Full Judgment
1. The price of the scrip on NSE rose from Rs. 3220/- on May 23, 2001 to Rs. 4565/- on June 19, 2001, and touched a high of Rs. 5550/- on June 04, 2001. On June 11, 2001 and June 15, 2001 the volume in the scrip was 314 shares and 1240 shares respectively.
2. The total traded quantity on BSE for the period of investigation was 6386 shares. The price of the scrip at BSE opened at Rs. 3650 on May 04, 2001 and touched a high of Rs. 5564.15 and a low of Rs. 3180 on May 15, 2001 and closed at Rs. 3975 on June 29, 2001. High volumes of 1012 shares and 1001 shares were observed on May 8, 2001 and May 21, 2001 respectively.
1. Observing large volumes in the scrip during the above mentioned period, investigation was conducted and the brokers and the clients were called for ascertaining the reason of trading in comparatively large quantities.
2. The trades in the scrip were investigated for the period May 04, 2001 to June 29, 2001. On National Stock Exchange comparatively large trading volumes were observed on June 11, 2001 and June 15, 2001 and a sharp rise in the closing prices of the scrip from Rs. 3220.00 on May 22, 2001 to Rs. 5555.30 on June 04, 2001. It was observed that two brokers viz., CFL Securities Ltd. and DGP Securities Ltd. matched their orders by placing buy and sell orders with little time gap.
3. The total traded quantity on NSE for the period of investigation was 1978 shares. The price of the scrip on NSE rose from Rs. 3220/-on May 23, 2001 to Rs. 4565/- on June 19, 2001, with a high of Rs. 5550/- on June 04, 2001 and a low of Rs. 3477/- on May 23, 2001. On June 11, 2001 and June 15, 2001 the volume in the scrip was 314 shares and 1240 shares respectively.
4. Ms. Ashadevi Beriwala traded through the broker DGP Securities Ltd. following are the trading details of the trades done by her: 5. It was found during the course of investigation that Ms. Ashadevi Beriwala is mother of the CEO of the broker, Mr. Mukund Beriwala. The orders for the above trades were matched with those of the broker CFL Securities Ltd. of which the client was one Ms. Aditi A Dalal. The above trades were executed by Ms. Ashadevi Beriwala in concert with Ms.
Aditi A Dalal who was a client of the broker CFL Securities Ltd. In total they executed 5 structured deals for above trades including 1100 shares as given below: 6. It was observed that Ms. Ashadevi Beriwala matched the trades by placing the orders for these trades at the same price and at approximately the same time. In the above trades CFL Securities Ltd. had been on the buy side and DGP Securities Ltd. had been on the sell side. All the deals had been executed by CFL Securities Ltd. on the buy side and Ms. Ashadevi Beriwala as a client to the broker DGP Securities Ltd. on the sell side.
7. The shares sold by Ms. Ashadevi Beriwala were delivered in the market from the demat account of Ms. Aditi Dalal, instead of Ms.
Ashadevi Beriwala's demat A/c. The broker CFL Securities Ltd. has been a net buyer and the broker DGP Securities Ltd. has been a net seller in the scrip during the period under investigation.
8. On analyzing the demat statements of both the above brokers, it was observed that all the shares sold on behalf of the client - Ashadevi Beriwala, were being transferred to the broker's pool account from the beneficiary account of Aditi Dalal - A/c 10405081----------------------------------------------------------- SN Date No. of shares % of Net bought shares to Mkt.-----------------------------------------------------------2001023 June 11, 2001 310 (81.58)2001024 June 15, 2001 790 (97.77)----------------------------------------------------------------------------------------------------------------------------------SN Date of No. of Avg trd.
Trd Qty % to Mkt Gross Trading Trades Price (Rs.) (shares) for The SN-----------------------------------------------------------------------2001023 June 11, 2001 1 4825 310 35.232001024 June 15, 2001 4 4712 790 30.83-----------------------------------------------------------------------Total 5 1100----------------------------------------------------------------------- 2.9 It was further observed that Aditi Dalal is the wife of Mr. Asim B.Dalal who is one of the directors of the broker CFL Securities Ltd. 1. It was observed that the amount due to Ms. Ashadevi Beriwala for the above trades had been transferred to the account of Aditi Dalal who is the wife of the director of the broker CFL Securities Ltd. It was also found during the investigation that Ms. Ashadevi Beriwala undertook these transactions to finance the broker CFL Securities Ltd. and later she took the money back from the broker through above trades executed in the market.
