sebi:SD/AO/117/2009

SEBI · SEBI · 2007-08-31 · Sandeep Deore, Adjudicating Officer

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Facts / Headnote

No penalty levied; Noticee given benefit of doubt; matter disposed of

Provisions invoked

• s. 15
• s. 15H
• s. 15J

Regulations

• Reg. 3
• Reg. 4(1)

Parties

• Virang Shah

Holding

The Adjudicating Officer gave the Noticee, Virang Shah, the benefit of doubt for the alleged manipulative trading in KCL and levied no penalty, disposing of the matter.

Full text

Page 2 of 8 Shah (hereinafter referred to as ‘Noticee’) as an Annexure 1 to Show Cause Notice (the details of which are discussed in para 6 of this order). Investigation by SEBI also observed that large numbers of off market trades were carried out in the scrip of KCL by the connected entities. The connection between these entities and their linkages were provided to Noticee as Annexure 2 to Show Cause Notice. The shares received in the off market were later used to complete the market obligations of the various connected entities. The transfer of shares of KCL in the off market deals between several entities further established linkages between the entities. It is also alleged that the Noticee also forms a part of the said connected entities who have acted in tandem with each other in manipulating the scrip of KCL. It is also alleged that the Noticee had received 35000 shares of KCL through off market transactions from one M/s Vijay Bhagwandas Shah who had off market transactions with various connected entities. Noticee however, sold 24000 shares of KCL in market through the same broker M/s Vijay B Shah and is thus connected with M/s. Vijay B Shah. It is also alleged that the connected entities entered into off market deals amongst themselves during the relevant period and by entering into trading amongst themselves, the said connected entities allegedly brought sudden spurt in the volume and price of the scrip. These volumes were adequate enough to induce the other investor

Page 3 of 8 APPOINTMENT OF ADJUDICATING OFFICER: 4. Ms. Babita Rayudu was appointed as the Adjudicating Officer vide order of SEBI dated August 31, 2007 under section 15-I of the Act r/w rule 3 of SEBI (Procedure for holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the Adjudicating Rules) to inquire into and adjudge under Section 15HA of the SEBI Act, the alleged violation of the provisions of Regulations 4(1), 4(2)(a), 4(2)(b), 4(2)(e) & 4(2)(g) of PFUTP Regulations.

Page 4 of 8 requested not to conduct enquiry and not to impose a penalty under SEBI Act. 8. Considering the facts of the case, it was decided to conduct an inquiry in the matter and the Noticee was granted an opportunity of personal hearing and accordingly was advised to attend the hearing on September 01, 2009 and Mr. Virang Shah appeared before me and inter-alia stated that all the transactions were done by his late father and at that time he was pursuing his CA course. He was a student during that period and was busy in studies and attending coaching classes. His late father had made all the transactions on behalf of Noticee and his two younger brothers. The Noticee also stated that just before 3 weeks of hearing he has passed his CA examinations. The Noticee submitted the copy of death certificate of his late father. The Noticee vide its letter dated September 16, 2009 inter-alia also submitted that the demat account was opened by his late father on February 24, 2000 i.e. at the time when Noticee was minor. Since the opening of demat account, it was operated by his late father and he came to know about the same only after the demise of his father. He also stated that there was no single transaction after the demise of his father and he submitted a demat account statement from the date of opening till Seprember 10, 2009. He also submitted that the demat account was suspended by Action Financial Services (I) Ltd.(Depository Participant) on December 15, 2006 when they realiz

Source: SecMarx — sebi:SD/AO/117/2009. 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.