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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited

Page 1 of 27 August 27, 2014


BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. JJ/AK/AO-113/2014]
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
Praveen Poddar
(PAN No. AAVPP5645D)
In the matter of Gangotri Textiles Limited

FACTS OF THE CASE IN BRIEF

1. Securities and Exchange Board of India (hereinafter referred to as SEBI)
conducted investigation in respect of buying, selling and dealing in the
shares of Gangotri Textiles Limited (hereafter referred to as
Gangotri/Company/scrip), during the period from April 07, 2006 to
May 31, 2006 (hereinafter referred to as Investigation Period). The
shares of Gangotri are listed on the BSE Limited (hereinafter referred to as
BSE), National Stock Exchange (hereinafter referred to as NSE),
Calcutta Stock Exchange, Madras Stock Exchange and Coimbatore Stock
Exchange, but during the investigation period the scrip was traded only at
NSE and BSE.

Price-Volume Analysis:
2. Before Investigation Period (January 2006 to April 6, 2006): It was observed
that the scrip of Gangotri was not listed in NSE during January 2006 to April
6, 2006 and it was only traded in BSE. The highest price during this period
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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was ` 52.25 (intra day high on February 6, 2006) and lowest price during
this period was ` 40.55 (intra day low on March 28, 2006). The average
daily traded quantity during this period was for 77,036 shares.

3. During Investigation Period (April 7, 2006 to May 31, 2006): The scrip of
Gangotri was traded in both NSE & BSE. Details of price volume data at
BSE & NSE for the period April 07, 2006 to May 31, 2006 are as follows:-


It was observed that during investigation period the price of the scrip
went up by 33.24% in BSE and 26.88% in NSE while the Sensex
recorded a decrease of 12.21% (from 11845.13 on April 07, 2006 to
10398.61 on May 31, 2006) and Nifty recorded a decrease of 12.89%
(from 3525.6 on April 07, 2006 to 3071.05 on May 31, 2006).
The price of the scrip mainly increased from April 20, 2006 to May 05,
2006, i.e. during these 12 trading days, the price of the scrip has
increased from ` 41.2 / 43 (NSE/BSE) on April 19, 2006 to
`71.05/70.95 (NSE/BSE) on May 05, 2006 a rise of 72.45%/65%
(NSE/BSE) along with volume spurt.
As on March 06, 2013 the price of the scrip at NSE and BSE was
`2.55 and `2.24 respectively.

4. After Investigation Period (June 2006 to December 2006): The scrip of
Gangotri was opened at `45.95 / 45.2 (NSE/BSE) on June 1, 2006 and
closed at `27.35 / 26.7 (NSE/BSE) on December 29, 2006. The highest
price during this period was `46.25 in (intra day high on June 2, 2006) in
NSE and `46.65 (intra day high on June 5, 2006) in BSE. The lowest price
Exchange Open High Low Close Volume Average
Daily
Volume
BSE 53.25
April 07, 2006
70.95
May 05, 2006
43.00
April 19, 2006
44.35
May 31, 2006
8941975 241675
NSE 56.00
April 07, 2006
71.05
May 05, 2006
41.25
April 19, 2006
45.40
May 31, 2006
6816750 184236
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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during this period was `24 (intra day low on December 13, 2006) in both
NSE and BSE. The average daily traded quantity during this period was for
34,080 / 43,717 (NSE/BSE) shares.

5. The role of the entities who had traded in the scrip of Gangotri was
scrutinized. It was observed during the investigation period that certain
entities collectively referred to as Vishvas Group namely, Sunita Gupta
(hereinafter referred to as "Sunita"), Purshottam Khandelwal (hereinafter
referred to as "Purshottam") Cosmo Corporate Services Limited
(hereinafter referred to as "Cosmo"), Ishita Finstock Limited (hereinafter
referred to as "Ishita"), Master Finlease Limited (hereinafter referred to as
"Master"), Avisha Credit capital Limited (hereinafter referred to as
"Avisha"), Vishvas Projects Limited (hereinafter referred to as "VPL"),
Praveen Poddar (hereinafter referred to as "Praveen"), Quantum Global
Securities and Leasing Company Limited (hereinafter referred to as
Quantum), Mefcom Securities Limited (hereinafter referred to as
Mefcom ), ISF Securities Ltd (hereinafter referred to as ISF), Vishvas
Securities Limited (hereinafter referred to as VSL), Anupama
Communications Private Limited (hereinafter referred to as Anupama)
and SIC Stock Brokers and Services Private Limited (hereinafter referred to
as SIC) had allegedly executed synchronized trades, circular trades and
reversal trades among themselves and traded in significant variation to the
Last Traded Price (LTP) in the shares of Gangotri.

6. It was alleged that one of the entity, Mr. Praveen Poddar (hereinafter
referred to as "Praveen"/"Noticee") had violated the provisions of section
12A(a), 12A(b), 12A(c) of Securities and Exchange Board of India Act, 1992
(hereinafter referred to as "SEBI Act") and Regulations 3(a), 3(b), 3(c),
3(d), 4(1), 4(2)(a) and 4(2)(e) of SEBI (Prohibition of Fraudulent and Unfair
Trade Practices relating to Securities Markets) Regulations, 2003
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(hereinafter referred to as PFUTP Regulations) and therefore, liable for
monetary penalty under section 15HA of SEBI Act.

