adjudication order in the matter of trading activity of shyam sunder gupta and related/connected...

8/9/2019 Adjudication order in the matter of Trading activity of Shyam Sunder Gupta and related/connected entities

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Adjudication order in the matter of Trading Activity of Shyam Sunder Gupta & related entities in four scrips

Page 1 of 63 April 24, 2015

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. ASK/RGA/AO/6-19/2015-16]

________________________________________________

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

S No. ENTITY NAME Order No.

1 Shyam Sunder Gupta ASK/RGA/AO/6/2015-16

2 Suresh Kumar Aggarwal ASK/RGA/AO/7/2015-16

3 Aarti Goel ASK/RGA/AO/8/2015-16

4 Preeti Goel ASK/RGA/AO/9/2015-16

5 Manish Goel ASK/RGA/AO/10/2015-16

6 Manish Goel (HUF) ASK/RGA/AO/11/2015-16

7 Lokesh Kumar Goel ASK/RGA/AO/12/2015-16

8 Lokesh Kumar Goel(HUF)

ASK/RGA/AO/13/2015-16

9 Santosh Kumari ASK/RGA/AO/14/2015-16

10 Symphony Merchants P.Ltd

ASK/RGA/AO/15/2015-16

11 Felex Enterprises P. Ltd ASK/RGA/AO/16/2015-16

12 Green FieldInfrastructure P. Ltd.

ASK/RGA/AO/17/2015-16

13 Sandeep Paul ASK/RGA/AO/18/2015-16

14 Sandeep Paul (HUF) ASK/RGA/AO/19/2015-16

In the matter of

Trading Activity of Shyam Sunder Gupta &related/connected entities

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FACTS OF THE CASE IN BRIEF

1. Securities and Exchange Board of India (hereinafter referred to as

'SEBI') conducted an investigation in the matter of trading activity of

Shyam Sunder Gupta & related/connected entities in the scrips of

Mahanagar Telephone Nigam Ltd., (MTNL) Areva T&D India Ltd.

(Areva), Power Grid Corporation of India Ltd. (Power Grid) and Tata

Teleservices (Maharashtra) Ltd. (Tata Tele) [collectively referred to as

'said four scrips'] and into the possible violations of the provisions of

the Securities and Exchange Board of India Act, 1992 (hereinafter

referred to as ('SEBI Act, 1992') and regulations of Securities and

Exchange Board of India (Prohibition of Fraudulent and Unfair TradePractices) Regulations, 2003 ('PFUTP Regulations, 2003') by Shyam

Sunder Gupta (Noticee No.1), Suresh Kumar Aggarwal (Noticee No.2),

Aarti Goel (Noticee No.3), Preeti Goel (Noticee No.4) Manish Goel

(Noticee No.5), Manish Goel (HUF) (Noticee No.6), Lokesh Goel

(Noticee No.7), Lokesh Goel (HUF) (Noticee No.8), Santosh Kumari

(Noticee No.9), Symphony Merchants P. Ltd. (Noticee No. 10), Felex

Enterprises P. Ltd. (Noticee No.11), Green Field Infrastructure P. Ltd.

(Noticee No.12), Sandeep Paul (Noticee No. 13) and Sandeep Paul

(HUF) (Noticee No. 14) {hereinafter collectively referred to as

"Noticees"} with regard to dealings in the aforesaid scrips.

2. The period of investigation conducted by SEBI in the above four scrips

is as under:

S crip Name Peri od of I nvestigation

Areva T&D India Ltd. July 28 - 29, 2010

Tata Teleservices (Maharashtra) Ltd. August 23, 2010

Power Grid Corporation of India Ltd. April 28, 2010

Mahanagar Telephone Nigam Ltd. July 28 - 29, 2010

During the investigation, it was observed that in cash segment of

National Stock Exchange (NSE), price of the said four scrips had



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increased sharply during the last few minutes of trading affecting the

closing price of the scrip for the day. Subsequently, after closing of the

market, significant quantities of call options were exercised. It was

observed that Noticees were related to each other.

3. SEBI has, therefore, initiated adjudicating proceedings under the SEBI

Act, 1992 to inquire into and adjudge under section 15HA of the SEBI

Act, 1992 the aforesaid alleged violations committed by the Noticees.

APPOINTMENT OF ADJUDICATING OFFICER

4. Mr. Piyoosh Gupta was appointed as Adjudicating Officer vide order

dated April 26, 2013 under section 15 I of the SEBI Act, 1992 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, 1992 for the alleged violation of section 12A(a),(b),(c) of the SEBI

Act, 1992 read with regulations 3(a),(b),(c),(d) and 4(1),(2)(a),(b),(e)

and (g) of PFUTP Regulations, 2003 by Noticee Nos.3, 10 and 12;

violation of section 12A(a),(b),(c) of the SEBI Act, 1992 read with

regulations 3(a),(b),(c),(d) and 4(1),(2)(a),(b)and(e)of PFUTP

Regulations, 2003 by Noticee No.1; violation of section12A(a),(b),(c) of

the SEBI Act, 1992 read with regulations 3(a),(b),(c),(d) and 4(1),(2)(a)

and (g)of PFUTP Regulations, 2003 by Noticee Nos. 5,6,7 and 11;

violation of section 12A(a),(b),(c) of the SEBI Act, 1992 read with

regulations 3(a),(b),(c),(d) and 4(1) of PFUTP Regulations, 2003 by

Noticee Nos. 2,4,8, 9, 13 and 14. Consequent to the transfer of Shri

Piyoosh Gupta, I have been appointed as Adjudicating Officer vide

order dated November 08, 2013.



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SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

5. Show Cause Notice (s) dated September 26, 2013 (hereinafter

referred to as “SCN's”) were issued to the Noticees under rule 4(1) of

the Rules to show cause as to why an inquiry should not be initiated

and penalty be not imposed under section 15HA of the SEBI Act, 1992

for the alleged violations specified in the SCN's.

6. SCN dated September 26, 2013 issued to Noticee No.1 was returned

undelivered. Thereafter, the said SCN was got affixed on December

10, 2013 at the last known address of the Noticee No.1 through SEBI

Northern Regional Office, New Delhi. However, no reply was received

by Noticee No.1. Subsequently, a copy of the said SCN was again

forwarded by Registered AD to the current/new address of Noticee

No.1, as obtained from NSDL. Also, an opportunity of personal hearing

was granted to him on November 21, 2014 vide notice dated

November 03, 2014 sent through RPAD. However, the Noticee No.1

neither filed reply to the SCN nor appeared for the hearing. Further,

another opportunity of hearing was granted to the Noticee No.1 on

December 23, 2014 vide notice dated December 03, 2014 sent

through NRO. However, the Noticee No.1 did not appear for the

hearing. Final opportunity of hearing was granted to the Noticee No.1

on January 27, 2015 vide notice dated January 02, 2015. However, the

Noticee No.1 did not appear for the hearing. Postal acknowledgment

cards duly signed by/on behalf of Noticee No.1 were received by us.

7. In the above background, I am of the view that sufficient opportunities

were provided to the Noticee No.1 to submit reply/written submissions

and to appear for the hearings which the Noticee No.1 failed to avail.

In this regard, it is pertinent to refer to Rule 7(4) of the Rules which

reads as under: “If any person fails neglects or refuses to appear as

required by sub-rule (3) before the adjudicating officer, the adjudicating



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officer may proceed with the inquiry in the absence of such person

after recording the reasons for doing so.”

8. Further, I would like to quote the observations of the Hon’ble SAT in

the matter of Classic Credit Limited v. SEBI ( Appeal No. 68 of 2003

order dated December 8, 2006), wherein it was observed that “the

appellant did not file any reply to the second show cause notice. This

being so, it has to be presumed that the charges alleged against them

in the show cause notice were admitted by them .” Hence, I am

proceeding against the Noticee No.1 ex-parte on the basis of available

records/evidence.

9. Noticee Nos. 2-9 vide separate letters dated October 09, 2013 sought

time for filing reply to the SCN. Vide Notice dated February 05, 2014

an opportunity of personal hearing was granted to Noticee Nos. 2-9 on

February 24, 2014. Vide letter dated February 20, 2014, Noticee Nos.

