before the adjudicating officer securities and … · page 3 of 32 (hereinafter referred to as...
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BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. PB/AO- 36/2012]
__________________________________________________
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995
In respect of
Ms. Pooja Menghani
(Pan No.: ANWPM1417C)
FACTS OF THE CASE IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as
“SEBI”) conducted investigation in the trading of Ms. Pooja
Menghani (hereinafter referred to as “PM/Noticee”) for the period
from June 01, 2008 to January 12, 2009 (hereinafter referred to as
“investigation period”).
2. The findings of the examination led to the allegation that the Noticee
had violated the provisions of regulations 3(a), (b), (c), (d) and 4(1) of
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to
Securities Market) Regulations, 2003 (hereinafter referred to as
“PFUTP Regulations” ) and consequently, liable for monetary
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penalty under section 15HA of the Securities and Exchange Board of
India Act, 1992 (hereinafter referred to as “SEBI Act”).
APPOINTMENT OF ADJUDICATING OFFICER
3. The undersigned has been appointed as Adjudicating Officer vide
order dated March 30, 2011 under section 15 I of the SEBI Act read
with rule 3 of SEBI (Procedure for Holding Inquiry and Imposing
Penalty by Adjudicating Officer) Rules, 1995 (hereinafter referred to
as the ‘Rules’) to inquire into and adjudge under section 15HA of
the SEBI Act.
SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING
4. Show Cause Notice No. EAD-7/PB/SS/19651/2011 dated June 20,
2011 (hereinafter referred to as “SCN”) was issued to the Noticee
under rule 4 of the Rules to show cause as to why an inquiry should
not be initiated and penalty be not imposed under section 15HA of
SEBI Act for the violation as alleged in the SCN.
5. It was alleged in the SCN that Noticee had bought and sold equal
quantities of shares in large volume in four scrips, namely Amtek
Auto Ltd (hereinafter referred to as “Amtek Auto”), Amtek India Ltd
(hereinafter referred to as “Amtek India”), Monnet Ispat Ltd
(hereinafter referred to as “Monnet Ispat”) and Ahmednagar
Forgings Limited (hereinafter referred to as “Ahmednagar Forging”)
through Religare Securities Limited (hereinafter referred to as
“Religare”), ISF Securities Limited (hereinafter referred to as “ISF”),
India Infoline Securities Limited (hereinafter referred to as “India Infoline”) and Narayan Securities Private Limited (hereinafter
referred to as “Narayan”). Further, Live Star Marketing Pvt. Ltd
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(hereinafter referred to as “Live Star”), SRS Portfolio Limited
(hereinafter referred to as “SRS”) and MSR Marketing Pvt. Ltd.
(hereinafter referred to as “MSR”) were also the clients of Religare.
The aforesaid entities i.e. Live Star, SRS, MSR have also traded in
the said scrips during the investigation period. Further, it was alleged
that Noticee has traded in the above mentioned scrips ahead of Live
Star, SRS and MSR with prior knowledge of the buy orders of
aforesaid entities and has done front running in the said scrips which
resulted in violation of provisions of regulations 3(a), (b), (c), (d) and
4(1) of PFUTP Regulations.
6. The aforesaid SCN was sent to the Noticee through SPAD. The said
notice was delivered to the Noticee. However, the Noticee did not
submit reply to the SCN.
7. In the interest of natural justice and in order to conduct an inquiry in
terms of rule 4(3) of the Rules, an opportunity of personal hearing
was granted on September 22, 2011 vide notice dated September
06, 2011. An adjournment of hearing was sought by eight weeks vide
letter dated September 20, 2011. Acceding to the request, another
opportunity of hearing was granted on December 15, 2011 vide
notice dated November 28, 2011. An adjournment of hearing was
sought by six to ten weeks vide letter dated nil received on December
12, 2011. It was further requested to shift the place of hearing from
Mumbai to Delhi. Acceding to the request, another opportunity of
hearing was granted on February 10, 2012 vide notice dated January
12, 2012 at Securities and Exchange Board of India, Northern
Regional Office, Delhi. M.G. Associates, Advocates & Solicitors,
Authorized Representative (hereinafter referred to as “AR”) of the
Noticee vide letter dated February 10, 2012 submitted that. T.P.
Singh will appear on behalf of them on the date of hearing. AR
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appeared on February 10, 2010 and submitted the power of attorney
executed by the Noticee in favour of AR. Upon perusal of the power
of attorney, it was observed that power of attorney did not have the
reference of SEBI adjudication proceedings and date of power of
attorney. The AR undertook to submit the fresh power of attorney by
February 13, 2012. During the course of hearing the AR submitted
inter-alia as under:
“I hereby submit letter dated February 10, 2012 from M.G. Associates,
Advocates and Solicitors. It is submitted that we have been recently engaged
by the Noticee. We need some more time to prepare for the case. It is
requested that one month time may be granted to the Noticee to go through
the files and submit written submissions in the matter. It is submitted that no
further hearing is requested for by the Noticees and the Adjudicating officer
is requested to consider the written submissions which will be filed in one
month time and pass the final order on the basis of same.”
8. The Noticee requested one month’s time to submit the written
submissions. Acceding to the request of the Noticee, such time was
granted to the Noticee.
9. The Noticee vide letter dated March 03, 2012 submitted the Power of
Attorney. The Noticee further requested for four weeks time to submit
the written submissions. The Noticee vide letter dated April 05, 2012
filed the written submissions inter-alia as under:
“ Sir, going by your allegations listed above, it is clear that the basis of your allegations is that our client Ms Pooja was introduced by Sh Deepak Khurana to Religare and he might have passed on some advance information to our client to enter the deal which turned out to be lucrative., Sir with utmost modesty to our credit, we state that there is nothing on record to substantiate your allegations against our client Ms Pooja Menghani. It has nowhere been proved that there was a mischievous connivance between Deepak Khurana and Ms Pooja Menghani. The fact is that Ms Pooja Menghani was a random & innocent investor and was relying on her own competence, instincts or intuition before
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entering into the deals. It has nowhere been proved that Ms Pooja defied any norms or submitted wrong financials to the company. She went through KYC norms and it was for Religare to ensure and decide to whom to extend credit or not. The statements of both Pooja Menghani and Sh Deepak Khurana were recorded by your honour and nowhere the statements contradict their version. It has been squarely stated by Sh Deepak Khurana that he met Pooja Menghani during KYC norms and has nothing personal with her and these facts have been stated by Pooja Menghani too. It will not be out of place to mention that even Religare during its internal enquiry have not found anything amiss with the conduct of Sh Deepak Khurana, nor they have given a finding that Sh Deepak Khurana has extended any favors to our client Ms Pooja Menghani. It is very important to note that the penalty proceedings are quasi judicial proceedings and a penalty cannot be levied on assumptions. There is nothing on record to prove that proves that our client has rigged the deals. It is of vital importance to know that Ms Pooja Menghani belongs to a lower middle class who resides with her retired father and mother in a small flat in the refugee colony of New Delhi at Rajinder Nagar. She has been working with banking sector at junior level and is not a person of means or can afford or dare to violate any laws. Currently she is suffering from a mental agony and pain due to certain personal reasons. These facts are essential to mention because this proves that she cannot be scheming about frauds. Her father is a retired govt. servant, her mother (seriously ill) is a retired govt, teacher.