APPOINTMENT OF ADJUDICATING OFFICER

7. Shri Piyoosh Gupta was appointed as Adjudicating Officer, vide order dated
August 08, 2013 under section 15-I of Securities and Exchange Board of
India Act, 1992 (hereinafter referred to as SEBI Act) and rule 3 of SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules, 1995 (hereinafter referred to as Rules) to enquire into and
adjudge under section 15HA of the SEBI Act for the alleged violations of
provisions of section 12A(a), 12A(b), 12A(c) of SEBI Act and Regulations
3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a) and 4(2)(e) of PFUTP Regulations by
Praveen. Consequent, to the transfer of Shri Piyoosh Gupta, the
undersigned was appointed as Adjudicating Officer vide order dated
November 08, 2013 to enquire and adjudge the matter
SHOW CAUSE NOTICE, HEARING AND REPLY
8. Show Cause Notice reference no. EAD/JJ/AK/32192/2013 dated
December 12, 2013 (hereinafter referred to as SCN) was issued to the
Noticee under rule 4(1) of the Rules to show cause as to why an inquiry
should not be held against the Noticee and penalty be not imposed under
section 15HA of SEBI Act for the alleged violations specified in the said
SCN. The said SCN was sent at the last known address of the Noticee i.e.
at "308 Skipper Corner, 88 Nehru Place, New Delhi - 110019" which was
returned undelivered. Thereafter, as per rule 7(c) of the Rules the said SCN
dated December 12, 2013 was affixed at the last known address of the
Noticee on March 07, 2014 (affixture report is present on record). Form the
documents available on record, it is observed that the Noticee had not
submitted any reply to the SCN.

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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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9. In the interest of natural justice and in order to conduct an inquiry as per
rule 4(3) of the Rules, the Noticee was granted an opportunity of personal
hearing on August 26, 2014 at SEBI, Head Office, Mumbai, vide notice
dated August 07, 2014. The said Notice of hearing dated August 07, 2014
was affixed at the last known address of the Noticee on August 13, 2014
(affixture report is present on record). However, it is observed that the
Noticee have neither submitted any reply nor did it avail the opportunity of
personal hearing.

10. In view of the aforesaid steps taken, I am convinced that opportunities have
been given to the Noticee to explain its case. As per rule 4(7) of the Rules,
if any person fails, neglects or refuses to appear as required by sub-rule (3)
before the Adjudicating Officer, he may proceed with the inquiry in the
absence of such person after recording the reasons therefor. Despite
having been given the opportunity of being heard, the Noticee had failed to
avail of the same. I am, therefore, compelled to proceed with the matter ex-
parte based on the material available on record.


CONSIDERATION OF ISSUES AND FINDINGS

11. After perusal of the material available on record, the issues that arise for
consideration in the present case are as under:
A. Whether the Noticee have violated the provisions of section 12A(a),
12A(b), 12A(c) of SEBI Act and Regulations 3(a), 3(b), 3(c), 3(d), 4(1),
4(2)(a) and 4(2)(e) of PFUTP Regulations?
B. Whether the Noticee is liable for monetary penalty under section 15HA
of the SEBI Act ?
C. What quantum of monetary penalty should be imposed on the Noticee
taking into consideration the factors mentioned in Section 15J of SEBI
Act ?
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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FINDINGS

12. On perusal of the material available on record and giving regard to the facts
and circumstances of the case, I record my findings hereunder:

ISSUE 1: Whether the Noticee have violated the provisions of section
12A(a), 12A(b), 12A(c) of SEBI Act and Regulations 3(a), 3(b),
3(c), 3(d), 4(1), 4(2)(a) and 4(2)(e) of PFUTP Regulations?


13. Before moving forward, it will be appropriate to refer to the relevant
provisions of SEBI Act and PFUTP Regulations, which read as under:

SEBI Act

Prohibition of manipulative and deceptive devices, insider trading and
substantial acquisition of securities or control.
Section 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 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

Regulation 3: - Prohibition of certain dealings in securities
3. No person shall directly or indirectly
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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(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 contravention of the provisions of the
Act or the rules and the regulations made thereunder.

Regulation 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.
(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 appearance of
trading in the securities market;
(b) ..
(c) ..
(d) ..;
(e) any act or omission amounting to manipulation of the price of a
security;


Connections between Vishvas Group entities:


14. From the documents available on records, following details were observed
with respect to the connection between Vishvas Group entities:

Sr.
No
Entity Name
(Brokers Name)
Connection with other entities of
Group
Traded Qty. (During
Investigation Period)
1 Master Finlease Ltd.
(Integrated Master
securities Pvt. Ltd.)
Same address as Avisha Credit
Capital & Vishvas Projects Ltd.
(Mefcom Agro. Industries Ltd.)
Share holder in Vishvas
securities Ltd. (Unlisted
Company - 19.24%
shareholding as on 30.09.2006)
BSE: Buy-38000
Sell-18386
NSE: Buy-20500
Sell-111400
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Off market transfers with
Vishvas Securities limited.
2 Purshottam Khandelwal
(SIC Stock and Services
Pvt. Ltd.)
Off Market Transfers from
Anupama Communications Pvt.
Ltd.
Entered into Synchronized
trades with entities at sr. no. 8,
9.
BSE: Buy 2927835
Sell 2882486
NSE:-Buy-NIL
Sell-NIL
3 Anupama Communications
Pvt. Ltd.
Transferred shares off market
to Purshottam Khandewal.
Directors of Anupama
Communications Pvt. Ltd. (
Rakesh Mishra, Ram dutt joshi)
are also directors in Cosmo
corporate services Ltd.
Nil Trading at BSE &
NSE
4 Cosmo Corporate services
limited.
(Integrated Master
securities Ltd.)
Entered into Off Market
Transfers with Master Finlease
Ltd.
Entered into Synchronized
trades with entities at sr. no.
6,7,8,9.
BSE:Buy-445643
Sell-320630
NSE:Buy-401520
Sell-471184
5 ISF Securities limited
(BSE:-Sam Global
Securities Ltd.
NSE:-ISF Securities Ltd.)
Off Market Transfers from
Master Finlease Ltd.
Entered into Synchronized
trades with entities at sr. no.
6,7,8,9.
BSE:Buy-389748
Sell-338795
NSE:Buy-453396
Sell-368574
6 Quantum Global Securities
and leasing company Ltd.
Entered into Synchronized
trades with entities at sr. no. 4,
5, 7, 10, and 12.
BSE: Buy-NIL
Sell-NIL
NSE:Buy-302095
Sell-286835
7 Ishita Finstock Ltd.
(Vishvas securities Ltd.)
Entered into large no. of
Synchronized trades with
entities at sr. no. 1, 4, 5, 6, and
10.
BSE: Buy-NIL
Sell-NIL
NSE:Buy1953803
Sell-1569204
8 Praveen Poddar
(TCP Stock Brokers Ltd)
Entered into large no. of
Synchronized trades with
entities at sr. no. 2, 4, 5, 9 and
10.
BSE:Buy-460990
Sell-460990
NSE:-Buy-NIL
Sell-NIL
9 Sunita Gupta
(Parasram Holdings)
Entered into large no. of
Synchronized trades with
entities at sr. no. 2, 4, 5, 8 and
10.
BSE:Buy-342246
Sell-342246
NSE:-Buy-NIL
Sell-NIL
10 Mefcom Securities limited
(Mefcom Securities limited)
Same address, same e-mail Id,
same director (Vijay Mehta) as
of Mefcom infrastructure project
Limited. And director (vijay
mehta) belongs to promoter
group of Vishvas Projects Ltd.
(Formerly Known as Mefcom
agro Industries Ltd.)
BSE:Buy-443942
Sell-348370
NSE:Buy-610646
Sell-667122
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11 Avisha Credit capital Ltd.
(Shriram Insight Share
Brokers Ltd.)
Holder of 25% stake in Vishvas
Sec Ltd. (Unlisted Co.) 337380
Shares as on 30.09.2006.
Same address as Vishvas
projects Ltd. (mefcom Agro
Industries Ltd.) & Master
Finlease Ltd.
Directors of Avisha Credit
Capital Ltd.( Shubha Jhindal,
Vijay Jhindal, & Rakesh
Agarwal) are also directors in
Master Finlease Ltd.
BSE: Buy-50000
Sell-NIL
NSE:-Buy-NIL
Sell-NIL
12 Vishvas Securities Ltd.
(Vishvas Securities Ltd.)
Old Address of Mefcom Agro
Industries Limited same as
address of Vishvas Securities
Ltd. i.e. 912, Kailash Building,
Kasturba Gandhi Marg, New
Delhi".
Off market transfer to Master
Finlease Ltd., SIC Stock and
Services Pvt. Ltd. (8/7/2006,
50000 shares) and Avisha
Credit Capital Ltd.
Avisha Credit capital Ltd. and
Master Finlease Ltd. were the
shareholders of Vishvas
Securities Ltd. as on
30.9.2006.(Unlisted Co.)
Atul Joshi one of the director of
Vishvas Securities Ltd. is also
director in Mefcom Agro
Industries Ltd.
BSE: Buy-NIL
Sell-NIL
NSE:Buy-134460
Sell-118661
13 Vishvas Projects limited
(Formerly Known as
Mefcom Agro Industries
Ltd.
(Mefcom Securities Ltd)
Same address as Avisha Credit
Capital & Master Finlease.
BSE:Buy-100000
Sell-NIL
NSE:-Buy-NIL
Sell-NIL
14 SIC Stocks and Services
Pvt. Ltd.
Received 50,000 shares from
Vishvas Securities Ltd. through
off market.
Holding 10.7% shares in
Mefcom Agro Industries Ltd.
(listed company) as on
20/9/2006.
Transfer of substantial amount
to avisha credit capital Limited
as per bank statements.
NIL Trading at BSE &
NSE


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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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From the above table I find the following:

The members of Vishvas Group namely, Purshottam, Ishita, Cosmo,
Praveen, Sunita, Master, Quantum, VPL, Avisha, Mefcom, ISF, VSL,
Anupama and SIC are connected to each other.
Noticee had traded through broker TCP Stock Brokers Limited
(hereinafter referred to as "TCP") in the scrip of Gangotri at BSE.

