sebi:Order/BM/GN/2022-23/18528-18529

SEBI · SEBI · 2022-03-11 · Barnali Mukherjee, Adjudicating Officer

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Facts / Headnote

The Adjudicating Officer found the alleged PFUTP violations and imposed penalties under Section 15HA of the SEBI Act. The penalty amount is not available in the supplied text.

Provisions invoked

• s. 15
• s. 19
• s. 12A
• s. 12
• s. 15H
• s. 15I
• s. 15J
• s. 28A

Regulations

• Reg. 3
• Reg. 4
• Reg. 4(1)
• Reg. 200
• Reg. 4(2)
• Reg. 3(a)
• Reg. 12A

Parties

• Noticee 1 (name not expressly stated; bank-transfer particulars refer to Roshan Arun Kumar Mandal)
• Noticee 2 (name not stated)

Holding

The Adjudicating Officer held that the Noticees’ conduct violated the cited provisions of Section 12A of the SEBI Act and the PFUTP Regulations, and imposed penalties under Section 15HA. The amount of penalty cannot be determined from the supplied excerpt.

Full text

Adjudication Order in the matter of Mohit Industries Limited Page 2 of 28 APPOINTMENT OF ADJUDICATING OFFICER 2. SEBI, vide order dated March 11, 2022, appointed the undersigned as the Adjudicating Officer under Section 19 of SEBI Act read with Sub-section (1) of Section 15I of the SEBI Act and Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 (hereinafter referred to as ‘SEBI Adjudication Rules’) to inquire into and adjudge under the provisions of : i. Section 15HA of SEBI Act, 1992, for the alleged violations of Section 12A(a), (b) and (c) of the SEBI Act, 1992 read with Regulations 3(a),(b),(c),(d) and Regulations 4(1), 4(2)(k) of PFUTP Regulations by Noticee 1. ii. Section 15HA of SEBI Act, 1992, for the alleged violations of Section 12A(a), (b) and (c) of the SEBI Act, 1992 read with Regulations 3(a),(b),(c),(d) and Regulations 4(1), 4(2)(a) of PFUTP Regulations by Noticee 2. SHOW CAUSE NOTICE, REPLY AND HEARING

Adjudication Order in the matter of Mohit Industries Limited Page 3 of 28 4. The allegations levelled against the Noticee1 and Noticee 2 are summarized below: i. Investigation observed the SMSes regarding Mohit Industries quoted “BUY Mohit Industries Ltd" (531453) CMP Rs. 57.85, TGT Rs 64, Dont forget STOP LOSS @ Rs. 54, visit: www.mohitindustries.com, Going to setup new plant in Ahmedabad” were circulated. ii. However, Mohit Industries on January 12, 2018, clarified to BSE that they have not made any announcement/statement for setting up new plant in Ahmedabad and they strongly deny such types of rumors. iii. During investigation, it was observed that bulk SMS were getting circulated in the market during November 2017 and January 2018. SMS were sent in two patches i.e November 15-29, 2017 (hereinafter referred to as SMS Patch 1) and January 3-9, 2018 (hereinafter referred to as SMS Patch 2). iv. The price of the scrip increased from Rs. 44.40 on November 15, 2017 to Rs. 54.20 on November 29, 2017 and from Rs. 48.00 on January 3, 2018 to Rs. 55.75 on January 9, 2018. Further, there was an increase in the average trading volume in the scrip by approx. 10.63 times during the SMS patch 1 and approx. 7.74 times during SMS patch 2. As a result of the bulk SMS, there was an increase in number of shareholders in the scrip by approx. 160% and 305% post SMS patch 1 and post SMS patch 2, respectively. v. It was observed by SEBI, that the SMS recipients bought 1,56,26,504 shares of the

Adjudication Order in the matter of Mohit Industries Limited Page 4 of 28 vii. SEBI observed that the promoter group (hereinafter referred to as Group 1) started selling shares from the SMS Patch 1 and continued to do so during and after SMS patch 2. In SMS patch 1, they sold approx. 3 lakhs shares, 1.66 lakhs shares in SMS patch 2 and approx. 18.58 lakhs shares in post SMS patch 2. Majority of the shares sold by them were picked by Noticee 1, Noticee 2 and Mr, Siva Balan Jaipal. viii. Noticee 1, Noticee 2 and Mr. Siva Balan Jaipal was trading substantially (i.e. both buy and sell trades) across all patches but had never traded in this scrip in the last 4 years. They had gross trade contribution of 19.54% in SMS patch 1 and 9.94% in SMS patch 2. Their trades were matched repeatedly amongst themselves and with the Group 1. They picked up more than 85% of the shares sold by the Group 1. ix. It was also observed from the KYC of Noticee 2 that he was trading worth crores of rupees, however no documents were available supporting his financial position. Transfer of funds by Noticee 1 to Smart Technology and Circulation of SMSes x. As per the ICICI bank statement of Smart Technology, Noticee 1 had made fund transfers of Rs. 10 Lakhs into the account of Smart Technology approximately a month prior to SMSes recommending buying of scrip of Mohit Industries were sent. Relevant details are mentioned below: Date Particulars Deposited Amount 26-09-2017 NEFT-AXIR172692602693-ROSHAN ARUN KUM

Source: SecMarx — sebi:Order/BM/GN/2022-23/18528-18529. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.