adjudication order in respect of vinod shares ltd. in the matter of maharashtra polybutenes ltd

8/20/2019 Adjudication order in respect of Vinod Shares Ltd. in the matter of Maharashtra Polybutenes Ltd.

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Adjudication Order in respect of Vinod Shares Ltd. in the matter of Maharashtra Polybutenes Ltd.

September 14, 2015

Page 1 of 17

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO.EAD-5/SVKM/RGA/AO/ 21 /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

Vinod Shares Ltd.

SEBI Registration No. INE261273633

PAN No. AACCV2843G

In the matter of M/s Maharashtra Polybutenes Limited

FACTS

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

as ‘SEBI’) conducted investigation into the alleged irregularities

in the trading in the shares of Maharashtra Polybutenes Ltd.

(hereinafter referred to as 'MPL') from February, 2009 to July,

2009 (hereinafter referred to as „relevant period’) and into the

possible violation of the provisions of the Securities and


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September 14, 2015

Page 2 of 17

Exchange Board of India Act, 1992 (hereinafter referred to as

'SEBI Act, 1992') and Regulations made thereunder. It was

observed that during the relevant period, MPL had incurred

losses till the financial year 2006-07 and made meagre profit of `

2.87 crore and ` 2.91 crore for the financial years 2007-08 and

2008-09 respectively. MPL shares were infrequently traded

before the relevant period. A total of 53,51,932 shares were

traded and the price increased from ` 53.35 to ` 79.95 an

increase of 49.85% during the relevant period.

2. It was observed that Vinod Shares Ltd. (hereinafter referred to as'Noticee') had executed self trades in its proprietary trading

account during the relevant period. It was alleged that the

Noticee's trades in MPL were irregular and had violated section

12A(a), (b) and (c) of SEBI Act, 1992, regulations 3(a), (b), (c),

(d), 4(1) and 4(2) (a), (e) and (g) of SEBI (Prohibition of

Fraudulent and Unfair Trade Practices Relating to Securities

Market) Regulations, 2003, ('PFUTP Regulations, 2003') and

clause A of the Code of Conduct prescribed in Schedule II of the

Broker Regulations, 1992 read with regulation 7 of SEBI (Stock

Brokers and sub-brokers) Regulations, 1992 (hereinafter referred

to as 'Broker Regulations, 1992'.

APPOINTMENT OF ADJUDICATING OFFICER

3. Vide order dated July 22, 2013, appointed Shri Piyoosh Gupta as

the Adjudicating Officer. Consequent to the transfer of Shri


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September 14, 2015

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Piyoosh Gupta, Shri A. Sunil Kumar was appointed as

Adjudicating Officer vide order dated November 08, 2013.

Pursuant to the transfer of Shri A. Sunil Kumar, the undersigned

has been appointed as Adjudicating Officer vide order dated June

22, 2015 to inquire and adjudge under sections 15A(a) of the

SEBI Act, 1992 the violations specified in the SCN.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

4. Show Cause Notice no. ASK/RGA/25500/2014 dated August 28,

2014 (hereinafter referred to as 'SCN') was issued to the noticee

in terms of Rule 4 of SEBI (Procedure for Holding Inquiry and

Imposing Penalties by Adjudicating Officer) Rules, 1995 read with

section 15I of SEBI Act, 1992 to show cause as to why an inquiry

should not be initiated and penalty be not imposed under section

15HA and 15HB of SEBI Act, 1992 for the violations specified in

the SCN. Noticee vide letter dated September 17, 2014 filed its

reply to the SCN. Vide notice dated January 02, 2015, an

opportunity of personal hearing was granted to the Noticee onJanuary 28, 2015. Vide letter dated January 16, 2015 Noticee

filed its reply wherein Noticee specifically stated that ".....no

useful purpose may serve by attending the hearing in person on

January 28, 2015 ..." . Further, subsequent to the transfer of

erstwhile Adjudicating Officer, another opportunity of hearing was

provided to the Noticee on July 02, 2015 vide notice dated June

22, 2015. The notice was delivered to and acknowledged by the

Noticee. However, the Noticee did not appear for the hearing.

The salient points of submissions of the Noticee vide its letter

dated September 17, 2014 and January 16, 2015 are as under:


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September 14, 2015

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MPL had recovered from losses and started earning profit,

had selected the scrip as our research team spotted the

security wherein there was a possibility of earning profit.

Trading carried out in proprietary account

Nowhere associated with promoters/any other directors

and thus there was no interest in creating a market of the

scrip. We were not holding any shares of MPL.

