Prashant Saran, Whole Time Member

Under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992

1. Securities and Exchange Board of India (hereinafter referred to as SEBI), inter-alia directed various persons/entities namely Mr. Jitendra Mannalal Jain, Ms. Renu Madhusudhan Paliwal, Ms. Rashmi R. Gandhi, Alpesh R. Shah (HUF), Anil Rajmal Shah (HUF), Ms. Hemlata Ramesh Hankare, Hasmukh Valchand Jain (HUF), Naresh V. Rajawat (HUF), Mr. Pawanben Valchand Jain, Ms. Reeta Naresh Rajawat, Mr. Kunal Dilip Kothari, Ms. Shweta Bharat Kothari, Ms. Neela Khicha, Ms. Shobha Dilip Kothari, Kamlesh P. Jain (HUF), Mr. Hitesh Mahendra Jain not to buy, sell or deal in the securities market, till further directions, vide an ex-parte ad interim order dated February 20, 2010 (hereinafter referred to as the earlier interim order), as these were prima facie found to have acted as a group and played key role in creating artificial volumes in the scrips namely All Cargo Global Logistics Limited, Asian Star Co. Limited, KSL & Industries Limited, Mavens Biotech Limited, Panoramic Universal Limited, Rasi Electrodes Limited, Sat Industries Limited and Ushdev International Limited during the periods of March 01, 2009 to June 30, 2009 (Period 1) and July 01, 2009 to September 20, 2009 (Period 2). The interim directions were confirmed against all of these persons/entities vide another order of SEBI dated October 06, 2010. While examining the trading details in a different set of scrips namely KBS Capital Management Limited, Lotus Eye Care Hospitals Limited, MVL Limited and Anil Products Limited, SEBI found that almost the same set of entities/individuals against whom directions were issued in the interim order referred in the preceding paragraph, was active in these four scrips also for the period of July 01, 2009 to December 15, 2009 and followed a similar trading pattern along with that role of nineteen (19) other persons was also observed. Based on the preliminary findings relating to the said four scrips and activities of nineteen other persons, SEBI issued another interim order dated May 27, 2011 (hereinafter referred to as the interim order) debarring thereby nineteen (19) of these additional entities/individuals namely Mr. Sunil Mehta, Ms. Anjana Mehta, Mr. Manish Mathur, Ms. Seema Mathur, Mr. Bhavesh Kothari, Mr. Praveen Gate, Mr. Rakesh Jain, Mr. Bhavesh Jain, Mr. Ramesh Gandhi, Mr. Sitanshu Nanawati, Mr. Devendra Kumar Rai, Ms. Meena Rajawat, Ms. Usha Mehta, Mr. Bharat Jain, Mr. Vinay Kothari, Mr. Pradeep Kothari, Mr. Ajay Roongta, Mr. Suresh Hanswal and Mr. Shaikh Soalli Jainuddin. The persons against whom the interim order was passed were advised that they may file their objections, if any, within twenty one (21) days from the date of the said order and also avail of an opportunity of personal hearing, if they so desire.

2. For reference purposes, these nineteen persons/entities mentioned in para 2 above would be collectively referred to as additional group entities and individually by their respective names. With regard to the scrips in para 1 and 2 these would be collectively referred to as stated scrips and individually by their respective names.

3. I note that the modus operandi of all these entities to create artificial volumes in the stated scrips has been described in detail in the interim orders dated February 20, 2010 and May 27, 2011. Based on the material available on record, I observe that one Mr. Sunil Mehta and/or his associates was allegedly executing the trades in the accounts of most of the above mentioned entities. It was prima facie revealed that Sunil Mehta and his associates had solicited the persons/entities for opening and operating their accounts by promising cash benefits. Subsequent to this, Sunil Mehta was also seen to be operating/controlling/using their trading accounts for manipulative activities in the stated scrips. Sunil Mehta and his associates opened trading accounts for the said entities with one stock broker, operated it for certain time and thereafter opened another trading account for the very same entities with other stock brokers, so that his manipulative activities will not be detected. Thus, Sunil Mehta and his associates were able to open different accounts and use them for the alleged manipulative activities in the stated scrips. Further, it was observed that in most of the cases, the initial funds to start the trading were deposited in the account of the entities in cash, allegedly provided by Sunil Mehta and/or his associates. It has been also revealed that most of the entities/individuals whose accounts were operated by Sunil Mehta and his associates through internet trading were men who used to live in slum areas, having meager income, not educated enough and hardly knew how to operate a computer. Further, huge cash flow that were seen to the respective stock brokers by such entities was beyond their financial capacity. The findings in respect of such prima facie benami accounts, operated by Sunil Mehta and his associates have been detailed in the order dated May 27, 2011.

