1.1 Credit Suisse First Boston (Mauritius) Ltd (formerly known as Kallar Kahar Investments Ltd) was a Sub Account of Credit Suisse First Boston, an FII registered with SEBI.1.2 The scrip of Global Trust Bank (hereinafter referred to as GTB) witnessed significant price rise accompanied with rise in volumes during the financial year 2000-2001. It was noticed that the price had actually gone up from a low of Rs. 57.00/- on October 11, 2000 to Rs. 114.70/- on November 20, 2000 (on BSE), i.e., an increase of more than 100% in just 29 trading sessions. During the same period the prices on NSE had gone up from a low of Rs. 57.05/- to a high of Rs. 114./-. For the period from September 1, 2000 to October 10, 2000 the average daily volumes on BSE were below 38,000 while the same had increased to more than 7,70,000 during the period of October 25, 2000 to November 23, 2000. For the same periods the average daily volumes on NSE were 4,20,000 and 12,96,000 respectively.
1.3 An investigation was ordered by SEBI into the buying, selling and dealing in the scrip of GTB under the provisions of the SEBI Act, 1992 read with SEBI ( Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 and other SEBI Regulations.
1.4 During the course of Investigations, it was observed that there was significant concentration of trading among a few brokers and common clients associated with Ketan Parekh ("KP"). An analysis of the trading of the clients of the top trading members revealed that the clients were related to each other and belonged to the same group. These factors indicated that there was no genuine interest of trading in the GTB scrip and a small group of brokers and investors had created artificial volumes and price manipulation in the scrip.
1.5 It was further observed that KP entities had purchased shares from the promoter group in synchronized manner and later parked it with some FIIs and OCBs thereby creating the artificial volume in the scrip. OCBs and certain sub-account including Sub account of Credit Suisse First Boston("CSFB")- Kallar Kahar Investments Limited (hereinafter referred to as "KKIL) were used by KP entities for circular trading, parking of shares, creation of artificial market and volumes, building up of concentration in select scrips, circumvention of Takeover Regulations, etc.
1.6 Therefore, SEBI vide interim order dated 31.12.2002 prohibited 50 entities including the KKIL from trading in the shares of GTB till the completion of investigations. After affording a post decisional hearing on February 03, 2003, the interim directions were revoked on 12/6/2004 for the reasons stated therein.
2.1 Subsequently, a show cause notice dated 30.6.04 under Section 11 and 11B of SEBI Act, 1992 read with Regulation 11 of SEBI(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market)Regulations, 2003 was issued to KKIL advising it to show cause as to why suitable directions be not issued to it for the allegations detailed therein.
2.2 KKIL replied to the said show cause notice vide its letter dated 21.07.04 and stated as under: 2.2.1 that it was not related to or associated in any manner with Ketan Parekh or entities related to him.
2.2.2 that there is no evidence to suggest that the impugned transactions were financing transactions. On the other hand it was contended that the transactions were genuine transactions and were settled for delivery versus payment. It purchased shares from CSFB India and paid the purchase consideration to CSFB India or to the Clearing House (depending on the nature of settlement i.e. Delivery versus Payment or Clearing House Trade) and similarly sold shares through CSFB India and received the sale proceeds from CSFB India or from the Clearing House (depending on the nature of settlement i.e.
Delivery versus Payment or Clearing House Trade)/ it did not make any payment to, or deal in any way with, KP entities or Overseas Corporate Bodies ("OCBs") for the transactions referred to in the SCN and, therefore, there is no basis for the allegation that these transactions were financing transactions.
2.2.3 that it executed each of the transactions listed in the show cause notice in order to hedge participatory notes issued to its offshore clients. None of the clients were related to KP or the OCBs named in the show cause notice. During the relevant period nine participatory notes were issued. Eight were purchased by BNP Hong Kong branch and one was purchased by Indocam, Himalayan Fund.
2.2.4 that there was no evidence whatsoever of any parking arrangement entered into by it with KP entities. The shares were purchased and sold through CSFB India, the broker and the ownership of shares so purchased was transferred in its favour. When the clients requested redemption of Participatory Notes ("PN"), it instructed its broker to sell the shares that constituted the hedge for the relevant PN.2.2.5 that it was not party to any synchronisaton of transactions. It was the broker who executed the transactions and who was party to synchronization and / or crossing. Further, it did not know and was not required to know whether or not the transactions were synchronized. Its objective was to carry out its investments in Indian Securities Market in accordance with applicable rules and regulations viz. through a recognized stockbroker and through exchanges. It was not interested to know and was not required to know as to how these transactions were executed by the broker so long as they were executed on the exchanges and settled in accordance with the rules and regulations of the exchanges and as well as the settlement mechanism prescribed by the exchanges. It placed orders and sold the GTB shares only through CSFB India, its broker. It did not place any orders for purchase or sale of GTB shares with KP entities nor did it purchase or sell GTB shares from/ to KP entities and/or OCBs as alleged. In respect of the shares it was buying or selling, at no point did it know the identity of the other party's broker or the beneficial owner of the shares from or to whom it was buying/selling. It is, therefore, incorrect to conclude that it purchased shares from KP entities or OCBs. It purchased shares only through CSFB India, its broker via BSE and NSE.2.2.6 that its transactions were genuine purchase and sale transactions, which were settled for delivery and payment by its Custodian, Citibank N. A., Mumbai Branch. The transactions were entered into for the purpose of hedging exposure under the PNs. The PNs were issued as a consequence of demand made by BNP, Hong Kong branch and Indocam, Himalayan Fund. The ownership of shares so purchased was transferred in its favour. There was no evidence submitted to the contrary. Merely by entering into a few large genuine transactions, it did not create artificial volumes. Being an FII sub-account, it is subject to stringent settlement procedures and hence cannot and did not enter into non-genuine transactions. The volume of transactions created by entering into genuine transactions is a natural volume and is not an artificial volume.
2.2.7 Further, it is represented that having regard to the order dated June 12, 2004, no fresh interim directions under Section 11 and 11B of SEBI Act could be passed. Also, no final directions under Section 11 and 11B of the SEBI Act read with regulations 11 and 12 of the SEBI (Prohibition of Fraudulent & Unfair Trade Practices Relating to Securities Market) Regulations, 2003 could be made.
2.2.8 Also it is submitted that its FII sub-account registration expired in June 2002 and the application for renewal of FII sub-account together with the application for renewal of FII license of CSFB was rejected in November 2002. It does not hold GTB shares and has no ability to sell or purchase securities in the Indian capital market.
The subject matter of the present show cause notice i.e. synchronized transactions in GTB scrip with KP entities and OCBs by CSFB India and assisting in the creation of artificial volumes had already been the subject of rigorous investigations which culminated in the issue of the report and show cause notice based thereon to interalia CSFB India and concluded with the suspension of CSFB India's stock broking business for a period of 2 years. More than half of the show cause notice relate to the activity of CSFB India.
2.2.9 That there has been no violation, as alleged, by it of any SEBI Regulations and it neither interfered with the fair and smooth functioning of the market nor indulged in any calculated act to facilitate price manipulation in GTB shares by KP entities nor did it aid and assist KP Group for the same as alleged in the show cause notice.
2.2.10 Also it is represented that there was no violation of Regulation 4(b) of the SEBI (Prohibition of Fraudulent & Unfair Trade Practices Relating to Securities Market) Regulations, 2003 read with SEBI Act, 1992 as alleged or at all by it and no directions are warranted against it under Section 11 & 11B of the SEBI Act read with Regulations 11 & 12 of SEBI (Prohibition of Fraudulent & Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
2.2.11 that SEBI had already barred it from dealing in GTB scrip for a period of nearly 1-1/2 years and then consequently by the order of June 12, 2004 revoked the bar on it. Further, its FII's sub account registration had expired in 2002 and its application for renewal of the registration was refused by SEBI by its order dated 27.11.2002.
Effectively, it was forced out of the market for more than 2 years.
Hence, any further action is unjustified, unwarranted and excessive.
