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TMI Blog2013 (10) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001 to May 2, 2001 ('investigation period' for short). During the period of investigation, there was consistent fall in price of the scrip of SIL accompanied by low delivery. Price of SIL scrip had fallen from ₹ 342/- as on February 5, 2001 to a low of ₹ 60.75 as on April 30, 2001 before finally closing at ₹ 73.75 on May 2, 2001. SEBI had also conducted investigation in the scrip of SIL, for the period from February 2000 to August 2000. During that period of investigation it was noticed that price of the scrip had increased from ₹ 10/- in February 2000 to ₹ 696/- in August 2000 and appropriate action was initiated against various persons/entities involved in dealing in scrip therein, including appellant. 4. Based on investigation report for the period February 5, 2001 to May 2, 2001, enquiry officer appointed by SEBI issued notice on June 18, 2008 calling upon appellant to show cause as to why trades executed by appellant on behalf of its client Mr. Heerachand Salecha in the scrip of SIL which were synchronized circular trades and executed between a set group, should not be held to be violative of Regulation 4(a) and (d) of the Securities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be violative of SEBI Act and regulations made thereunder. b. Alleged violations pertain to trades executed in 2001 and impugned order is passed after 12 years contrary to Regulation 28 (2) of Intermediaries Regulations. Relying on decisions of this Tribunal in Appeal No.143 of 2011 decided on November 28, 2011 Aditi Dalal v. SEBI [2012] 25 taxmann.com 48 (Sat - Mum.)) and Appeal no.114 of 2012 (HB Stockholdings Ltd. v. SEBI) decided on 27/8/2013 it is contended that impugned order which suffers from inordinate delay is liable to be quashed and set aside or in the alternative, appellant be let off by warning appellant to be careful in future. c. Where trades executed by a client through a broker are found to be manipulative, broker can be made liable only if there existed relationship more than that of broker-client relationship. In the present case no such relationship is shown to have been existing between appellant (broker) and Heerachand Salecha (client) and hence prohibition imposed against appellant by impugned order is unjustified. d. Neither there is any material on record to suggest that there was any connection between appellant (broker) and Heerachand Salecha (clie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 342 to ₹ 296 (opening price). Thereafter, the trading of these entities in the scrip reduced drastically, the volume of trades in the scrip became negligible and the price of the scrip also started declining. The 'last traded price' (LTP) analysis for the entire period shows that the price of the scrip varied in the range from -14% to 11.54%. 4. During the investigation period, three different groups were found trading in the scrip of SIL in a circular manner. Out of these, the group consisting of eight (8) brokers/ subbrokers (namely N.C. Jain, Opulant Stock Broking, Bharti Thakkar India Sec. Pvt. Limited, ISJ Securities/ Vintel Securities, Sripal Jain, Joindre Capital Service/ Alwin Securities and Reneissance Securities Limited/ Mellennium Securities) and their clients including Angel Broking Limited (hereinafter referred to as the 'noticee') (identified as 'Group 1') were found trading amongst themselves in circular manner, which led to the creation of artificial volumes in the market. The total volume generated by the said group by way of circular trades was 3,42,800 shares (gross) i.e. about 37.52% of the total quantity traded during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 10:36:45 369 1000 Opulant Broking Ramsudhakara 10:36:45 369 1000 10:36:45 100 369 0:00:00 06/02/01 Angel Broking Heerachand 11:58:07 381.50 800 Opulant Broking Ramsudhakara 11:58:07 381.50 700 11:58:08 100 381.50 0:00:00 06/02/01 Angel Broking Heerachand 11:58:07 381.50 800 Opulant Broking Ramsudhakara 11:58:07 381.50 700 11:58:08 100 381.50 0:00:00 06/02/01 Angel Broking Heerachand 11:58:07 381.50 800 Opulant Broking Ramsudhakara 11:58:07 381.50 700 11:58:08 100 381.50 0:00:00 06/02/01 Angel Broking Heerachand 11:58:07 381.50 800 Opulant Broking Ramsudhakar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:28:09 377.75 900 Opulant Broking Ramsudhakara 13:28:09 377.25 900 13:28:10 100 377.75 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.5 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking Ramsudhakara 13:56:40 378.50 700 13:56:40 100 378.50 0:00:00 06/02/01 Angel Broking Heerachand 13:56:40 378.50 700 Opulant Broking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achand Salecha Opulent Broing Ramsudhakaran 900 Bharati Thakkar Govind Chinchani Angel Broking Ltd. Heerachand Salecha 900 Reneissance Sec. Abhayraj Shukla Bharati Thakkar Govind Chinchani 900 06/02/2001 N.C. Jain Own Reneissance Sec. Abhayraj Shukla 1,000 Opulent Broking Ramsudhakaran N.C. Jain Own 1,000 Angel Broking Ltd. Heerachand Salecha Opulent Broking Ramsudhakaran 1,000 Bharati Thakkar Govind Chinchani Angel Broking Ltd. Heerachand Salecha 1,000 Reneissance Sec. Abhayraj Shukla Bharati Thakkar Govind Chinchani 1,000 N.C. Jain Own Reneissance Sec. Abhayraj Shukla 800 Shripal Jain Own N.C. Jain Own 800 Opulent Broking Ramsudhakaran Shripal Jain Own 800 Angel Broking Ltd. Heerachand Salecha Opulent Broking Ramsudhakaran 800 Bharati Thakkar Govind Chinchani Angel Broking Ltd. Heerachand Salecha 800 Reneissance Sec. Abhayraj Shukla Bharati Thakkar Govind Chinchani 800 From table B above, I note that the same number of shares were being rotated in a circular manner among the group of brokers. It is seen that the trades were so well organized that the same number of shares went back to the original seller at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anonymity, brokers always plead that they were ignorant about the counterparty 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. Similarly, if two or more market players start trading in circles and do not allow the shares to go out of the circle, it could be reasonably inferred that both traders and their brokers are colluding to execute such artificial trades which give a misleading appearance of trading in the market without change of beneficial ownership in the traded scrip…" Therefore, in facts of present case, where circular trading in a synchronized manner in SIL scrip has been executed repeatedly for several days, conclusion drawn in impugned order that appellant was acting in tandem with the group, cannot be faulted. Argument that appellant on its own had reported to the stock exchange regarding some other suspicious trades of Heerachand Salecha cannot be a ground to escape liability in the present case where synchronized circular trades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, while holding that SEBI must endeavour to pass final order in any proceedings initiated by it, as expeditiously as possible, we hold that on facts of present case, appellant/broker who had executed synchronized/circular trades on behalf of its client cannot escape penalty imposed by impugned order merely because SEBI has passed that order belatedly. 16. Argument that there existed nothing more than broker-client relationship and that there is no material on record to show that appellant was connected with the group is also without any merit. It is on record that trades in question were carried out by appellant in the scrip of SIL on behalf of Heerachand Salecha who was a director in SIL. It is also on record that majority of orders placed by appellant matched instantly and trades took place within the group repeatedly and for several days. These facts on record clearly demonstrate that there were synchronized circular trades within the group and there being a pattern of circular trading, penalty imposed against appellant needs no interference by this Tribunal. 17. Argument that turnover in SIL scrip was miniscule compared to large turnover of appellant and hence penalty n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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