TMI Blog2023 (11) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any plausible explanation by the appellants (the Chandas) of the peculiar and unusual manner in which their trades were executed ahead of the trades of the clients of Sharekhan and matched with the trades of the Sterling group. We further find that the nature, volume and value of trades of Anandilal Chanda and Anandilal Chanda HUF further corroborate the fact that they were carrying out front running activity in order to front run the clients of Sharekhan based on the information that was being passed on by Madhu Chanda to Anandilal Chanda. WTM order and the AO order have correctly held that due to the trading based on prior information of trades of the aforesaid 7 noticees and of the Sterling group, Madhu Chanda, Anandilal Chanda and Anandilal Chanda HUF defrauded investors in the securities market and caused loss to other investors / deprived the investors from profits, and made unlawful gains in their respective trading accounts. The front runners viz. Viraj Mercantile, Josh Trading, Pinky Auto, E-Ally, Shree Jaisal and Bhavesh Gadhavi respectively have also admitted their role in lending the trading accounts to Praveen Jain and in fact couched their submissions be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referred to as Viraj Mercantile ), Abhinandan Ranka noticee nos. 5 (hereinafter referred to as Abhinandan ), Josh Trading Pvt. Ltd. noticee nos. 6 (hereinafter referred to as Josh Trading ) against the order of the WTM dated December 18, 2020 wherein they have been debarred for a period of five years. Similarly, appeal nos. 448 of 2021 has been filed by EAlly Consulting India Pvt. Ltd. noticee nos. 8 (hereinafter referred to as E-Ally Consulting ), Sandeep Maloo noticee nos. 9 (hereinafter referred to as Sandeep ), Shree Jaisal Electronics and Industries Ltd. noticee nos. 10 (hereinafter referred to as Shree Jaisal Electronics ) and Neeta Maloo noticee nos. 11 (hereinafter referred to as Neeta ) against the order of the WTM dated October 18, 2020 wherein these appellants have been debarred for a period of five years. Appeal No. 335 of 2021 has been filed by Madhu Chanda noticee nos. 13, Anandilal Chanda noticee nos. 14 and Anandilal Chanda HUF noticee nos. 15 against the order of the WTM dated December 18, 2020 wherein they have been debarred for a period of six years and further have been directed to disgorge a sum of Rs. 91,21,781/- inclusive of interest to be paid join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RLING FUTURES ) 3. RATHA INFRASTRUCTURE PVT. LIMITED ( RATHA INFRASTURCTURE ) 4. BAGHMAR FINLEASE PVT. LIMITED ( BAGHMAR FINLEASE ) 5. SHANMUGA HOME MAKERS PVT. LIMITED ( SHANMUGA HOME MAKERS ) 6. SIVA TRADE CONSULTANCY PVT. LIMITED ( SIVA TRADE CONSULTANCY ) 7. SARAVANA ENTERPRISES ( SARAVANA ) 8. SHANMUGA REAL ESTATE PROMOTERS PVT. LIMITED ( SHANMUGA ) 9. V. S. NET LIMITED 10. SIVA PROJECTS ENGINEERING ENTERPRISES LIMITED ( SIVA PROJECTS ) 6. The investigation further found that the appellant Manish Chaturvedi was the key person who perpetrated the front running activity with the aid and assistance of other noticees including his parents (Laxmi Chaturvedi and Manohar Chaturvedi). Manish Chaturvedi was admittedly employed with the Sterling group from 03.11.2008 to 08.11.201I and was responsible for research and suggesting scrips ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Madhu Chanda, obtained confidential information about orders placed by clients of Sharekhan and had front-run the trades of Sharekhan s clients in his own account, HUF account and proprietary account of Sharekhan. 11. As a result, the aforementioned entities / noticees nos. 1-15 were alleged to have violated the provisions of the SEBI Act and the PFUTP Regulations, 2003. 12. It was alleged that Praveen Jain provided multiple trading accounts for front-running and was, therefore, a part of the fraudulent scheme of front-running by Manish Charurvedi. As a result, Praveen Jain / Noticee nos. 16 was alleged to have violated the provisions of the SEBI Act and the PFUTP Regulations, 2003 cited in the beginning of this paragraph. 