3.1 A personal hearing before the Chairman was granted to KKIL on 28.09.04. Written submissions were also filed by KKIL vide its letter dated 12.10.04, reiterating its position as set out in its reply dated 21.07.04. The following further submissions were made: 3.1.1 In its answer to the query of Chairman in the personal hearing that why participatory notes were sold to BNP, Hong Kong Branch when they have their own FII, it was submitted that BNP Paribas SA, the entity which bought participatory notes had no FII licence as per the information on SEBI Website, although, BNP Paribas UK Ltd appears to have obtained a FII licence on 2.3.01, much after the impugned transactions were executed.
3.1.2 regarding the question whether during the relevant period, KKIL had ever transacted with KP or KP entities, it was submitted that no participatory notes were issued to KP or to any KP entity.
3.2 In accordance with the principles of natural justice KKIL was given a fresh opportunity of personal hearing before me on 21.09.2005. KKIL availed the said opportunity through Shri Shuva Mandal Advocate and P C Singh, CSFB Asia, who made submissions on behalf of KKIL. Vide letter dated 10.10.2005 KKIL further clarified the dealings with regard to the PN's issued on the underlying GTB shares as under; 3.2.1 PNs issued to BNP, Hong Kong Branch in Respect of buy trades of 1, 00,000 and 5, 00,000 shares of GTB undertaken on January 24, 2001 and January 25, 2001 and Sale trades of 60, 00, 000 shares of GTB undertaken on February 13, 2001 by KKIL.
3.2.2 As per the records, none of the offshore investors to whom the participatory notes were issued is/ was related to KP entities or OCB's named in the show cause notice.
3.2.3 All the trades conducted by KKIL as mentioned in the show cause notice was conducted as per prevailing market prices of GTB shares on respective stock exchanges.
3.2.4 CSFB stated that the commercial rationale for the sale and purchase trades by KKIL was to hedge the exposure related to participatory notes that had been issued. Therefore, CSFB or KKIL had not incurred any loss; rather the holders of participatory notes had incurred the loss. Since all the trades were hedge trades for clients to whom PN's were issued, neither CSFB nor KKIL had any interest in the trades.
3.2.5 There is no evidence against CSFB as to prove the synchronized transactions alleged to be coordinated by KP.4.1 I have carefully examined the findings of Investigations, show cause, the reply and the submissions by KKIL. KKIL (now known as CSFB [Mauritius] Ltd was a sub-account of FII Credit Suisse First Boston and is registered in Mauritius. This sub account was investigated for alleged misuse by Ketan Parekh entities for parking of shares, building up of concentrated positions, circumventing Takeover code etc.
4.2 Following are the Trades done by Kallar KaharBroker Name Date Pur/Sale Rate Quantity ExchangeCredit Suisse 07.01.00 Purchase 62.65 4000000 BSEFirst BostonCredit Suisse 07.07.00 Purchase 60.15 1280000 BSEFirst BostonCredit Suisse 25.08.00 Purchase 61.64 82000 NSEFirst BostonCredit Suisse 25.08.00 Purchase 62.08 20010 BSEFirst Boston.Credit Suisse 28.08.00 Purchase 65.21 126990 NSEFirst BostonCredit Suisse 28.08.00 Purchase 65.25 36000 BSEFirst BostonCredit Suisse 29.08.00 Purchase 70.00 90000 NSEFirst BostonCredit Suisse 29.08.00 Purchase 70.81 60000 BSEfirst BostonCredit Suisse 30.08.00 Purchase 78.32 126210 NSEFirst BostonCredit Suisse 30.08.00 Purchase 79.37 45000 BSEFirst BostonCredit Suisse 31.08.00 Purchase 79.25 230000 NSEFirst BostonCredit Suisse 31.08.00 Purchase 79.82 97790 BSEFirst BostonCredit Suisse 04.09.00 Purchase 82.96 239855 NSEFirst BostonCredit Suisse 