15. Traded quantity of Vishvas Group at BSE and NSE (During Investigation
Period)

From the above table I find the following:

Nine members of Vishvas Group namely, Master, Purshottam,
Cosmo, ISF, Praveen, Sunita, Mefcom, Avisha and VPL had traded
in the scrip of Gangotri at BSE.
Sr.
No.
Members of
Vishvas Group
Traded quantity (During Investigation Period)
BSE NSE
Buy Sell Buy Sell
1 Master
38000 18386 20500 111400
2 Purshottam
2927835 2882486 0 0
3 Anupama
0 0 0 0
4 Cosmo
445643 320630 401520 471184
5 ISF
389748 338795 453396 368574
6 Quantum
0 0 302095 286835
7 Ishita
0 0 1953803 1569204
8 Praveen
460990 460990 0 0
9 Sunita
342246 342246 0 0
10 Mefcom
443942 348370 610646 667122
11 Avisha
50000 0 0 0
12 VSL
0 0 134460 118661
13 VPL
100000 0 0 0
14 SIC
0 0 0 0

Total
5198404 4711903 3876420 3592980
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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Seven members of Vishvas Group namely, Master, Cosmo, ISF,
Quantum, Ishita, Mefcom and VSL had traded in the scrip of
Gangotri at NSE.
Total buy and sell quantity of the members of Vishvas Group at BSE
is 51,98,404 shares and 47,11,903 shares respectively.
Total buy and sell quantity of the members of Vishvas Group at NSE
is 38,76,420 shares and 35,92,980 shares respectively.
Noticee had bought 4,60,990 shares of Gangotri and sold 4,60,990
shares of Gangotri i.e. net position of the Noticee after investigation
period was zero.

TRADE CONCENTRATION
AT BSE:

16. From the trade & order log and documents available on record, I find that
total traded volume of the scrip of Gangotri during investigation period was
89,41,975 shares in BSE. During the investigation period, the trading details
of top 10 trading brokers were analyzed and found that they had contributed
68.5% (61,29,624 shares) and 61.8% (55,24,429 shares) of the gross buy
and gross sell respectively. Further, it is observed that Noticee's broker
TCP appeared in top 10 trading brokers by gross buy and gross sell.
Noticee's broker TCP had contributed 4,82,190 shares to gross buy and
4,81,890 shares to gross sell of total market quantity.

17. During investigation period, the trading details of top 10 trading clients were
analyzed and found that they had contributed 62.47% (55,86,236 shares)
and 57.82% (51,69,927 shares) of the gross buy and gross sell
respectively. Further, it is observed out of top 10 trading clients, seven
members of Vishvas Group namely, Purshottam, Praveen, Cosmo,
Mefcom, ISF, Sunita and VPL were appeared in gross buy with total
contribution of 57.1% (51,10,404 shares) of total traded quantity and six
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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members of Vishvas Group namely, Purshottam, Praveen, Mefcom, Sunita,
ISF and Cosmo were appeared at gross sell with a total contribution of
52.5% (46,93,517 shares) of total traded quantity. Noticee had contributed
4,60,990 shares to gross buy and 4,60,990 shares to gross sell of total
market quantity.

18. During investigation period, the trading details of top 10 clients with net buy
and net sell position were also analyzed and found that 6 members of
Vishvas Group namely, Cosmo, VPL, Mefcom, ISF, Avisha and Purshottam
are appearing at net buy position. The net buy position of the Noticee was
zero.

SYNCHRONIZED TRADES
AT BSE

19. Upon perusal of data, trade & order log and documents available on record,
I find that during investigation period, 24,154 trades were executed for a
total traded quantity of 89,41,975 shares at BSE. Out of these, 430 trades
for 15,60,914 shares (17.45% of the total traded quantity) were
synchronized trades i.e. the difference between buy order time and sell
order time was less than 60 seconds and there was no difference between
buy order rate and sell order rate as well as there was no difference
between buy order quantity and sell order quantity.

20. It is observed that there were 34 trading days (out of total 37 trading days
during the investigation period) when synchronized trading was being done
at BSE, out of which members of Vishvas Group appeared in 26 trading
days. Out of these 26 days, on 25 days, the matching of synchronized
trades of members of Vishvas Group with total market synchronized trades
was more than 50% and on 12 days, the contribution of volumes through
synchronized trades by the members of Vishvas Group was more than 15%
to the total market volume. For e.g. on May 30, 2006 the total day traded
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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volume was 31,756 shares out of which 19,416 shares (61.14% shares)
were synchronized by the members Vishvas Group.

21. It is observed that the eight members of Vishvas Group namely,
Purshottam, Cosmo, Sunita, Praveen, Mefcom, ISF, Avisha and VPL,
indulged in 210 synchronized trades for 12,26,309 shares (78.56% of total
synchronized quantity). The details of synchronized trade amongst the
member of Vishvas Group are as under:

Particulars Seller Name
Buyer Name Purshottam Praveen Sunita Mefcom Cosmo Avisha VPL ISF Total
Praveen 189069 00 14774 29621 36377 00 00 00 269841
Mefcom 123830 16999 15455 00 6500 00 00 32500 195284
ISF 99968 19990 5500 17146 29019 00 00 00 171623
Sunita 47858 14240 00 38951 24367 00 00 51397 176813
Cosmo 101825 15900 23811 21700 00 00 00 7000 170236
Purshottam 1 46841 14665 37040 14188 00 00 39820 152555
Avisha 49999 00 00 00 00 00 00 00 49999
VPL 23958 00 00 00 10000 00 00 6000 39958
Total 636508 113970 74205 144458 120451 00 00 136717 1226309