As regards the matching of buy order with that of another broker's sale order could be a matter of chance, coincidence or matching sale/ purchase order by the buyer or seller as obvious from the net. You must appreciate that Religare was the buyer's as well as seller's broker in Ahmednagar Forging and Amtek Auto which goes to prove that Religare would not side/pitch one investor against the other investor.
It is further submitted that there was no intention to commit any fraud, there is no connivance with the broker, or the investee company resulting into extra ordinary gains.
Our client Pooja Menghani is a bonafide investor who is a client of Religare and has complied with KYC norms. The investments made are by selecting randomly from the scrip by gathering market information and have got nothing to do with any manipulations.
The fund invested is from personal savings about which proper Income Tax returns have been regularly filed.
It is hoped that your honour will find the above in order and will proceed to close the matter or if necessary a personal hearing be accorded to us to explain the matter personally.”
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CONSIDERATION OF ISSUES AND FINDINGS
10. The issues that arise for consideration in the present case are :
a) Whether the Noticee had violated regulations 3(a), (b), (c), (d) and
4(1) of PFUTP Regulations?
b) Does the violation, if any, on the part of the Noticee attract
monetary penalty under sections 15 HA of SEBI Act?
c) If so, what would be the monetary penalty that can be imposed
taking into consideration the factors mentioned in section 15J of
SEBI Act?
11. Before moving forward, it will be appropriate to refer to the relevant
provisions of PFUTP Regulations, which reads as under:
3. Prohibition of certain dealings in securities
No person shall directly or indirectly-
(a) buy, sell or otherwise deal in securities in a fraudulent
manner;
(b) use or employ, in connection with issue, purchase or
sale of any security listed or proposed to be listed in a
recognized stock exchange, any manipulative or
deceptive device or contrivance in contravention of the
provisions of the Act or the rules or the regulations
made there under;
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(c) employ any device, scheme or artifice to defraud in
connection with dealing in or issue of securities which
are listed or proposed to be listed on a recognized
stock exchange;
(d) engage in any act, practice, course of business which
operates or would operate as fraud or deceit upon any
person in connection with any dealing in or issue of
securities which are listed or proposed to be listed on
a recognized stock exchange in contravention of the
provisions of the Act or the rules and the regulations
made there under.
4. Prohibition of manipulative, fraudulent and unfair trade
practices
(1) Without prejudice to the provisions of regulation 3, no
person shall indulge in a fraudulent or an unfair trade
practice in securities.
12. Upon perusal of the documents available on record, I find the
following:
Findings in respect of trading of Noticee in the scrip of Amtek Auto
i. It is observed from NSE trade log that, Noticee has traded in the
scrip of Amtek Auto on the following days during the investigation
period.
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Date Broker for Pooja Menghani
Pooja Menghani’s Buy quantity
Pooja Menghani’s Sell quantity
Counter Major Buy client
Counter Buy Broker of Major client
Matched Buy Quantity of Counter Major Buy client
Total Buy Quantity of Major Buy Client
02/07/08 India Infoline
40 ---- -- --- --- ------
03/07/08 Narayan 16,275 16,275 CF3 Sunglow 7,139 101,27315/10/08 Religare 50,000 50,000 MP3252 Religare 50,000 121,00016/10/08 Religare 28,000 28,000 MP3252 Religare 28,000 39,15617/10/08 Religare 6,324 6,324 CF1 Sunglow 5,717 67,00020/10/08 Religare 23,547 23,547 MP3252 Religare 23,544 41,68423/10/08 Religare 26,605 26,605 MP3252 Religare 26,605 72,00024/10/08 Religare 14,061 14,061 MP3252 Religare 14,060 18,13431/10/08 Religare 50,000 50,000 MP3252 Religare 50,000 110,00007/11/08 ISF 18,180 18,180 MP3252 Religare 15,033 23,70010/11/08 ISF 34,560 34,560 MP3252 Religare 29,005 43,00012/11/08 ISF 10,000 10,000 MP3252 Religare 9,843 20,00017/11/08 Religare 40,000 40,000 ---- ---- ---26/11/08 ISF 50,000 50,000 MP3252 Religare 50,000 52,03928/11/08 ISF 2,362 2,362 ---- ----- ----TOTAL 3,69,954 3,69,914 3,08,946 7,08,986
( MP 3252 : MSR Marketing Pvt. Ltd.// CF 3: SRS Portfolio Ltd.)
ii. The table given above reveals the following :
The Noticee traded in the scrip of Amtek Auto through Religare
for 15 days whereby the Noticee has bought 3,69,954 shares
and sold 3,69,914 shares. Further, on 14 days the Noticee
squared off the position at the end of each day.
Out of 15 days, on 10 days sell orders of the Noticee matched
with the buy orders placed by MSR through Religare
constituting 2,96,090 shares, which is 80.4% of gross sell of the
Noticee.
