V.K. Chopra, Member

1. BACKGROUND

1.1 Ranbaxy Laboratories Ltd. (hereinafter referred to as "Ranbaxy") is engaged mainly in the business of manufacturing and marketing of pharma products. The price of the scrip of Ranbaxy moved up significantly from Rs. 270/- in January 1999 to about Rs. 1200/- in October 1999 accompanied by significant increase in volumes. Considering the above major spurt in price and volumes traded in the Exchanges particularly on the Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE), Calcutta Stock Exchange (CSE) and Delhi Stock Exchange (DSE). Securities and Exchange Board of India (hereinafter referred to as "the Board") conducted an investigation into the affairs relating to buying, selling and dealing in the shares of Ranbaxy against several brokers including Shankar Lal Chokhany (Kashi Prasad Chokhany), a broker of CSE (hereinafter referred to as "Broker") bearing SEBI Registration no. INB030036811.

1.2 The Board after considering the Investigation Report, appointed an Enquiry Officer vide Order dated November 27, 2002 under Securities and Exchange Board of India (Procedure for holding Enquiry by Enquiry Officer and imposing penalty) Regulations, 2002 (hereinafter referred to as "Enquiry Regulations") to enquire into the alleged violations of the provisions of Regulation 4(a), (b), (c) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 (hereinafter referred to in short as "PFUTP Regulations"), Regulation 7 read with Clause A(3) and (4) of the Code of Conduct for Stock Brokers as specified in Schedule II of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as "Stock Brokers Regulations") and Rules, Regulations and Bye-laws of Stock Exchanges.

1.3 The Enquiry Officer, after conducting an enquiry in accordance with the provisions of Regulation 6 of the Enquiry Regulations submitted a report dated November 14,, 2003 wherein he observed that the Broker had violated the provisions of SEBI circular No. SMDRP/POLICY/CIR-32/1999 dated September 14, 1999; Regulation 7 read with Clause A(3) and (4) of Code of Conduct as specified in Schedule II of Stock Brokers Regulations and Regulation 4(b) & (c) of PFUTP Regulations. He recommended suspension of registration of the Broker for a period of six months.

2. SHOW CAUSE NOTICE & REPLY

2.1 Pursuant to the receipt of the said Enquiry Report, a Show Cause Notice dated December 05, 2003 was issued to the Broker, enclosing therewith a copy of the said Enquiry Report and advising him to show cause as to why the action as recommended by the Enquiry Officer or any other penalty deemed appropriate should not be imposed on him.

2.2 The Broker submitted his reply to the said show cause notice, vide letter dated December 24, 2003. In the said reply, the Broker stated that he had not indulged in synchronized/matching trades, which tampers with price discovery mechanism of the concerned exchange and also the smooth functioning of the market.

2.3 In the above reply, the Broker submitted that his reply dated July 18, 2003 which was filed in the enquiry proceedings may be considered in these proceedings and also informed that he did not want any personal hearing in the matter. Therefore, I am proceeding in the matter on the basis of the materials on record before me.

3. REPLY OF THE BROKER IN THE ENQUIRY PROCEEDINGS

3.1 I observe that the Broker submitted reply to the show cause notice issued in the enquiry proceedings vide its letter dated July 18, 2003. He inter alia submitted as follows:

The Broker stated that he had not executed any synchronized / matching trades in the shares of Ranbaxy during the period January 1, 1999 to October 31, 1999 with any of the other brokers of CSE including the broker(s) who dealt with the associates of Ketan Parekh / brokers. He also submitted that the trades were executed through the computerized system and the seller and buyer click the computer button at same time either to buy or to sell the shares, without knowing the identity of each other, and hence at times the transactions were held simultaneously. As such neither the buyer nor the seller was aware of the identity.

The Broker submitted that he had bought and sold approximately 95 lakh shares of Ranbaxy during the period January 1999 to October 31, 1999 and if a negligible quantity of 10 lakh shares of the Ranbaxy scrip had been found to be synchronized / matching trades, it is not deliberate or intentional on his part.

4. CONSIDERATION OF ISSUES & FINDINGS

4.1 I have carefully examined the enquiry report, show cause notice, and reply of the Broker.

4.2 The scrip of Ranbaxy traded around the price range of Rs. 270/- at the beginning of January 1999. The price of the scrip moved up to Rs. 320/- by the end of January 1999 and it continued to move upward during February - March 1999 and reached Rs. 650/- by the end of March 1999. The price of the scrip thereafter moved to Rs. 700/- during May 1999 and came down to Rs. 600/- during June 1999. The price subsequently touched Rs. 800/- during July 1999 and Rs. 1000/- during August 1999. The scrip was being traded in the range of Rs. 900/- to Rs. 1100/- during August - September 1999 and its price increased to Rs. 1200/- during October 1999. Effectively, the price of the scrip moved up from Rs. 267 on January 01, 1999 to a high of Rs. 1215/- on 13.10.99. Later on the price started falling gradually and closed at Rs. 869 on 29.10.99 at BSE.

4.3 The Enquiry Officer arrived at a conclusion in his enquiry report that the Broker carried out 74 instances of synchronization of trades with a view to create misleading appearance of trading which tampers with price discovery mechanism of stock exchange. The charges levelled against the Broker are on the basis of the aforesaid synchronized trades. The synchronized trade is a kind of transaction where the seller and buyer execute the trade for almost same quantity and price at substantially the same time. The synchronized deal per se is not illegal. On the other hand, the synchronized deal with fraudulent or deceptive intention to create misleading appearance of trading and to manipulate the price and volume of the scrip price to tamper the price discovery mechanism of stock exchange with a view to get undue gain out of it, is a serious matter.

4.4 Hence the issue to be decided in this case is whether the Broker has carried out any such synchronised trades and to take a decision as to whether the penalty recommended by the enquiry officer against the Broker is warranted. In order to decide the said issue, I felt it necessary to analyze the under mentioned details of synchronized trades executed by the Broker;

Buy Mem Name

Trade date

Buy Order time

Buy order Qty

Buy orderrate

Sell Mem Name

Sell Order time

Sell Order Qty

Sell order rate

Time Diffe rence

Price diffe rence

SHREE HARIVANSA SECURITIES PVT

5/5/1999

11:11:15

10000

634.80

SHANKAR LAL CHOKHANY

11:11:15

10000

634.80

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

5/10/1999

11:42:31

25000

728.30

SHANKAR LAL CHOKHANY

11:42:31

25000

728.30

0:00:00

0.00

SHYAM SUNDAR DALMIA

5/11/1999

11:20:33

25000

758.20

SHANKAR LAL CHOKHANY

11:20:33

25000

758.20

0:00:00

0.00

SOMANI STOCK BROKING PVT. LTD

5/12/1999

11:54:39

5000

738.90

SHANKAR LAL CHOKHANY

11:54:38

5000

738.90

0:00:01

0.00

Lexus Shares & Stock Brokers P

5/12/1999

12:15:08

5000

742.00

SHANKAR LAL CHOKHANY

12:15:08

5000

742.00

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

5/18/1999

10:42:07

25000

709.90

SHANKAR LAL CHOKHANY

10:42:07

25000

709.90

0:00:00

0.00

SINGHANIA BROTHERS LIMITED

5/19/1999

13:11:44

5000

721.00

SHANKAR LAL CHOKHANY

13:11:45

5000

721.00

0:00:01

0.00

SHANKAR LAL CHOKHANY

5/21/1999

10:46:00

7500

652.80

PRAKASH CHAND BAID

10:46:01

7500

652.80

0:00:01

0.00

SHANKAR LAL CHOKHANY

5/21/1999

10:47:20

5000

652.80

MPC STOCK BROKING PVT LTD

10:47:20

5000

652.80

0:00:00

0.00

SHANKAR LAL CHOKHANY

5/21/1999

11:04:36

7500

648.60

SINGHANIA BROTHERS LIMITED

11:04:36

7500

648.60

0:00:00

0.00

SHANKAR LAL CHOKHANY

5/24/1999

10:37:55

5000

644.40

Murari Securities Ltd.

10:37:55

5000

644.40

0:00:00

0.00

SHANKAR LAL CHOKHANY

5/24/1999

10:48:57

7500

646.00

SINGHANIA BROTHERS LIMITED

10:48:57

7500

646.00

0:00:00

0.00

SHANKAR LAL CHOKHANY

5/24/1999

14:26:12

15000

645.00

B L B SHARE & FINANCIAL SERVIC

14:26:12

15000

645.00

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

6/8/1999

12:19:41

25000

603.70

SHANKAR LAL CHOKHANY

12:19:40

25000

603.70

0:00:01

0.00

SHREE HARIVANSA SECURITIES PVT

6/9/1999

10:30:46

25000

609.70

SHANKAR LAL CHOKHANY

10:30:46

25000

609.70

0:00:00

0.00

SINGHANIA BROTHERS LIMITED

6/9/1999

11:04:59

15000

616.20

SHANKAR LAL CHOKHANY

11:04:59

15000

616.20

0:00:00

0.00

SHANKAR LAL CHOKHANY

6/15/1999

12:32:33

10000

570.00

SHREE HARIVANSA SECURITIES PVT

12:32:33

10000

570.00

0:00:00

0.00

RAJENDRA KUMAR CHOKHANY

6/16/1999

14:26:52

10000

587.70

SHANKAR LAL CHOKHANY

14:26:52

10000

587.70

0:00:00

0.00

RAJENDRA KUMAR CHOKHANY

6/23/1999

12:43:13

15000

656.10

SHANKAR LAL CHOKHANY

12:43:12

15000

656.10

0:00:01

0.00

SHREE HARIVANSA SECURITIES PVT

6/23/1999

13:12:50

20000

668.50

SHANKAR LAL CHOKHANY

13:12:49

20000

668.50

0:00:01

0.00

SINGHANIA BROTHERS LIMITED

6/23/1999

14:49:18

10000

664.50

SHANKAR LAL CHOKHANY

14:49:17

10000

664.50

0:00:01

0.00

SHANKAR LAL CHOKHANY

6/29/1999

12:08:43

18200

666.70

SHREE HARIVANSA SECURITIES PVT

12:08:43

18200

666.70

0:00:00

0.00

SHANKAR LAL CHOKHANY

6/29/1999

12:10:19

10000

665.70

SHYAM SUNDAR DALMIA

12:10:20

10000

665.70

0:00:01

0.00

SHANKAR LAL CHOKHANY

6/30/1999

11:42:06

21800

659.40

SHREE HARIVANSA SECURITIES PVT

11:42:07

21800

659.40

0:00:01

0.00

SHANKAR LAL CHOKHANY

7/2/1999

13:21:57

10000

658.20

SINGHANIA BROTHERS LIMITED

13:21:57

10000

658.20

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

7/5/1999

13:19:16

25000

675.80

SHANKAR LAL CHOKHANY

13:19:16

25000

675.80

0:00:00

0.00

B L B SHARE & FINANCIAL SERVIC

7/5/1999

14:08:31

15000

679.80

SHANKAR LAL CHOKHANY

14:08:31

15000

679.80

0:00:00

0.00

SHANKAR LAL CHOKHANY

7/5/1999

15:23:39

5000

675.40

RAJENDRA KUMAR CHOKHANY

15:23:39

5000

675.40

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

7/6/1999

14:37:42

20000

683.50

SHANKAR LAL CHOKHANY

14:37:42

20000

683.50

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

7/7/1999

11:11:08

15000

703.30

SHANKAR LAL CHOKHANY

11:11:08

15000

703.30

0:00:00

0.00

SINGHANIA BROTHERS LIMITED

7/7/1999

11:11:27

12000

703.20

SHANKAR LAL CHOKHANY

11:11:27

12000

703.20

0:00:00

0.00

SHYAM SUNDAR DALMIA

7/7/1999

11:19:10

35000

700.40

SHANKAR LAL CHOKHANY

11:19:10

35000

700.40

0:00:00

0.00

SHANKAR LAL CHOKHANY

7/7/1999

14:49:12

15000

691.50

RAJENDRA KUMAR CHOKHANY

14:49:12

15000

691.50

0:00:00

0.00

SHANKAR LAL CHOKHANY

7/13/1999

12:56:25

5000

724.30

RAJENDRA KUMAR CHOKHANY

12:56:25

5000

724.30

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

7/20/1999

13:11:39

25000

811.20

SHANKAR LAL CHOKHANY

13:11:39

25000

811.20

0:00:00

0.00

SHYAM SUNDAR DALMIA

7/21/1999

13:33:28

15000

857.40

SHANKAR LAL CHOKHANY

13:33:28

15000

857.40

0:00:00

0.00

SHANKAR LAL CHOKHANY

7/23/1999

12:30:39

25000

897.20

SHREE HARIVANSA SECURITIES PVT

12:30:39

25000

897.20

0:00:00

0.00

RAJENDRA KUMAR CHOKHANY

7/27/1999

13:04:00

15000

881.80

SHANKAR LAL CHOKHANY

13:04:00

15000

881.80

0:00:00

0.00

SHANKAR LAL CHOKHANY

7/28/1999

13:43:54

14640

866.80

RAJENDRA KUMAR CHOKHANY

13:43:54

14640

866.80

0:00:00

0.00

SHANKAR LAL CHOKHANY

8/9/1999

14:56:47

5000

998.40

JALAN & CO.

14:56:47

5000

998.40

0:00:00

0.00

SHANKAR LAL CHOKHANY

8/10/1999

10:26:00

25000

975.50

SHREE HARIVANSA SECURITIES PVT

10:26:01

25000

975.50

0:00:01

0.00

SHANKAR LAL CHOKHANY

8/10/1999

10:26:52

20000

974.60

SHREE HARIVANSA SECURITIES PVT

10:26:52

20000

974.60

0:00:00

0.00

SHANKAR LAL CHOKHANY

8/10/1999

12:00:37

5000

980.00

PREM RATAN BAHETY

12:00:40

5000

980.00

0:00:03

0.00

SHANKAR LAL CHOKHANY

8/13/1999

11:13:37

20000

1012.80

Agbros Securities Pvt. Ltd.

11:13:37

20000

1012.80

0:00:00

0.00

SHANKAR LAL CHOKHANY

8/13/1999

15:06:14

13000

1003.80

RAJENDRA KUMAR CHOKHANY

15:06:14

13000

1003.80

0:00:00

0.00

RAJENDRA KUMAR CHOKHANY

8/17/1999

12:10:28

5000

991.50

SHANKAR LAL CHOKHANY

12:10:28

5000

991.50

0:00:00

0.00

SHREE HARIVANSA SECURITIES PVT

8/17/1999

12:55:18

20000

992.50

SHANKAR LAL CHOKHANY

12:55:17

20000

992.50

0:00:01

0.00

SHREE HARIVANSA SECURITIES PVT

8/17/1999

15:14:11

25000

986.30

SHANKAR LAL CHOKHANY

15:14:11

25000

986.30

0:00:00

0.00

DINESH KUMAR SINGHANIA & CO.

8/20/1999

14:13:48

40000

1048.50

SHANKAR LAL CHOKHANY

14:13:47

40000

1048.50

0:00:01

0.00

DINESH KUMAR SINGHANIA & CO.

8/20/1999

14:44:49

20000

1051.70

SHANKAR LAL CHOKHANY

14:44:47

20000

1051.70

0:00:02

0.00

SHANKAR LAL CHOKHANY

8/24/1999

12:26:40

16000

1039.50

RAJENDRA KUMAR CHOKHANY

12:26:40

16000

1039.50

0:00:00

0.00

SANJAY KHEMANI

8/25/1999

14:39:46

10000

958.20

SHANKAR LAL CHOKHANY

14:39:41

10000

958.20

0:00:05

0.00

Agbros Securities Pvt. Ltd.

8/27/1999

12:37:17

25000

1061.20

SHANKAR LAL CHOKHANY

12:37:17

25000

1061.20

0:00:00

0.00

SHANKAR LAL CHOKHANY

9/10/1999

15:08:36

7000

1106.50

M. PRASAD & CO. LTD.

15:08:38

7000

1106.50

0:00:02

0.00

SHANKAR LAL CHOKHANY

9/14/1999

12:05:23

15500

1075.60

B L B SHARE & FINANCIAL SERVIC

12:05:24

15500

1075.60

0:00:01

0.00

SHANKAR LAL CHOKHANY

9/14/1999

13:03:23

20000

1063.20

DALMIA SECURITIES (P) LTD.

13:03:24

20000

1063.20

0:00:01

0.00

SHANKAR LAL CHOKHANY

9/14/1999

13:12:06

5000

1066.10

SPAN STOCK BROKING PRIVATE LIM

13:12:06

5000

1066.10

0:00:00

0.00

SHANKAR LAL CHOKHANY

9/22/1999

10:36:30

5000

1020.00

DINESH KUMAR SINGHANIA & CO.

10:36:31

5000

1020.00

0:00:01

0.00

SHANKAR LAL CHOKHANY

9/27/1999

13:04:01

5000

1054.80

AMITABH SONTHALIA

13:04:02

5000

1054.80

0:00:01

0.00

SOMANI STOCK BROKING PVT. LTD

9/27/1999

14:22:24

20000

1067.80

SHANKAR LAL CHOKHANY

14:22:23

20000

1067.80

0:00:01

0.00

SHREE HARIVANSA SECURITIES PVT

9/28/1999

13:49:35

12500

1068.60

SHANKAR LAL CHOKHANY

13:49:35

12500

1068.60

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/4/1999

13:03:11

7500

1001.20

SOMANI STOCK BROKING PVT. LTD

13:03:12

7500

1001.20

0:00:01

0.00

SHANKAR LAL CHOKHANY

10/4/1999

14:31:25

5000

1005.30

KIRAN PARASRAMPURIA

14:31:25

5000

1005.30

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/5/1999

12:18:44

15000

995.50

SURENDRA KUMAR DUGAR & CO.

12:18:44

15000

995.50

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/5/1999

12:42:41

15000

993.80

SURENDRA KUMAR DUGAR & CO.

12:42:41

15000

993.80

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/5/1999

12:52:25

6000

991.10

MPC STOCK BROKING PVT LTD

12:52:25

6000

991.10

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/5/1999

14:34:05

5000

1001.00

C. K. TIBRAWALLA & CO.

14:34:06

5000

1001.00

0:00:01

0.00

SHREE HARIVANSA SECURITIES PVT

10/8/1999

12:05:58

25000

1135.90

SHANKAR LAL CHOKHANY

12:05:58

25000

1135.90

0:00:00

0.00

SURYA PRAKASH TOSHNIWAL

10/12/1999

10:06:02

5000

1150.00

SHANKAR LAL CHOKHANY

10:06:07

5000

1150.00

0:00:05

0.00

Murari Securities Ltd.

10/12/1999

11:37:32

5000

1153.00

SHANKAR LAL CHOKHANY

11:37:31

5000

1153.00

0:00:01

0.00

DINESH KUMAR SINGHANIA & CO.

10/13/1999

12:53:19

10000

1189.50

SHANKAR LAL CHOKHANY

12:53:19

10000

1189.50

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/15/1999

13:14:54

8500

1173.50

Agbros Securities Pvt. Ltd.

13:14:54

8500

1173.50

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/22/1999

13:33:57

6000

1036.50

SURESH KUMAR ALMAL

13:33:57

6000

1036.50

0:00:00

0.00

SHANKAR LAL CHOKHANY

10/26/1999

11:39:05

5000

1020.00

SONTHALIA & CO.

11:39:01

5000

1020.00

0:00:04

0.00

4.5 I find that the Broker executed 74 instances of synchronized trades in Ranbaxy with the counter party members. Synchronized trades are evident from the fact that in all cases order quantity and price are same with counter party order quantity and price. Orders were placed at the same time in most of the cases with counter party brokers while in few cases the orders were placed within a period of 1-5 seconds. The Enquiry Officer has also observed that the percentage of the matching transactions of the Broker to his total transactions in the share of RLL during the period under consideration is 11.36%. In one instance the order quantity is not the usual quantity like 100/1000/ 5000/100000 shares, etc. Even this order quantity is matched by the Broker with a counter party broker simultaneously. Details of the said order are given below:

Mem. Code

Member Name

Order Date

Time

Qty.

Price

B/ S

Order No.

D0149

Shankar Lal Chokhany

7/28/99

13:43:54

14640

866.80

B

540160

D0536

Rajendra Kumar Chokhany

7/28/99

13:43:54

14640

866.80

S

540159

4.6 In the above transaction time difference between buy and sell order is zero second which indicates a clear prior understanding. I find that there are many other transactions where the difference between buy and sell orders are zero second. On the basis of such type of transactions, the Enquiry Officer held that such matching and synchronised deals are possible only if the trades are put in the system with prior understanding. In such cases prices and quantities have been negotiated outside the system and orders had been executed simultaneously.

4.7 It is also observed that the Broker executed 20 trades with M/s Shree Harivansha Securities Pvt. Ltd. and 10 trades with Rajendra Kumar Chokhany. Such large number of synchronised trades with specific brokers that too with same order quantity and time indicates abnormal trading pattern which is against the prevailing market system. Further, the broker reversed his sales position of June 9, 1999 (25000 shares) with M/s Shree Harivansha Securities Pvt Ltd on June 15, 1999 (15000 shares) which falls in the next settlement period. Similar pattern of reversal of trades in the next settlement period is also observed on June 23, 1999, June 29, 1999, July 05, 1999, July 20, 1999 and July 23, 1999.

4.8 I have also observed that orders for 75,000 shares out of total of 10,36,140 shares (i.e. 7.2%) of the Broker were matched with the Broker Dinesh Kumar Singhania, who had dealt for entities connected or associated with Ketan Parekh group. Dinesh Kumar Singhania had been declared defaulter by CSE and SEBI had subsequently cancelled his registration as per Press Release dated October 22, 2001. The details of the said transactions are given hereunder.