From the above table, it is observed that:
Out of total shares bought (4,60,990 shares) by the Noticee during
investigation period, 2,69,841 shares were synchronized with the
other members of the Vishvas Group i.e. Purshottam, Sunita,
Mefcom and Cosmo.
Out of total shares sold (4,60,990 shares) by the Noticee during
investigation period, 1,13,970 shares were synchronized with the
other members of the Vishvas Group i.e. Mefcom, ISF, Sunita,
Cosmo and Purshottam.
One of the instances of the synchronized trade and reversal trade by
the Noticee with other members of Vishvas Group is that on May 23,
2006, Noticee bought 5,000 shares of Gangotri @ ` 49.9 from
Purshottam at 10:33:32. The buy order was placed by Noticee at
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10:33:31 @ `49.9 for 5,000 shares and the sell order was placed by
Purshottam at 10:33:26 @ ` 49.9 for 5,000 shares. The order time
difference was 5 seconds. Noticee again sold 5,000 Gangotri shares
back to Purshottam @ ` 50.65 at 10:51:40 i.e. the trade was
reversed within 20 minutes. In the reverse trade the buy order was
placed by Purshottam at 10:51:39 @ ` 50.65 for 5,000 shares and
the sell order was placed by Noticee at 10:51:34 @ ` 50.65 for 5,000
shares. The order time difference was 5 seconds. During
investigation period, similar trading patterns of synchronized trading
were also observed between Noticee and other members of Vishvas
Group.

22. Details of total number of synchronized buy and sell orders, trades and
trade quantity by the members of Vishvas Group during investigation period
are as under:

Client Name Buy Sell Total
Count
of Buy
Orders
Count
of Buy
Trades
Total
Buy Qty
Count of
Sell
Orders
Count
of Sell
Trades
Total
Sell Qty
Total
Order
Total
Trades
Total
Qty
Praveen
39 39 269841 21 21 113970 60 60 383811
Mefcom 49 49 195284 27 27 144458 76 76 339742
ISF 28 28 171623 28 28 136717 56 56 308340
Sunita
30 30 176813 17 17 74205 47 47 251018
Cosmo.
22 22 170236 20 20 120451 42 42 290687
Purshottam 36 36 152555 97 97 636508 133 133 789063
Avisha 1 1 49999 0 0 0 1 1 49999
VPL 5 5 39958 0 0 0 5 5 39958
Total
210 210 1226309 210 210 1226309 420 420 2452618

From the above table, it is observed that out of total 420
synchronized trades (buy & sell) by Vishvas Group for 24,52,618
shares, Noticee was indulged in 60 synchronized trades for 3,83,811
shares.


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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
Page 15 of 27 August 27, 2014

CIRCULAR TRADES and REVERSAL TRADES

23. Upon analysis of trade log in BSE, it is observed that there were
substantial number of trades in which parties and counterparties to the
trade were same entities which belong to Vishvas Group. They were
creating an artificial volume in the market by trading among themselves i.e.
by circular trading and reversal trading. Nine members of Vishvas Group
were doing circular trading and reversal trading in BSE.

AT BSE

24. It is observed that that nine members of Vishvas Group viz. Purshottam,
Cosmo, Sunita, Praveen, Mefcom, ISF, Avisha, VPL and Master were
involved in circular trading in 29 trading days out of 37 trading days during
investigation period and created artificial volume of 26,90,184 shares
(30.08% of total traded quantity) by buying and selling among themselves.
These transactions took place in 2138 trades. Out of the same, circular
trades aggregating to 12,26,309 shares from 210 trades were
synchronized.

25. It is also observed that the members of Vishvas Group made large
contribution in circular/reversal trades as compared to the total market
volume in the scrip. The circular trades and reversal trades by the members
of Vishvas Group resulted in significant proportion of volume to the total
market volume in the scrip. Out of 29 trading days, on 10 days, the
percentage of circular trade volume of Vishvas Group to the total market
volume was more than 40% and on 3 days it was more than 60%.


26. The details of circular trades among the nine members of Vishvas Group
are as under:-

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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
Page 16 of 27 August 27, 2014

Circular
Trade Sellers
Buyers Cosmo Sunita Master Mefcom Purshottam ISF Praveen
Grand
Total
VPL 10000 8000 00 00 54509 6000 19597 98106
Avisha 00 00 00 00 50000 00 00 50000
Cosmo 5672 43875 00 59535 259186 7000 49152 424420
Sunita 38031 00 00 43901 82808 94132 29928 288800
Master 00 00 00 10000 13399 00 4000 27399
Mefcom 9500 36059 00 00 180381 45579 52274 323793
Purshottam 72446 150814 8386 108126 65025 124694 187160 716651
ISF 35602 19965 10000 21041 215666 00 38990 341264
Praveen 61559 29674 00 32044 279473 17001 00 419751
Grand Total 232810 288387 18386 274647 1200447 294406 381101 2690184


From the above table, it is observed that:

Out of total shares bought (4,60,990 shares) by the Noticee during
investigation period, 4,19,751 shares were involved in circular
trading with the other members of the Vishvas Group i.e. Cosmo,
Sunita, Mefcom, Purshottam and ISF.

Out of total shares sold (4,60,990 shares) by the Noticee during
investigation period, 3,81,101 shares were involved in circular
trading with the other members of the Vishvas Group i.e. VPL,
Cosmo, Sunita, Master, Mefcom, Purshottam and ISF.



