ahmadi ao order

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BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO.ISD/ IPO/AO/DRK- DS/EAD-3/ 511 / 55 /2014]

_________________________________________________________________

UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5(1) OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995

Against:

Amadhi Investments Limited (PAN – AAACA7300E)

EL-10, GF, Memnagar Complex New Sahkar Association Near State Bank of India Memnagar, Ahmedabad

In the matter of IPO irregularities

FACTS IN BRIEF

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”)

conducted investigations into the dealings in the shares of certain

companies during their Initial Public Offerings (hereinafter referred to as

‘IPOs’) covering the period from the year 2003 to 2005.

2. The investigations revealed that certain entities referred to by SEBI as

‘key operators’ or ‘master account holders’, had opened large number of

demat accounts and bank accounts which were in the names of benami

or non-existent persons and acquired shares of various companies in the

IPOs by making applications in the names of such fictitious or benami

entities with each of the application being of such a value so as to make it

eligible for allotment under the retail category. It was observed that,

subsequent to the allotment of shares in IPOs, the shares from the demat

accounts of such fictitious/ benami allottees were transferred in the demat

account of key operators/ master account holders before the listing of

such shares on stock exchange(s). The key operators then transferred the

shares through off market deals to certain entities referred to as the

"financiers". It was revealed that the scheme was designed to corner

shares from the quota reserved for retail investors in the IPOs of various

companies and to make profit by selling the shares. The investigation also

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revealed that Amadhi Investments Limited (hereinafter referred to as

‘Noticee/ Amadhi’) acted as a financier in the scheme / arrangement of

cornering of shares in certain IPOs.

APPOINTMENT OF ADJUDICATING OFFICER

3. I was appointed as the Adjudicating Officer vide order dated December

10, 2008, (subsequent to the transfer of the previous Adjudicating Officer),

under section 15-I of the Securities and Exchange Board of India Act,

1992 (hereinafter referred to as SEBI Act) read with Rule 3 of Securities

and Exchange Board of India (Procedure for Holding Inquiry and Imposing

Penalties by Adjudicating Officer) Rules, 1995, to inquire into and adjudge

under Section 15HA of the Securities and Exchange Board of India Act,

1992 (hereinafter referred to as ‘SEBI Act’), the alleged violation of the

provisions of Section 12A of the SEBI Act, Regulations 3, 4 and 6 of the

SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the

Securities Market) Regulations, 1995 (hereinafter referred to as ‘PFUTP

Regulations 1995’) and Regulations 3 and 4 of the SEBI (Prohibition of

Fraudulent and Unfair Trade Practices relating to the Securities Market),

Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations 2003’)

by the noticee/ Amadhi / it.

SHOW CAUSE NOTICE, REPLY AND HEARING

4. A Show Cause Notice No. A&E/BS/69440/2006, dated June 16, 2006

(hereinafter referred to as ‘SCN’) was issued to the noticee by Registered

Post Acknowledgement Due (RPAD) in terms of the provisions of Rule 4

of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by

Adjudicating Officer) Rules, 1995 requiring it to show cause as to why an

inquiry should not be held against the noticee and why penalty, if any,

should not be imposed on the noticee under Section 15HA of the SEBI

Act, 1992 for the alleged violation of the provisions of Section 12A of the

SEBI Act; Regulations 3, 4 and 6 of the SEBI PFUTP Regulations, 1995

and Regulations 3 and 4 of the SEBI PFUTP Regulations, 2003. In the

SCN, it was alleged that the noticee had cornered/ acquired shares in

various IPOs during the period 2003-2005 by financing various key

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operators. The said key operators made large number of applications in

IPOs in fictitious/ benami names in the category reserved for retail

investors. On allotment of shares in the IPOs, the said shares were

transferred to the key operators, who subsequently transferred the shares

to the noticee through off market deals.

5. The noticee vide letter dated July 5, 2006 sought extension of four to five

weeks for submitting reply to the SCN. Thereafter, vide reply dated

September 11, 2006, the noticee denied all the allegations made against

it and submitted the following:

a) The SCN does not specifically state the violations alleged to have

been committed by the noticee.

b) No relevant material, based on which the SCN is issued are provided

to the noticee.

c) The SCN also does not show how the shares were cornered and in

which IPOs.

d) The noticee is not aware of the key operators and how the shares in

IPOs were cornered.

6. Vide hearing notice dated January 15, 2007, the noticee was provided an

opportunity of personal hearing before the Adjudicating Officer on

February 1, 2007 at SEBI Bhavan, Mumbai. Along with the hearing notice

the noticee was provided with a copy of the relevant extract of the

investigation report in the matter and also directed it to furnish the

transcripts of all demat accounts of the noticee since January 1, 2003 and

the details of all the securities lying in the said demat accounts since April

27, 2006. However, the hearing scheduled on February 1, 2007 was

adjourned and the same was communicated to the noticee vide letter

dated January 31, 2007.

7. Subsequent to transfer of the adjudication proceedings to the

undersigned, vide office note dated October, 16, 2009, it was informed

that the noticee had filed an application seeking to settle the alleged

violations through a consent order and accordingly the proceedings were

kept in abeyance till disposal of the consent application.

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8. In the meanwhile, a detailed investigation report (IR) was received from

the Integrated Surveillance Department (ISD). And vide Supplementary

SCN dated April 28, 2011, the noticee was provided with the

supplementary material and the noticee was also clarified, the issues

raised by it in pre para 5,(hereinafter both SCN and the supplementary

SCN are collectively referred to as "SCNs"). The supplementary material

alleged that the noticee was identified as one of the financiers to Sugandh

Estates and Investments Private Limited (SEIPL) in the IPO of

Infrastructure Development Finance Company Limited (IDFC), Sasken

Communication Technologies Limited (Sasken) and FCS Software

Solutions Limited (FCS).

9. It was alleged that in the IPO of IDFC, the noticee provided finance of

`4,76,00,000 to SEIPL and received 2,65,734 shares of IDFC from SEIPL

before the listing and a refund of `3,85,65,044 was made to the noticee

by SEIPL.

10. Similarly in the IPO of Sasken, the noticee provided finance of

`1,70,00,000 to SEIPL subsequent to which 4700 shares were transferred

to the noticee and a refund of `69,00,000 was made to the noticee.

11. In the IPO of FCS, the noticee provided finance to the tune of

`7,87,50,000 subsequent to which 38,200 shares were transferred to the

noticee and a refund of `7,68,40,000 was made to the noticee. These

shares were sold by the noticee after their listing in the stock exchanges.

Thus it was alleged that by employing the design to corner the shares, the

noticee made an ill-gotten gain of `83,84,796.

12. Vide letter dated May 4, 2011, the noticee stated that it will make

modification in the consent application submitted by it in the light of the

supplementary material and requested to keep the adjudication

proceedings in abeyance till disposal of the same. However, vide office

note dated March 16, 2012, it was informed by the concerned department

that the terms of settlement proposed by the noticee in the revised

consent application submitted by it was not in concurrence with the

settlement terms discussed in the Internal Committee and accordingly, the

application was rejected.

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13. Since the consent application was rejected, vide hearing notice dated

February 10, 2012, the noticee was provided an opportunity of personal

hearing on February 24, 2012 at 11.00 AM at SEBI Bhavan, Mumbai. The

hearing notice also required the noticee to submit its reply to the

supplementary materials on or before February 20, 2012. Vide letter

dated March 5, 2012 the noticee stated that it had received the above

said hearing notice only on March 3, 2012 since the same was sent to the

noticee's old address. The noticee also stated that the consent application

filed by it on April 13, 2010 was pending and requested to cancel the

hearing notice. Thereafter, vide hearing notice dated April 17, 2012, the

noticee was provided a final opportunity of personal hearing before the

adjudicating officer on May 4, 2012 and further directed the noticee to

submit its reply to the supplementary material on or before April 30, 2012.

Further, the noticee was informed that as per records no consent

application is pending as the application submitted was rejected.

14. The noticee vide letter dated April 27, 2012 submitted that the Hon'ble

Securities Appellate Tribunal had vide order dated August 3, 2011 set

aside the order passed by the Whole Time Member of SEBI against the

noticee and remanded the matter for fresh disposal. It was requested that

since the present adjudication also has arisen from the same

transactions, the SCN and the supplementary material issued against the

noticee in the present proceedings are also not maintainable. It was

further submitted that documents forwarded to the noticee give different

set of facts and figures of profit gained as ill-gotten gains and are not

supported by evidence. The noticee further submitted that hearing notice

dated January 15, 2007 is missing in the reference in the hearing notice

dated April 17, 2012 and whether to treat the same as part of the current

adjudication proceedings or not.

15. Vide letter as well as email dated May 2, 2012, the noticee was informed

that the present adjudication is a separate proceedings and hence

advised it to attend the personal hearing scheduled on May 4, 2012. In

response, the noticee vide letter dated May 3, 2012 submitted that it is

willing to cooperate with the adjudication proceedings, provided, it be

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provided with copy of complete investigation report and documents

collected during investigation, opportunity of inspection of all such

documents, opportunity to place request for further documents and

reasonable time thereafter to submit the reply followed by opportunity of

personal hearing.

16. As requested by the noticee, it was decided to provide an opportunity of

inspection of documents to the noticee and the same was communicated

vide letter dated October 4, 2012. The request of the noticee for

inspection of documents was forwarded to ISD and the noticee was

advised to make further communication if any, with the said department.

The noticee was also advised to complete the inspection of documents

expeditiously and submit its reply within 15 days from the date of

completion of inspection. It was also communicated that the SCN and the

supplementary material already provided to the noticee along with the

extract of investigation report sufficiently explain the allegations made

against it. Since, no reply was received from the noticee, vide office note

dated April 16, 2013, ISD was requested to provide status of the

inspection. In response to the said office note, vide office note dated May

15, 2013, ISD informed that inspection of documents was not carried out

by the noticee. Subsequently, vide letter dated July 9, 2013 the noticee

was informed that it has not availed the opportunity of inspection till date

and was advised to submit its reply to the SCNs and the supplementary

material issued to it on or before July 19, 2013. It was communicated that

on failure to submit reply within the specified time, it shall be presumed

that the noticee has no reply to submit in the matter and the matter shall

be proceeded with based on the material available on record. .

17. In response to the said letter, the noticee vide letter dated July 16, 2013

submitted that it was not able to conduct the inspection of documents due

to some unavoidable circumstances, and requested for another

opportunity for inspection of documents. The noticee further reiterated the

submissions made by it in its earlier correspondence such as not

providing it the documents to substantiate the allegations made against it.

18. The SCNs and the supplementary material provided to the noticee along

with the relevant extract of the investigation report explains the allegations

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made against the noticee. Therefore, having been provided with the

documents which were relied upon in the SCNs pertaining to the noticee,

it was in a sufficient position to reply to the allegations. Further as stated

in pre-paras, opportunity of inspection of documents was already granted

to the noticee vide letter dated October 4, 2012. However, no inspection

was carried out by the noticee inspite of lapse of more than 9 months.

Only after the reminder letter dated July 09, 2013, the noticee submitted

that it could not carry out the inspection of documents due to unavoidable

circumstances and requested for another opportunity, however no

justifiable grounds were provided by the noticee for not carrying out the

inspection for such a long period. From the various correspondences

received from the noticee, it is seen that the noticee did not make any

detailed reply on merit of the case but only kept requesting for the

inspection of documents. But even after the receipt of letter dated October

04, 2012 advising the noticee to undertake the inspection, no such

request was made by the noticee till the receipt of our letter dated July 9,

2013. Further, it is also observed that after the receipt of the letter dated

July 09, 2013, the noticee neither made any request to the concerned

department i.e. ISD for the inspection nor it made any attempt to conduct

the inspection in coordination with ISD. Therefore, the request for

inspection of the noticee can be seen as aimed at delaying the

proceedings. In view of the above, it can be noted that the Principles of

Natural Justice have been complied with and therefore I am compelled to

pass this order based on the materials available on record.

CONSIDERATION OF EVIDENCE AND FINDINGS

19. Before going into the merits of the case, the preliminary issues raised by

the noticee shall be dealt with. It is noted that the noticee, time and again

had requested for copy of the complete Inspection Report and documents

collected during the course of investigation, opportunity of inspection of all

documents collected during the course of inspections, opportunity to place

request for further documents and reasonable time thereafter to furnish

written submission followed by the opportunity of personal hearing.

However, it may be added that the noticee was provided with the

supplementary material relied upon for issuing the supplementary SCN

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dated April 28, 2011. Further, despite providing it opportunity of

inspection, the noticee has failed to avail the inspection till date.

20. The IR deals with other entities and other scrips as well which are not

relevant to the noticee. Therefore, the relevant extract relating to the entity

was provided. Further, it also noted that the noticee was provided with

three opportunities of personal hearing. The noticee neither attended any

of the personal hearings granted to it nor it filed any detailed reply on

merit of the case.

21. Further, as stated in pre-para 14, the noticee vide its letter dated April 27,

2012 had contended that the SCNs give different set of facts and figures

of profit gained as ill-gotten gains. In this regard, it may be noted that

along with the SCN dated June 16,2006, the noticee was provided with

the provisional ill gotten gains as the investigation was still continuing.

However, vide the supplementary material forwarded along with the

Supplementary SCN dated April 28, 2011, the noticee was provided with

the final set of ill gotten gains.

22. Further, with regard to the noticee's observation that personal hearing

notice dated January 15, 2007 was not quoted under the heading

reference, it may be added that the same was erroneously omitted.

However, the noticee was in receipt of the said personal hearing notice.

Further, the said hearing was also rescheduled on February 01, 2007 and

the noticee was intimated of the same.

23. The allegation against the noticee is that it had financed SEIPL in the

IPOs of IDFC, Sasken and FCS for the purpose of cornering the shares

reserved for retail investors in these IPOs. The noticee had not replied on

the merits of the SCN and the supplementary material served on it, except

that it vaguely denied the allegations made against it vide letter dated

September 11, 2006. Further, the noticee failed to undertake the

inspection granted to it till date i.e. even after a lapse of an year and a

half, without furnishing any justifiable grounds.

24. In this regard, it may be noted that while deciding the appeal filed by the

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present noticee against the 11B order passed the Whole Time Member of

SEBI, arising out of same set of facts, Shri. P.K.Malhotra along with Shri

SSN Moorthy, the then Members of Hon'ble SAT in their separate but

majority opinion referred to Pricewaterhouse v. SEBI (SAT Appeal No. 8

of 2011) and observed that :

“In our this view, we are supported by the judgment of the Supreme

Court in the case of Natwar Singh vs Director of Enforcement (2010) 13

SCC 255 where the Apex Court has observed that even the principles of

natural justice do not require supply of documents upon which no reliance

has been placed by the authority to set the law into motion. Supply of

relied on documents based on which the law has been set into motion

would meet the requirements of the principles of natural justice... This is

not so here. In the facts and circumstances of the present case, we are of

the considered view that the appellants are not entitled to the material

collected during the course of investigation by the Board which has not

been relied upon in the show cause notice. This prayer of the appellants

is, therefore, rejected.” (emphasis supplied).

25. Therefore, based on the above findings of Hon'ble SAT, it can be

concluded that in a civil proceedings, it would be sufficient to provide the

noticee with only those documents which are sufficient to explain the

allegations made against it and those which are relied on by the authority

to reach a conclusion. In the present case, the noticee was provided with

all the relevant material relied upon in the SCNs. Further, the noticee was

given sufficient time of 9 months to inspect the documents. The noticee

was categorically informed vide letter dated October 04, 2012 that for the

purpose of inspection, it needs to communicate with ISD. However, till

date the noticee has not communicated with ISD for undertaking the

inspection. Thus, it can be concluded that the noticee had no inclination to

co-operate with the current adjudication proceedings. With respect to the

allegations against the noticee, the following can be concluded:

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Dealings in the IPO of IDFC Limited

26. The IPO of IDFC opened on July 15, 2005 and closed on July 22, 2005.

The shares were listed on August 12, 2005. The issue price was ` 34 per

share. In the IPO each applicant who applied for 1000 shares for `47,600

received allotment of 266 shares. It was alleged on the basis of IR that the

noticee provided finance of ` 4,76,00,000 to SEIPL, vide cheques

mentioned in the following table, from bank account of noticee with HDFC

bank bearing account number 00492320001329.

Date Cheque No. Amount (`) 21.07.05 391214 2,00,00,000 26.07.05 391211 2,00,00,000 26.07.05 391212 76,00,000

Total 4,76,00,000

27. It was alleged that the said amount given to SEIPL corresponds to

application money for 1,000 applications at the rate of ` 47,600/- (1000

applications x ` 47,600 per application = ` 4,76,00,000). Each applicant

who applied for ` 47,600/- per 1000 shares received allotment of 266

shares. Therefore allotment for 1,000 applicants comes out to 2,66,000

shares.

