specifically sought by SEBI. I note that Mavi has inter alia cited operational difficulties in providing relevant details relating to the beneficial owners in respect of its investors. Nonetheless, I note that SEBI also sought information from the FSC, Mauritius in respect of investors in Mavi, which when examined, was found to be substantially similar to the information submitted by Mavi to SEBI. In this regard, I find that the aforesaid information (obtained from FSC, Mauritius and also submitted by Mavi) did not indicate any connection between Mavi and AP/CP Group or the promoters of CAT. Hence, in light of the aforesaid and considering the evidence available on record, I am inclined to give Mavi the benefit of doubt in respect of the charge of failing to provide details of beneficial owners of its investors to SEBI.

24. I note that the preliminary findings made by SEBI in respect of the matter relating to market manipulation using GDRs Issues did indeed indicate the existence of an arrangement in which several Sub-Accounts had sold considerable quantities of shares upon conversion of GDRs of the Issuer Companies to common counterparties. I note that the preliminary findings also indicated that such Issuer Companies had issued GDRs on the advice of Pan Asia and AP. I note that Maars was one of the scrips under examination by SEBI for fraud perpetrated by AP and the trading aspect of Mavi in the said scrip, as discussed in the preceding paragraphs, did provide sufficient grounds to suggest that it was a part of a larger group which had allegedly indulged in the aforesaid market manipulation. Considering the magnitude of the alleged market manipulation through the GDR Issues, SEBI could not have been a mere spectator and it had to intervene in the matter to protect the integrity of the securities market and the interests of investors. Therefore, in such circumstances, SEBI was justified in issuing directions against Mavi vide the Interim and Confirmatory Orders. Further, as the investigation in the matter of market manipulation using GDRs Issues was still in progress, the directions imposed vide the aforesaid Orders were continued against Mavi.

25. I note that Mavi has already undergone the restraint imposed vide the Interim and Confirmatory Orders for a period of two years. I note that the investigation in the matter of market manipulation using GDRs Issues has now been completed as against Mavi. At this stage of final disposal of the proceedings, I find that the charges levelled against Mavi in the SCN dated August 28, 2013, have not been decisively established by the material available on record and in view of the same, I am inclined to grant Mavi the benefit of doubt in respect of the violations alleged therein. Having arrived at the aforesaid finding, the SCN needs to be disposed of and the restraint imposed on Mavi vide the aforesaid Orders needs to be vacated.

26. As stated in paragraphs 16.12–16.13 of this Order, SEBI has requested FINMA for information in respect of Mavi, which is still awaited. In this regard, I note that the Hon’ble SAT in its Order dated July 17, 2013, had directed SEBI to conclude the proceedings against Mavi within a time-bound period. In view of the said direction, it is incumbent upon SEBI to pass the final order in the matter. It is, therefore, emphasized that this Order is based on the material available on record. However, it is clarified that if any information is received from FINMA which is contrary to the submissions made or information submitted by Mavi, then the same shall not prejudice the right of SEBI to take any further action in accordance with law, as it deems fit.

Order –

27. I, therefore, in exercise of the powers conferred upon me under section 19 of the SEBI Act read with sections 11, 11(4) and 11B thereof, hereby dispose of the SCN dated August 28, 2013, issued to Mavi without any further directions and the restraint imposed on Mavi vide the Interim Order and the Confirmatory Order are vacated with immediate effect.

Place: Mumbai S. RAMAN Date: September 25, 2013 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA