This document is an adjudication order from the Securities and Exchange Board of India imposing a monetary penalty on Vinod Khetan for fraudulent and manipulative trading in the shares of Adani Exports Ltd. The order finds that Khetan violated securities regulations through synchronized and reversed trades with a small group of entities that created artificial volumes and prices in the stock. While some profiting from manipulation was alleged, the order notes Khetan claimed a loss and poor financial position. Considering this and precedents on penalties being workable, the adjudicating officer imposes a penalty of 150,000 rupees.

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BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. SD/AO- 20/2009]
________________________________________________________
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
Against
Shri Vinod Khetan
(PAN. AHNPK7226L)
FACTS OF THE CASE IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as
“SEBI”) conducted investigation in respect of buying, selling and dealing
in the shares of M/s Adani Exports Ltd. (hereinafter referred to as ‘AEL ’)
for the period from between July 09, 2004 and January 14, 2005
(hereinafter referred to as the first period) and August 08, 2005 to
September 09, 2005 (hereinafter referred to as the Second Period). The
price of the scrip of AEL witnessed wide fluctuations in the price in the
price ranging from Rs. 481 to Rs. 756 (during pre split in first period) and
from Rs. 59.90 to Rs. 82.50 (after split).
2. The role of the brokers and their clients who had traded in the scrip of AEL
were scrutinized. It was alleged that through collusion with the brokers and
other clients, certain entities transacted in the shares of AEL in such a
manner that led to creation of artificial volumes in the scrip and was
designed to create a false market and distorted market equilibrium leading
to spurt in the price of the scrip which did not have any correlation with the
performance of the company.
3. It was alleged that one of the entities, viz., Shri Vinod Khetan (hereinafter
referred to as “Noticee”), client of M/s Joindre Capital Services Ltd.
(hereinafter referred to as “JCSL”) violated the provisions of Regulations
4(1), 4(2)(a), (b), (e), and (g) of SEBI (Prohibition of Fraudulent and Unfair

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Trade Practices Relating to Securities Markets) Regulations, 2003
(hereinafter referred to as “PFUTP”) and therefore, liable for monetary
penalty under section 15HA of Securities and Exchange Board of India
Act, 1992 (hereinafter referred to as “SEBI Act”).
APPOINTMENT OF ADJUDICATING OFFICER
4. Ms. Babita Rayudu was appointed as Adjudicating Officer vide order dated
July 24, 2007 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 regulations 4 (1), 4 (2) (a), (b), (e) and (g)
of PFUTP committed by Noticee.
5. Consequent upon the transfer of Ms. Babita Rayudu, the undersigned was
appointed as the Adjudicating Officer vide order dated November 23,
2007.
SHOW CAUSE NOTICE, HEARING AND REPLY
6. Show Cause Notice No. EAD-2/SD/AB/129454/2008 dated June 20, 2008
(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 on the Noticee under
section 15HA of SEBI Act for the alleged violation specified in the said
SCN.
7. The Noticee vide letter dated July 16, 2008 wrote a letter in response to
the SCN and sought one month time to file the reply. However, even after
lapse of one month time no detailed reply to the SCN was filed by the
noticee.
8. In the interest of natural justice and in order to conduct an inquiry as per
rule 4 (3) of the Rules, the Noticee was granted an opportunity of personal
hearing on February 2, 2009 vide notice dated January 7, 2009. The
Noticee, appeared in person to attend the hearing proceedings. The
noticee submitted a copy of Client Cash Global Net Outstanding Position
for the financial years 2004-05 and 2005-06. The Noticee further
submitted that the alleged trading was executed in normal course of
business and that he did not have any intention to execute any
manipulative or fraudulent trades and that he has not earned any
substantial profit from entering into these transactions. The Noticee
pleaded that it was a mistake and that his case should be treated on