28. The IR observed that the noticee received 2,65,468 shares from SEIPL

on August 11,2005 (which is one day before the date of listing i.e. August

12, 2005), 266 shares from SEIPL on September 02, 2005. The

corresponding allotment money in respect of these shares works out to `

90,34,956 (2,65,734 shares x 34, being issue price). Thus, the total refund

money after adjustment of allotment money in respect of 2,65,734 shares

works out to be ` 3,85,65,044 (` 4,76,00,000 – ` 90,34,956 (allotment

money for 2,65,734 shares)). It is observed from the bank account

statement of the noticee (Account number 00492320001329 held with

HDFC Bank) that on 10.08.2005, the noticee received money in its

account in the following manner :

Sr. No. Cheque No. Date Amount (in `)

1 266106 10.08.2005 1,73,00,000

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2 266109 10.08.2005 1,11,00,000

3 266132 10.08.2005 1,65,044

TOTAL 2,85,65,044

Dealings in the IPOs of Sasken and FCS

29. It was alleged in the IR that similar modus operandi was adopted by the

noticee in the IPOs of Sasken and FCS. The flow of funds precisely match

with the application for shares and refunds received. The shares received

by the key operator (SEIPL) were transferred to the noticee, thus

indicating the pre-arrangement with the key operator.

Name of IPO Name

of Key operator

Funds provided to SEIPL

Details of Cheques / ledger entries

No of Shares Given to Financier (Amadhi)

Value of Shares (no of shares * issue price. )

Refunds received from SEIPL

Details of Refund Cheques / ledger entries

Sasken (11.08.05 to 17.08.05)

SEIPL

1,70,00,000

Ch. no 391242 dt. 31.08.05

4700

Nil

69,00,000 68,50,000 32,50,000

ch no 417616 dt. 19.09.05 ch no 417617 dt. 19.09.05 ch no 26628 dt. 22.09.05

Total 1,70,00,000

1,70,00,000

FCS (22.08.05 to 26.08.05)

SEIPL

2,25,00,000 2,25,00,000 2,25,00,000 1,12,50,000

ch no 391269 dt. 31.08.05 ch no 391270 dt. 31.08.05 ch no 391271 dt. 31.08.05 ch no 391273 dt. 31.08.05

38,200

19,10,000

2,00,00,000 5,60,00,000 1,40,000 7,00,000

ch no 275576 dt. 23.09.05 ch no 275581 dt. 26.09.05 ch no 275591 dt. 28.09.05 ch no 275587 dt. 28.09.05

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Total 7,87,50,000 38,200

19,10,000 7,68,40,000

30. Based on the IR, it was alleged that by cornering the shares by the Key

Operator and then transferring the same to the noticee, as mentioned

above and subsequently selling the same in the market or through off

market, the noticee had made a profit as described in the table below.

Name of IPO

No of shares received from SEIPL

Date of receipt

Purchase price (1)

Date of sale

Market / Off market

No of shares sold (2)

Sale price (3)

Diff between sale price and purchase price (3) - (1)

Actual Profit (2) * (3 – 1)

IDFC

2,65,468 266

09.08.05 31.08.05

34 16.08.05

Off Market *

2,66,000 34* 0 0

Sasken 4,700 05.09.05

0 12.09.05 09.09.05

Market Market

700 4000

434 463

434 463

3,03,800 18,52,000

FCS 10,800 27,400

19.09.05 21.09.05

50 23.09.05

Market 8200 15000 15000

218.78 211.5 211.5

168.78 161.5 161.5

13,83,996 24,22,500 24,22,500

Total 83,84,796 Off market sale to one Shri Jitendra Lalawani and corresponding sale consideration of Rs

90,44,000 (2,66,000 shares x Rs 34) received from Jitendra Lalwani vide cheque no 723635 on 16.08.05.

31. The noticee did not submit any reply on merit to the allegations made in

SCNs inspite of providing various opportunities and reminders for doing

so as discussed in pre paras. Since with respect to the flow of funds and

the transfer of securities as mentioned above, the noticee has not

submitted any proof/ documents, and in the absence of any evidence

establishing the contrary, the present adjudication proceedings can be

concluded on the basis of the material available on record.

32. It is observed that the noticee provided finance to SEIPL around or

immediately after the closure of the respective IPO. The noticee was

observed to have received 2,65,734 shares of IDFC, 4,700 shares of

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Sasken and 38,200 shares of FCS from SEIPL subsequent to allotment of

shares in the IPOs and in majority of the cases before their listing on the

stock exchanges. Further, the amount corresponding to the difference

between the finance provided to SEIPL and the cost of the shares

transferred by SEIPL to the noticee was observed to have been received

by the noticee in its bank account. Chronology of these events leads to a

logical conclusion that the noticee had financed SEIPL so that SEIPL can

apply in the IPOs through benami/ fictitious demat account holders in the

category of RII and on allotment, such benami/ fictitious entities

transferred the shares to SEIPL, which in turn was transferred to the

noticee.