4. Pursuant to the passing of the interim order, the entities namely Manish Mathur, Ms. Seema Mathur, Ms. Anjana Mehta, Sunil Mehta and Ajay Roongta replied vide their letters dated July 05, 2011, July 05, 2011, July 04, 2011, July 05, 2011 and June 02, 2011 respectively. Manish Mathur, Sunil Mehta, Ms. Anjana Mehta and Ajay Roongta also sought some details/documents from SEBI which were provided to them. The submissions of the entities in brief are:

a. Manish Mathur and Seema Mathur vide their respective replies dated July 05, 2011, took the following arguments:

- They have not been provided with various documents/statements relied upon by SEBI.

- He did not know Ms. Hemlata Ramesh Hankare, Ms. Renu Madhusudan Paliwal, Ms. Meena Rajawat and Devender Kumar Rai and had never met or spoken to these. The statements given by these are false and frivolous. The KYC of Ms. Hemlata Ramesh Hankare may have his name in compulsory reference column but he is not aware of it, also the same do not bear his signature. The director of Triveni Management Consultancy Limited, with whom he was an employee introduced him to the husband of Ms. Hemlata Hankare who was also dealing at the Vasai branch of Triveni Management Consultancy Limited.

- He had joined Triveni Management Consultancy Limited in July, 2006 as Chief Operation and was not involved in its day to day accounting or opening or closing of trading accounts. He had met Sunil Mehta during the year 2006-2007. There is no business relation or association with Sunil Mehta. He had no role to play in the allegation made by SEBI which is based on false, frivolous and unfounded notion.

- Had not done any synchronized trading or created artificial volume.

- That Seema Mathur has been implicated without any wrong doing just because she is the wife of Manish Mathur.

b. Sunil Mehta and Anjana Mehta took common arguments vide their respective replies dated July 05, 2011 and July 04, 2011. These are:

- They have not been provided with the relevant documents based on which the order is passed.

- Sunil Mehta has denied of knowing any of the persons mentioned in the order except Ms. Hemlata R. Hankare, Mr. Jitendra Jain, Ms. Renu M. Paliwal and Ms. Usha Mehta. He has admitted operating the account of Ms. Anjana Mehta and Ms. Usha Mehta. Further, trading in the account of Ms. Anjana Mehta is miniscule in volume.

- Sunil Mehta has submitted that he knew Hemlata Hankare, as his wife Anjana Mehta had signed the KYC of Ms. Hemlata R. Hankare.

- Further, Sunil Mehta has submitted that Ms. Renu Paliwal is the wife of his friend Mr. Madhusudan Paliwal and that he does not remember introducing her with ISJ Securities Limited. It has also been submitted that he had not operated the account of Ms. Renu Paliwal in association with Ms. Madhusudan Paliwal.

- It has been submitted that there was insignificant/no substantial co-relation/linkage between them and other debarred entities.

- Sunil Mehta has denied of any relation with Ms. Rashmi Gandhi and using her login/password/deposit of any cash in her account. He has denied of knowing or advising Praveen Gate, Rakesh Jain, Bhavesh Jain, Shaikh Soalli Jainuddin and Sitanshu Nanvati and opened the trading account. He has also denied of opening and operating the trading account of Devendra Kumar Rai.

- It has been submitted that Jitendra Jain is his friend and he used to borrow/lend money whenever in need. The sharing of the same address and telephone number was for the sake of convenience and economy between the friends. They had held joint account for some time i.e., from October 13, 2007 to April 01, 2008. He has admitted the placing of orders for Jitendra Jain in the scrip of Asian Star Company Limited. No substantial evidence to show that the account of Jitendra was used by him as a conduit for transfer of funds and for utilizing the same towards manipulative transactions. He has also denied the knowledge of Jitendras trading account with BP Equities.

- He has admitted of knowing Ms. Ravi Kudal as he opened his and his wifes account with BP Equities. Further, it is submitted that he knew Mr. Bhavesh Kothari as Kothari was the sub broker with the India Capital Market Limited where he had a trading account. They both used to discuss about the share market.