2-9 sought inspection of documents. Accordingly, inspection of

documents was provided to the aforesaid Noticees on April 23, and

April 24, 2014. Further, another opportunity of hearing was granted to

the aforesaid Noticees on May 27, 2014 vide Notice dated May 12,

2014. Vide letter dated May 22, 2014, Noticee Nos. 2-9 requested for

adjournment of hearing and sought further time for filing reply to the

SCN. Subsequently, another opportunity of hearing was granted to the

aforesaid Noticees on September 17, 2014 vide Notice dated

September 01, 2014. The aforesaid Noticees submitted their reply vide

letter dated September 16, 2014. The Authorized Representatives

appeared and reiterated their submissions. Also, they sought time till

September 23, 2014 to file additional written submissions. Accordingly,

vide letter dated September 23, 2014 the aforesaid Noticees filed

additional written submissions. Though the Noticee Nos. 2-9 filed



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separate submissions, they are more or less similar. The major

submissions of the aforesaid Noticees are as follows:

Vide letter dated February 20, 2014 inter-alia sought copies of

various documents relied upon for issuing the Notice, including

copy of investigation report, copy of statements of various

entities/their representatives recorded by SEBI, copy of all

trade details (including trade log and other log) obtained from

Stock Exchanges and Brokers and any statement relied upon

by SEBI. However, despite specific request, SEBI has made

available only the extracts of the investigation report and trade

logs and other logs obtained from NSE for cash and further

and option segment in certain scrips. They were not provided

with any other documents/ information as sought vide letterdated February 20, 2014. Non- providing of the aforesaid

documents is in gross violation of principles of natural justice

and vitiates the entire proceeding.

Noticee No. 2-9 are family members. They are financially

independent and traded independently without acting in

concert with any other person or entity. In so far as, Noticee

No.1 is concerned, they have no relation/connection or nexus

with him. Merely, because as per KYC of broker Noticee No.1

is introducer of Noticee No.2, it was alleged that they have

relationship with Noticee No.1, which is wholly erroneous.Noticee No.2 knows Noticee No.1 for last several years but

he does not have any other relationship financial or otherwise.

Merely because Noticee No.1 is the introducer in the KYC of

Noticee No.2, the burden of his actions cannot be shifted to

them. In so far as Noticee No. 10, 11, 12 and 13 are

concerned, nothing has been brought on record to

substantiate the alleged relationship.

All their trading in the various scrips was in the ordinary course

of business, dehors sinister intent or design. During the period

from January 01, 2010 & December 31, 2010 they had traded

in various other scrips. All the transactions carried out by them

in the securities market were the intention of investing and

earning profits.

Whatever profits or losses have been incurred by them while

trading are arising as a result of genuine trading. Merely



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because profits have been made as alleged in some of the

transactions, no adverse inferences qua their trading can be

drawn.

With regard to the trading of Noticee No.3 in Tata Tele

Noticee No.3 is not aware of the trading done by Noticee

No.10. Nothing has been brought on record to suggest any

kind of connection with Noticee No.10.

It is common knowledge that the buyer of the call option has

the right to exercise his calls, which can be exercised at any

time upto the expiration date. As a result of exercise of said

Call options, they have infact suffered losses in the entire

transaction, if their exercise price is compared with our

purchase price.

Noticee No.3 has denied any connection with Noticee No.1 as

alleged. Further, they are not aware of others, who hadexercised the call options on 11.06.2010 and the same is of no

concern. It may be noted that the quantity of the alleged trades

was very small, in comparison to the total exercised quantity

on June 11, 2010. Based on the perceived connection

between Noticee No.3 and others who had traded in the scrip

during the period, the burden of trading done by others is

being erroneously sought to be saddled on Noticee No.3

without any credible basis. It is submitted that she had bought

and sold call options in the scrip of Areva in several other days

and there are no allegations against such trades.

10. Noticee No. 10 vide letter dated October 18, 2013 sought inspection of

documents. Accordingly, inspection of documents was provided to

Noticee No. 10 on January 17, 2014. Vide notice dated February 05,

2014, an opportunity of personal hearing was granted to the Noticee

on February 24, 2014. Vide letter dated February 19, 2014, Noticee

No. 10 requested for adjournment of hearing and sought time for filing

reply to the SCN. Vide letter dated April 10, 2014 Noticee No. 10 filed

its reply to the SCN. Subsequently an opportunity of personal hearing

was granted to the Noticee No. 10 on May 27, 2014. However, Noticee

No. 10 did not appear for hearing. Subsequently, another opportunity

of hearing was granted to the Noticee No. 10 on September 17, 2014



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vide Notice dated September 01, 2014. However, the said Noticee

sought adjournment on the plea that it received the Notice subsequent

to scheduled date of hearing. Later, hearing was held on September

25, 2014. The Authorized Representatives appeared and reiterated the

submissions. Also, they sought time till October 02, 2014 for filing

additional written submissions. Additional written submissions were

filed by Noticee No. 10 on October 08, 2014. The salient points of

submission of Noticee No.10 are as follows:

It traded independently, without acting in concert with anybody. It

has been trading in both cash and F&O segment in the ordinary

course of business.

As per the Notice, not exercised any call options as alleged. Since

not exercised any call options the while theory of making profits etc

collapses.

No link/nexus/relationship/connection with any of the entities

against whom the Notice has been issued.

It has been trading in the scrip for quite a long time. Have traded

prior to , during and post the impugned period. It is not the case

that trades were confined to impugned period only i.e. 23.08.2010.

On 23.08.2010, its trading in the scrip was not confined to 15:04:32

to 15:06:21. It traded throughout the day i.e. from 11:27:59 to15:07:21. SEBI has cherry picked the time slot and have drawn

adverse inferences .

Highest price on 23.08.2010 was ` 25. Based on the normal price

fluctuation in the price of the scrip increased from ` 24.65 to Rs.

24.95.

It is not aware of Noticee No.3 and is not concerned with her trades

in the scrip. At the relevant time, was also not aware that she was

trading in the scrip. Traded through the on screen based

mechanism of the stock exchanges wherein it is not possible to

know the counter party broker or client. Was not aware of the

counter party to trades including Noticee No.3 as alleged. The

alleged matching of trades with Noticee No.3 is not by design but is

sheer coincidence.

It is denied that it executed self trades as alleged. Had placed a sell

order for 1575 shares for a price of ` 24.90 which did not get



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executed at the relevant time. Subsequently, at around 15:04:32

when buy order was placed, earlier sell order of 1575 shares got

matched with the same. There was a time gap of around more

than half an hour in the order time, it cannot be alleged that it had

executed self trades.

The alleged price rise in the scrip is consequent to bonafide trading

done was in the ordinary course and is not the outcome of any

manipulative trading as alleged.

All sales took place through screen based mechanism of the stockexchange wherein it is not possible to know the counter partybroker or client. It was not aware that Noticee No.3 and NoticeeNo.5 were counter parties to their trades and the same was not ofconcern to them. In so far as purchase of 1,50,000 shares in thepost closing session on 29.07.2010 is concerned, the same was

made in the ordinary course of business without being aware of thecounter party.

11. Noticee No.11 vide letter dated October 18, 2013 sought inspection of

documents. Accordingly, inspection of documents was provided to the

Noticee No.11 on January 17, 2014. An opportunity of personal

hearing was granted to Noticee No. 11 on February 24, 2014 vide

notice dated February 05, 2014. Vide letter dated February 20, 2014,

Noticee No.11 requested for adjournment of hearing and sought time

for filing reply to the SCN. Thereafter, Noticee No.11 filed reply to the

SCN vide letter dated April 10, 2014. Accordingly, another opportunity

of hearing was granted to Noticee No.11 on May 27, 2014. The

Authorized Representatives of Noticee No.11 reiterated the

submissions and sought time till June 09, 2014 for filing additional

submissions. Accordingly, additional submissions were filed by Noticee

No.11 vide letter dated June 07, 2014. The salient point of submissions

of Noticee No.11 are as follows:

It has no connection/relation/nexus with any of the entities which

are collectively referred as the “Noticees” in the Notice.

Transactions executed were independent and devoid of any

link/relationship/connection with any of the other notices.



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Page 10 of 63 April 24, 2015

It was a day trader in the scrip of MTNL, and was attracted to the

scrip due to the volatility and the volume that was prevalent to the

relevant point of time. It decided to buy the scrip post closing

because the shares of MTNL were available at much lower price

compared to pre closing, (during pre closing the scrip had hit

highest high of the day i.e. ` 73.80/-) and wanted the prices to cool

down a bit before it could purchase.

Further, the trades executed post closing were done on the closing

price of the scrip it had no role in alleged fixation of the close price

during the day. Therefore, it neither gained anything by executing

trades post closing nor avoided any loss by choosing to trade

during post closing.

SCN clearly states that actions of one Noticee No.1 were

responsible for impacting the closing price of the scrip and it had no

role to pay in the alleged increase in price of the scrip. It has norelation/ nexus/connection with the other Noticees or with entities

mentioned in the SCN.