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compassionate grounds since his financial position is not good and he has
stopped trading frequently.
CONSIDERATION OF ISSUES AND FINDINGS
9. The issues that arise for consideration in the present case are :
a) Whether the Noticee has violated regulations 4 (1), 4 (2) (a), (b), (e)
and (g) of PFUTP?
b) Does the violation, if any, on the part of the Noticee attract monetary
penalty under section 15 HA 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. From the material on record it is observed that on National Stock
Exchange of India Ltd. (Hereinafter referred to as ‘NSE’) during the period
from 15.10.2004 to 14.01.2005, the price of the scrip of AEL moved in the
range of Rs. 59.90 to Rs. 82.50. It is alleged that synchronized trading and
reversal of trades resulted in creation of artificial volume of 1,29,81,714
shares and the Noticee has bought 11,72,632 shares and sold 11,61,670
shares constituting 3.28% and 3.25% of the buy and sell volume
respectively. Upon examination of data and documents available on
record, it was found that majority of these trades were executed so that
the time difference between placement of buy and sell orders was less
than 30 seconds and many trades were also reversed between the same
set of clients on the same day or the next day. In case of 5898 trades for
90,37,854 shares the time gap between the buy and sell orders was
between 0-10 seconds and the Noticee could not give proper explanation
for the pattern of his trading to me or to the Investigating Authority. The
pattern of trading of the Noticee surely creates doubts about the
genuineness of his trades in my mind and without proper explanation
about the same, I believe that the trades carried out were fraudulent and
manipulative in nature. In a scrip where the liquidity is high, the orders get
matched executed instantaneously. In such a case, generally the counter
parties are scattered. However, in the present case, the records show that
the most of the trading carried out by the Noticee was with a fixed set of
entities. This is quite a remote possibility in normal circumstances as the
liquidity is AEL is reasonably good and this can be achieved only if the
entities have colluded with each other and entered into synchronized
trading. Table I shows that out of total trading of the Noticee trades

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amounting to 10,40,698 are allegedly synchronized and reversed. The
trading with the first 3 entities have formed bulk of the transactions of the
Noticee. As I have stated earlier, in a liquid scrip, it would be very difficult
to carry out majority of the trades with a particular set of entities. If the
Noticee would have executed genuine transactions, the counterparties
would have been scattered and would not have concentrated to a few
entities.
Table I: Trades of Vinod Khetan
Matched trades of Vinod Khetan (in quantity) with
other entities
Quantity
Reversed
Vinod Khetan - Haresh Posnak 408471
Vinod Khetan - Sunil Kuril 365933
Vinod Khetan - Bhuptani Chantrabhuj 117114
Vinod Khetan - Deven Shah 38160
Vinod Khetan - Shashikant Turakhia 34600
Vinod Khetan - Vishvas Securities 33220
Vinod Khetan - Kamdar Navin 23200
Vinod Khetan - Vipul Shah 20000
Total reversed quantity of shares among
themselves 1040698
11. I have placed reliance on the judgment of SAT in the matter of Ketan
Parekh v. SEBI, Appeal No. 2 of 2004 wherein SAT has stated that mere
synchronization of trade is not per se illegal, a presence of additional
factor is necessary to come to a conclusion that the synchronized trade is
illegal. In the present case, the additional factors adequately proved and
as discussed above, the trading pattern of the Noticee does depict
manipulative trading.
12. However, there is no other linkage of the Noticee with the counter party
clients. The Noticee has submitted his summary of trading details for the
Financial Year 2004-05 and 2005-06 and it is seen that the Noticee has
executed large trades and his trading volume in the scrip of AEL for years
2004-05 and 2005-06 stood at 64,35,011 and 6,40,950 shares
respectively. Such a volume of trading gives credence to the Noticee’s
claim of acting as jobber. The role of broker is also unclear in relation to
such trading. The possibility of Noticee placing the order over phone and
some manipulation by the broker cannot be ruled out.
13.Taking into consideration the above and the submissions of the Noticee, I
find that the Noticee has not executed genuine transactions and has