13. The WTM and AO after considering the material evidence on record, found the appellants guilty of front running activities. Accordingly, direction of debarment and disgorgement was passed by WTM and penalty was imposed by AO. 14. The authorities found that trades of the Sterling group were front-run in 7 different trading accounts of appellant Laxmi Chaturvedi, appellant Viraj Mercantile, appellant Josh Trading, Pinky Auto Finance Ltd. (herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proprietary account of Sharekhan. 18. The proceedings initiated against Sharekhan vide the 2nd show cause notice dated February 9, 2017 as well as adjudicating proceedings against Sharekhan were settled and disposed of vide a settlement order dated April 23, 2019 read with addendum to the settlement order dated June 4, 2019 passed by the respondent whereby Sharekhan has deposited the entire ill-gotten gain and settlement amount in accordance with the aforesaid settlement order. 19. The role and connection of the appellants have been set out in detail at paras II, III, IV and VI of the WTM order. This connection has not been disputed by any of the appellants. Further, the appellants viz. Praveen Kumar Jain, E-Ally Consulting, Sandeep Maloo, Shree Jaisal Electronics, Neeta Maloo, Viraj Mercantile, Abhinandan Ranka and Josh Trading have even admitted their respective role in the scheme of front running in the course of oral arguments before this Tribunal. 20. We have heard Mr. Gaurav Joshi, the learned senior counsel with Mr. V. M. Singh and Mr. Pulkit Sharma, the learned counsel with Mr. Sukrut Mhatre, Ms. Rishika Harish, Ms. Akshaya Bhansali, Mr. Suyash Bhandari, Mr. Pul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reason, matching of common scrip days, common percentage of shares, precise matching of price by the front runner with the Big Client, earning significant amounts of profits on common scrip days with the Big Client when compared to non-common scrip days are all extremely strong indicators that the front runners were placing its orders ahead of and in tandem with the large orders of the Big Client in order to make gains for themselves. Thus, due to the trading based on prior information of trades of the Sterling group, the front runners and the entities who facilitated them gained unlawfully and caused loss to other investors/ deprived the investors from profits. 25. We also find that the calls made between Manish Chaturvedi and Madhu Chanda (the dealer at Sharekhan) in respect of the trades executed in the trading accounts of the front runners (i.e. the noticee nos. 2, 4, 6, 7, 8, 10 and l2), shows synchronization of the trade timing as well as trade quantity by the front runners with that of the Sterling group. 26. The said modus operandi as well as the synchronization of trade timing and trade quantity between the trades of the front runners vis-a-vis the Sterling group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 09:38:31- 09:38:42 81,575 85,116 3. Laxmi Chaturvedi 12:36:55- 12:58:50 13:02:15- 13:02:32 2,48,037 2,50,000 1,06,818 100.00 4. Laxmi Chaturvedi 13:12:32- 13:19:39 13:19:44- 13:19:46 30,338 30,345 9,453 100.00 5. Laxmi Chaturvedi 13:40:45- 13:46:26 13:46:43- 13:46:50 83,768 83,768 51,122 100.00 TOTAL 5,52,437 5,54,407 2,59,135 99.98 TABLE VIII TRADES OF E-ALLY ON 18.11.2010 SR. NO. CLIENT A B C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69.63 5,32,57,509 A B C D E F G H BUY BUY BUY BUY SELL SELL SELL SELL ORDER TIME ORDER PRICE (Rs.) TRADE TIME TRADE PRICE (Rs.) ORDER TIME ORDER PRICE TRADE TIME TRADE PRICE (Rs.) FROM 13:01:55 69.60 13:02:15 69.60 13:02:15 69.60 13:02:15 70.10 TO 13:02:08 69.60 13:02:32 69.60 13:02:32 69.60 13:02:45 69.60 (iv) At 12:33:08, Manish Chaturv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght by front-runners i.e. buy quantity of 5,53,000 shares (see Total Buy Quantity at Table X and also column D of Tables VII and VIII above). 29. It is clear from the above trading pattern in the trading accounts of Laxmi Chaturvedi and E-Ally that it could not have been possible unless such trading activity was based on information about the impending orders of the Sterling group. From the details of calls made by Manish Chaturvedi to Madhu Chanda near the order timings in the account of Laxmi Chaturvedi and E-Ally and the voice heard in the background in the recording provided by JMFL corroborated with the trade data in the account of E-Ally, it is clearly established that Manish Chaturvedi was front-running the Sterling group in the above case analysis though the accounts of Laxmi Chaturvedi and E-Ally on the basis of information in his possession. 