It was neither involved in alleged up-surging the closing price in the

scrip, by executing trades between 15:29:30 to 15:29:59 nor was

involved in exercising any call options to make profit or avoid loss

as alleged in the Notice. It was a day trader, and it was basically

executing intraday trades in the scrip of MTNL. It had traded in the

scrip of MTNL from July 28, 2010 to August 19, 2010, wherein we

had bought 5,01,896 shares at an average price of ` . 68.00/- and

sold 5,01,896 shares at an average price of ` 66.71/- and in the

process incurred a loss of ` 1.29/- per shares and a total of `

7,72,812/- (Seven lakh Seventy Two Thousand Eight Hundred and

Twelve.)

12. Vide letter dated January 27, 2015, Noticee Nos. 12, 13 and 14 filed a

common reply to the SCN. Vide notice dated February 05, 2014 an

opportunity of personal hearing was granted to the aforesaid Noticees

on February 24, 2014. Vide letter dated February 14, 2014 the

aforesaid Noticees reiterated the submissions. Vide e-mail dated

February 17, 2014, the aforesaid Noticees have again reiterated their

earlier submissions and have also stated that "Since we have already

replied to the SCN by email and also sent the reply by speedpost, we

hope that our personal presence , February 24, 2014, would no longer



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Page 11 of 63 April 24, 2015

be necessary." Further, another opportunity of personal hearing was

granted to the aforesaid Noticees on May 27, 2014 vide notice dated

May 12, 2014. Vide e-mail dated May 26, 2014, the aforesaid Noticees

requested for rescheduling the hearing. One more opportunity of

hearing was granted to the aforesaid Noticees on September 17, 2014.

The aforesaid Noticees vide e-mail dated September 16, 2014

requested for rescheduling the hearing. Another opportunity of hearing

was granted to the Noticee on October 16, 2014. Vide e-mail dated

October 16, 2014, the aforesaid Noticees stated that "We have stated

the factual and true position in our various communications. Now it is

up to you to examine the broker concerned and pass suitable

adjudication order." It is noted that sufficient opportunity of hearing

have been given to the aforesaid Noticees, however, the Noticees

have not availed the same.

13. The salient point of submissions of Noticee Nos. 12, 13 and 14 are as

follows:

Noticee No.12 was out of country at the relevant time. The trades

have been done by the said broker by virtue of blank Power Of

Attorney taken from them in the garb of giving them an assured

return on investment of their funds. There is no connection /relationwhatsoever with Noticee No.1 and/or other related or connected

entities. The broker can also be cross examined as to the

authorization of the said trades. The official of M/s. Religare

Securities Limited, without taking the Noticee No. 13 into

confidence has done unauthorized trading for which separate

appropriate action is taken.

CONSIDERATION OF ISSUES AND FINDINGS

14. I have carefully perused the written submissions of the Noticees and

the documents available on record. The issues that arise for

consideration in the present case are :

a. Whether the Noticees had violated the provisions of section

12(A)(a), (b),(c) of the SEBI Act, 1992 read with regulations



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Page 12 of 63 April 24, 2015

3(a),(b),(c),(d) and 4(1),(2) (a),(b),(e) and (g) of PFUTP

Regulations, 2003?

b. Does the violation, if any, attract monetary penalty under section

15HA of SEBI Act, 1992?

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, 1992?

15. Before moving forward, it is pertinent to refer to the relevant provisions

of SEBI Act, 1992 and PFUTP Regulations, 2003 which reads as

under:-

SEBI Act, 1992

Section 12

Prohibition of manipulative and deceptive devices, insider trading and

substantial acquisition of securities or control.

12A. No person shall directly or indirectly —

(a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange,

any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with

issue or dealing in securities which are listed or proposed to be listed on arecognised stock exchange;

(c) engage in any act, practice, course of business which operates or wouldoperate as fraud or deceit upon any person, in connection with the issue,

dealing in securities which are listed or proposed to be listed on a

recognised stock exchange, in contravention of the provisions of this Act or

the rules or the regulations made thereunder;

SEBI (Prohibition of Fraudulent and Unfair Trade Practices)

Regulations, 2003

Regulation 3: No person shal l dir ectly or indirectly —

(a) buy, sell or otherwise deal in securities in a fraudulent manner;



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Page 13 of 63 April 24, 2015

(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;

(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 ona recognized stock exchange

Regulation 4: Prohibiti on of manipulative, fraudulent and unf air trade

practices

(1) Without prejudice to the provisions of regulation 3, no person shallindulge in a fraudulent or an unfair trade practice in securities.

(2) Dealing in securities shall be deemed to be a fraudulent or an

unfair trade practice if it involves fraud and may include all or any

of the following, namely: —

(a) indulging in an act which creates false or misleading appearanceof trading in the securities market;

(b) dealing in a security not intended to effect transfer of beneficial

ownership but intended to operate only as a device to inflate,depress or cause fluctuations in the price of such security forwrongful gain or avoidance of loss;

(e) any act or omission amounting to manipulation of the price of a

security;

g) entering into a transaction in securities without intention of performing it

or without intention of change of ownership of such security;

Finding

The issues for examination in this case and the findings thereon are as

follows:

(a) Whether the Noticees had violated the provisions of section

12(A)(a), (b),(c) of the SEBI Act, 1992 read with regulations

3(a),(b),(c),(d) and 4(1),(2) (a),(b),(e) and (g) of PFUTP Regulations,

2003?

16. Before going to the facts of the matter, I would like to address the

contention of the Noticee Nos. 2-9 that that they were not provided with

any other documents/ information as sought vide letter dated February



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Page 14 of 63 April 24, 2015

20, 2014. I find that the aforesaid Noticees vide letter dated February

20, 2014 inter-alia sought copies of various documents relied upon for

issuing the Notice, including copy of investigation report, copy of

statements of various entities/their representatives recorded by SEBI,

copy of all trade details (including trade log and other log) obtained

from Stock Exchanges and Brokers and any statement relied upon by

SEBI. I find that all the documents relied upon in the SCN including

the relevant extracts of investigation report, trade logs and other logs

obtained from the stock exchange were provided to the aforesaid

Noticees. Not only this, the Noticees were also provided an opportunity

to inspect the relied upon documents, which they did inspect on April

23, 2014 and April 24, 2014.

17. In this context, it becomes necessary to quote the judgment of the

Hon’ble Securities Appellate Tribunal, (SAT) in the case o f Mayrose

Capfin Private Limited V/s. Securities and Exchange Board of India

(Appeal No. 20 of 2012) dated 30.03.2012, wherein it was observed that

“The principles of natural justice require that the inquiry officer should make

available such document and material to the delinquent on which reliance isbeing placed in the inquiry. It is not necessary for the inquiry officer to make

available all the material that might have been collected during the course of

investigation, but, has not been relied upon for proving charge against the

delinquent. No prejudice can, therefore, be said to have been caused to the

appellant on this count ”.

18. I further find that in Chandrama Tiwari vs. Union of I ndia (AIR 1988 SC

117), the Hon'ble Supreme Court has also observed that " It is not

necessary that each and every document must be supplied to the delinquent

government servant facing charges; instead only material and relevant

documents are necessary to be supplied to him. If a document even though

mentioned in the Memo of charges is not relevant to the charges or if it is not



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Page 15 of 63 April 24, 2015

referred to or relied upon by the enquiry officer or the punishing authority in

holding the charges proved against the government servant, no exception can

be taken to the validity of the proceedings or the order passed on the ground

of non-supply of the copy of the order. If a document is not used against the

party charged, the ground of violation of principles of natural justice cannot

be successfully raised. Violation of the principles of natural justice arises only

when a document, a copy of which may not have been supplied to the party

charged, is used in recording findings of guilt against him."

19. In view of the above, I find that in the instant case, the principles of

natural justice have been met with and no prejudice has been caused

to the aforesaid Noticees Nos. 2-9 in this regard.

20. Now I proceed to deal with the facts of the case. It was observed

during investigation that in cash segment of National Stock Exchange

(NSE), price of the said four scrips had increased sharply during the

last few minutes of trading affecting the closing price of the scrip for the

day. Subsequently, after closing of the market, significant quantities of

call options were exercised. It was observed that Noticees wereinvolved in increasing the price of the said four scrips in last few

minutes and these Noticees thereafter exercised call option in the

derivative segment thereby making profits.