Buy Mem Name

Trade date

Buy Order time

Buy order Qty

Buy orderrate

Sell Mem Name

Sell Order time

Sell Order Qty

Sell order rate

Time Difference

Price Difference

DINESH KUMAR SINGHANIA & CO.

8/20/1999

14:13:48

40000

1048.50

SHANKAR LAL CHOKHANY

14:13:47

40000

1048.50

0:00:01

0.00

DINESH KUMAR SINGHANIA & CO.

8/20/1999

14:44:49

20000

1051.70

SHANKAR LAL CHOKHANY

14:44:47

20000

1051.70

0:00:02

0.00

SHANKAR LAL CHOKHANY

9/22/1999

10:36:30

5000

1020.00

DINESH KUMAR SINGHANIA & CO.

10:36:31

5000

1020.00

0:00:01

0.00

DINESH KUMAR SINGHANIA & CO.

10/13/1999

12:53:19

10000

1189.50

SHANKAR LAL CHOKHANY

12:53:19

10000

1189.50

0:00:00

0.00

4.9 I have examined the reply of the Broker submitted before the Enquiry Officer. The Broker mainly contented that they are not aware of the counter parties and the trading was done "ONLINE" where no body knows the name and identity of the counter party. They stated that it is not a deliberate attempt by them. It may be noted that synchronized deals are possible if the trades are put in the system with prior understanding. In such cases prices and quantities have been negotiated outside the system and orders had been executed simultaneously. Synchronized trades entered into with prior understanding have no contribution in proper price discovery. Ordinary investors are deprived of the best price discovered in the system. Such tampering of price discovery mechanism through synchronized and matching trades goes against the fundamental concept of stock exchange where price is discovered through the mechanism of demand and supply of a particular scrip.

4.10 Further, I am of the view that several synchronization of trades cannot be treated as mere coincidence. In such cases, prices and quantities had been negotiated outside the system and orders had been executed simultaneously. I find that all the aforementioned 74 transactions give an impression that these were all synchronized and traded to create artificial market, otherwise there was no possibility of such perfect matching of quantity price, etc. The said issue was already discussed by the Honble SAT in Appeal Nos 54 to 57 of 2002 in the case of Nirmal Bang Securities (P) Ltd. v. SEBI and held that in a synchronized trading manipulative intention is implicit and the synchronized nature of the transaction is in violation of Regulation 4 of the FUTP Regulations. Further, I observe that the standard of proof required in a proceeding of this nature is at variance with the standard of proof required in criminal cases. It is sufficient if the preponderance of probabilities suggests towards the indulgence of the delinquent in the misconduct. The strict rules of Evidence Act and proof beyond reasonable doubt are not applicable to a proceeding of this nature. The Supreme Courts decision in Gulabchand v. Kudilal and the decision of the Special Court for trial of offences relating to transactions in securities in the matter of National Housing Bank v. ANZ Grindlays Bank 1998 (2 ) LJ 153 are relied upon in this regard.

4.11 In view of these, I find that the Broker has put these trades with a view to create misleading appearance of trading. This synchronization of trades tampers with price discovery mechanism of stock exchange and also militates against concept of transparency. The Broker had entered into several synchronized deals. These trades abetted in creating artificial volumes and false market in the scrip of Ranbaxy Laboratories Ltd. and thus the trades executed by the Broker are in violation of the Regulation 7 read with the Clause A (3) and (4) of Code of Conduct as specified in Schedule II of Stock Brokers Regulations, which provides that,

(3) Manipulation: A stock-broker shall not indulge in manipulative, 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 of the market. A stock-broker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness.

4.12 Further, the Broker through his dealings in the scrip of Ranbaxy has also violated the provisions of Regulation 4 (b) and (c) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995, which provides that,

4 No person shall -

(b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market;

(c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions;

4.13 Having considered all aspects and circumstances of the case, I am of the view that suspension of certificate of registration of the Broker for a period of 7 days is sufficient to meet the ends of justice.

5. ORDER

5.1 Taking into consideration all facts and circumstances of the matter and 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 Regulation 13(4) of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, I hereby impose a minor penalty of suspension of certificate of registration of Shri Shankar Lal Chokhany (Kashi Prasad Chokhany) bearing SEBI Registration no. INB030036811 for a period of 7 days.

5.2 This order shall come into force on the expiry of 21 days from the date of this order.