30. We also find that Madhu Chanda had used / passed the information of orders placed by Manish Chaturvedi in the trading accounts of the aforesaid 7 entities as well as the trades of the Sterling group to her husband, Anandilal Chanda. 31. Anandilal Chanda with the strength of such information as passed on by Madhu Chanda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on account of specific information obtained by Anandilal Chanda from Madhu Chanda. 33. In this regard, the WTM and the AO scrupulously did a sample analysis of the trades of Anandilal Chanda / Anandilal Chanda HUF vis-a-vis the trades of respective front runner entity from the aforesaid 7 Noticees vis-a-vis the trades of the Sterling group. While analyzing the aforesaid trades, the WTM and the AO inter-alia noted that orders were placed in the accounts of Anandilal Chanda and Anandilal Chanda HUF either seconds before the order of client of Sharekhan or at a price slightly better than that of the client of Sharekhan. 34. Thus, considering all the above facts and attendant circumstances, the WTM and the AO correctly held that the trades of Anandilal Chanda and Anandilal Chanda HUF were based on the specific information obtained by Anandilal Chanda from Madhu Chanda, and more so in the absence of any plausible explanation by the appellants (the Chandas) of the peculiar and unusual manner in which their trades were executed ahead of the trades of the clients of Sharekhan and matched with the trades of the Sterling group. 35. We further find that the nature, volume and valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the money trail and that calculation of unlawful gains was incorrect. It was, thus, contended that the order of the WTM and AO was passed in violation of the principles of natural justice. 38. We find that no attack on merits were placed by the appellants before us and, therefore, the findings given by the WTM / AO remains unrebutted. These appellants have also advanced technical arguments which cannot be raised at this stage. We find that these appellants had abstained from participating in the proceedings before the WTM / AO. These appellants did not appear nor filed any reply to the show cause notice. Therefore, the charges levelled against them remained unrebutted. The WTM has dealt at length the numerous opportunities given to them which they deliberately failed to avail. If they had appeared they could have been provided the documents now sought for. Thus, we do not find any violation of the principles of natural justice as no request was made by them either before the WTM or before the AO. Thus, contention of a person being present during cross-examination, voice recording, non-supply of investigation report cannot be considered at this stage since no objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever Manish Chaturvedi requested for the same after deducting commission and expenses. Thus, Praveen Kumar Jain granted control of the 6 trading accounts to Manish Chaturvedi for the fraudulent activity of front running. The role of Praveen Kumar Jain was a crucial one in the present case who has made available 6 trading accounts thereby enabling and facilitating Manish Chaturvedi in carrying out the fraudulent activity of front running. 43. The front runners (noticee nos. 4, 6, 7, 8, l0 and 12) viz. Viraj Mercantile, Josh Trading, Pinky Auto, E-Ally, Shree Jaisal and Bhavesh Gadhavi respectively have also admitted their role in lending the trading accounts to Praveen Jain and in fact couched their submissions before this Hon'ble Tribunal as a 'mercy petition' whereby they have restricted their submissions only to reduction of penalty and period of debarment imposed against them. In this regard, it is submitted that lending of trading accounts is an offence of grave nature as the same may lead to misuse of trading accounts for activities in the securities market that may not be for genuine transactions as has happened in the present case and the same amounts to frau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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