21. It was also observed that all the above Noticees were inter- connected

by virtue of their being part of the same family or the trading pattern as

shown below:

Name of the Noticee Relationship

Shyam Gupta (Noticee No.1) As per KYC with Arch Finance P. Ltd., ShyamGupta introduced Suresh Kumar Aggarwal

Suresh Kumar Aggarwal (Noticee No.2)

As per KYC with Arch Finance P. Ltd., introducerwas Shyam Gupta

Santosh Kumari(Noticee No.9) Wife of Suresh Kumar Aggarwal



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Page 16 of 63 April 24, 2015

Manish Goel, (Noticee No.5)

Manish Goel (HUF), (Noticee No.6)

Lokesh Goel (Noticee No7)

Lokesh Goel (HUF) (Noticee

No.8)

Sons of Suresh Kumar Aggarwal

Aarti Goe (Noticee No.3) and Preeti Goel (Noticee No.4)

Spouse of Lokesh Goel and Manish Goelrespectively

Symphony Merchants P. Ltd.(Noticee No. 10)

Trading pattern in the scrip of MTNL suggests thatSymphony and Felex are related to the aforesaid

group. Felex Enterprises P. Ltd.(Noticee

No. 11)

Green Field Infrastructure P. Ltd.

(Noticee No. 12)

Trading pattern in the scrip of Power Grid suggests

that Green Field is related to the aforesaid group

Sandeep Paul

(Noticee No. 13)

Director of Green Field

22. The details of the trading done by the Noticees in various scrips are

discussed below:

22.1 AREVA T&D INDIA LTD.

22.1.1 It was observed that on June 11, 2010 there was substantial

increase in the price in the scrip of Areva at 15:29:41 when the scrip

moved from ` 300.45 to ` 309 i.e., a rise by 2.84% in 1 second and

4,05,751 Areva shares got traded which was 25.94% of the day's

market volume of 15,64,453 shares as is evident from the price volume

data as on June 11, 2010 as given below:

Price Volum e Data on Ju ne 11, 2010:

Pri ce Movement for the day ( ) Pr ice movement

at 15:29:41 ( )

Volume till

15:29:40

Volume till

15:30:00

Volumes

traded at

15:29:41Open H igh Low Close From H igh295 309 295 304.25 300.45 309.00 11.40 lakh 15.55 lakh 4.05 lakh

22.1.2 It was also observed upon analysis of the trading activity in cash

segment at NSE that Noticee No.1 was the top client on gross and net



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Page 17 of 63 April 24, 2015

buy basis on June 11, 2010 at 15:29:41 i.e., during the period of

substantial price rise. Noticee No.1 started trading in this scrip only

from June 10, 2010 when he bought 55,561 shares and sold 33,350

shares. Whereas on June 11, 2010 Noticee No.1 bought 4,09,648

shares with substantial quantity of 4,05,000 shares at 15:29:41 and

sold 1,89,648 shares, which represented 19.15% of the gross market

quantity. The purchase of 4,05,000 shares done by the Noticee No.1 at

15:29:41 accounted for 49.94% to market gross and 100% of market

net (buy). The closing price (weighted average price of the last half

hour) of the scrip due to the aforesaid price rise was ` 304.25.

Excluding the aforesaid buy trades of the Noticee No.1in the last half

an hour, the close price would have been ` 303.74. If the market had

closed at 15:29:40, the close price would have been ` 301. It was

observed that the buy trades of Noticee No.1 has impacted the price of

the scrip of Areva which increased from ` 301 to ` 309 (i.e., an

increase of ` 8).

22.1.3 It was also observed upon analysis of the trading in derivative

segment at NSE that on June 11, 2010, Noticee No.1 was holding a

long position of 2,30,000 Areva shares in the near month contract i.e.,

contract expiring on June 24, 2010. A large number of exercises were

observed on June 11, 2010 in near month call options as shown below:

I nstrument Type Str ike

Price

Option Type Exercise Quanti ty

OPTSTK 260 CA 750

OPTSTK 280 CA 1,02,000

OPTSTK 290 CA 14,82,000OPTSTK 300 CA 9,750

TOTAL 15,94,500

On analysis of the call options of strike price of ` 280 and ` 290 that

were exercised, it was observed that they were held by clients

which were related to Noticee No.1. Also, Noticee No.1 and



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Noticee Nos. 2-9 exercised call options for 11.16 lakh shares (70%

of total exercises) and benefitted from the price rise as under:

Client

Name

Strike

Price

Exercised

Qty

Amt earned

on exercise( ̀ 304.25 -

Str ike Pri ce

Exercise

amt ifShyam

Gupta's

trades are

excl.

( ` 303.74 -

Strike

Price)

Diff amt

attributed torise in price

( ̀ 304.25 -

` 303.74)

Aarti Goel 280 1,02,000 24,73,500 24,21,480 52,020

290 4,64,250 66,15,563 63,78,795 2,36,767

Preeti Goel 290 68,250 9,72,562 9,37,755 34,807

ShyamGupta

290 2,28,00032,49,000 31,32,720

1,16,280

Suresh

Kumar

Aggarwal

290 15,000

2,13,750 2,06,100

7,650

Santosh

Kumari

290 3,750

53,437 51,525

1,912

Lokesh

Kumar Goel

290 36,000

5,13,000 4,94,640

18,360

Lokesh

Kumar Goel HUF

290 84,750

12,07,688 11,64,465

43,222

Manish Kumar Goel

290 61,5008,76,375 8,45,010

31,365

Manish Kumar Goel

HUF

290 52,500

7,48,125 7,21,350

26,775

TOTAL 11,16,000 1,69,23,000 1,63,53,840 5,69,158

22.1.4 I find that the trading details as mentioned above have not been

disputed by the aforesaid Noticees. In response to the SCN, Noticee

Nos. 2-9 have mainly contended that that they are financially

independent and had traded independently. They also contended that

the buyer of the call option has the right to exercise his calls, which can

be exercised upto its expiration. While admitting that Noticee Nos. 2-9



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Page 19 of 63 April 24, 2015

are family members, they contended that they have no

relation/connection/nexus with Noticee No.1.

22.1.5 I note that Noticee No.1 was the top client on gross and net buy

basis on June 11, 2010 at 15:29:41 i.e. during the period of substantial

price rise. The orders entered by Noticee No.1 for which trades were

executed at 15:29:41 are as under:

Upon analysis of the orders entered by Noticee No.1, I find that on

June 11, 2010, Noticee No.1 placed a buy order at 15:18:54 for5,00,000 shares at ` 280 when the last traded price (LTP) was

` 304.50. Subsequently, the order was modified and the buy order

volume was reduced to 4,05,000 shares. Then at 15:29:41 he once

again modified the order and increased the limit price to ` 337.50

which was 12.13% above LTP of ` 301. With this buy order all the

available sell orders at price of ` 309 or less during that instance (total

of 4,05,000 shares) were executed. I find that the price of the scrip

increased from ` 301 to ` 309 at 15:29:41 because of the purchases

made by Noticee No.1.

23.1.6 I note that the closing price of the scrip is nothing but weighted

average price of the last half hour. It has been clearly brought out

hereinabove that Noticee No.1 by his trading in the cash segment has

Date Orde

r No.

Add

Upd

Del

Order

Time

Order

Qty

Order

Price

LTP

at

order

entry

Orde

r

level

LTP

varia

tion

Trad

e

Tim

e

Tr

ade

Qty

Trade

Price

11- Jun-

10

20100611

0326

8260

A 15:18:54 500000 280.00304.50

U 15:27:45 405000 280.00301.35

U 15:29:41 405000 337.50 301.00

12.13%

15:29:41

4050

00

301.00-

309.00



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impacted the closing price and ultimately the closing price of the scrip

was ` 304.25. If the impact caused by Noticee No.1 is excluded, the

markets would have closed at ` 301 and the closing price (weighted

average price of the last half hour ) would have been ` 303.74

I also find that Noticee Nos.1-9 exercised a total of 11.16 lakh shares

(70% of total exercises) of strike price of ` 280 and ` 290.

22.1.7 From the material available on record, I find that it is Noticee

No.1 i.e Shyam Sunder Gupta who introduced Noticee No.2 i.e.

Suresh Kumar Aggarwal to the broker Arch P Finance Ltd. Moreover,

Noticee No. 2 himself has accepted that he knows Noticee No.1 for

last several years. Noticee Nos. 2-9 are all part of the same family.