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MSR has bought the shares of said scrip on 12 days, out of
which on 10 days the sell orders placed by the Noticee matched
with those of MSR. Further, on all the 10 days, both the Noticee
and MSR had placed orders through Religare.
iii. The analysis of the orders placed by the Noticee and MSR is as
under:
Date Pooja Menghani’s Buying/ (Selling) Period (Order Log)
Pooja Menghani’s Limit Price range
Sell LTP prior to order entry
MP3252 (MSR) Buy order period
MP3252 (MSR) Buy Limit Price
12:01:05 to 15:17:09
101.5 to 105
NA NA NA 15/10/2008
15:11:13 to 15:11:52
108.5 to 109
102.6 15:12:35 to 15:24:53
102 to 110
13:05:56 to 14:39:23
93 to 103 NA NA NA 16/10/2008
14:39:51 105 101 14:39:56 to 14:40:32
102 to 105
12:32:23 to 15:14:33
100.5 to 103
NA NA NA 20/10/2008
15:13:39 to 15:15:00
105.5 to 106
103 to 103.9
12:40:43 to 15:17:58
101.5 to 106
10:19:27 to 12:52:16
85 to 87 NA NA NA 23/10/2008
13:53:46 89.9 89.1 10:21:39 to 14:15:40
85 to 90
12:20:56 to 12:21:07
66.5 to 67 NA NA NA 24/10/2008
13:03:24 69 68.05 12:41:50 to 13:04:50
67.5 to 69
14:33:51 to 15:11:32
72 to 73 NA NA NA 31/10/2008
15:13:46 75 72.5 15:00:32 to 15:16:54
72 to 75.5
13:21:12 to15:16;22
69 to 71 NA NA NA 07/11/2008
15:02:46 to 15;23:54
70 to 70.9 70.6 to 71.9
15:08:37 to 15:25:11
70 to 70.9
11:24:33 to 13:49:40
68.5 to 69.6 NA NA NA 10/11/2008
13:40:25 71 69.95 14:28:12 to 71
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14:28:55 14:38:40 to
15;02:25 63.5 to 64.5 NA NA NA 12/11/2008
15:08:13 65.8 63.35 15:10:58 to 15:18:52
64 to 66
13:23:54 to 15;22:47
45.85 to 50.5
NA NA NA 26/11/2008
15:23:34 49.80 49.4 15:23:33 49.85
iv. From the above table, it is found that on the days when the
Noticee’s sell orders have matched with the buy orders of MSR, the
Noticee has bought at lower prices prior to the buy orders of MSR.
Further, the Noticee’s sell order limit price was always above the
sell LTP prior to the order entry but was same or very close to the
buy limit price of MSR.
v. The net profit of Amtek Auto for the quarter ending September 30,
2008 was substantially reduced to ` 4806 lakh from ` 7497 lakh
achieved in the quarter ending June 30, 2008. The NSE price
volume data for the trading in the scrip of Amtek Auto on the days
when the Noticee’s sell trades have matched with the buy trades of
MSR was as follows:
Symbol Date Open Price
High Price
Low Price
Close Price
Total Traded Quantity
AMTEKAUTO 15-Oct-08 106.85 109.35 101.5 105.85 256613
AMTEKAUTO 16-Oct-08 97 106 87 103.05 116841
AMTEKAUTO 20-Oct-08 103 106 100.05 104.5 127873
AMTEKAUTO 23-Oct-08 82.25 90.4 81.05 83.7 431762
AMTEKAUTO 24-Oct-08 82 82.8 58.1 74.05 240516
AMTEKAUTO 31-Oct-08 73.1 75 70.5 73.5 224809
AMTEKAUTO 7-Nov-08 70 74 66.5 70.3 197893
AMTEKAUTO 10-Nov-08 70 71.95 68.5 69.6 190474
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AMTEKAUTO 12-Nov-08 63 65.8 62.25 64.45 131920
AMTEKAUTO 26-Nov-08 43.8 50.85 43.4 49.05 208699
vi. From the above table, it is found that the price of Amtek Auto was
continuously falling over this period as the scrip which opened at
`106.85 on October 15, 2008 finally closed at ` 49.05 on November
26, 2008.
vii. On comparing the price volume table with the table containing
analysis of orders placed by the Noticee and MSR, it is observed
that Noticee’s sell order limit price which was always above the sell
LTP prior to these order entry and was same or very close to the
buy limit price of MSR, was also close to the highest price reached
on NSE on those days.
Findings in respect of trading of Noticee in the scrip of Amtek India viii. It is observed from NSE trade log that, Noticee has traded in the
scrip of Amtek India on the following days during the investigation
period.
Date Broker for Pooja Menghani
Pooja Menghani’s Buy quantity
Pooja Menghani’s Sell quantity
Counter Major Buy client
Counter Sell Broker of Major client
Matched Buy Quantity of Counter Major Buy client
Total Buy Quantity of Major Buy Client
Religare 10,000 10,000 CF3 Sunglow 9,9991/07/2008 Narayan 10,000 10,000 CF3 Sunglow 8,459
136,104
11/11/2008 ISF 26,805 26,805 MP3252 Religare 26,418 35,00012/11/2008 ISF 10,000 10,000 MP3252 Religare 10,000 20,00025/11/2008 ISF 90,000 90,000 MP3252 Religare 89,996 174,00026/11/2008 ISF 30,000 30,000 MP3252 Religare 30,000 35,76728/11/2008 ISF 80,000 80,000 MP3252 Religare 75,343 175,000
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01/12/2008 ISF 90,000 90,000 MP3252 Religare 90,000 149,00002/12/2008 ISF 90,000 90,000 MP3252 Religare 88,032 254,00003/12/2008 ISF 90,000 90,000 MP3252 Religare 90,000 222,42004/12/2008 ISF 102,481 102,481 MP3252 Religare 90,000 511,000TOTAL 6,29,286 6,29,286 6,08,247 15,76,187
(MP 3252 : MSR Marketing Pvt. Ltd.// CF 3: SRS Portfolio Ltd. )
ix. The table given above reveals the following :
:
The Noticee has traded on 10 days in the scrip of Amtek India,
whereby the Noticee has bought a total of 6,29,286 shares and
sold the same number. Further, the Noticee has squared off the
position at the end of each day.
Out of 10 days, on 9 days the sell orders placed by the Noticee
through ISF has matched with the buy orders placed by MSR
trading through Religare, which constitutes 93.72% of Noticee’s
gross sell.