- He has admitted of having friendly relationship with Ajay Roongta, Ms. Seema Mathur, Manish Mathur and Suresh Hanswal but denied any synchronized trading with them. He has also denied knowledge of trading of Suresh Hanswal in the scrip of Asian Star Company Limited.

c. Ajay Roongta vide his letter dated June 02, 2011 denied the averments and observation made in the interim order and sought inspection of the relevant documents. The same was granted to him on July 19, 2011. His submissions in brief are:

- The prohibitory directions passed against him are premature and without following due process of law.

- His trading in various other scrips was in the ordinary course of business and the volume traded by him is miniscule in comparison to the total volume traded in the said scrips, during the period of investigation.

- The amount of `1,00,000 paid to Mr. Narendra Sanghi was a friendly loan which was returned by way of transfer of Net4India Limited shares valued at `97,000 on April 22, 2009.

- His advice to the entities to trade in the scrip of Asian Star Company Limited is not proven and the same is based on the statement of Narendra Sanghi. This statement of Narendra Sanghi cannot be relied upon unless opportunity of cross examination has been given to him.

d. Other entities namely Bhavesh Kothari, Praveen Gate, Rakesh Jain, Bhavesh Jain, Ramesh Gandhi, Sitanshu Nanawati, Devendra Kumar Rai, Meena Rajawat, Usha Mehta, Shaikh Soalli Jainuddin, Bharat Jain, Vinay Kothari, Pradeep Kothari and Suresh Hanswal have not filed any objections to the interim order.

5. Thereafter, opportunities of hearing were granted to all the entities on January 13, 2012. On the date scheduled for hearing, Mr. Rajesh Khandelwal, Advocate appeared for the personal hearing for the entities namely Sunil Mehta, Ms. Anjana Mehta and Ms. Usha Mehta and made submissions. He inter-alia argued that the name of Ms. Usha Mehta may be removed from the order that was issued, as she has already undergone debarment and is of advanced age.

Manish Mathur appeared for Ms. Seema Mathur along with Mr. Aditya Khanna, Advocate and made submissions on behalf of both Manish Mathur and Seema Mathur. Mr. A. Vyas, Consultant appeared for Ajay Roongta and filed submissions dated January 12, 2012.

6. I have considered the respective replies/objections filed by the entities, the submissions made on their behalf during the personal hearing and the relevant material available on record. The limited issue to be considered and decided in this order is whether, based on the available material on record and after considering the submissions made by the entities, the directions issued by SEBI vide the second interim order needs to be continued, revoked or modified in any manner, in so far as it relates to the entities herein.

7. Certain entities who have filed objections and appeared for the personal hearing have taken a common ground that they have not been provided with relevant documents and they had no links/connections with the counterparty clients as stated in the interim order. In this regard, I observe that the entities were found to be the part of a single group on the basis of their creating volumes in the stated scrips and same has been discussed broadly in the second interim order. I note that in certain cases, the relationship is based on the circumstantial evidence of common address, telephone number, e-mail address and in certain others, a relation is established on the basis of the statement of the entities. However, considering that the said order was passed at a preliminary stage as an interim measure, there was no conclusive evidence as regards the relation with the counterparties. I note that the investigation in the matter is already complete and that SEBI has issued show cause notices to the entities giving the detailed findings in respect of their roles and relationship with each other. Thus, at present, I am of the considered view that it would not be appropriate to give any conclusive findings as to any of the facts or submissions made by the entities. The entities, who have filed the objections, have already been provided with the documents they sought for, in their respective replies. Further, as regards issue of cross examination, the same can be taken up in the proceedings initiated by way of the SCN, on completion of investigation.

8. The interim order has also compared in detail the trading concentration of the group of entities and the market trades in the stated scrips. Further, the concentration in the synchronized trades among the group of entities was found to be significant, which suggests that some concerted efforts were undertaken by the entities to match their orders within the group only. I note that the entities as a group have contributed considerable percentage of volumes in the stated scrips. Such conduct of the entities appears to be highly suspicious as the trading by a few entities in one or two scrips in this manner can be concluded as a coincidence, but trading by the entities has been observed in many scrips and that also in the identical pattern of synchronization. This suggests certain efforts by the entities to match their orders within the group only.