Have not placed any order above 3000 shares in one go

and subsequently when we found that the ultimateobjective of earning profit from trading activity was not

getting materialized, then we had stopped trading within a

short span of time.

We have not done any fraud in the market. We have not

participated in price movement as we quickly squared up

our position at the earliest opportunity.

We have exercised due care and skill and no malpractices

have been adopted by us.

5. In view of the aforesaid, ample opportunities have been given to

the Noticee to defend his 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 ample opportunities,

the Noticee has failed to avail of the opportunity of personal


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September 14, 2015

Page 5 of 17

hearing. I am, therefore, proceeding with the matter based on

documents on record.

CONSIDERATION OF ISSUES AND FINDINGS

6. The issues that arise for consideration in the present case are :

a. Whether Noticee violated the provisions of section 12A(a), (b)

and (c) of SEBI Act, 1992, regulations 3(a), (b), (c), (d), 4(1) and

4(2) (a), (e) and (g) of PFUTP Regulations, 2003?

b. Whether Noticee violated the provisions of regulation 7 of

Broker Regulations, 1992 read with clause A of the Code of

Conduct prescribed in Schedule II of the Broker Regulations,

1992?

c. Does the violation, if any, attract monetary penalty under

section 15HA and 15HB of SEBI Act, 1992?

d. 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?

7. It would be appropriate here to refer to the aforesaid provisions of

the SEBI Act, 1992, PFUTP Regulations, 2003 and Broker

Regulations, 1992 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 —


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September 14, 2015

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(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 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

Regulation 3

Prohibition of certain dealings in securities

No person shall directly or indirectly —

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

(b) use or employ, in connection with issue, purchase or sale of any securitylisted or proposed to be listed in a recognized stock exchange, any manipulativeor 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 dealingin or issue of securities which are listed or proposed to be listed on arecognized stock exchange;

(d) engage in any act, practice, course of business which operates or wouldoperate as fraud or deceit upon any person in connection with any dealing in orissue 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 theregulations made there under.

Regulation 4

4. Prohibition of manipulative, fraudulent and unfair trade practices


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September 14, 2015

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(1) Without prejudice to the provisions of regulation 3, no person shall indulgein 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;(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;

SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992

Regulation 7: Stock-Brokers to abide by Code of Conduct.The stock-broker holding a certificate shall at all times abide by the

Code of Conduct as specified at Schedule II.

Schedule I I : Clause A:

(1) INTEGRITY: A stock-broker, shall maintain high standards ofintegrity, promptitude and fairness in the conduct of all his business.(2) EXERCISE OF DUE SKILL AND CARE: A stock-broker, shall

act with due skill, care and diligence in the conduct of all hisbusiness.

(3) MANIPULATION: A stock-broker shall not indulge inmanipulative, fraudulent or deceptive transactions or schemes or

spread rumours with a view to distorting market equilibrium or

making personal gains.(4) MALPRACTICES: A stock-broker shall not create false market either singly

or in concert with others or indulge in any act detrimental to the investors

interest or which leads to interference with the fair and smooth functioning ofthe market. A stock-broker shall not involve himself in excessive speculativebusiness in the market beyond reasonable levels not commensurate with his

financial soundness. (5) Compliance with statutory requirements: A stock-

broker shall abide by all the provisions of the Act and the rules, regulationsissued by the Government, the Board and the Stock Exchange from time to timeas may be applicable to him.

8. From the material available on record, it is observed that the

Noticee had executed self trades for the quantity of 50,601

shares on 51 instances during 14 days. The Noticee hadexecuted self trades without the intention of change of

ownership of MPL shares, created artificial volume and created


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September 14, 2015

Page 8 of 17

false or misleading appearance in the securities market. The

details of such self trades are as under:

Trade Date

Buy

Client

Name

Sell

Client

Name

Buy

Member

Name

Sell

Member

Name

Trade

RateLTP

Trade

Qty

Time

Diff inputting

buy and

sell

order

Order

Rate

CP

Order

Rate

Buy

Term

No

Sell

Term

No

27-February-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.10 -3.00 1000 00:00:10 47.10 47.10 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

50.10 3.00 401 00:00:05 50.10 50.10 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

50.10 0.10 80 00:00:09 50.10 50.10 3153001 3153001

27-February-2009 VINODSHARES

LTD

VINODSHARES

LTD

VINODSHARES

LIMITED

VINODSHARES

LIMITED

49.10 2.00 500 00:00:04 49.10 49.10 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

50.00 0.90 19 00:01:26 50.00 50.10 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.00 -0.30 400 00:00:06 47.00 47.00 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.00 0.00 100 00:00:30 47.00 47.00 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

50.00 3.00 500 00:00:06 50.00 50.00 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

46.70 -1.00 500 00:00:06 46.70 46.70 3153001 3153001


SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

49.70 3.00 500 00:00:05 49.70 49.70 3153001 3153001

18-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.10 -1.65 1000 00:00:06 47.10 47.10 3153001 3153001

18-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

49.00 1.90 1300 00:00:11 49.00 49.00 3153001 3153001

18-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.20 -1.80 500 00:00:05 47.20 47.20 3153001 3153001


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Page 9 of 17

18-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

48.50 1.30 500 00:00:05 48.50 48.50 3153001 3153001

18-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.10 -0.10 300 00:00:06 47.10 47.10 3153001 3153001

18-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

47.25 -1.75 200 00:00:28 47.25 47.25 3153001 3153001

25-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

51.60 -2.30 500 00:00:04 51.60 51.60 3153001 3153001

25-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

53.80 2.20 500 00:00:07 53.80 53.80 3153001 3153001

25-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

51.70 -2.10 500 00:00:05 51.70 51.70 3153001 3153001

25-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

53.90 0.10 300 00:00:03 53.90 53.90 3153001 3153001

25-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

53.90 0.00 1 00:00:51 53.90 53.90 3153001 3153001

26-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

50.80 -2.00 4000 00:00:05 50.80 50.80 3153001 3153001

26-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

52.90 2.10 4000 00:00:04 52.90 52.90 3153001 3153001

26-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

51.00 -1.90 400 00:00:03 51.00 51.00 3153001 3153001

26-March-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

52.00 1.00 400 00:00:04 52.00 52.00 3153001 3153001

24-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

51.00 0.50 1000 00:00:02 51.00 51.00 3153001 3153001

24-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

52.00 1.00 1600 00:00:03 52.00 52.00 3153001 3153001

24-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

51.00 -1.00 600 00:00:08 51.00 51.00 3153001 3153001

27-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

51.00 -1.20 2000 00:00:07 51.00 51.00 3153001 3153001

27-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

52.00 1.00 2000 00:00:06 52.00 52.00 3153001 3153001


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September 14, 2015

Page 10 of 17

28-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

49.00 -2.00 2000 00:00:04 49.00 49.00 3153001 3153001

28-April-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

52.00 3.00 2000 00:00:04 52.00 52.00 3153001 3153001

20-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

58.50 -0.50 250 00:00:14 58.50 58.50 3153001 3153001

20-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

61.50 3.00 750 00:00:05 61.50 61.50 3153001 3153001

20-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

58.50 -3.00 500 00:00:11 58.50 58.50 3153001 3153001

22-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

72.50 0.45 500 00:00:07 72.50 72.50 3153001 3153001

22-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

73.50 1.00 500 00:00:08 73.50 73.50 3153001 3153001

27-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

71.80 -0.20 1000 00:00:06 71.80 71.80 3153001 3153001

27-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

69.80 -2.00 3000 00:00:09 69.80 69.80 3153001 3153001

27-May-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

71.80 2.00 2000 00:00:07 71.80 71.80 3153001 3153001

11-June-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

77.10 0.10 500 00:00:09 77.10 77.10 3153001 3153001

11-June-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

78.80 1.70 500 00:00:07 78.80 78.80 3153001 3153001

27-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

74.20 0.00 1000 00:00:04 74.20 74.20 3153001 3153001

27-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

76.70 2.50 1000 00:00:06 76.70 76.70 3153001 3153001

30-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

78.05 -1.95 2500 00:00:06 78.05 78.05 3153001 3153001

30-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

79.95 1.90 2500 00:00:03 79.95 79.95 3153001 3153001

30-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

79.90 -0.05 250 00:00:03 79.90 79.90 3153001 3153001


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Page 11 of 17

30-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

78.90 -1.00 25 00:00:04 78.90 78.90 3153001 3153001

30-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

78.90 0.00 225 00:00:05 78.90 78.90 3153001 3153001

31-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

79.10 0.10 2000 00:00:02 79.10 79.10 3153001 3153001

31-July-2009 VINOD

SHARES

LTD

VINOD

SHARES

LTD

VINOD

SHARES

LIMITED

VINOD

SHARES

LIMITED

80.10 1.00 2000 00:00:01 80.10 80.10 3153001 3153001

9. From the above, I find that Noticee executed self trades during

the relevant period spread over a period of 14 days. On perusal

of the above self trades, it is also seen that on a number of

instances, Noticee has placed buy orders at a new high price

than the LTP when shares were available at lower prices and

changed the course of the prices.

10. At this juncture, I would like to quote the Orders of the Hon'ble

Securities Appellate Tribunal (SAT) with respect to 'self trades'

wherein it was held as follows :

i. Chirag Tanna Vs The Adjudicating Officer Appeal No. 26

of 2011 on June 16, 2011

Self trades have been defined by the Hon‟ble SAT as

"...trades in which both the buyer and the seller are the sameentity."

Further in the same order, Hon‟ble SAT also held that:

“..we have on record the trade and order logs from which it hasbeen pointed out by the learned counsel for the respondentBoard that the appellant had executed self trades i.e. trades inwhich he was both the buyer and the seller. Such trades are,


12/17


September 14, 2015

Page 12 of 17

admittedly, fictitious and create artificial volumes in the tradedscrip..”

ii. Order dated 23.4.2012 in Appeal no. 21 of 2012 -

Systematix Shares & Stocks (India) Limited vs. SEBI :

" …. It has been held in several cases by this Tribunal that selftrades are fictitious and reprehensible. Trades, where beneficialownership is not transferred, are admittedly manipulative in nature.….."

iii. Order dated 03.12.2012 in Appeal No. 211 of 2012 - Anita

Dalal vs. SEBI :

"..... The appellant has been found guilty of self trade as well. Selftrades admittedly are illegal. This Tribunal has held in several casesthat self trades call for punitive action since they are illegal innature. In M/s. Jayantilal Khandwala & Sons Pvt. Ltd. vs. Securitiesand Exchange Board of India (Appeal no. 24 of 2011 decided onJune 8, 2011) this Tribunal has held that “one cannot buy and sellshares from himself. Such transactions are obviously fictitious andmeant only to create false volumes on the trading screen of theexchange”."

11. From the above cited orders of the Hon'ble SAT, I also note that -

a) Self Trades are trades where beneficial ownership is not

transferred;

b) Self trades are fictitious and reprehensible;

c) Trades where beneficial ownership is not transferred, are

manipulative in nature;

d) Self trades create artificial volume in the market;

12. Further, the similar findings were made by the Hon'ble Securities

Appellate Tribunal in the case of Krupa Soni & Ors. v/s SEBI


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(Appeal No. 32/2013) decided on January 09, 2014 holding that-

On perusal of pleadings and hearing the oral submissions, we note that

the self trades are fictitious in nature as there is no transfer of actual

beneficial ownership of share and because the buyer and seller are the

same person. Such trades are injurious to a healthy market and result

in the creation of artificial volumes in the scrip. This in turn gives a

totally wrong signal to the members of the public who may invest in the

hope of making some gains but ultimately land up with losses".

13. I find that Noticee in its reply has not submitted anything with

regard to self trades. Noticee has admittedly done proprietary

trading. In its submissions, the Noticee has stated that it hastraded in the scrip of MPL with the objective of earning profit.

However, when the Noticee realized that the ultimate objective of

earning profit from trading activity was not getting materialized,

then it stopped trading within a short span of time. It is noted from

the aforesaid table, that Noticee has traded throughout the

relevant period from February 2009 to July 2009. Thus, the

contention of the Noticee that it traded for a short span of time is

devoid of merit. Further, it is also noted that in most of the

instances, where the Noticee was both a buyer and seller,

Noticee has put the counter order within a span of less than 10

seconds. The conduct of the Noticee makes it clear that the

objective of the Noticee was to create artificial volume and

manipulate the price in the scrip of MPL. In a number of

instances where the shares were available at a lower price, the

Noticee had placed buy orders at a higher price which is unusual

and not explained.


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14. Noticee as a registered intermediary was under an obligation to

maintain high standards of integrity, exercise due skill and care,

not indulge in manipulation and malpractices. In the instant case,

Noticee has itself executed self trades. In this context, it is

pertinent to mention the judgment of Hon‟ble Supreme Court in

the matter of Chander Kanta Bansal vs. Raj inder Singh Anand

[(2008) 5 SCC 117 ] wherein Hon'ble SC has discussed the

concept of „due diligence‟ and observed that due diligence meant

„reasonable diligence; …. such diligence as a prudent man would

exercise in the conduct of his own affairs.‟

15. In my opinion, a registered intermediary such as the noticee

should have appropriate systems to ensure that unfair market

practices like self trades / fictitious trades in such high volumes

should not take place from its own terminals. It may also be

added that the activities that are prohibited should not be

executed. The same has also been emphasized by the Hon'ble

SAT in the case of H J Secu rit ies Pvt. Ltd . vs. SEBI (Appeal

No. 76/2012) decided on May 11, 2012. As a stock broker, the

Noticee has a duty to preserve the integrity and equilibrium of the

securities market.

16. Thus, the self trades executed by Noticee on numerous

instances has created artificial volume and prices in the scrip

resulting in false and misleading appearance of trading in the

scrip and also manipulated the price of the scrip and therebyviolated the provisions of section 12A(a), (b) and (c) of SEBI Act,

1992, regulations 3(a), (b), (c), (d), 4(1) and 4(2) (a), (e) and (g)


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of PFUTP Regulations, 2003 and regulation 7 of SEBI Broker

Regulations, 1992 read with clause A of the Code of Conduct

prescribed in Schedule II of the Broker Regulations, 1992.

17. In this context, reliance is placed upon the order of the Hon‟ble

Supreme Court of India in the matter of Chairman , SEBI v..

Shriram Mutual Fun d {[2006] 5 SCC 361} wherein it was held

that "In our view, the penalty is attracted as soon as contravention of

the statutory obligations as contemplated by the Act is established and,

therefore, the intention of the parties committing such violation

becomes immaterial. ………. Hence, we are of the view that once the

contravention is established, then the penalty has to follow and only thequantum of penalty is discretionary."

18. Thus, the aforesaid violations by the Noticee make it liable for

penalty under Section 15HA and 15HB of SEBI Act, 1992 which

read as follows:

“ Penalty for fraudulent and u nfai r trade pract ices

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.”

"Penal ty for co ntravent ion where no separate penal ty

has been provided

15HB. Whoever fails to comply with any provision of this

Act, the rules or the regulations made or directions issued


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by the Board thereunder for which no separate penalty has

been provided, shall be liable to a penalty which shall not

be less than one lakh rupees but which may extend to one

crore rupees."

19. It is noted that the disproportionate gain or unfair advantage

made by the Noticee or loss caused to the investors as a result of

default of this nature is not available on record. Noticee had

executed the self trades in an irregular manner over a period of

14 days on 51 instances. The nature of default can be termed as

repetitive in nature.

ORDER

20. After taking into consideration the facts and circumstances of the

case, nature and gravity of the charges and the factors

mentioned in section 15J of the SEBI Act, 1992 I, in exercise of

the powers conferred upon me under Section 15I of the SEBI

Act, 1992 read with Rule 5 of the Adjudication Rules, I hereby

impose following monetary penalty on the Noticee:

Penalty Amount Violation

` 21,00,000/- (RupeesTwenty One Lakh Only)

Under Section 15HA of SEBI Act, 1992 forviolation of section 12A(a), (b) and (c) ofSEBI Act, 1992, Regulations 3(a), (b), (c),(d), 4(1) and 4(2) (a), (e) and (g) of PFUTPRegulations, 2003

` 11,00,000/- (RupeesEleven Lakh Only)

Under Section 15HB of SEBI Act, 1992 forviolation of Clause A of the Code of

Conduct for Stock Brokers as specifiedunder Schedule II read with Regulation 7of the Broker Regulations, 1992

Total ` 32,00,000/- (Rupees Thirty Two Lakh Only)


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21. I am of the view that the penalty imposed is commensurate with

the violations committed by the Noticee. The Noticee shall pay

the said amount of penalty by way of demand draft in favour of

“SEBI - Penalties Remittable to Government of India”, payable at

Mumbai, within 45 days of receipt of this order. The said demand

draft should be forwarded to The Division Chief, Enforcement

Department-EFD-DRA-III, SEBI Bhavan, Plot No. C – 4 A, “G”

Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.

22. In terms of rule 6 of the Rules, copies of this order are sent to the

Noticee and also to the Securities and Exchange Board of India.

&ADJUDICATING OFFICER

DATE: SEPTEMBER 14, 2015 S.V. KRISHNAMOHAN

PLACE: MUMBAI CHIEF GENERAL MANAGER

adjudication order in respect of vinod shares ltd. in the matter of maharashtra polybutenes ltd

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