Further, MSR has bought the said scrip on 9 days and on all the
days the buy orders placed by MSR matched with the sell
orders placed by the Noticee.
x. The analysis of orders placed by the Noticee and MSR is as under:
Date Pooja Menghani’s Buying/ (Selling) Period (Order Log)
Pooja Menghani’s Limit Price range
Sell LTP prior to order entry
MP3252 (MSR) Buy order period
MP3252 (MSR) Buy Limit Price
13:44:24 to 15;17:56
38.5 to 39 NA NA NA 11/11/2008
15:22:56 38 to 40.6 39.15 15:23:09 to 15:23:36
40.65 to 40.7
13:26:48 to 14:49:10
39 NA NA NA 12/11/2008
15:07:32 40.7 39 15:11:31 to 15:19:29
40 to 41
25/11/2008 11:31:59 to 14:15:10
18.9 to 19 NA NA NA
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14:15:29 20.25 to 20.5
19 14:16:09 to 14:16:59
20.5
12:26:50 to 15:09:43
19.5 to 21 NA NA NA 26/11/2008
15:16:30 21.65 20.55 15:16:33 21.65 14:56:06 to
15:17:49 21.5 to 22.5 NA NA NA 28/11/2008
15;18:31 21.25 to 23.3
22 15:17:16 to 15:20:30
23.3 to 23.35
13:35:35 to 15:09:00
21.9 to 22.1 NA NA NA 1/12/2008
15:09:21 23.9 22 15:10:23 to 15:10:28
24
13:47:07 to 14:38:35
21 to 21.6 NA NA NA 2/12/2008
15:09:28 22.5 to 23.2 21.2 15:09:36 to 15:11:19
22.5 to 23.25
12:54:36 to 15:09:24
20.95 to 22 NA NA NA 3/12/2008
15:08:58 22.5 21.3 15:10:12 to 15:13:22
22.5 to 23.1
14:02:11 to 14;37:45
21.9 to 22.1 NA NA NA 4/12/2008
14:17:04 to 14:29:17
22.75 to 23.1
21.95 to 23.25
14:17:49 to 14:25:48
23 to 24.1
xi. From the above table it is found that on the days when the
Noticee’s sell orders have matched with the buy orders of MSR, the
Noticee has bought at lower prices prior to the buy orders of MSR.
Further, the Noticee’s sell order limit price was above the sell LTP
prior to the order entry but was close to the buy limit price of MSR.
xii. The net profit from ordinary activities after tax of Amtek India for the
quarter ending September 30, 2008 has reduced to ` 2217 lakh
from ` 2551 lakh achieved in the quarter ending June 30, 2008.
The NSE price volume data for the trading in the scrip of Amtek
India on the days when the Noticee’s sell trades have matched with
the buy trades of MSR was as follows:
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Symbol Date Open Price
High Price
Low Price
Close Price
Total Traded Quantity
AMTEKINDIA 11-Nov-
08 38.35 40.8 38.1 40.35 94519
AMTEKINDIA 12-Nov-
08 42 42 38 40 40579
AMTEKINDIA 25-Nov-
08 19.25 20.7 18.6 19.65 377453
AMTEKINDIA 26-Nov-
08 20.5 21.65 19.15 21.25 107535
AMTEKINDIA 28-Nov-
08 21.7 23.3 20.55 22.45 341634
AMTEKINDIA 1-Dec-08 22.3 24 20.75 22.75 434390
AMTEKINDIA 2-Dec-08 21.45 23.2 20.55 22.05 903918
AMTEKINDIA 3-Dec-08 21 22.85 20.6 22.3 589060
AMTEKINDIA 4-Dec-08 21.6 23.5 20.6 21 1342845 xiii. From the above table, it is found that price of Amtek India was
falling over this period as the scrip which opened at ` 38.35 on
November 11, 2008 finally closed at ` 21 on December 04, 2008.
xiv. On comparing the above price volume table with the table
containing analysis of orders placed by the Noticee and MSR, it is
observed that Noticee’s sell order limit price which was above the
sell LTP prior to these order entry and was close to the buy limit
price of MSR, was also close to the highest price reached on NSE
on those days.
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Findings in respect of trading of Noticee in the scrip of Ahmednagar Forgings xv. It is observed from NSE trade log that, Noticee has traded in the
scrip of Ahmednagar Forgings on the following days during the
investigation period.
Date Broker for Pooja Menghani
Pooja Menghani’s Buy quantity
Pooja Menghani’s Sell quantity
Counter Major Buy client
Counter Sell Broker of Major client
Matched Buy Quantity of Counter Major Buy client
Total Buy Quantity of Major Buy Client
04/07/2008 Narayan 12,000 12,000 CF3 Sunglow 11,998 54,16909/07/2008 Narayan 4,764 4,764 CF3 Sunglow 4,764 15,00011/07/2008 Narayan 10,000 10,000 CF3 Sunglow 9,797 45,29916/07/2008 Narayan 7,438 7,438 CF3 Sunglow 7,438 54,60617/07/2008 Narayan 647 647 CF3 Sunglow 647 6,33918/07/2008 Narayan 3,438 3,438 CF3 Sunglow 3,438 5,05421/07/2008 Narayan 6,921 6,921 CF3 Sunglow 6,921 10,00022/07/2008 Narayan 4,669 4,669 21/10/2008 Religare 90,000 90,000 MP3252 Religare 90,000 124,61724/10/2008 Religare 45,986 45,986 MP3252 Religare 45,166 73,00003/11/2008 Religare 121,016 121,016 MP3252 Religare 121,016 206,10104/11/2008 Religare 90,000 90,000 MP3252 Religare 76,407 240,00011/11/2008 ISF 21,000 21,000 MP3252 Religare 21,000 35,00012/11/2008 ISF 9,347 9,347 MP3252 Religare 9,347 20,00017/11/2008 ISF 75,000 75,000 MP3252 Religare 74,999 139,93903/12/2008 ISF 38,038 38,038 MP3252 Religare 37,236 50,000TOTAL 5,40,264 5,40,264 4,75,171 8,88,657
(MP 3252 : MSR Marketing Pvt. Ltd.// CF 3: SRS Portfolio Ltd. ) xvi. The table given above reveals the following :
During the investigation period the Noticee had traded for 16
days in the scrip Ahmednagar Forgings, whereby the Noticee
had bought a total of 5,40,264 shares and sold the same
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number. Further, the Noticee has squared off the position at the
end of each day.
The Noticee’s trades were concentrated on few days in July
2008 when on 7 days sell orders of the Noticee through broker
Narayan have substantially matched with the buy orders of the
client SRS trading through broker Sunglow. Again on 8 days in
October/November/December 2008 sell orders of the Noticee
through Religare/ISF have matched with the buy orders of the
client MSR trading through broker Religare.