2. Milan Dalal Director of CFL Securities Ltd. stated following as the reason for the above structured deals: 'Our basic requirement at that time was only to obtain funds for our NSE pay-in purpose. If any transaction found matched it was unintentionally happened.' 'M/s Aditi Dalal has sold 1100 shares to Ashadevi Beriwala in 2 off-market deals. We were in need of money to meet our pay-in obligation at that time and we used to receive money through M/s Aditi Dalal from Ashadevi Beriwala against the sale of shares by Ms.
Aditi Dalal to Ashadevi Beriwala. The same no. of shares we received through the market and it was done by matching our orders with those of DGP Securities Ltd. Mrs. Ashadevi Beriwala advised on doing this deal through the market only and the orders were matched for this trade to take place so that we could get the shares from her only and the money should have been paid to her only through market mechanism.' 'We have placed buy orders on June 11, 2001 and on June 15, 2001; 310 and 790 for the major quantity of 1100 shares as above and we have placed buy order for 450 shares in settlement no. 2001024.' 'We required funds for meeting our pay-in obligations and these transactions were done for the purpose of funding only. Ms. Ashadevi Beriwala, the client of the counter party broker DGP Securities Ltd has arranged the required funds through these transactions with our client Ms Aditi Dalal to enable CFL Securities Ltd. to meet its pay - in obligations on NSE.' Further, he stated "the sole purpose of these transactions were to raise temporary funding and at any stage or for any transaction neither was there an intention to manipulate the price or create any artificial volumes. Technical irregularities if any, by us may kindly be condoned" 2.12 Authorised representative of Ms. Aditi Dalal, Mr. Thomas Abraham stated as the reason for trading in the scrip that they had traded through Tropical Securities & Investments Pvt. Ltd , CFL Securities Ltd. not only in this scrip as they are associated with the group and the trading with SPS Shares and Stock Brokers Pvt. Ltd. was to raise temporary finance for Tropical Securities & Investments Pvt. Ltd , CFL Securities Ltd. to meet their pay-in obligations on BSE & NSE respectively.' 1. The shares sold by Ms. Ashadevi Beriwala were delivered for pay-in from the demat account of Ms. Aditi Dalal. For this abnormal movement of shares Mr. Thomas Abraham stated that as they had sold the shares to Ashadevi Beriwala and they in turn had to deliver to M/s DGP Securities Ltd. they were requested to pay-in directly to DGP Securities Ltd. to avoid any delay. Similarly as the funds were ultimately due to Aditi Dalal, at Ms. Ashadevi Beriwala's request, DGP Securities Ltd. paid them the amount debiting Ms. Ashadevi Beriwala's account.
2. Further he stated that these transactions were entered by them to help them to tide over their financial requirements to meet the pay-in obligation for BSE & NSE respectively. The orders placed by her through her broker DGP Securities Ltd. on June 11, 2001 and on June 15, 2001 during the settlement 200123 and 200124 she has sold 310 and 790 shares respectively through Ms. Ashadevi Beriwala's broker were having very little time gap with those placed by the counter party broker CFL Securities Ltd. 3. The shares sold by Ms. Ashadevi Beriwala were delivered to DGP Securities Ltd. from the demat account of Ms. Aditi Dalal. Also the amount due to her was transferred to the account of Ms. Aditi Dalal.
For the above third party deliveries her authorised representative Mr.
Mukund Beriwala stated she used to buy shares from Ms Aditi Dalal and then proceed to sell the same on the NSE through DGP Securities Ltd. To save on time and cost due to transaction charges levied by the Bank, she used to often instruct Ms Aditi Dalal to transfer the shares to the Pool Account of DGP Securities Ltd. instead of having them transferred to her own account and then on to DGP Securities pool account.
Similarly, on sale of shares in her account on the NSE through DGP Securities Ltd, the credit that she had received, she often used to instruct DGP Securities Ltd in writing to issue cheques in favour of Ms Aditi Dalal for the next lot of shares that she had bought from her.