This clearly establishes that all the aforementioned Noticees are inter-

connected. Further, I find that all the aforesaid Noticees were holding

long positions in the derivative segment and their call options were at

the verge of expiry. The Noticee No.1 placed large orders towards the

closing of trading hours on June 11, 2010 and increased the closing

price of the Areva scrip from ` 301 to ` 309. I also find that Noticee

Nos. 2-9 who dealt in the above scrip have all exercised their calloptions at the same time, taking advantage of increased closing price

of the scrip. The contention of the aforesaid Noticees that their trading

was in the ordinary course of business without any sinister intent or

design cannot be accepted. It cannot be a mere coincidence. The

conduct of the aforesaid Noticees clearly reflect their intention.

Certainly this is a concerted action on the part of the aforesaid

Noticees who by trading substantial quantity of shares towards the

closing hours caused an impact on the closing price followed by

trading in the derivative segment taking advantage of rise in the

closing price. Thus, I find that the aforesaid Noticees earned an

additional positive square off difference of ` 5.69 lakh because of the

rise in closing price of the scrip.



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Page 21 of 63 April 24, 2015

22.2 TATA TELESERVICES (MAHARASHTRA) LTD.

22.2.1 It was observed that on August 23, 2010, there was sudden

spurt in the price in the scrip of Tata Tele between 15:04:32 and15:06:21 wherein the price of the scrip increased from ` 24.65 to

` 24.95 i.e., registering a rise by 1.21% in less than 2 minutes and

27,73,696 shares were traded which was 35.86% of the day's market

volume of 77,35,781 shares as given below:

Price Volum e Data on Au gust 23, 2010:

Pri ce Movement for the day ( ) Price movement

b/w 15:04:32

and 15:06:21( )

Volume

til l

15:04:32

Volume

til l

15:30:00

Volumes

traded b/w

15:04:32 and15:06:21

Open High Low Close From H igh

24.30 25.00 23.75 24.90 24.65 24.95 35.81 lakh 77.35 lakh 27.73 lakh

22.2.2 It was also observed upon analysis of trading activity in cash

segment at NSE, that Noticee No. 3 and Noticee No. 10 were the top

clients on gross, net buy and net sell basis between 15:04:32 and

15:06:21 i.e., during the period of substantial price rise.

Client

Name

Buy

Qty

Sell

Qty

Gross

Qty

% to

mkt

gross

Net

Buy

Qty

% to

mkt

net

Net

Sell

Qty

% to

mkt

net

Aarti Goel 13,00,000 11,00,000 24,00,000 43.26 2,00,0

00

31.3

4

- -

Symphony 13,50,000 9,73,449 23,23,449 41.88 3,76,551

59.01

- -

22.2.3 Noticee No.10 was the top client on net buy basis. Noticee

No.10 bought a net quantity of 3.76 lakh shares and accounted for

41.88% to market gross and 59.01% to market net quantity. Noticee

No.10 started trading in this scrip from August 9, 2010 and on August

23, 2010, its trades accounted for 93% of the day's buy quantity and

81.97% of the day's sell quantity between 15:04:32 and 15:06:21.

Noticee No.3 was also amongst the top clients on net buy basis, her



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Page 22 of 63 April 24, 2015

net buy was 2 lakh shares and accounted for 43.26% to market gross

and 31.34% to market net. Noticee No.3 started trading in Tata Tele

only from July 30, 2010 and traded till August 23, 2010. The day wise

trading activity of Noticee No.10 in cash segment in Tata Tele

between January 1, 2010 and August 23, 2010 is as under:-

Date Buy Qty Sell Qty Avg Buy Pri ce Avg Sell Pri ce % to mkt gross

9-Aug-10 2,00,000 57,608 23.85 23.75 2.13

10-Aug-10 40,000 40,000 23.50 24.00 0.62

11-Aug-10 - 1,40,000 - 24.44 0.66

16-Aug-10 14,85,119 4,20,000 24.83 24.84 7.59

17-Aug-10 2,34,156 5,50,000 24.75 24.95 5.94

18-Aug-10 9,50,552 4,50,552 24.54 24.32 11.61

19-Aug-10 8,05,161 8,05,161 24.53 24.45 17.12

20-Aug-10 2,05,000 2,05,000 24.12 24.10 6.86

23-Aug-10 14,51,575 11,87,552 24.90 24.89 17.06

22.2.4 The day wise trading activity of Noticee No.3 in cash segment

in Tata Tele shares between January 1, 2010 and August 23, 2010 is

as under:-


30-Jul-10 87,860 13,400 22.87 22.55 0.66

3-Aug-10 - 24,460 - 22.90 0.43

6-Aug-10 - 50,000 - 23.50 0.1518-Aug-10 2,90,000 - 24.25 - 2.40

19-Aug-10 11,00,000 4,66,603 24.44 24.55 16.65

20-Aug-10 2,00,000 - 24.10 - 3.35

23-Aug-10 13,00,000 11,00,000 24.95 24.95 15.51

The trades done by Noticee Nos. 3 and 10 resulted in matched

trades and self trades. These trades resulted in the price of the

scrip of Tata Tele moving from ` 24.65 to ` 24.95.

22.2.5 It was also observed upon analysis of the trading in

derivative segment at NSE that large number of exercises were

observed on August 23, 2010 in near month call options as given

below: .



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Page 23 of 63 April 24, 2015

Instrument Type Strike Price Option

Type

Exercise

Quantity

OPTSTK 20.00 CA 9,000

OPTSTK 22.50 CA 48,96,000

TOTAL 49,05,000

22.2.6 Client wise holding position in Tata Tele shares as on

August 23, 2010 of the group is as under:-

Instrument

Type

Expir y Date Str ike

Price

Option

Type

Net Long

Qty

Net Short

Qty

Exercised

Qty

SYMPHONY MERCHANTS P. LTD.

FUTSTK 26-Aug-10 - FF 16,20,000 - -

FUTSTK 30-Sep-10 - FF 4,50,000 - -

OPTSTK 30-Sep-10 23 CA 90,000 - -

AARTI GOEL

FUTSTK 26-Aug-10 - FF 4,32,000 - -

OPTSTK 26-Aug-10 22.50 CA 14,13,000 - 14,13,000

PREETI GOEL

OPTSTK 26-Aug-10 22.50 CA 10,08,000 - 10,08,000

LOKESH KUMAR GOEL

OPTSTK 26-Aug-10 22.50 CA 5,58,000 - 5,58,000

SANTOSH KUMARI

OPTSTK 26-Aug-10 22.50 CA 4,95,000 - 4,95,000

OPTSTK 26-Aug-10 25.00 CA 9,000 - -

SHYAM GUPTA

OPTSTK 26-Aug-10 22.50 CA 4,05,000 - 4,05,000

SURESH KUMAR AGGARWAL

OPTSTK 26-Aug-10 22.50 CA 3,60,000 - 3,60,000

MANISH KUMAR GOEL

OPTSTK 26-Aug-10 22.50 CA 2,25,000 - 2,25,000

MANISH KUMAR GOEL (HUF)

OPTSTK 26-Aug-10 22.50 CA 2,07,000 - 2,07,000

TOTAL 46,71,000



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22.2.7 It was observed that Noticee Nos. 1, 2, 3,4,5,6,7 and 9

exercised options for a total of 46.71 lakh Tata Tele shares

(95.22% of total exercises) and thus benefitted from the price rise

as under:

Cli ent Name Str ike

Price

Exercised

Qty

Amt

earned on

exercise ( ` .

24.90 -

Strike

Price)

Exercise

amt if

concerned

trades are

excl. ( ` .

24.80 -

Str ike Pri ce)

Diff amt

attributed

to rise in

price ( ` .

24.90 - `

24.80)

Aarti Goel 22.50 14,13,000 33,91,200 32,49,900 1,41,300

Preeti Goel 22.50 10,08,000 24,19,200 23,18,400 1,00,800

Lokesh

Kumar Goel

22.50 5,58,000 13,39,200 12,83,400 55,800

Santosh

Kumari

22.50 4,95,000 11,88,000 11,38,500 49,500

Shyam Gupta 22.50 4,05,000 9,72,000 9,31,500 40,500

Suresh

Kumar

Aggarwal

22.50 3,60,000 8,64,000 8,28,000 36,000

Manish

Kumar Goel

22.50 2,25,000 5,40,000 5,17,500 22,500

Manish

Kumar Goel

(HUF)

22.50 2,07,000 4,96,800 4,76,100 20,700

TOTAL 46,71,000 1,12,10,400 1,07,43,300 4,67,100

22.2.8 In response to the SCN, Noticee No. 3 has contended that she

was not aware of trading done by Noticee No.10. Nothing has been

brought on record to suggest any kind of connection with Noticee No.