33. The shares which were cornered by the noticee as mentioned above,

were reserved for the retail individual investors. By the nefarious design

adopted by the noticee in cornering the shares, the genuine retail

individual investors were deprived of opportunity of getting allotment in the

IPOs. This amounts to manipulation and defrauding in connection with

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

recognised stock exchange.

34. In light of all the above facts and circumstances of the case, I am of the

opinion that the Noticee had indulged in fraudulent and manipulative

activities and employed deceptive devices and scheme to corner the

shares reserved for Retail Individual Investors in the IPOs of IDFC

Limited, Sasken Communication Technologies Limited and FCS Software

Solutions Limited. I, therefore, conclude that the Noticee has violated the

provisions of section 12A (a), (b) and (c) of the SEBI Act and Regulations

3 (a), (b), (c) and (d) and Regulation 4(1) of PFUTP Regulations, 2003. It

is further observed that since the violations alleged against the noticee

were committed during the year 2005 and the PFUTP Regulations, 2003

came into force with effect from July 17, 2003. Thus, the PFUTP

Regulations, 1995 are not applicable on the current set of facts. The text

of section 12A (a), (b) and (c) of the Act and Regulations 3 (a), (b), (c) and

(d) and Regulation 4(1) of PFUTP Regulations, 2003 are reproduced

below:

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SEBI ACT

“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 recognised 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 a recognised stock exchange;

(c) engage in any act, practice, course of business which operates or

would operate 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;

PFUTP REGULATIONS, 2003

Prohibition of certain dealings in securities

3. 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 thereunder;

(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

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contravention of the provisions of the Act or the rules and the regulations made thereunder.

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.

35. The above violations attract penalty under Section 15HA of the SEBI Act.

The text of the said provision is reproduced below:

Penalty for fraudulent and unfair trade practices.

15HA. 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.”

36. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of

the Rules require that while adjudging the quantum of penalty, 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

37. In this regard it is noted that the supplementary SCN dated April 28, 2011

and the material provided with it quantified the illegal profit made by the

noticee as � 83,84,796/-.

38. Having considered the facts and circumstances of the case and after

taking into account the factors under section 15J of the SEBI Act, 1992, I

hereby impose a penalty of �2,50,00,000 (Rupees Two Crores Fifty Lakhs

only) on Amadhi Investments Limited under Section 15 HA of the Securities

and Exchange Board of India Act, 1992, which is appropriate in the facts

and circumstances of the case.

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ORDER

39. In exercise of the powers conferred under Section 15 I of the Securities

and Exchange Board of India Act, 1992, and Rule 5 of Securities and

Exchange Board of India (Procedure for Holding Inquiry and Imposing

Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty

of �2,50,00,000 (Rupees Two Crores Fifty Lakhs only) on Amadhi

Investments Limited (PAN No. AAACA7300E) in terms of the provisions of

Section 15HA of the Securities and Exchange Board of India Act, 1992 for

violation of the provisions of section 12A (a), (b) and (c) of the SEBI Act

and Regulations 3 (a), (b), (c) and (d) and Regulation 4(1) of SEBI

(Prohibition of Fraudulent and Unfair Trade Practices relating to the

Securities Market), Regulations, 2003. In the facts and circumstances of

the case, I am of the view that the said penalty commensurate with the

violations committed by the noticee.

40. The penalty shall be paid by way of Demand Draft drawn 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 shall be

forwarded to General Manager, ISD, Securities and Exchange Board of

India, Plot No. C4-A, ‘G’ Block, Bandra Kurla Complex, Bandra (E),

Mumbai – 400 051.

41. In terms of the provisions of Rule 6 of the Securities and Exchange Board

of India (Procedure for Holding Inquiry and Imposing Penalties by

Adjudicating Officer) Rules 1995, copy of this order is being sent to

Amadhi Investments Limited and also to the Securities and Exchange

Board of India, Mumbai.

Place: Mumbai D. RAVI KUMAR Date: April 28, 2014 CHIEF GENERAL MANAGER &

ADJUDICATING OFFICER

ahmadi ao order

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