27. During investigation period, circular trading among Vishvas Group were
observed from April 21, 2006 till May 31, 2006. Some of the instances of
circular trading are as follows:




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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
Page 17 of 27 August 27, 2014

Trade Quantity = 7,475



Trade Quantity = 7,500 Trade Quantity = 7,500







Trade Quantity = 8,000 Trade Quantity = 10,000




Circular pattern observed on April 24, 2006 among the group is as
under:




PRICE MANIPULATION:

28. Last Traded Price (LTP) analysis:- It is observed that during investigation
period, the price of the scrip has decreased in patch I & III and increased in
patch II as discussed below:

Patch I (April 7, 2006 to April 20, 2006):

Exchange Opening price
(April 07, 2006)
Closing price
(April 20, 2006)
Trading
days
% Change in
price of the
scrip
Average
Daily Traded
Volume
BSE 53.25 44.75 8 Days 15.96%
(Decrease)
70713
NSE 56.00 44.40 8 Days 20.70%
(Decrease)
68005

Patch II (April 21, 2006 to May 5, 2006):

Exchange Opening price
(April 21, 2006)
Closing price
(May 05, 2006)
Trading
days
% Change in
price of the
scrip
Average
Daily
Traded
Volume
BSE 46.00 66.55 11 Days 44.70%
(Increase)
338391
NSE 46.00 66.90 11 Days 45.40%
(Increase)
213738
Cosmo
Sunita
Mefcom
Praveen
ISF
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
Page 18 of 27 August 27, 2014
Patch III (May 8, 2006 to May 31, 2006):

Exchange Opening price
(May 08, 2006)
Closing price
(May 31,
2006)
Trading
days
% Change in
price of the
scrip
Average
Daily
Traded
Volume
BSE 64.50 44.35 18 Days 31.20%
(Decrease)
258554
NSE 63.55 45.40 18 Days 28.60%
(Decrease)
217866

It is observed that, all the members of Vishvas Group started trading
on or after April 21, 2006 i.e. they had traded only during patch II
(Period of price rise) and patch III (Period of price fall).
It is also observed that the day from when the members of Vishvas
Group start trading, the average trading volume of the scrip at BSE
had gone up significantly from 70,713 shares (during April 07, 2006
to April 20, 2006) to 3,38,391 shares (during April 21, 2006 to May
05, 2006) and 2,58,554 shares (during May 08, 2006 to May 31,
2006).

29. LTP contribution of Visvas Group entities at BSE: Total cumulative
positive and negative LTP contribution was `1130.40 and `1139.25
respectively during investigation period in BSE whereas, it is observed that
the nine members of Vishvas Group namely, Purshottam, Mefcom,
Praveen, Sunita, ISF, Cosmo, Avisha, VPL and Master had contributed
`718.05 to positive LTP and `468.65 to Negative LTP. The details of LTP
contribution of nine members Vishvas Group to cumulative Positive and
Negative LTP variation are as under:
Sr.
No.
Client Name Sum of Positive
LTP `
Sum of Negative
LTP `
Total positive
Cumulative LTP
1 Purshottam 673.5 -431.7 241.8
2 Mefcom 18.30 -24.25 -5.95
3 Praveen 10.20 -3.20 7
4 Sunita 5.70 -4.35 1.35
5 ISF 5.10 -3.05 2.05
6 Cosmo 4.75 -1.70 3.05
7 Avisha 0.15 0 0.15
8 VPL 0.35 -0.20 0.15
9 Master 0 -0.20 -0.2
Total 718.05 -468.65 249.4
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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Noticee had contributed ` 10.20 to total cumulative positive LTP and
` 3.20 to total cumulative negative LTP.

30. It is observed that the Noticee's contribution towards LTP was not much.
However, the role of the Noticee in executing the larger game plan of
creating manipulation in the scrip of Gangotri in concert with the other
entities of the Vishvas Group cannot be overlooked i.e. the Noticee had
mostly traded with Purshottam, Mefcom, VPL, Cosmo, ISF, and Sunita, who
are the contributors towards LTP variation. Further, most of the
synchronized trades and circular trades of the Noticee's were with
Purshottam, Mefcom, Master, VPL, Cosmo, ISF, and Sunita. It is not
possible for a single entity to manipulate the market and the role of the
entire Vishvas group has to be considered in a holistic manner to arrive at
any conclusion. Thus, Noticee have also aided and abetted the other
members of Vishvas Group in manipulating the price of the scrip of
Gangotri.

31. I find that during the investigation period, the Noticee had bought 4,60,990
shares and sold 4,60,990 shares (total traded volume of the Noticee was
9,21,980 shares). Out of total trading volume of the Noticee, 3,83,811
shares of the Noticee were synchronized and 8,00,852 shares were circular
with other members of Vishvas Group. I also find that at the end of the
investigation period the net position of the Noticee was zero.

32. I find that the patterns of circular trading among the Vishvas Group are in
the manner [ABCDA]. Almost same numbers of shares were
rotated in a circular manner among the Vishvas Group on daily basis and
the pattern depicts that the trades were planned with a manipulative intent.
Thus, the said circular trading was not just a co-incidence and the same
indicates their concerted effort and manipulative intent to increase the price
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
Page 20 of 27 August 27, 2014
of the scrip by creating false and artificial volume in the scrip. Due to the
concerted effort of Vishvas Group the price of the scrip in BSE had
increased from `43 on April 19, 2006, touched the high to `70.95 on May
05, 2006 and then decreased to `44.35 on May 31, 2006 within a period of
one and half month. This gave an impression to other investors in the
market that the scrip of Gangotri was being actively traded at the prevailing
price but actually this was not the case.