9. I note the submissions of the entities who have filed their objection to the second interim order and note that there is certain contradiction in the stand taken by the entities and the findings of the investigation. These have been discussed as under:

a. I note that Manish Mathur has denied his knowing the entities including Ms. Hemlata Ramesh Hankare, Ms. Renu Madhusudan Paliwal, etc. He has also denied any knowledge of the trading by the said group entities as well as that of Sunil Mehta. However, from the trading details it is seen that Manish Mathur and his wife namely Ms. Seema Mathur had entered reversal/structured trades with various group entities across the said scrips for several days.

I note that Manish Mathur in his statement has said that Ms. Seema Mathur is a housewife and her accounts are managed by him. Further, from the investigation, I note the admission of Sunil Mehta that he used to place orders with Emkay Global, broker on behalf of Ms. Seema Mathur. I observe that Sunil Mehta used to accept the contract notes of Ms. Seema Mathur which were being received by him at his address.

I have seen the instances of matched trades among the group entities in the scrip of Asian Star Company Limited. From the same, it is seen that as on July 28, 2009 at 12:15:12, Manish Mathur entered a buy order for 400 shares at a price of `1,224.25. Immediately thereafter, Jitendra Jain placed a sell order at 12:15:13 for 350 shares at the same price of `1,224.25. These two orders got matched immediately for a quantity of 350 shares. The remaining pending buy order of Manish Mathur for the balance 50 shares matched with another order of Jitendra Jain placed at 12:15:25 at a price of `1224.50. Further, on the same day within few minutes of the above trade, 400 shares were sold by Manish Mathur to Ms. Hemlata Ramesh Hankare at a price of `1,227 i.e., `2.50 more than the earlier traded price between the group clients in structured manner.

Similar pattern of matched trades was also found in the scrip of Panoromic Universal Limited. An instance of such trade in Panoromic Universal Limited is being discussed for reference purposes. As on August 07, 2009 at 13:59:15, Ms. Anjana Mehta, wife of Sunil Mehta placed buy order for 800 shares at a price of `217. Immediately thereafter, Manish Mathur placed a sell order at 13:59:18 for a quantity of 500 shares at a price of `217. The remaining pending buy order of Ms. Anjana Mehta for the balance 300 shares matched with another order of Manish Mathur placed at 13:59:22 at a price of `217. I have observed the similar pattern of trading between Manish Mathur and Ms. Hemlata Ramesh Hankare; Ms. Seema Mathur and Jitendra Jain.

In addition to the above, I have seen the instances of circular trading involving both Manish Mathur and Seema Mathur in the scrips of All Cargo Global Logistics Limited and KSL & Industries Limited with the entities Jitendra Jain, Ms. Hemlata Hankare and Ms. Rashmi Gandhi. An instance of the same from the scrip of All Cargo Global Logistics Limited as on July 29, 2009 has been reproduced below for reference:



b. Sunil Mehta in his submission has denied knowing Ms. Rashmi Gandhi and others. I note that Sunil Mehta, in his statement before the SEBI has accepted placing of orders for Ms. Seema Mathur, Ms. Anjana Mehta, Ms. Usha Mehta and Ms. Hemlata Ramesh Hankare. I further note that there were disproportionately huge cash deposits in the bank account of Ms. Hemlata Ramesh Hankare and the cash deposit slip bears the signature of Sunil Mehta. He has also accepted undertaking jobbing transactions along with Bhavesh Kothari in the trading account of Sitanshu Nanawati.

I note that Sunil Mehta in his statement has accepted placing orders for Jitendra Jain in the scrip of Asian Star Company Limited. The relationship between Sunil Mehta and Jitendra Jain can further be substantiated by the facts like cash deposit in the account of Jitendra Jain by Sunil Mehta himself and the issue of cheques to the brokers in the handwriting of Sunil Mehta as also confirmed by the handwriting experts.

It is seen that Sunil Mehta, his wife Ms. Anjana Mehta and his mother Ms. Usha Mehta had undertaken structured trades with many of the above said entities (including Jitendra Jain, Ms. Renu Paliwal, Sitanshu Nanawati, Ms. Hemlata, Manish Mathur, Ms. Seema Mathur etc.) across various scrips for many days. A few instances of the same have been discussed below:

In the scrip of Panoromic Universal Limited, Jitendra Jain placed buy order for 300 shares at a price of `224 on September 09, 2009 at 11:50:15. Immediately thereafter, on the same day, Sunil Mehta placed sell order at 11:50:16 for 250 shares at a price of `224. These orders got matched immediately for a quantity of 250 shares. The remaining pending buy order of Jitendra Jain for the balance 50 shares matched with another order of Sunil Mehta placed at 11:50:21 at a price of `224. Similar pattern of trading was seen in the scrip of SAT Industries Limited also, wherein the trades were executed between Anjana Mehta and Suresh Hanswal; Ms. Usha Mehta and Ms. Renu Madhusudan Paliwal. Further, it is seen that Sunil Mehta has transferred shares of SAT Industries Limited in off-market to Suresh Hanswal which he had ultimately off-loaded in the market after buying and selling for few days.

c. Ajay Roongta was also found executing matched trades in the stated scrips. A few instances of the same are being discussed below:

Ajay Roongta placed a sell order for 500 shares at a price of `812 in the scrip of All Cargo Global Logistics Limited as on June 17, 2009 at 12:29:16. Immediately thereafter, Ms. Renu Madhusudan Paliwal placed a buy order for 350 shares at 12:29:17 at a price of `812. These two orders got matched immediately for a quantity of 350 shares. The remaining pending sell order of Ajay Roongta for the balance 150 shares matched with another order of Ms. Renu Madhusudan Paliwal placed at 12:29:19 at a price of `812. On the very next day, a similar quantity of shares was reversed in similar matched trade. Similar pattern of trading was seen in the scrip of Asian Star Company Limited wherein the trades were executed between Ajay Roongta and Jitendra Jain and the same was reversed merely after three minutes.

In addition to the above, I have seen the instances of circular trading involving Ajay Roongta, Jitendra Jain and Hemlata Hankare in the scrip of KSL & Industries Limited. Further, the fund flow between Ajay Roongta and Ms. Anjana Mehta; Ajay Roongta and Jitendra Kumar Jain have been observed. Ajay Roongta in his submission has said that the funds transferred to Narendra Sanghi were loan transactions. This submission is not supported by any documentary proof and the same do not appear to be a normal market practice, as admittedly the said loan amount was returned by way of transfer of shares of Net4India Limited, total value of which was not exactly the same of what the loan was made.

10. Considering these details, I note that it is impossible for persons who are unknown to each other to enter the trades continuously in a similar pattern in different scrips. The same cannot be said to be a coincidence. Such trading by the group as a whole, prima facie contributed significantly to the total volume in the market. Such increase in volumes in the stated scrips was primarily attributed to the trades executed by the entities. The very act of repeated execution of trades for several days by the entities in a group that too in a unique pattern reveals that these entities were having some nexus with each other.

11. Having seen the volume contributed by these entities and the circumstances which led to the passing of the interim orders, I note that the groups of persons/entities stated in the previous paragraphs, were prima facie found to have joined hands to manipulate the volumes of the stated scrips. The individual acts of the entities under these circumstances cannot be isolated from the case, rather the focus should be on the case in its entirety and it is the ultimate goal of manipulators that should be critically assessed.

12. Thus, I am of the considered opinion that it would not be appropriate to give any conclusive findings as to any fact or submissions made by the entities, at this stage. The objections made by the entities would be considered in detail in the respective proceedings where SCNs have already been issued. Therefore, I do not find it fit to modify/revoke the ad interim directions issued vide Order dated May 27, 2011. I am convinced that the directions in the interim order in respect of the entities need to be continued, till further directions. Needless to say, the same would be reviewed upon conclusion of all the proceedings in the matter. I note that the interim order was issued after taking into consideration, the prima facie fraudulent, abusive and manipulative activities committed by certain persons identified in the said order. In view of the foregoing, I, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B thereof, hereby confirm the directions issued against Mr. Sunil Mehta, Ms. Anjana Mehta, Mr. Manish Mathur, Ms. Seema Mathur, Mr. Bhavesh Kothari, Mr. Praveen Gate, Mr. Rakesh Jain, Mr. Bhavesh Jain, Mr. Ramesh Gandhi, Mr. Sitanshu Nanawati, Mr. Devendra Kumar Rai, Ms. Meena Rajawat, Ms. Usha Mehta, Mr. Bharat Jain, Mr. Vinay Kothari, Mr. Pradeep Kothari, Mr. Ajay Roongta, Mr. Suresh Hanswal and Mr. Shaikh Soalli Jainuddin, vide ex-parte ad interim Order dated May 27, 2011, in the matter of Synchronized Trading by Connected Persons.