Out of 16 days, on 15 days the sell order placed by the Noticee
matched with either SRS or MSR, which constitutes 96.28% of
gross sell of the Noticee.
xvii. The analysis of orders placed by the Noticee, SRS and MSR are as
under:
• Orders placed by Pooja Menghani and SRS are as under:
Date Pooja
Menghani’s Buying/ (Selling) Period (Order Log)
Pooja Menghani’s Limit Price range
Sell LTP prior to order entry
CF3 (SRS) Buy order period
CF3 (SRS) Buy Limit Price
14:02;24 to 14:16:56
73.5 to 81.45
NA NA NA 04/07/2008
14:17:12 88 81.4 14;22:09 to 14:58:01
79 to 89.95
13:54:59 to 15:05:55
88.45 to 90.5
NA NA NA 09/07/2008
14:19:35 to 15:13:32
95 to 98 89.5 to 99 15:12:58 to 15;13:32
98 to 100
13:06:33 to 14:04:11
102 to 103 NA NA NA 11/07/2008
14:56:38 107 to 108 98.15 15:04;31 99 16/07/2008
13;13:09 to 14:53:55
91.75 to 97.5
NA NA NA
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14:49:06 104 96.5 15;05:39 to 15:27:26
102 to 107
13:03:47 to 14:30:56
99.6 to 103 NA NA NA 17/07/2008
15:00:01 105 105.6 14:52;43 to 15:10:50
103 to 105
14:56:38 to 14:58:26
100 NA NA NA 18/07/2008
15:07:19 103 100 12:55:45 to 15:10:24
101.8 to 103
14;47:46 to 15:19:19
103-105 NA NA NA 21/07/2008
15:20:06 110 105 15:22:39 to 15:23;58
107 to 111
From the above table, it is found that on the days when the Noticee’s
sell orders have matched with the buy orders of SRS, the Noticee has
bought at lower prices prior to the buy orders of SRS. Further, the
Noticee’s sell order limit price was above the sell LTP prior to the order
entry but was same or very close to the buy limit price of SRS.
• Orders placed by the Noticee and MSR are as under:
Date Pooja Menghani’s Buying/ (Selling) Period (Order Log)
Pooja Menghani’s Limit Price range
Sell LTP prior to order entry
MP3252 (MSR) Buy order period
MP3252 (MSR) Buy Limit Price
12:28:20 to 13:14:35
45 NA NA NA 21/10/2008
13:38:59 to 13:39:47
53.5 to 54.5 48 to 48.9 13:15:27 to 13:43:29
45 to 55
11:13:31 to 15:17:05
33 to 39.25 NA NA NA 24/10/2008
11:51:06 to 15:23:07
35 to 39 32.5 to 38.35
11:53:54 to 15:23:34
33 to39
11:44:10 to 15:15:16
32 to 37.5 NA NA NA 3/11/2008
13:07:12 to 15:18:19
36.45 to 36.95
32.9 to 34.4
11:48:00 to 15:18:37
32 to 37
4/11/2008 12:03:31 to 32.5 NA NA NA
Page 18 of 32
12:06:29 13;50:53 to
13:51:30 35 to 37.4 33.5 13:42:00 to
13:59:10 32.5 to 38
13:24:44 to 14:08:57
31.5 to 32.1 NA NA NA 11/11/2008
14:54:01 33 31.2 14:59:31 to 14:59:56
33 to 33.05
13:26:57 to 14:49:45
29.85 to 30.5
NA NA NA 12/11/2008
15:05:36 31.8 30 15:10:22 to 15;19:16
31 to 32
12:28:58 to 13:45:22
25.55 to 26.25
NA NA NA 17/11/2008
14:00:40 27.5 25.55 13:21:46 to 14;01:15
25.55 to 27.55
13:35:55 to 14:42:46
21.95 to 22 NA NA NA 3/12/2008
15:14:54 22 to 23 22 15:15:15 23
From the above table, it is found that on the days when the
Noticee’s sell orders have matched with the buy orders of MSR, the
Noticee has bought at lower prices prior to the buy orders of MSR.
Further, the Noticee’s sell order limit price was above the sell LTP
prior to the order entry but was close to the buy limit price of MSR.
xviii. The net profit of Ahmednagar Forgings for the quarter ending June
30, 2008 has reduced to ` 1293 lakh from ` 1572 lakh achieved in
the quarter ending March 31, 2008. The NSE price volume data for
the trading in the scrip of Ahmednagar Forging on the days when
sell trades of the Noticee has matched with the buy trades of SRS
was as follows:
Symbol Date Open Price
High Price
Low Price Close Price
Total Traded Quantity
AHMEDFORGE 4-Jul-08 75 89.95 70.55 89.95 86165
AHMEDFORGE 9-Jul-08 96 102.85 83.2 96.45 646669
AHMEDFORGE 11-Jul-08 100 108 97 104.75 69945
AHMEDFORGE 16-Jul-08 92.55 107 88.05 104.6 76161
Page 19 of 32
AHMEDFORGE 17-Jul-08 107 107 97.3 104.3 17110
AHMEDFORGE 18-Jul-08 106.8 106.9 99.05 102.9 22658
AHMEDFORGE 21-Jul-08 103.95 114.9 98.65 108.05 19297
xix. From the above table, it is found that price of Ahmednagar Forging was
rising over this period as the scrip which opened at ` 75 on July 04, 2008
finally closed at `108.05 on July 21, 2008. However, the traded volume
has substantially reduced during the said period.
xx. The net profit of Ahmednagar Forgings for the quarter ending September
30, 2008 has reduced to ` 1122 lakh from ` 1293 lakh achieved in the
quarter ending June 30, 2008.The NSE price volume data for the trading
in the scrip of Ahmednagar Forgings on the days when sell trades of the
Noticee has matched with the buy trades of MSR was as follows:
Symbol Date Open Price
High Price
Low Price
Close Price
Total Traded Quantity
AHMEDFORGE 21-Oct-08 50.05 54.5 45 47.85 291085
AHMEDFORGE 24-Oct-08 40 40 31.45 33.8 152777
AHMEDFORGE 3-Nov-08 37 37.3 32 35.35 529082
AHMEDFORGE 4-Nov-08 35 37.4 32.25 34 534195
AHMEDFORGE 11-Nov-08 32.2 33 30.7 31.3 89370
AHMEDFORGE 12-Nov-08 31.9 31.9 29.2 30.9 59411
AHMEDFORGE 17-Nov-08 28.5 28.5 25.55 25.55 321104
AHMEDFORGE 3-Dec-08 22.5 23 21.25 22.85 165389
xxi. From the above table it is found that price of the scrip of
Ahmednagar Forgings was falling over this period as the scrip
which opened at ` 50.05 on October 21, 2008 finally closed at `
22.85 on December 03, 2008.
Page 20 of 32
xxii. On comparing the above price volume table with the table
containing analysis of orders placed by the Noticee and MSR, it is
observed that sell order limit price of the Noticee which was always
above the sell LTP prior to these order entry and was same or very
close to the buy limit price of MSR, was also close to the highest
price reached on NSE on those days.