10. Similarly, Noticee No. 10 has contended that it is not aware of

Noticee No.3. Its trading was not confined to 15:04:32 to 15:06:21 and

time slots were cherry picked. It has traded throughout the day on

August 23, 2010. I do not accept this contention of Noticee No. 10

because I find from the documents submitted by Noticee No. 10 that it

has selectively traded more in the time slot of 15:04:32 to 15:06:21.

Also, I find that Noticee No. 3 and Noticee No. 10 were the top clients

on gross, net buy and net sell basis between 15:04:32 and 15:06:21



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Page 25 of 63 April 24, 2015

i.e., during the period of substantial price rise. I note from the material

available on record that the orders entered by Noticee No.3 and

Noticee No. 10 are as under:

Upon analysis of the orders placed by Noticee No.3 and 10 thefollowing is noted:

a) Noticee No.10 placed a stop loss buy order for 10 lakh shares at

14:56:28 at a limit price of ` 25 with a trigger price of ` 24.95

when the LTP at order entry was ` 24.50.

Client Name Order

No.

B/

S

Add

Upd

Del

Order

Time

Order

Qty

Disc

Qty

Order

Price

LTP at

order

entry

Trade

Time

Trade

Qty

Trade

Price

Symphony 2010082

3687983

01

S A 14:21:28 1575 1,575 24.90 24.70 15:04:32 1575 24.90

Symphony 2010082

3690178

47

B A 14:56:28 10,00

,000

10,00,0

00

25.00

(Trig.

24.95)

24.50

15:04:32 10,00

,000

10,00,0

00

25.00 24.95 15:04:32 1000

000

24.95

Aarti Goel 2010082

3690232

03

S A 14:57:13 1,00,

000

1,00,00

0

24.95 24.50 15:04:32 1000

00

24.95

Aarti Goel 2010082

3690406

85

S A 15:00:00 8,00,

000

8,00,00

0

24.95 24.60 15:04:32

-

15:04:36

8000

00

24.95

Aarti Goel 2010082

3690412

20

S A 15:00:05 2,00,

000

2,00,00

0

24.95 24.60 15:04:36 2000

00

24.95

Symphony 2010082

3690712

54

B A 15:04:32 3,50,

000

3,50,00

0

24.95 24.65 15:04:32 3500

00

24.65

-

24.95

Symphony 2010082

3690495

51

S A 15:01:18 1,00,

000

1,00,00

0

25.25 24.60

U 15:01:24 10,00

,000

10,00,0

00

25.25 24.60

U 15:04:34 10,00

,000

10,00,0

00

24.95 24.60 15:04:36

-

15:06:29

1000

000

24.95

Aarti Goel 2010082

3690718

92

B A 15:04:36 8,00,

000

8,00,00

0

24.95 24.65 15:04:36 8000

00

24.65

-

24.95

Aarti Goel 2010082

3690844

07

B A 15:06:21 5,00,

000

5,00,00

0

24.95 24.90 15:06:21 5000

00

24.95



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Page 26 of 63 April 24, 2015

b) Subsequently, Noticee No.10 placed three sell orders for 1 lakh

shares (at 14:57:13), 8 lakh shares (at 15:00:00) and 2 lakh

shares (at 15:00:05) at a limit price of ` 24.95.

c) Thereafter, at 15:04:32 Noticee No.10 placed a buy order for

3.50 lakh shares at a limit price of ` 24.95 when the order level

LTP was ` 24.65. This buy order cleared the available sell orders

at price of ` 24.95 or less and a total of 3.50 lakh shares were

traded.

d) Since the LTP reached the threshold of ` 24.95, the buy order of

10 lakh shares placed by Noticee No.10 got triggered. This

swept all the available sell orders at price of ` 24.95 including the

sell order of Noticee No.3 for 1 lakh shares and 8 lakh shares.

e) Thereafter, Noticee No.10 at 15:04:34 modified an existing sell

order of 10 lakh shares at a limit price from ` 25.25 to ` 24.95.

f) At 15:04:36 Noticee No.3 placed a buy order for 8 lakh shares at

a limit price of ` 24.95 and this order swept the available sell

orders including the sell orders of Noticee No.3 for the remaining

8 lakh shares and 2 lakh shares. It also swept the order modified

by Noticee No.10 for 10 lakh shares at 15:04:34.

22.2.9 It is evident from the above, that the trading done by Noticee

Nos.3 and 10 resulted in the price of the scrip moving from ` 24.65 to

` 24.95. Consequently, the closing price of the scrip was ` 24.95. If

the impact caused by Noticee No.3 and 10 is excluded the scrip would

have closed at ` 24.65 and the closing price would have been

` 24.8.



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22.2.10 I find that that Noticee Nos. 1, 2, 3,4,5,6,7 and 9 exercised

options for a total of 46.71 lakh Tata Tele shares (95.22% of total

exercises).

22.2.11 I also find that the aforesaid orders resulted in matched

trades between Noticee Nos. 3 and 10, detailed as under:-

Buyer

Name

Buy

Member

Name

Sell

Member

Name

Seller

Name

Trade

Price

Trade Qty Trade

Time

Symphony Arch Fin. Kotak Sec. Aarti Goel 24.95 1,00,000 15:04:32

Symphony Arch Fin. Kotak Sec. Aarti Goel 24.95 7,03,543 15:04:32

Symphony Arch Fin. Arch Fin. Symphony 24.90 1,575 15:04:32

Aarti Goel Kotak Sec. Kotak Sec. Aarti Goel 24.95 96,457 15:04:36

Aarti Goel Kotak Sec. Kotak Sec. Aarti Goel 24.95 2,00,000 15:04:36

Aarti Goel Kotak Sec. Arch Fin. Symphony 24.95 4,87,693 15:04:36

Aarti Goel Kotak Sec. Arch Fin. Symphony 24.95 60,000 15:06:21








Aarti Goel Kotak Sec. Arch Fin. Symphony 24.95 4,181 15:06:21TOTAL 20,73,449

Noticee Nos. 10 and 3 had bought 26.50 lakh shares and sold

20.73 lakh shares between 15:04:32 to 15:06:21. Thus, majority of

the buy quantity (i.e., 78%)/sell quantity (100%) of Noticee No.10

and Noticee No. 3 were matched between themselves. The

argument of the aforesaid Noticees that they were not aware of

each other and that there was no connection between them does

not really hold any merit. There are many instances of matched

trades. This cannot happen without prior meeting of minds.

Intention of the aforesaid Noticees is clearly implicit in their trading

pattern.



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22.2.12 Further, I also find that the aforesaid Noticees had

executed self trades. On an analysis of order no.

2010082368798301, Noticee No. 10 placed a sell order at 14:21:28

of 1575 shares at ` 24.90 and then later placed a buy order at

15:04:32 of 1575 shares at ` 24.90. Noticee No.10 has denied

that it has executed self trades as alleged. Noticee No. 10

submitted that he first placed a sell order which did not get

executed and then subsequently when it placed buy order after

about half an hour, it got matched with the earlier sell order. This

contention of the Noticee is not acceptable. There may be time

difference as contended by Noticee No. 10 but the point to be noted

is that both the buy and sell orders placed by Noticee No. 10

matched both in terms of quantity and price. More importantly, at

the relevant point of time when the Noticee No. 10 placed buy order

there was no other sell order placed in the system except his own

sell order placed earlier which was pending for execution. Thus, I

conclude that the Noticee No. 10 had placed the aforesaid buy and

sell orders with the intention to execute self trade which resulted in

creation of artificial volume in the scrip without any change inbeneficial ownership.

22.2.13 Further, Noticee No.3 also executed self trades. On an

analysis of order no. 2010082369041220 it is noted that sell order

of 2,00,000 shares was placed by Noticee No.3 at 15:00:05 at `

24.95 and then later placed a buy order of 2,00,000 shares at

15:04:36 at ` 24.95. I find that the buy and sell orders placed by

Noticee No.3 matched both in terms of quantity and price. I find

that the Noticee No. 3 had placed the aforesaid buy and sell orders

with the intention to execute self trade which resulted in creation of

artificial volume in the scrip without any change in beneficial

ownership.



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Page 29 of 63 April 24, 2015

22.2.14 Self trades per se are illegal and hence fictitious. The

Hon'ble Securities Appellate Tribunal (SAT) has held in several

cases that self trades call for punitive action since they are illegal

by their very nature. Following are a few cases in respect of self

trades decided by SAT:

In M/s Marwadi Shares and Finance L imi ted Vs. SEBI (Appeal No. 85

of 2011 dated July 26, 2012, SAT held, "......Self Trades by their very

nature, are fictitious. ................Such transactions executed for and on

behalf of the clients will fall within the definition of suspicious

transactions having no economic rationale or bona fide purpose..."