33. The pattern of synchronized order placement, reversal trading and circular
trading clearly points out that the transactions were carried out with the
intention that the orders of particular entities should match and there was a
prior arrangement with respect to these transactions. These transactions
resulted in creation of artificial volume. The pattern of trading indicates
several instances where the time difference between buy and sell orders
was less than 20 seconds. No unknown person can trade continuously with
same set of persons by putting orders in such pattern contributing
significantly to total volume in the market. The Noticee along with the other
members of Vishvas Group have transacted amongst themselves in the
shares of Gangotri through circular, reversal and synchronized order
placement in a contrived pricing pattern and it led to creation of artificial
volumes in the scrip as the trades were reversed in a short time. The
increase in the trading volume of Gangotri shares can be attributed to the
trades done by the Noticee in collusion with the other members of Vishvas
Group. Thus, these trades were fraudulent and manipulative in nature as
Noticee have misused the trading mechanism and also created artificial
trading volume.

34. The fact is that had the trades of the members of Vishvas Group been
executed in the normal course of business, the possibility of such perfect
matching would not have been possible. The buy and sell prices of one
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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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entity were close to the buy/sell rates of the other entity in all the
settlements, such that the trades of these entities were always matched.
Greater the number of synchronized trades, the larger is the chance of
trades not being genuine in nature, which is bound to affect the market
equilibrium. A trade can be executed on the screen and still be manipulative
in nature. Considering the number of such trades, it is clear that there has
been a gross mis-use of the screen based trading system. It is also to be
stated that intention is inherent in all cases of synchronized trading
involving large scale price manipulation and the same was also brought out
in the case of Nirmal Bang Securities (P) Ltd. vs SEBI by the Honble SAT
whereby it was observed that Intention is reflected from the action of the
Appellant. Choosing selective time slots does not appear to be an involuntary
action.

35. The trading pattern of the Noticee creates doubts about the genuineness of
his trades. I am of the view that the trades carried out were fraudulent and
manipulative in nature. However, in the present case, the records show that
most of the trading carried out by the Noticee was with a fixed set of entities
i.e. members of Vishvas Group namely, Purshottam, Mefcom, VPL, Cosmo,
ISF, and Sunita.

36. Therefore, I am of the view that the trades of the members of Vishvas
Group were with the intention not to transfer the beneficial ownerships of
the shares of Gangotri but with an intention to operate only as a device to
inflate, depress or cause fluctuations in the price of shares of Gangotri for
wrongful gains. Thus the Noticee through collusion with the other members
of the Vishvas Group has transacted in the shares of Gangotri in such a
manner that it led to creation of artificial volumes in the scrip and a false
market leading to price movement in the scrip which lacked presence of any
sort of fundamentals.

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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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37. It is evident from the trading pattern of the Noticee and other members of
Vishvas Group that through circular, reversal and synchronized trades, they
have manipulated the price of the scrip during the period under scrutiny. It
is also observed that there was no transfer of ownership of shares.

38. Honble Securities Appellate Tribunal (hereinafter referred as SAT), in
Ketan Parekh Vs. Securities & Exchange Board of India (Appeal No. 2 of
2004), observed that, A synchronized transaction even on the trading screen
between genuine parties who intend to transfer beneficial interest in the trading
stock and who undertake the transaction only for that purpose and not for rigging
the market is not illegal and cannot violate the regulations. As already observed
synchronisation or a negotiated deal ipso facto is not illegal. A synchronised
transaction will, however, be illegal or violative of the Regulations if it is executed
with a view to manipulate the market or if it results in circular trading or is
dubious in nature and is executed with a view to avoid regulatory detection or does
not involve change of beneficial ownership or is executed to create false volumes
resulting in upsetting the market equilibrium. Any transaction executed with the
intention to defeat the market mechanism whether negotiated or not would be
illegal. Whether a transaction has been executed with the intention to manipulate
the market or defeat its mechanism will depend upon the intention of the parties
which could be inferred from the attending circumstances because direct evidence
in such cases may not be available. The nature of the transaction executed, the
frequency with which such transactions are undertaken, the value of the
transactions, whether they involve circular trading and whether there is real
change of beneficial ownership, the conditions then prevailing in the market are
some of the factors which go to show the intention of the parties. This list of
factors, in the very nature of things, cannot be exhaustive. Any one factor may or
may not be decisive and it is from the cumulative effect of these that an inference
will have to be drawn.

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Adjudication Order in respect of Praveen Poddar in the matter of M/s Gangotri Textiles Limited
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39. In my view, the Noticee through the said artificial trades interfered with the
market mechanism by manipulating the price and volume of the said scrip.
When the trades were inherently non genuine, I do not feel that it is
necessary to prove that investors had, in fact got induced and bought and/
or sold on the basis of these trades. Similar views were expressed by
Honble SAT in its order dated 14.7.2006 in Ketan Parekh Vs. SEBI wherein
it had observed that When a person takes part in or enters into transactions in
securities with the intention to artificially raise or depress the price he thereby
automatically induces the innocent investors in the market to buy /sell their stocks.
The buyer or the seller is invariably influenced by the price of the stocks and if that
is being manipulated the person doing so is necessarily influencing the decision of
the buyer / seller thereby inducing him to buy or sell depending upon how the
market has been manipulated. We are therefore of the view that inducement to any
person to buy or sell securities is the necessary consequence of manipulation and
flows therefrom. In other words, if the factum of manipulation is established it will
necessarily follow that the investors in the market had been induced to buy or sell
and that no further proof in this regard is required. The market, as already
observed, is so wide spread that it may not be humanly possible for the Board to
track the persons who were actually induced to buy or sell securities as a result of
manipulation and law can never impose on the Board a burden which is impossible
to be discharged. This, in our view, clearly flows from the plain language of
Regulation 4(a) of the Regulations.

40. Keeping in mind the dicta of the SAT as reproduced above, I see no reason
to take a different view in the present case.