Ms. Ashadevi Beriwala had done this to save on time that would had been lost if DGP Securities Ltd. issued the cheque to her and then she would issue the cheque to Ms. Aditi Dalal after DGP Securities Ltd. cheque got cleared in her account. This was done by her to avoid the additional transaction cost of transferring the shares from Ms Aditi Dalal's Account to her Account and then finally to DGP Securities Ltd account. With regard to the issuance of cheques favouring Ms Aditi Dalal from the credit lying in Ms. Ashadevi Beriwala's Account with DGP Securities Ltd was based on written instructions given by Ms. Ashadevi Beriwala to the latter to save on time and cost.
1. Mr. Mukund Beriwala stated that to save on time and cost due to transaction charges levied by the Bank, Ms. Ashadevi Beriwala used to often instruct Ms Aditi Dalal to transfer the shares to the pool Account of DGP Securities Ltd. instead of having them transferred to her own account and then on to DGP Securities pool account. Similarly, on sale of shares in her account on the NSE through DGP Securities Ltd, the credit that she had received, she often used to instruct DGP Securities Ltd in writing to issue cheques in favour of Ms Aditi Dalal for the next lot of shares that Ms. Ashadevi Beriwala had bought from her.
2. The above reply of Mr. Mukund Beriwala reveals that Ms. Ashadevi Beriwala acted in concert with Ms. Aditi A Dalal. I find that Ms.
Ashadevi Beriwala executed matched transactions in the shares and created artificial volume in the scrip of RSFL and executed financial transactions through the two brokers and undertaken these transactions to meet the financial obligations of the broker CFL Securities Ltd. (Broker - NSE) and violated regulations 4(b) and 4(c) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995.
2. 18.03.04 was issued to Ms. Ashadevi Beriwala, directing her toshow cause as to why appropriate directions including directions under section 11 read with section 11 B of the SEBI Act, 1992 and Regulation 11 of the FUTP Regulations, 2003, restraining her from the securities market for a particular period should not be issued against her.
3. Ms. Asha Beriwala vide her letter dated 01.04.2004 made following submissions: 1. That she had done some business with M/s Aditi Dalal wherein he bought shares from her in a spot transaction and proceeded to sell the same on the NSE. The transactions were carried out at the prevailing market price and were all delivery based transactions as she did not do any square up transaction in them. Thus there was no adverse impact of her transactions on the market price of the scrip and nor did she attempt to manipulate the price. The same can be confirmed by seeking the data in the enquiry report. She also submitted that her transactions over 2 days in consideration were executed in a price range of Rs.4680 and Rs.4825 which were in line with the normal price movement of the scrip.
2. That the number of days she had transacted in this scrip is only 2 trading days. These transactions amount to a very small percentage of the total business she had done.
3. That she has no link with the promoters of M/s Ravalgaon Sugar Farm Ltd. or any other group with vested interests in that company and had no ulterior motive in doing the said transactions in its shares.
4. That RSFL was one of the 6-7 scrips she had dealt with M/s Aditi Dalal. The transactions in all these scrips, the time span, their nature and in every other aspect were identical. As soon as she realized that they were in violation of certain regulations of SEBI, she stopped doing the same immediately. She had inadvertently violated certain provisions of regulations of SEBI but never had any malafide intention.
3.3 A hearing was given to Ms. Ashadevi Beriwala on 11.06.04. She authorized Shri Mukund Beriwala, her son, to appear on her behalf. She also filed an affidavit dated 11.06.04 stating as under: "i) My son, Mr. Mukund Beriwala was approached by Mr. Milan Dalal on behalf of M/s Aditi Dalal with a requirement of short term funding.
Since I had the available resources and it seemed like sound proposition at the time, so when my son asked me I agreed. I used to issue a cheque from either my own bank account or issue instruction to my NSE broker M/s DGP Securities to issue a cheque on my behalf against the credit I had lying with them in my account to Ms. Aditi Dalal, for the purchase of the shares of the said company in a spot transaction. To save on time and cost I had instructed M/s Aditi Dalal to transfer the shares directly to the pool account of M/s DGP Securities. After this I proceeded to sell the same shares through their broker. This cycle would get repeated when the funds were received by me from this sale on pay out day after two weeks.
ii) These transactions were carried out at the prevailing market price and were all delivery based transactions as I did not do any square up transactions in them. Thus there was no adverse impact of my transactions on the market price of the scrip and nor did I attempt to manipulate the price.
2. I have gone through the show cause notice, the replies filed by Ms.
Ashadevi Beriwala and submissions made by her representative during the course of hearing and the affidavit filed by her.
