Adjudication Order in respect of Tejas Ghelani.pdf

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BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. VSS/AO-160/2009]
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
Tejas Ghelani
(PAN. Not Furnished)
FACTS OF THE CASE IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as
“SEBI”) conducted investigation into trading in the scrip of Adani
Exports Ltd. (hereinafter referred to as ‘AEL’) for the period from
November 27, 2003 to December 23, 2003 (hereinafter referred to
as ‘period of investigation’) due to sharp rise in price and volume
of the scrip on National Stock Exchange of India Ltd. (hereinafter
referred to as ‘NSE’) and Bombay Stock Exchange Ltd. (hereinafter
referred to as ‘BSE’).
2. The role of the brokers, sub-brokers and their clients who had
traded in the scrip was scrutinized. It was observed during the
investigation that certain entities had indulged in synchronization of
deals/reversal trading/fictitious trading in the shares of AEL in such

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a manner that led to creation of artificial volume and impacted the
price of the scrip. The entities found to have been involved in the
alleged manipulation and against whom adjudication proceedings
were initiated are as under:-
Entities traded on BSE
Sl.
No.
Name of Broker Name of Sub-broker Name of Client
1 ASE Capital Rajender J Shah V&S Intermediaries
2 ASE Capital ESS ESS
Intermediaries
Samir P Shah
3 ASE Capital Rajesh N Jhaveri Falguni Shah
4 Naman Securities --- ESS ESS Intermedieries
5 Mangal Keshav E Stocks INC Dilip Champalal Jain
6 Vijay Bhagwandas --- Own/director’s account
7 Sanchay Fincom --- Tejas Ghelani
Entities traded on NSE
Sl.
No.
Name of Broker Name of Sub-broker Name of Client
1 Grishma Securities --- Rajesh N Jhaveri
2 Mangal Keshav E Stocks INC Dilip Champalal Jain
3 ASE Capital --- Manoj T Shah
4 Sanchay Finvest --- Tejas Ghelani
5 M.G. Capital (**) --- Bela H Kayastha
6 Inventure Growth (**) --- Mangiram S Sharma
(**)Administrative warning issued.
3. It was alleged that one of the entities, viz., Mr. Tejas Ghelani
(hereinafter referred to as “Noticee/Tejas”) who traded in the scrip
of AEL through M/s. Sanchay Fincom Ltd. (hereinafter referred to
as “Fincom”), on BSE and through Sanchay Finvest Ltd.
(hereinafter referred to as “Finvest”) on NSE had violated the
provisions of regulations 4(1), 4(2)(a), 4(2)(b), 4(2)(e), 4(2)(g) and
4(2)(n) of SEBI (Prohibition of Fraudulent and Unfair Trade
Practices Relating to Securities Markets) Regulations, 2003
(hereinafter referred to as “PFUTP Regulations”) and therefore,
liable for monetary penalty under sections 15HA and 15HB of
Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as “SEBI Act”).

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APPOINTMENT OF ADJUDICATING OFFICER
4. Mr. Piyoosh Gupta was appointed as Adjudicating Officer vide
order dated December 14, 2005 under section 15 I of SEBI Act
read with rule 3 of SEBI (Procedure for Holding Inquiry and
Imposing Penalties by Adjudicating Officer) Rules, 1995
(hereinafter referred to as ‘Rules’) to inquire into and adjudge the
alleged violations of the provisions of SEBI Act and PFUTP
Regulations.
5. Consequent upon the transfer of Mr. Piyoosh Gupta, the
undersigned has been appointed as the Adjudicating Officer vide
Order dated November 19, 2007
SHOW CAUSE NOTICE, HEARING AND REPLY
6. Show Cause Notice No. EAD/EAD-5/PG/68751/2006 dated May
31, 2006 (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 sections 15HA and 15HB of SEBI Act for the
alleged violation specified in the said SCN. The Noticee
acknowledged the receipt of the same, but did not reply.
7. 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 hearing on August 25, 2009 vide notice dated August
12, 2009. The Noticee acknowledged the receipt of the same.
However, no one appeared for the hearing. Another opportunity of
hearing was granted to the Noticee on October 08, 2009 vide notice
dated September 18, 2009. The Noticee acknowledged the receipt
of the same. The Notice was also posted on SEBI website under

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the label captioned “unserved Notice/summons”. However, no one
appeared for the hearing.
8. I am convinced that ample opportunities have been given to the
Noticee to explain 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 the opportunity of personal hearing. I am, therefore,
compelled to proceed with the matter ex-parte based on the
material available on record.
CONSIDERATION OF ISSUES AND FINDINGS
9. I have carefully perused the documents available on record. The
issues that arise for consideration in the present case are :
a) Whether the Noticee had violated regulations 4 (1), 4(2)(a),
4(2)(b), 4(2)(e), 4(2)(g) and 4(2)(n) of PFUTP Regulations?
b) Does the violation, if any, on the part of the Noticee attract
monetary penalty under sections 15HA and 15HB of SEBI
Act?
c) If so, what would be the monetary penalty that can be
imposed taking into consideration the factors mentioned in
section 15J of SEBI Act?
10. Before moving forward, it will be appropriate to refer to the relevant
provisions of PFUTP Regulations, which reads as under:
PFUTP Regulations
4. Prohibition of manipulative, fraudulent and unfair trade practices

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(1) Without prejudice to the provisions of regulation3, 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) dealing in a security not intended to effect transfer of
beneficial ownership but intended to operate only as a device
to inflate, depress or cause fluctuations in the price of such
security for wrongful gain or avoidance of loss;
(c) …
(d) …
(e) any act or omission amounting to manipulation of the price
of a security;
(f) …
(g) entering into a transaction in securities without intention of
performing it or without intention of change of ownership of
such security.
(h) …
(i) …
(j) …
(k) …
(l) …
(m) …
(n) circular transactions in respect of a security entered into
between intermediaries in order to increase commission to
provide a false appearance of trading in such security or to
inflate, depress or cause fluctuations in the price of such
security;
11. On perusal of the documents available on record, I find the
following:
In respect of trades executed on NSE
• The price of the scrip increased from Rs.250.10 (on December
12, 2003) to Rs.448.80 (on December 19, 2003) in a span of 5
trading days.
• The total traded quantity of the scrip on NSE during the period of
investigation was 38,91,856 shares.
• During the period of investigation, the Noticee along with other
brokers and clients entered into 228 synchronized/reversal trades

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involving 2,96,943 shares (7.63% of the market gross during the
period of investigation). The details are as under:
S.
No.
Buy broker
name (sub-
broker)
Buying
client
Selling Broker
name (sub-
broker)
Selling
client
No. of
trades
Synchron
ized
quantity
No. of
days
traded
% Range of
synchronize
d deals to
qty traded
in the day
1. Grishma Sec Rajesh
Jhaveri
ASE Capital Manoj T
Shah
105 143440 11 22% to
42%
2. Mangal Keshav
(E Stocks INC)
Dilip C.
Jain
Sanchay
Finvest
Tejas
Ghelani
23 54654 9 2% to 16%
3. ASE Capital Manoj T
Shah
M G Capital Bela H
Kayastha
33 31450 3 28% to 29%
4. Mangal Keshav
(E Stocks INC)
Dilip C
Jain
Inventure
Growth
Mangiram
S Sharma
22 22399 10 2.98% to
8.44%
5. Inventure
Growth
Mangiram
S Sharma
Sanchay
Finvest
Tejas
Ghelani
10 18750 5 2.98% to
18.39%
6. Inventure
Growth
Mangiram
S Sharma
Kotak Sec. Mangiram
S Sharma
24 16250 7 1.39% to
8.44%
7. Grishma Sec. Rajesh
Jhaveri
M G Capital Bela H
Kayastha
11 10000 1 34.70%
TOTAL 228 296943
• Out of a total of 2,96,943 shares, 54,654 shares were traded by
the Noticee in 23 synchronized/reversal trades through Finvest
with Mangal Keshav Securities Ltd. (hereinafter referred to as
“Mangal”), who was trading on behalf of Dilip Champalal Jain,
during the period from December 8, 2003 to December 18, 2003
(majority of trades) and December 23, 2003 (2 trades) i.e. in 9
trading days.
• Out of these 9 trading days, on 2 days, the synchronized/reversal
trades contributed to more than 10% of the day’s quantity traded,
on 5 days, contribution was more than 5% of the day’s quantity
traded. These trades accounted for 1.40% of the gross quantity
traded during the entire period of investigation.
• Most of the buy and sell orders were placed with a time difference
of less than 3 seconds and many of them were with zero time
difference. The order, limit prices and quantities were also
matched with those of the counter party broker/client in all these

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trades. The quantity, rate matched and reversal of trades were
always with the same client.
• The Noticee had nil delivery positions.
In respect of trades executed on BSE
• The price of the scrip increased from Rs.209.55 (on November
27, 2003) to Rs.443.10 (on December 23, 2003) in a span of 19
trading days. The scrip touched a highest price of Rs.478.00 on
December 19, 2003.
• The total traded quantity in the shares of AEL on BSE during the
period of investigation was 11,32,400 shares.
• Out of 11,32,400 shares, 3,42,780 shares (30.27%) were traded
in circular/synchronized/reversal trades involving certain brokers,
sub-brokers and clients. The details are as under:
Date Bought
Qty
Bought by
Client (sub-
broker/Broker)
Bought From
Client (Broker)
Sold
Qty
Sold by Client (sub-
broker/Broker)
Sold To Client
(Broker)
27.11.03
to
23.12.03
74450 ESS (ASE
Capital)
ESS (Naman
Sec.)
74500 ESS (ASE Capital) ESS (Naman
Sec.)
27.11.03
to
23.12.03
57475 Falguni Shah
(through Rajesh
N Jhaveri/ ASE
Capital)
V & S
Intermediaries
(through R J Shah
/ ASE Capital)
57490 Falguni Shah
(through Rajesh N
Jhaveri/ ASE Capital)
V & S
Intermediaries
(through R J
Shah / ASE
Capital)
27.11.03
to
23.12.03
23340 Dilip Champalal
Jain (through M/s
E Stocks/Mangal
Keshav)
Own A/c (Vijay
Bhagwandas)
25200 Dilip Champalal Jain
(through M/s E
Stocks/Mangal
Keshav)
Own A/c (Vijay
Bhagwandas)
27.11.03
to
23.12.03
16050 Dilip Champalal
Jain (through M/s
E Stocks/Mangal
Keshav)
Tejas Ghelani
(Sanchay Fincom)
14300 Dilip Champalal Jain
(through M/s E
Stocks/Mangal
Keshav)
Tejas Ghelani
(Sanchay
Fincom)
• A total of 128 synchronized/reversal trades were executed
between the Noticee and Mangal who was trading on behalf of
Mr. Dilip Champalal Jain.
• These 128 synchronized/reversal trades were executed on 5
trading days during the period from December 9, 2003 to
December 18, 2003. It generated a total volume of 30,350 shares

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accounting for 5.67% of the total market volume during the same
period.
• The synchronized/reversal trades of the Noticee accounted for
more than 14% of the daily volume on 1 day and between 7.63%
and 8.75% on other trading days.
• For most trades, buy and sell orders were placed within a time
difference of 0 to 6 seconds of each other. The order limit prices
and quantities were also matching with those of the counterparty
broker in all the trades. The reversal of trades took place within
half an hour after execution of first set of trades. The delivery
obligation on most of the days has been nil.
• The Noticee and Dilip Champalal Jain executed/entered reversal
transactions on 9th,
10th
and 18th
of December, 2003.
12. The Hon’ble SAT in Ketan Parekh Vs. Securities & Exchange Board of
India (Appeal No. 2 of 2004) held that in order to find out 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. In the case of Ashok K Chaudhary v SEBI, Appeal No 69 of
2008, dated November 5, 2008, the Hon’ble SAT observed that
large number of reverse trades raises a presumption of
manipulative transactions. In Nirmal Bang Securities Pvt. Ltd Vs
Chairman, SEBI, Appeal No. 54-57/2002, dated October 31, 2003,
the Hon’ble SAT observed that where there are too many
transactions over a period of time giving an impression that these
were all synchronized, the argument that the parties had no means
of knowing whether any entity controlled by the client is
simultaneously entering any contra order elsewhere for the reason

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that in the online trading system, confidentiality of counter parties is
ensured, is untenable.
13. I find that the investigation did not establish any link (a) between
the Noticee and its broker (b) between the Noticee and other
brokers who had traded in the scrip (c) between the Noticee and
clients of other brokers who had traded in the scrip (d) between
Noticee and the company/directors of AEL.
14. However, the method and the manner in which the trades were
executed are the most important factors to be considered in these
circumstances. The motive, thereafter, automatically falls in line.
Trades like cross deals and synchronized trades are executed on
the trading screen of a stock exchange and with proper delivery
versus payment system. Clearly in almost all the deals, the orders
are placed so as to ensure a matching of the buy and the sell
quantity and the buy and the sell price with the counter party. The
buy and the sell orders are placed at almost the same time
between the counter brokers, with a difference of a few seconds.
This proximity in the inputting of orders at the same price and for
the same quantity, results in getting them matched, such that there
is almost perfect matching in all the trades, with all the three
parameters, viz., quantity, price and most importantly, the time
required to conclude the trades, which to a large extent indicates
synchronization in the logging in of the orders, albeit executed on
the screen of the stock exchange.
15. This is what has transpired in the present case. A large number of
trades got matched regularly. The phenomenal regularity with
which the Noticee had indulged in such trades, leads one to
conclude, that these transactions were effectively meant to

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manipulate the market. It is my considered belief that frequency of
such trades ensured consistent matching of the orders purely for
the purpose of projection of the volumes of the scrip in a way that
was not the market determined volumes but with a sinister motive
to induce other persons to invest in the said scrip.
16. In case an entity is alleged to have manipulated the market or
distorted the market equilibrium in terms of the PFUTP Regulations
and their acts are corroborated up to a certain extent by the
investigation findings, then the underlying intention of the said entity
is brought out. Furthermore, price manipulation does not only
involve the manipulation in the prices of the scrip but also includes
building up of volumes. This is evident from the findings mentioned
above.
17. The fact is that had the aforesaid discussed trades 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 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. The transactions as pointed out in the tables earlier and
spread over a short period of time are definitely done with some
inbuilt component of ‘intent’ involved. Greater the number of such
synchronized trades, the larger is the chances 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 misuse 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 earlier cited case of Nirmal

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Bang Securities (P) Ltd. vs SEBI by the Hon’ble 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.”
18. The Noticee by participating in the trading in this manner involved
in the execution of synchronized/reversal transactions created
artificial liquidity in the scrip and played a role in the manipulation of
the trading. In my view, the Noticee through the said artificial
trades interfered with the market equilibrium and thereby affected
the manipulation of price and volume of the said scrip. The trades
executed herein by the Noticee were not the real trades as there
was no intention to change the beneficial ownership. When the
trades were inherently not 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
the Hon’ble 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

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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.
19. I find that the Noticee had executed 151 (128 on BSE and 23 on
NSE) synchronized/reversal trades involving 85,004 shares. The
moot point is all these transactions have matched with the counter
party broker Mangal, sub-broker E Stocks Inc and the ultimate
client Dilip Champalal Jain.
20. In order to establish the fraudulent nature of trades indulged in by
the Noticee, reference may also be made to the definition of fraud
laid down in regulation 2 (1) (c) of the PFUTP Regulations, which
reads as follows:
"2 (1)(c) "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 to deal in securities,
whether or not there is any wrongful gain or avoidance of any loss, …
…”
21. Regulation 4(2)(a) of PFUTP Regulations prohibits a person from
indulging in an act which creates false or misleading appearance of
trading in the securities market. Regulation 4(2)(b) of PFUTP
Regulations prohibits dealings in a security intended to operate as
a device to inflate, depress or cause fluctuations in the price of
such security for wrongful gains. Regulation 4(2)(e) of PFUTP
Regulations prohibits any act or omission amounting to
manipulation of the price of a security. Regulation 4(2)(g) of
PFUTP Regulations prohibits from entering into a transaction in
securities without intention of performing it or without intention of
change of ownership of such security. As detailed above, the acts
of the Noticee clearly created false and misleading appearance of

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trading in the shares of AEL and he did not act in a bonafide
manner. The facts of the case highlight the Noticee’s involvement,
by executing continuous synchronized/reversal trades in a
substantial manner, in the manipulation of price/volume of the
shares of AEL which led to creation of artificial volume and
misleading appearance of trading in the said shares on account of
collusive activities with the entity as discussed in the preceding
paragraphs. As the transactions executed by the Noticee in AEL
were synchronized, there does not appear to be any genuine
trading interest in the scrip. All these, resulted in violation of the
provisions of regulations 4(1), 4(2)(a), (b), (e) and (g) of the PFUTP
Regulations.
22. Generally, synchronized trades/cross deals/circular trades are the
instruments/tools employed by some unscrupulous elements in the
securities market to manipulate the market and deceive the
general/genuine investors in the market place. The pattern of
trading, behaviour of the entities, apparent irregularities and the
available trading data, etc., prove manipulation which always
depends on inferences drawn on a mass of factual detail. When all
of these are considered together, they can emerge as ingredients
to prove the manipulative scheme designed and executed by such
manipulators with intent to tamper with free market forces.
23. I am of the view that the facts of the present case clearly bring out
an element of fraud and unfair trade practices indulged in by the
Noticee. Therefore, I hold that the charges leveled against the
Noticee are proved and that the allegation of violation of provisions
of regulations 4(1), 4(2)(a), (b), (e) and (g) of PFUTP Regulations
by the Noticee stands established.

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24. The Hon’ble Supreme Court of India in the matter of SEBI Vs. Shri
Ram Mutual Fund [2006] 68 SCL 216(SC) 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 Regulations is
established and hence the intention of the parties committing such
violation becomes wholly irrelevant…”.
25. Thus, the aforesaid violations by the Noticee make him liable for
penalty under Section 15HA of SEBI Act, 1992 which read as
follows:
“Penalty for fraudulent and unfair trade practices
15HA. If any person indulges in fraudulent and unfair trade
practices relating to securities, he shall be liable to a penalty of
twenty-five crore rupees or three times the amount of profits made
out of such practices, whichever is higher.
26. While determining the quantum of penalty under section 15HA, 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.”
27. It is difficult, in cases of such nature, to quantify exactly the
disproportionate gains or unfair advantage enjoyed by an entity and
the consequent losses suffered by the investors. I have noted that
the investigation report also does not dwell on the extent of specific
gains made by the clients or sub-broker. Suffice to state that
keeping in mind the practices indulged in by the Noticee, gains per
se were made by the Noticee in that he traded in the scrip in a

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manner meant to create artificial volumes and liquidity which is an
important criterion, apart from price, capable of misleading the
investors while making an investment decision. In fact,
liquidity/volumes in particular scrip raise the issue of ‘demand’ in
the securities market. Greater the liquidity, higher is the investors’
attraction towards investing in that scrip. Hence, anyone could have
been carried away by the unusual fluctuations in the volumes 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 synchronized/reversal trades were carried out over a
short period of time, it can safely be surmised that the nature of
default was also repetitive.
ORDER
28. After taking into consideration all the facts and circumstances of the
case, I impose a penalty of Rs.50,000/- (Rupees fifty thousand
only) on the Noticee which will be commensurate with the
violations committed by him.
29. 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 Ms.
Pradnya Saravade, Officer on Special Duty, Investigation

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Department, SEBI, SEBI Bhavan, Plot No. C – 4 A, “G” Block,
Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.
30. 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.
Date: October 9, 2009 V.S.SUNDARESAN
Place: Mumbai ADJUDICATING OFFICER

Adjudication Order in respect of Tejas Ghelani.pdf

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