Findings in respect of trading of Noticee in the scrip of Monnet Ispat
xxiii. It is observed from NSE trade log that, Noticee has traded in the
scrip of Monnet Ispat on the following days during the investigation
period.
Date Broker for Pooja Menghani
Pooja Menghani’s Buy quantity
Pooja Menghani’s Sell quantity
Counter Major Buy client
Counter Sell Broker of Major client
Matched Buy Quantity of Counter Major Buy client
Total Buy Quantity of Major Buy Client
Religare 10000 10000 ML526 Religare 500027/06/2008 India Infoline
2500 2500 ML526 Religare 150070000
Religare 5000 5000 LP187 Religare 5000India Infoline
2000 2000 LP187 Religare 200030/06/2008
Narayan 10000 10000 LP187 Religare 10000
184501
Religare 5000 5000 LP187 Religare 5000India Infoline
2500 2500 LP187 Religare 250001/07/2008
Narayan 10000 10000 LP187 Religare 5465
27166
02/07/2008 Narayan 8000 8000 LP187 Religare 8000 3385803/07/2008 Narayan 10000 10000 LP187 Religare 6667 2900004/07/2008 Narayan 2700 2700 LP187 Religare 1413 1000007/07/2008 Narayan 10000 10000 LP187 Religare 9597 1586409/07/2008 Narayan 10000 10000 LP187 Religare 9761 50285TOTAL 87,700 87,700 71,903 1,39,007
LP 187 Live Star
Page 21 of 32
xxiv. The table given above reveals the following :
The Noticee had traded in the scrip of Monnet Ispat, for 8 days
from June 27, 2008 to July 09, 2008 where the Noticee was
buying and selling equal quantities on each day. The Noticee
has bought a total of 87,700 shares and sold the same number
of shares.
On 7 days, sell orders of the Noticee through brokers
Religare/India Infoline/Narayan have substantially matched with
the buy orders of Live Star trading through Religare, which
constitutes74.57% of gross trading of the Noticee.
xxv. The analysis of the order placed by the Noticee and Live Star is as
under:
Date Pooja Menghani’s
Buying/ (Selling) Period (Order Log)
Pooja Menghani’s Limit Price range
Sell LTP prior to order entry
LP187 (Live Star) Buy order period
LP187 (Live Star) Buy Limit Price
(R) 10:48:46 520 (N) 10:52:01 to
11:36:37 519 to 520
(I) 10:51:51 520
NA NA NA
(R) 11:34:24 519.95 to 530
519
(N) 11:37:00 520 to 530 520
30/06/2008
(I) 11:31:22 520 to 530 519.7
09:55:25 to 15:22:36
515 to 531
(R) 11:12:38 to 12:47:27
510 to 512
(N) 11:08:30 to 12:51:12
510 to 513
(I) 11:58;06 510
NA NA NA 01/07/2008
(R) 13:34:16 515 510 10:04:54 to 495 to 525
Page 22 of 32
(N) 13:39:33 to 14:02:29
508 to 512 512 to 515.95
(I) 13:29:21 510 to 514 510
15:17:18
12:25:21 to 14:10:17
485 to 490 NA NA NA 02/07/2008
14:10:58 497 490 11:15:16 to 15:29:05
465 to 510
11:13:22 to 11:23:41
485 NA NA NA 03/07/2008
15:20:49 to 15:24:43
490 490 to 496 13:29:39 to 15:25:41
467 to 500
11:44:52 to 14:39:50
487 to 494 NA NA NA 04/07/2008
14;38;45 499 495 14:48:04 to 15:29:47
496 to 510
14:03:55 to 15:22:14
505 to 509.5
NA NA NA 07/07/2008
15:24:04 to 15:51:37
510 509 10:35:07 to 15:50:16
509.05 to 520
13:53:07 to 14:25:08
501 to 502.5
NA NA NA 09/07/2008
14:26:45 to 15:27:18
503.1 to 507
502 to 505.95
14:56;32 to 15:29:50
497 to 510
xxvi. From the above table it is found that on the days when the
Noticee’s sell orders have matched with the buy orders of Live Star,
the Noticee has bought at lower prices prior to the buy orders of
Live Star. Further, the Noticee’s sell order limit price was above the
sell LTP prior to the order entry but was close to the buy limit price
of Live Star.
xxvii. The net profit of Monnet Ispat for the quarter ending June 30, 2008
has increased to ` 7032 lakh from ` 5720 lakh achieved in the
quarter ending March 31, 2008. The NSE price volume data for the
trading in the scrip of Monnet Ispat on the days when sell trades of
the Noticee have matched with the buy trades of Live Star was as
follows:
Page 23 of 32
Symbol Date Open
Price High
Price Low
Price Close
Price
Total Traded Quantity
MONNETISPA 30-Jun-08 524.95 530 503 517.45 268000
MONNETISPA 1-Jul-08 511.15 525 476.25 498.55 140372
MONNETISPA 2-Jul-08 504.65 509.75 462 497.4 83337
MONNETISPA 3-Jul-08 485 502 463 493.8 77118
MONNETISPA 4-Jul-08 492 505 483 501 36054
MONNETISPA 7-Jul-08 515 529 501 509.05 54187
MONNETISPA 9-Jul-08 548.9 558.9 495.1 504.5 100203
xxviii. From the above table it is found that price of Monnet Ispat was
falling over this period as the scrip which opened at ` 524.95 on
June 30, 2008 has closed at ` 504.5 on July 09, 2008.
xxix. I have noted the following submissions made by the Noticee during
the course of investigation:
The Noticee has done major trading in the scrips of Amtek Auto,
Amtek India, Ahmednagar Forgings and Monnet Ispat during 2008-
09. Subsequently, the Noticee has not traded in above scrips.
With regard to the reasons for the aforesaid trades the Noticee has
submitted that the trades were jobbing in nature.
The Noticee was not a regular investor or speculator in the share
market. The Noticee used to do technical analysis of scrips where
the Noticee was interested and based on media reports on CNBC,
NDTV etc. decided on quantity of shares to be bought and sold and
the period for which the shares were to be held.
The Noticee used to place orders over phone through her mobile
(mobile-9811266244) and landline numbers of her earlier
organization (Centurion Bank of Punjab). The Noticee used to call
Shri Asish Kumar (Branch Head), Shri Dawar (Marketing) for
Page 24 of 32
Indiainfoline, Shri Anand, Shri Deepak Khurana (Branch Head) etc
in Religare, Shri Ravi, Shri Leela in Narayan Securities and Shri
Rakesh/ Suresh in ISF.