In M/s. Jayanti lal Khandwala & Sons Pvt. Ltd. vs. Secur it ies and

Exchange Board of I ndia (Appeal no. 24 of 2011 dated June 8, 2011)

SAT observed: "One cannot buy and sell shares from himself. Such

transactions are obviously fictitious and meant only to create false

volumes on the trading screen of the exchange".

22.2.15 It has been clearly established that trading done by the

aforesaid Noticees towards the closing hours in the cash segment

has impacted the closing price. Trades done by these Noticees

include self trades and also matched trades amongst themselves.

These trades were done during a particular time slot. Subsequently,

Noticee Nos. 1,2,3,4,5,67 and 9 exercised call options in the

derivative segment to take advantage of the increased price in the

cash segment. These Noticees are all part of the same family.However, trading strategy/pattern followed by the aforesaid

Noticees was common and more interestingly this common strategy

was followed by all the aforesaid Noticees on a particular day,

during a particular time slot, in a particular scrip. This cannot be

said to be a mere coincidence. I am of the view that the



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Page 30 of 63 April 24, 2015

circumstances are sufficient enough to hold that there was a

concerted and pre-meditated action on the part of the aforesaid

Noticees to deliberately increase the price in the cash segment and

trade thereafter in the derivative segment to take advantage of the

rise in price. Thus, the aforesaid Noticees earned an additional

positive square off difference of ` 4.67 lakh because of the rise in

closing price of the scrip.

22.3 POWER GRID CORPORATION OF INDIA LTD.

22.3.1 It was observed that on April 28, 2010 there was substantial

increase in price and volume in the scrip of Power Grid between15:28:59 and 15:29:09 during which price of the scrip moved from

` 108.10 to ` 120 after touching a high of ` 120.50 at 15:29:05 i.e.,

a rise by 11% in 10 seconds and 17, 15, 527 shares were traded

which was 33.91% of the day's market volume of 50, 59, 017

shares as is evident from the price volume data on April 28, 2010

as given below:

Price Volum e Data on Ap ri l 28, 2010:

Pri ce Movement for the day

( )

Price movement b/w

15:28:59 and 15:29:09 ( ` )

Volume

til l

15:28:59

Volume

til l

15:30:0

0

Volumes

traded b/w

15:28:59

and

15:29:09

Open High Low Close F rom H igh

112.50 120.50 108.10 114.90 108.10 120.50 29.10

lakh

50.16

Lakh

17.15 lakh

22.3.2 It was also observed upon analysis of the trading activity in

cash segment at NSE that Noticee No. 1 and Noticee No.12 were

amongst the top clients on gross, net buy and net sell basis

between 15:28:59 and 15:29:09 i.e., during the period of price rise.



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The total quantity bought and sold by Noticee No.1 and Noticee No.

12 are as follows:

Cli ent Name Buy

Qty

Sell

Qty

Gross

Qty

% to

mkt

gross

Net Buy

Qty

% to

mkt

net

Net Sell

Qty

% to

mkt

net

Green Field Infrastructure P. Ltd.

16,90,000 5,00,000 21,90,000 63.83 11,90,000 98.65 - -

Shyam Gupta - 1,34,400 1,34,400 3.92 - - 1,34,400 11.14

22.3.3 It was also observed upon analysis of the trading activity in

cash segment at NSE that Noticee No. 1 and Noticee No.12 were

amongst the top clients on gross, net buy and net sell basis


It was observed that Noticee No. 12 net buy was 11.90 lakh shares

and accounted for 63.83% to market gross and 98.65% to market

net. Major counterparty sellers for the buy trades of Noticee No. 12

were Noticee No. 12 and Noticee No.1.

22.3.4. Following was the day wise trading activity of Noticee No.

12 in cash segment in Power Grid between January 1, 2010 and

April 28, 2010:-


8-Apr-10 1,900 - 110.55 - 0.04

9-Apr-10 1,500 - 111.00 - 0.06

12-Apr-10 5,500 - 108.71 - 0.57

13-Apr-10 1,000 - 108.10 - 0.07

15-Apr-10 1,641 4,891 108.01 108.16 0.32

22-Apr-10 26,700 9,000 108.25 109.71 0.97

23-Apr-10 22,725 20,000 109.34 109.25 3.10

27-Apr-10 6,72,451 500 113.02 113.50 5.10

28-Apr-10 16,90,000 5,00,000 117.28 119.95 21.64

It was observed that during calendar year 2010, Noticee No. 12 had

started trading in this scrip from April 8, 2010. Further, on April 28,

2010 the entire day's quantity of Noticee No. 12 was bought and

sold in 10 seconds time span. It was observed that for almost the



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Page 32 of 63 April 24, 2015

entire 5 lakh shares sold by Noticee No. 12, Noticee No. 12 itself

was counter party.

22.3.5 It was thus observed that trading done by Noticee No. 12

resulted in the price of the Power Grid scrip moving from ` 108.50

to ` 120 thereby impacting the closing price of the scrip.

22.3.6 It was observed that large number of call options were

exercised on April 28, 2010 by Noticee No. 1, 12 13 and 14 in the

scrip of Power Grid which are as under:

Instrument

Type

Expir y Date Strike Pri ce Option

Type

Net Long

Qty

Net

Short

Qty

Exercised

Qty

GREEN FIELDOPTSTK 29-Apr-10 100 CA 19,250 - 19,250

OPTSTK 29-Apr-10 110 CA 23,73,525 - 23,73,525

OPTSTK 29-Apr-10 100 PA 1,925 - -

OPTSTK 29-Apr-10 110 PA 69,300 - -

OPTSTK 27-May-10 110 PA 9,625 - -

OPTSTK 27-May-10 120 PA 1,05,875 - -

FUTSTK 29-Apr-10 - FF 42,350 - -

FUTSTK 27-May-10 - FF - 23,100 -

SANDEEP PAUL

OPTSTK 29-Apr-10 100 CA 13,475 - 13,475OPTSTK 29-Apr-10 110 CA 1,77,100 - -

OPTSTK 29-Apr-10 110 PA 19,250 - -

SANDEEP PAUL (HUF)

OPTSTK 29-Apr-10 100 CA 25,025 - 25,025

OPTSTK 29-Apr-10 110 CA 11,39,600 - 11,39,600

OPTSTK 27-May-10 110 CA 15,400 - -

OPTSTK 29-Apr-10 110 PA 23,100

OPTSTK 27-May-10 120 PA 30,800

FUTSTK 29-Apr-10 - FF 36,575

FUTSTK 27-May-10 - FF 3,850

SHYAM SUNDER GUPTA

OPTSTK 29-Apr-10 110 CA 2,02,125 - 2,02,125

FUTSTK 27-May-10 - FF - 51,975 -

Total 37,73,000



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Page 33 of 63 April 24, 2015

22.3.7 It was observed that Noticee No. 1, 12, 13 and 14 exercised

call options of 37.73 lakh shares (81.67% of total exercises) and

thus benefitted from the price rise as shown below:

Client Name Str ike

Price

Exercised

Qty

Amt earned on

exercise( ` 114.90 -

Str ike Pri ce)

Exercise amt if

Green Field'strades are excl .

( ` 111.14 -

Str ike Pri ce)

Diff amt

attributed tor ise in pri ce ( `

114.90 - `

111.14)

Green Field

Infrastructure

P. Ltd.

100 19,250 2,86,825.00 2,14,445.00 72,380.00

110 23,73,525 1,16,30,272.50 27,05,818.50 89,24,454.00

Sandeep Paul 100 13,475 2,00,777.50 1,50,111.50 50,666.00

Sandeep Paul

HUF

100 25,025 3,72,872.50 2,78,778.50 94,094.00

110 11,39,600 55,84,040.00 12,99,144.00 42,84,896.00

Shyam Sunder

Gupta

110 2,02,125 9,90,412.50 2,30,422.50 7,59,990.00

Total 37,73,000 1,90,65,200 48,78,720 1,41,86,480

22.3.8 In response to the SCN, a common reply was filed by

Noticee No. 12, 13 and 14. It was contended that Noticee No. 13

was out of country during the period of transaction and that trades

have been done by the said broker by virtue of blank Power Of

Attorney taken from them in the garb of giving them an assuredreturn on investment of their funds. They have also submitted that

the officials of Religare Securities Ltd had done unauthorized

trading due to which they suffered huge losses. They also

submitted that there is no connection /relation whatsoever with

Noticee No.1 and/or other related or connected entities.