41. As per regulation 2 (1) (c) of PFUTP Regulations, "fraud" includes any act,
expression, omission or concealment committed whether in a deceitful manner or
not by a person or by any other person with his connivance or by his agent while
dealing in securities in order to induce another person or his agent to deal in
securities, whether or not there is any wrongful gain or avoidance of any loss.
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42. I find that the Noticee has failed to file any reply to the said SCN and has
not refuted the charges. The Honble Securities Appellate Tribunal (SAT) in
the matter of Classic Credit Ltd. v/s SEBI [2007] 76 SCL 51 (SAT -
MUM.) inter-alia held the appellants 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. The order passed by
Honble SAT is relied upon in this case for guidance. Therefore, I presumed
that the Noticee has admitted the charges alleged in the said SCN.

43. Therefore, I hold that the charges leveled against the Noticee are proved
and that the allegation of violation of provisions of section 12A(a), 12A(b),
12A(c) of SEBI Act and regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), &
4(2)(e) of PFUTP Regulations by the Noticee stand established.

ISSUE 2: Whether the Noticee is liable for monetary penalty under
section 15HA of the SEBI Act ?

44. The aforesaid violations of SEBI Act and PFUTP Regulations by the
Noticee make him liable for penalty under Section 15HA of SEBI Act which
reads as follows:

Section 15HA. Penalty for fraudulent and unfair trade practices.
If any person indulges in fraudulent and unfair trade practices relating to
securities, he shall be liable to a penalty of twenty-five crore rupees or three times
the amount of profits made out of such practices, whichever is higher.

45. In the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL 216 (SC),
the Honble Supreme Court of India has held that In our considered opinion,
penalty is attracted as soon as the contravention of the statutory obligation as
contemplated by the Act and the regulation is established and hence the intention of
the parties committing such violation becomes wholly irrelevant.
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46. As already observed that, Noticee have violated the provisions of sections
12A(a), 12A(b), 12A(c) of SEBI Act and regulations 3(a), 3(b), 3(c), 3(d),
4(1), 4(2)(a) & 4(2)(e) of PFUTP Regulations. Therefore, I find that the
Noticee is liable for monetary penalty under Section 15HA of the SEBI Act.

ISSUE 3: What quantum of monetary penalty should be imposed on
the Noticee taking into consideration the factors mentioned
in Section 15J of SEBI Act ?

47. While determining the quantum of penalty under Section 15HA of SEBI Act,
it is important to consider the factors stipulated in section 15J of SEBI Act,
which reads as under:-

15J - Factors to be taken into account by the adjudicating officer
While adjudging quantum of penalty under section 15-I, the adjudicating officer
shall have due regard to the following factors, namely:-
(a) the amount of disproportionate gain or unfair advantage, wherever
quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the
default;
(c) the repetitive nature of the default.

48. I note that on the basis of data available on record, it is difficult, in cases of
such nature, to quantify exactly the disproportionate gain or unfair
advantage enjoyed by the Noticee and the consequent losses suffered by
the investors. Further the amount of loss to an investor or group of investors
also cannot be quantified on the basis of available facts and data. Even
though the monetary loss to the investors cannot be computed, any
manipulation in the volume or price of the stocks caused by vested interest
always erodes investor confidence in the market so that investors find
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themselves at the receiving end of market manipulators. Hence, anyone
could have been carried away by the unusual fluctuations in the
volume/price and been induced into investing in the said scrip. Besides, this
kind of activity seriously affects the normal price discovery mechanism of
the securities market. People who indulge in manipulative, fraudulent and
deceptive transactions, or abet the carrying out of such transactions which
are fraudulent and deceptive, should be suitably penalized for the said acts
of omissions and commissions. Considering the continuous effort of the
Noticee in this aspect where the trading was carried out over a period of
time, it can safely be surmised that the nature of default was also repetitive.

49. In the forgoing paragraphs, it is now established that the Noticee have
violated the provisions of sections 12A(a), 12A(b), 12A(c) of SEBI Act and
regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a) & 4(2)(e) of PFUTP
Regulations. In view of the above and considering the facts and
circumstances of the case and factors under Section 15J of the SEBI Act
and the violation committed by the Noticee, I find that imposing a penalty of
` 70,00,000/- (Rupees Seventy Lakhs only) on the Noticee would be
commensurate with the violations committed by him.

ORDER


50. In exercise of the powers conferred under Section 15-I of the SEBI Act and
in terms of the provisions of Section 15HA of the SEBI Act & Rule 5(1) of
the Rules, I hereby impose a penalty of ` 70,00,000/- (Rupees Seventy
Lakhs only) on Praveen Poddar for violation of provisions of sections
12A(a), 12A(b), 12A(c) of SEBI Act and regulations 3(a), 3(b), 3(c), 3(d),
4(1), 4(2)(a) & 4(2)(e) of PFUTP Regulations.

51. The Noticee shall pay the said amount of penalty by way of demand draft
drawn in favour of SEBI Penalties Remittable to Government of India
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payable at Mumbai within 45 days of receipt of this Order. The said demand
draft shall be forwarded to the Division Chief, Investigation Department (IVD
ID6), Securities and Exchange Board of India, Plot No. C4-A, G Block,
Bandra Kurla Complex, Bandra (E), Mumbai 400051.

52. In terms of rule 6 of the Rules, copies of this order are sent to the Noticee
and also to SEBI.


Date: August 27, 2014 Jayanta Jash
Place: Mumbai Adjudicating Officer


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