The only issue that arises is that whether Ms .Ashadevi Beriwala in concert with Ms. Aditi Dalal indulged in any fraudulent and unfair trade practices.
1. I observe that Ms. Ashadevi Beriwala matched the trades by placing the orders for these trades at the same price and at approximately the same time. In the above trades CFL Securities Ltd. had been on the buy side and DGP Securities Ltd. had been on the sell side. All the deals had been executed by CFL Securities Ltd. on the buy side and Ms.
Ashadevi Beriwala as a client to the broker DGP Securities Ltd. on the sell side.
2. I further observe that the shares sold by Ms. Ashadevi Beriwala were delivered in the market from the demat account of Ms. Aditi Dalal, instead of Ms. Ashadevi Beriwala's demat A/c. The broker CFL Securities Ltd. has been a net buyer and the broker DGP Securities Ltd. has been a net seller in the scrip during the period under investigation.
3. On analyzing the demat statements of both the above brokers, I find that all the shares sold on behalf of the client - Ashadevi Beriwala, were being transferred to the broker's pool account from the beneficiary account of Aditi Dalal - A/c 10405081 - UTI Bank Ltd 4. I further note that Aditi Dalal is the wife of Mr. Asim B. Dalal who is one of the directors of the broker CFL Securities Ltd. It was found during the course of investigation that Ms. Ashadevi Beriwala is mother of the CEO of the broker, Mr. Mukund Beriwala. The orders for the above trades were matched with those of the broker CFL Securities Ltd. of which the client was one Ms. Aditi A Dalal.
5. I observe that the amount due to Ms. Ashadevi Beriwala for the above trades had been transferred to the account of Aditi Dalal who is the wife of the director of the broker CFL Securities Ltd. It was also found during the investigation that Ms. Ashadevi Beriwala undertook these transactions to finance the broker CFL Securities Ltd. and later she took the money back from the broker through above trades executed in the market.
6. From the foregoing it is observed that the broker i.e. DGP Securities Ltd. sold the shares for Ms. Ashadevi Beriwala and received the shares from the Account of Ms Aditi Dalal who was the buying client of DGP Securities Ltd.'s counter party broker CFL Securities Ltd. for the 5 structured deals executed by DGP Securities Ltd. on June 11, 2001 and June 15, 2001 and DGP Securities Ltd. was directly crediting Ms.
Ashadevi Beriwala's sale proceeds in this regard to the account of Ms Aditi Dalal. This is in violation of Regulation 4 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995.
7. I therefore find that Ms. Ashadevi Beriwala executed matched transactions for 1100 shares on NSE with the counter party client Ms.
Aditi Dalal to enable her fund the amounts to meet the financial obligations of the broking firm of her group viz., CFL Securities Ltd. - Broker (NSE) and thereby violated regulation 4 of SEBI(Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 1995.
4.9 Regulation 4 under Chapter II of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 inter-alia provides as follows: (a) effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person; (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; (d) enter into a purchase or sale of any securities, not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress, or cause fluctuations in the market price of securities; (e) pay, offer or agree to pay or offer, directly or indirectly, to any person any money or money's worth for inducing another person to purchase or sell any security with the sole object of inflating, depressing, or causing fluctuations in the market price of securities." 1. In view of the above, I find that the Ms. Ashadevi Beriwala has acted in violation of Regulation 4 (a), (c) and (d) of the FUTP Regulations, 1995 and has created an artificial market for the scrip of Shrenuj & Co. Ltd. and also admittedly entered into spot deals thereby manipulating the price of the scrip during the period May 02, 2001 to June 19, 2001.
2. I note that Ms. Ashadevi Beriwala has acted in such a manner that has placed the interest of investors at risk and also jeopardized the trust of investors in the safety and integrity of the securities market. I find that in the interest of investors in the securities market, it is necessary to restrain entities/persons such as Ms.
Ashadevi Beriwala from being associated with the securities market.
3. I further note that similar violations have been committed by Ms.
Ashadevi Beriwala in the scrip of Shrenuj & Co. Ltd. also and appropriate orders are being passed for the same.
5.1 Therefore, I, in exercise of powers conferred on me vide Sections 11(4) and 11B read with Section 19 of the SEBI Act and Regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, do hereby direct Ms. Ashadevi Beriwala to disassociate herself from the securities market and not to deal in securities for a period of six months.