22.3.9 I find that Noticee No.1 and Noticee No. 12 had both traded

in the scrip of Powergrid in the cash segment as well as the

derivative segment. Noticee No. 13 and 14 traded only in derivative

segment. Noticee No. 12, 13 (director of Noticee No. 12) and 14

(HUF of Noticee No. 13) are found to be related to each other. I

find that the aforesaid Noticees have merely contended that the



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Page 34 of 63 April 24, 2015

broker had done unauthorized trading by virtue blank Power of

Attorney trades and that they have suffered huge losses in that

regard. I note that on one hand the aforesaid Noticees submitted

that they had given Power of Attorney to the broker, on the other

hand they alleged unauthorized trading in their account. Thus, the

submissions made by the said Noticees are contradictory.

Nevertheless, the said Noticees ought to have taken proper care

before giving Power of Attorney to the broker. Be that as it may, the

Noticees have not submitted any documentary evidence to show

that trades have been done by the broker in his account without his

authority. Moreover, it is also not known if the said Noticees have

raised any objection/grievance/dispute with the broker or with the

stock exchange. At this juncture, the said Noticees cannot disclaim

the trades so done simply because they have in the process

incurred losses.

22.3.10 The aforesaid Noticees have also submitted that the

broker can also be cross examined as to the authorization of the

said trades. I find that no statement of the broker was relied upon in

the SCN nor it was cited as witness. Moreover, as already

mentioned above, the Noticees have not submitted any

documentary evidence in support of their contention that the broker

has done unauthorized trading in their account. I therefore, find no

merit in the contention of the aforesaid Noticees.

22.3.11 Having thus rejected the contentions raised by the

aforesaid Noticees, I now proceed further based on the material

available on record. I find that Noticee No. 1 and Noticee No.12

were amongst the top clients on gross, net buy and net sell basis


I note that the orders entered by Noticee No. 12 are as under:



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Page 35 of 63 April 24, 2015

Upon analysis of the orders following is noted:

a) Noticee No. 12 placed a sell order for 5 lakh shares at 15:16:13 ata limit price of ` 118.95 which was subsequently modified at

15:21:45 when the limit price was increased to ` 119.95.

b) Noticee No. 12 at 15:16:25 placed a stop loss buy order for 7 lakh

shares at a limit price of ` 119.00 with a trigger price of ` 118.65

Date Orde

r No.

B/ S Add

Upd

Del

Order

Time

Order

Qty

Disc

Qty

Order

Price

LTP

at

orde

rentr

y

Order

level

LTP

variat ion

Trade

Time

Trade

Qty

Trad

e

Pric

e

28-

Apr-10

2010

04283594

4951

B A 15:16

:25

70000

0

7000

00

119.0

0(Trig.

118.6

5)

110.

00

U 15:21

:53

70000

0

7000

00

120.0

0

(Trig.

119.6 5)

109.

90

A 15:29

:03

70000

0

7000

00

120.0

0

110.

00

9.10% 15:29

:03 -

15:29:08

70000

0

108.

80-

120.00

28- Apr-

10

20100428

3594

2964

S A 15:16 :13

500000

500000

118.95

110.00

U 15:16

:18

50000

0

5000

0

118.9

5

109.

95

U 15:21

:45

50000

0

5000

0

119.9

5

109.

95

9.10% 15:29

:02 -15:29

:03

50000

0

119.

95

28-

Apr-10

2010

04283605

4645

B A 15:29

:01

99000

0

9900

00

120.0

0

108.

50

10.60

%

15:29

:01 -15:29

:02

99000

0

108.

50 -119.

95



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Page 36 of 63 April 24, 2015

which was subsequently modified at 15:21:53 at a limit price of

` 120 and trigger price of ` 119.65. Thus, it was observed that

Noticee No. 12 increased the price of the sell order by ` 1 and

then within 8 seconds increased the limit price of the buy order as

well as the trigger price by ` 1.

c) Thereafter Noticee No. 12 placed a fresh buy order at 15:29:01

for 9.90 lakh shares (even though there was a pending buy order

for 7 lakh shares) at a price of ` 120 which was 10.60% above

LTP of ` 108.50. This buy order executed all the available sell

orders at price of ` 119.95 or less and a total of 9,90,000 shares

were traded between 15:29:01 to 15:29:02. It was noted that

Noticee No. 12 had a sell order for 5 lakh shares at a limit price of

` 119.95 and thus 1,26,425 shares got matched.

d) Further, as the trigger price (i.e., ` 119.65) of the earlier order

(i.e., of 7 lakh shares) which was pending in the system with a

limit price of ` 120 at 15:29:03 got triggered, this buy order swept

all the available sell orders at price of ` 120 or less during thatinstance and a total of 7, 00, 000 shares were traded between

15:29:03 to 15:29:08. In this case also Noticee No. 12 had sell

order for remaining shares of 3,73,505 shares at a limit price of

` 119.95 and thus these orders were matched.

22.3.12 It is evident from the above, that the trading done by

Noticee No.12 resulted in the price of the scrip moving from

` 108.50 to ` 120. The closing price of the scrip due to the

aforesaid price rise was ` 114.90. Excluding the aforesaid buy

and sell trades of the client in the last half an hour, the close price

would have been ` 111.14 and if the markets had closed at

15:29:00 (15:29:01 is the time when first trade of Noticee No. 12



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Page 37 of 63 April 24, 2015

was executed during the last half hour) the closing price would

have been ` 109.25.

22.3.13 Also, the trading pattern of the Noticee No. 12 also

reveal that they have indulged in self trades. On analysis of order

no. 2010042835942964 , I find that Noticee No.12 placed a sell

order of 5,00,000 shares at 15:16:13 at ` 118.95 and then placed

a buy order of 5,00,000 shares at 15:29:03 at ` 119.95. Thus,

Noticee No. 12 executed self trade. It is needless to mention that

self trades per se are illegal.

22.3.14 I find from the discussion at para no. 22.3.5 that the

Noticee No.12 by their trades in the cash segment had

contributed to the price rise from ` 108.50 to ` 120 in 10 seconds

towards the close of trading hours and subsequently they traded

in the derivative segment taking advantage of the increased price.

Subsequently, Noticee No. 12, 13 and 14 exercised call options

of 37.73 lakh shares (81.67% of total exercises). Had these

trades been excluded, the closing price would have been `

111.14 and the clients would have made losses on contracts withstrike price of ` 110. Thus, these entities earned an additional

positive square off difference of ` 1.34 crores because of the rise

in closing price of the scrip. Further, I find that Noticee No. 12

was both the buyer and seller for 5,00,000 shares and has thus

executed self trades. Their trading pattern in the scrip at the

relevant time period clearly reflect their intention. They cannot

escape from the consequences simply by stating that they have

incurred losses in other scrips/ other time periods.

22.3.15 As regards, the trading of Noticee No.1, I note that

Noticee No.1 did trade at the relevant time in the cash segment

in the scrip of Powergrid. Thereafter, taking advantage of the



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Page 38 of 63 April 24, 2015

price rise, he exercised options in the derivative segment and

benefitted from the price rise. There may not be any direct

evidence to show connection of Noticee No.1 and the remaining

Noticees who traded in the scrip of Powergrid. However, the

trading strategy/pattern followed by the aforesaid Noticees

including Noticee No.1 was common and more interestingly this

common strategy was followed by all the aforesaid Noticees on a

particular day , during a particular time slot, in a particular scrip.

This itself, in my view is sufficient enough to hold that there was a

concerted and pre-meditated action on the part of the aforesaid

Noticees to deliberately increase the price in the cash segment

and trade thereafter in the derivative segment to take advantage

of the rise in price. Thus, the aforesaid Noticees benefitted from

the price rise to the tune of ` 1.41 crore.

22.4 MTNL

22.4.1 It was observed that on July 28, 2010 the price of the scrip

of MTNL moved from ` 66.75 to ` 73.80 i.e., registered a rise of

10.56% in less than 30 seconds between 15:29:31 and 15:30:00.There was also spurt in volume of MTNL shares just before the

markets closed for the day and further, substantial volumes were

traded in the post closing session as shown below:

Price volume data on July 28, 2010

Pri ce Movement for the day ( ` .) Price

movement b/w

15:29:31 and

15:30:00 (Rs.)

Volume

s till

15:29:3

0

Volum

es till

15:30:

00

Volumes

traded

b/w

15:29:31

and

15:30:00

Volume

s traded

in post

closing

sessionOpen High Low Close From H igh

67.40 73.80 66.35 69.45 66.75 73.80 9.30lakh

19.69lakh

10.40lakh

10.83lakh



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adjudication order in the matter of trading activity of shyam sunder gupta and related/connected...

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