The Noticee has admitted that she has received calls from Deepak
Khurana, Branch Head of Religare, Pritampura Branch, New Delhi,
before her buy orders in the aforesaid four scrips. The Noticee also
admitted that she has received calls from Deepak Khurana before
her sell orders in the aforesaid four scrips wherein Deepak Khurana
used to inform her about the current price and market behavior.
Also she used to place the sell order. In her tradings through
Religare, she has placed orders through Deepak Khurana.
xxx. The statement of Deepak Khurana was recorded by SEBI during
the course of investigation. In his statement Deepak Khurana has
admitted that SRS, Live Star and MSR are registered with Religare
as clients and Deepak Khurana has placed orders in the exchange
system for them. Further, Deepak Khurana has admitted in his
statement that he has placed the orders in the exchange system for
the Noticee.
xxxi. The broker Religare vide letters dated February 20, 2009, October
28, 2009 and June 24, 2010 and the examination report conducted
by Religare has submitted the following:
The Noticee was registered as a client on June 04, 2007 and
was introduced by Deepak Khurana. As per KYC her income
was in the range of Rs.5 to 10 lakh per annum.
The Noticee and Live Star were its clients.
Deepak Khurana and Anand Sagar were the common dealers
for Live Star, SRS and MSR who had received and placed
orders on their behalf.
Page 25 of 32
13. The arguments put forward by the Noticee in the letter dated April 05,
2012 and my findings thereon are as under:
I. “……It has nowhere been proved that there was a mischievous
connivance between Deepak Khurana and the Noticee. The fact is that
the Noticee was a random and innocent investor and was relying on her
own competence, instincts or intuition before entering the deals. The
investments made are by selecting randomly from the scrip by gathering
market information and have nothing to do with any manipulations……”
II. I find that Deepak Khurana has introduced the Noticee to
Religare. The Noticee has herself admitted in her statement
before SEBI that she has received the calls from Deepak Khurana
before both buy and sell orders. The price of Amtek Auto, Amtek
India, Ahmednagar Forging and Monnat Ispat has fallen during
the investigation period. Moreover, the net profit of Amtek Auto,
Amtek India, Ahmednagar Forging has fallen during the
investigation period. Therefore, contention of the Noticee that
investments were made in the said scrips by gathering the market
information does not get justified. Therefore, in a period when
price of the above mentioned scrips were falling substantially on a
daily basis, modus operandi of first large scale buying during the
day and subsequently placing sell orders at a limit price above
LTP but close to the highest price of the day which was also close
to the buy limit price of MSR/Live Star/SRS, reveals that the
Noticee had a prior knowledge of impending large scale buy
orders of MSR/Live Star/SRS at a higher price. Thus, in view of
the same, the contention of the Noticee does not hold any merit.
III. “……As regards the matching of buy order with that of another
brokers’s sale order could be matter of chance, coincidence or matching
Page 26 of 32
sale/purchase order by the buyer or seller as obvious from the net. You
must appreciate that Religare was the buyer’s as well as sellers’s broker
in Ahmednagar Forging and Amtek Auto which goes to prove that
Religare would side/pitch one investor against the other investor……”
IV. I find that the Noticee has traded on 49 days with MSR, SRS and
Live Star in the aforesaid four scrips on NSE. It cannot be a
coincidence that on so many occasions trading has been done in
the same scrips by the aforesaid entities which are purportedly
not even connected. The only logical inference is that there was a
pre-existing knowledge about MSR, SRS and Live Star’s trades
with the Noticee. The matched trades between MSR, SRS and
Live Star and the Noticee signify that the Noticee was well aware
of orders to be/ being placed by MSR, SRS and Live Star.
Further, from the data it is observed that though a number of
brokers were involved on both the sides of trades for the Noticee
and major buyers i.e. MSR, SRS & Live Star, still Religare was
the broker substantially carrying out the orders for both the major
buyers and the Noticee. I find that the Noticee has squared off the
position on the same day. Merely squaring up large volumes
cannot lead to any allegation or suspicion, however, the number
of “coincidences” involved in trading of the Noticee and MSR,
SRS and Live Star make it difficult to believe that all the trading
was done by the Noticee on her own. Apart from squaring up the
trades, such pattern of order placement and execution leads to
the inference that the trading was done on the basis of
information provided by Deepak Khurana with regard to the buy
orders received from MSR, SRS and Live Star and can
appropriately be called ‘Front Running’. Front running has been
defined in Farlex Financial Dictionary as “The act of entering a
trade, either with a long or short position, knowing that other investors
Page 27 of 32
are about to take a position that will positively influence one's own.” * In
the present case, the Noticee was well aware of the forthcoming
orders of MSR, SRS and Live Star and she accordingly took a
long or short position so that she could benefit from the price
movement caused due to the orders of MSR, SRS and Live Star.
Thus, this is a classic case of front running. The Noticee and
Deepak Khurana were an essential part of this collusive trading
as she used the sensitive information about MSR, SRS and Live
Star’s forthcoming trades and hence is responsible for the front
running. Thus, the contention made by the Noticee does not hold
any merit.
14. In conclusion, the findings can be summarized as under:
a) During the investigation period, the Noticee traded on 49 days in
above four scrips. Further, majority of trades of the Noticee were on
the days when large buy trades of Live Star and MSR were
undertaken through the broker Religare and of SRS through the
broker Sunglow.
b) Though a number of brokers were involved on both the sides of
trades for the Noticee and major buyers i.e. MSR, SRS & Live Star,
still Religare was the broker substantially carrying out the orders for
both the major buyers and the Noticee. Details of the same are
given below:
Scrip
No. of Days Pooja Menghani Traded
Presence of Religare Remark
Amtek Auto 15 10On 6 days Religare was present on both the sides of the trade
Amtek India 10 9 Pooja Menghani has traded through ISF and MSR has
Page 28 of 32
traded through Religare Ahmednagar Forging 16 8
On 4 days Religare was present on both the sides of the trade
Monnet Ispat 8 7
Pooja Menghani has traded through Narayan/India Infoline/Religare and Live Star has traded through Religare
Total 49 34
c) Further, Deepak Khurana was the common dealer taking
instructions and putting orders in the system for both the sides.
d) Deepak Khurana has also introduced the Noticee to Religare.
e) The Noticee has received calls from Deepak Khurana before both
buy orders and sell orders of MSR, SRS & Live Star. While her
investment during the year 2008-09 in the market was not more
than ` 5 Lakh, still she was allowed to take large positions in the
scrips through Religare.
f) Deepak Khurana has aided and abetted the Noticee by
communicating the information with regard to the large buy orders
received from Live Star, MSR and SRS to the Noticee, and the
Noticee taking advantage of the said information, had placed buy
orders at lower prices and subsequently sold them at higher price
and thereby made gains in the scrip of Amtek Auto (purchased
369954 shares and sold 369914 shares ), Amtek India (purchased
6,29,286 shares and sold 6,29,286 shares), Monnet Ispat
(purchased 87,700 shares and sold 87,700 shares) and
Ahmednagar Forging (purchased 5,40,264 shares and sold
5,40,264 shares).