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violated Regulations 4(1), 4(2)(a), (b), (e), and (g) of SEBI (Prohibition of
Fraudulent and Unfair Trade Practices Relating to Securities Markets)
Regulations, 2003 making him liable for penalty under Sec. 15HA of the
Securities and Exchange Board of India Act, 1992.
14.In view of the above, the next issue for consideration is as to what would
be the monetary penalty that can be imposed on the Noticee for the
violation of abovementioned provisions of the PFUTP Regulations.
15.The Hon’ble Supreme Court of India in the matter of SEBI v. Shri Ram
Mutual Fund, [2006] 68 SCL 216(SC) interalia held that “once the violation
of statutory regulations is established, imposition of penalty becomes sine
qua non of violation and the intention of parties committing such violation
becomes totally irrelevant. Thus, as the violation of statutory obligations by
the Acquirers has been established, I hold that they are liable for monetary
penalty.”
16.The provisions of section 15HA of the SEBI Act as prevailing at the
relevant time are reproduced hereunder :
“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.”
17.While imposing monetary penalty 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.”
18. In this matter, the Noticee has not made any substantial profit from
trading and from the ledger it seems that he has made a loss for trading

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carried out in the scrip of AEL during 2004-05. The loss caused to the
investors also cannot be quantified as the majority of the trading was
carried out by only a few clients. The noticee has also cited his bad
financial position for considering this case on compassionate grounds. To
support his claim he has also filed documents showing that his financial
position is in a bad state.
19. While considering the facts, I have also examined the judgment of SAT in
the matter of Alkan Projects v. Securities and Exchange Board of India,
Appeal No. 88 of 2004, has highlighted the importance of imposing
adequate amount of penalty on the entities, after considering their
financial position. In this matter SAT has stated that
“13. Considering the impecuniosity of the appellant as the business of
the appellant had come to a standstill, we feel these high penalties will be
merely paper orders, which can never be implemented by execution in a
court.
14. It is not disputed that the company is in doldrums and has incurred
heavy losses and is a rural company with tribal background and a perusal
of the latest balance sheet indicates there is no liquidity and the company
is facing the threat of winding up.
15.The Parliament, in its wisdom, has directed certain factors to be taken
into account by the Adjudicating Officer before imposing a
penalty. Section 15J reads as follows:
…
All these pre-requisites, admittedly, are in the negative and in favour of the
appellant for a substantial reduction of the penalty. Although section 15J
does not consider impecuniosity as a factor in adjudicating the quantum of
penalty, it appears to us it would be an important factor along with the
three factors mentioned in 15J, viz., (a) amount of disproportionate gain,
(b) amount of loss caused to the investor and (3) repetitive nature of the
default.
16. The Supreme Court, in pronouncements dealing with compensation
under the Criminal Procedure Code, has held that the means of the
accused has also to be considered if a workable order is to be
passed. (See:
(i) (1978) 4 SCC 111, Sarwan Singh vs. Punjab
(ii) (1988) 4 SCC 51, Hari Singh vs. Sukhbir Singh)
Although the judgments relate to trials with respect to criminal offences, it
would not be out of place to mention that the principle laid down by the
Supreme Court with regard to the ability or the means of the appellant to

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pay a penalty in monetary terms, would also apply on principle to the law
laid down by the Supreme Court.”
20. Thus, keeping in view of the judgment of SAT and the observation that
the Supreme Court cases are applicable to monetary penalty also, I
believe a flexible approach is required in this case and considering the
spirit of these judgments I believe that this order should be workable and
should not be a origination point of another lengthy litigation in the form of
prosecution proceedings.
ORDER
21.In view of the above, after considering all the facts and circumstances of
the case and exercising the powers conferred upon me U/s 15-I(2) of the
Act, I hereby impose a monetary penalty of Rs. 1,50,000/- (Rupees One
Lakh Fifty Thousand only) on the Noticee, Shri Vinod Khetan.
22.The above penalty amount shall be paid by the Noticee through a duly
crossed demand draft drawn in favour of “SEBI – Penalties Remittable to
Government of India” and payable at Mumbai, within 45 days of receipt of
this order. The said demand draft should be forwarded to the Chief
General Manager, Investigation Department (ID -1), Securities and
Exchange Board of India, SEBI Bhavan, Plot No, C4-A, “G” Block, Bandra
Kurla Complex, Bandra(East), Mumbai-400 051.
23.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: February 25, 2009 SANDEEP DEORE
Place: Mumbai ADJUDICATING OFFICER