Thus, the Noticee has done front running in the scrips of Amtek
Auto, Amtek India, Monnet Spat and Ahmednagar Forging and
benefited from trading ahead of buy trades of Live Star, SRS and
MSR.
15. In order to establish the fraudulent nature of trades indulged in by the
Noticee, reference may also be made to the definition of fraud laid
Page 29 of 32
down in regulation 2 (1) (c) of the PFUTP Regulations, which reads
as follows:
"2 (1)(c) "fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, … …”
16. Regulation 3(a) of PFUTP Regulations prohibits a person directly or
indirectly to buy, sell or otherwise deal in securities in a fraudulent
manner. Regulation 3(b) of PFUTP Regulations prohibits a person
directly or indirectly to use or employ, in connection with issue,
purchase or sale of any security listed or proposed to be listed in a
recognized stock exchange, any manipulative or deceptive device or
contrivance in contravention of the provisions of the Act or the rules
or the regulations made thereunder. Regulation 3(c) of PFUTP
Regulations prohibits a person directly or indirectly to employ any
device, scheme or artifice to defraud in connection with dealing in or
issue of securities which are listed or proposed to be listed on a
recognized stock exchange; Regulation 3(d) of PFUTP Regulations
prohibits a person directly or indirectly to engage in any act, practice,
course of business which operates or would operate as fraud or
deceit upon any person in connection with any dealing in or issue of
securities which are listed or proposed to be listed on a recognized
stock exchange in contravention of the provisions of the Act or the
rules and the regulations made thereunder. Regulation 4(1) of
PFUTP Regulations prohibits a person from indulging in a fraudulent
or an unfair trade practice in securities.
Page 30 of 32
17. In view of the foregoing, the allegation of violation of regulations 3(a),
(b), (c), (d) and 4(1) of PFUTP Regulations by the Noticee stands
established.
18. The Hon’ble Supreme Court of India in the matter of SEBI Vs. Shri
Ram Mutual Fund [2006] 68 SCL 216(SC) held that “In our considered
opinion, penalty is attracted as soon as the contravention of the statutory
obligation as contemplated by the Act and the Regulations is established
and hence the intention of the parties committing such violation becomes
wholly irrelevant…”.
19. Thus, the aforesaid violations by the Noticee make her liable for
penalty under 15HA of the SEBI Act, 1992 which read as follows:
15HA.Penalty for fraudulent and unfair trade practices.- If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher.
20. While determining the quantum of penalty under section 15HA, it is
important to consider the factors stipulated in section 15J of the SEBI
Act, which reads as under:-
“15J - Factors to be taken into account by the adjudicating officer While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely:- (a) the amount of disproportionate gain or unfair advantage,
wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of
investors as a result of the default; (c) the repetitive nature of the default.”
Page 31 of 32
21. The details of shares purchased, sold and profit earned by the
Noticee during the investigation period in the scrips of Amtek Auto,
Amtek India, Ahmednagar Forging and Monnat Ispat are as under:
Name of Scrips
Buy quantity (Shares)
Buy value
(`)
Sale quantity (Shares)
Sale value
(`)
Profit
(`)
Amtek Auto 369914 30123257 369914 31326527 12,03,270
Amtek India 629286 15446078 629286 16424409 9,78,330
Ahmednagar Forging
540264 20928246 540264 23204339 22,76,093
Monnet Ispat 87700 44440031 87700 44888170 4,48,139
Total 16,27,164 11,09,37,611
16,27,164 11,58,43,444
49,05,832
22. The Noticee colluded with Deepak Khurana to obtain sensitive
information regarding forthcoming orders from MSR, SRS and Live
Star and did front running on that basis thereby making huge illegal
profits. This has acted as a fraud against the market and has mislead
and deceived the investors. This activity of the Noticee has seriously
undermined the market integrity. Considering the fact that the annual
income of the Noticee as per KYC ranged from of ` 5 to ` 10 lakh, I
note that the Noticee took huge position in the scrips of Amtek Auto,
Amtek India, Ahmednagar Forging and Monnat Ispat. It is clear that
the Noticee had received prior information in violation of PFUTP
Regulations and was conducting manipulative and deceptive trading
tantamounting to front running. As can be seen from table above, the
total profit made by the Noticee from front running done during the
investigation period works out to approximately ` 49 lakh. Front
running is the instrument/tool employed by some unscrupulous
elements in the securities market to manipulate the market and
deceive the general/genuine investors in the market place. The
pattern of trading, behaviour of the entities, apparent irregularities
and the available trading data, etc., prove manipulation which always
Page 32 of 32
depends on inferences drawn on a mass of factual detail. When all of
these are considered together, they can emerge as ingredients to
prove the manipulative scheme designed and executed by such
manipulators with intent to tamper with free market forces. The
manner and frequency with which such manipulative trading has
been done shows the repetitive nature of violation of law by the
Noticee. People who indulge in manipulative, fraudulent and
deceptive transactions, or abet the carrying out of such transactions
which are fraudulent and deceptive, should be suitably penalized for
the said acts of omissions and commissions.
ORDER
23. After taking into consideration all the facts and circumstances of the
case, I impose a penalty of `1,00,00,000 /- (Rupees one crore only)
under section 15HA of the SEBI Act on the Noticee which will be
commensurate with the violations committed by her.
24. The Noticee shall pay the said amount of penalty by way of demand
draft in favour of “SEBI - Penalties Remittable to Government of
India”, payable at Mumbai, within 45 days of receipt of this order. The
said demand draft should be forwarded to Mr. S.V Krishnamohan,
Regional Manager, Securities and Exchange Board of India, Eastern
Regional Office (ERO), L&T Chambers, 3rd Floor, 16, Camac Street,
Kolkata- 700 017.
25. In terms of rule 6 of the Rules, copies of this order are sent to the
Noticee and also to the Securities and Exchange Board of India.
Date: April 30, 2012 PARAG BASU
Place: Mumbai ADJUDICATING OFFICER