04.09.00 Purchase 83.92 96000 BSEFirst BostonCredit Suisse 05.09.00 Purchase 86.58 210000 NSEFirst BostonCredit Suisse 05.09.00 Purchase 86.54 40145 BSEFirst BostonCredit Suisse 07.09.00 Purchase 90.41 880000 NSEFirst BostonCredit Suisse 07.09.00 Purchase 88.81 120000 BSEFirst BostonCredit Suisse 21.11.00 Purchase 108.27 1700000 NSEFirst BostonCredit Suisse 29.11.00 Purchase 99.24 2000000 BSEFirst BostonCredit Suisse 27.12.00 Sale 79.41 2200000 BSEFirst BostonCredit Suisse 29.12.00 Sale 82.05 1500000 BSEFirst BostonCredit Suisse 24.01.01 Purchase 91.57 345000 NSEFirst BostonCredit Suisse 24.01.01 Purchase 92.26 125000 BSEFirst BostonCredit Suisse 25.01.01 Purchase 104.04 63000 NSEFirst BostonCredit Suisse 25.01.01 Purchase 105.68 67000 BSEFirst BostonCredit Suisse 13.02.01 Sale 94.59 6000000 NSEFirst BostonCredit Suisse 02.03.01 Sale 72.17 500000 NSEFirst Boston 4.3 From the above table, it may be noticed that KKIL had purchased 40 lacs & 12.80 lacs shares of Global Trust Bank on June 7 & July 7, 2000 respectively. These shares were acquired from Wakefield (an OCB) vide a cross deal through CSFB. Ketan Parekh entities/its associates bought around 85 lacs shares out of the 1 crore shares of GTB sold by ADB.After a short gap, these associates/others who bought the shares had sold them back to Ketan Parekh entities which in turn sold it to Wakefield. Wakefield in turn sold it to other sub-accounts Capthol and KKIL. Apart from the transaction between Wakefield and KKIL, shares were purchased by KKIL from other set of OCBs i.e. Brentfield and Kensington.Broker Date Pur/Sale Rate Quantity Exch Counter ClientName ange party BrokerCSFB 07-Sep- Purchase 90.41 880000 NSE Classic PFMS 00 Share & StockCSFB 07-Sep- Purchase 88.8 120000 BSE Market 00CSFB 21-Nov- Purchase 108.27 1700000 NSE CSFB Kens 00 ington 4.4 Between August 25 & September 5, 2000 KKIL had purchased another 15 lacs shares of Global Trust Bank through CSFB. The trading details of KKIL from September 3, 2000 till March 2, 2001 with counter party details is as follows: 4.5 On September 7, 2000, KKIL bought totally 10 lacs shares through CSFB. Out of these 10 lacs shares, 8.8 lacs shares were bought in NSE @ 90.41 per share & 1.2 lacs in BSE @ 88.81 per share. For the NSE transaction the counter party (seller) for 5 lacs shares was Classic Share & Stock Brokers Limited, a broking entity of KP and the client was Panther Fincap & Management Services Limited (PFMS), another Ketan Parekh entity.
4.6 KKIL purchased another 17 lacs shares on November 21, 2000 through CSFB. These shares were bought @ Rs. 108.27 per share. This was a cross deal and selling client were Kensington Investments Ltd., an OCB and Brentfield Holdings Ltd. Kensington sold 15 lacs shares to KKIL and similarly Brentfield sold 2 lacs shares. On November 29, 2000 KKIL again purchased another 20 lacs shares through CSFB. This was also a cross deal, the selling client being Kensington Investments. This deal was done at @ Rs. 99.24 per share.
4.7 From the above, it may be observed that the KP entities initially parked major chunk of shares with a set of OCBs (Brentfield, Wakefield and Kensington) and after a short gap, these shares were shifted to KKIL. It may be further observed that from June 7, 2000 till November 29, 2000 KKIL had acquired totally 1.148 crores shares of Global Trust Bank. This amounts to 9.66% of the equity capital of the Bank. Out of these 1.148 crores shares, KKIL had bought 52.8 lacs shares from Wakefield, 35 lacs from Kensington, 2 lac shares from Brentfield and 5 lacs from PFMS. The remaining 20 lac shares were purchased from the market. All the 89.8 lacs shares from the three OCBs namely Brentfield, Kensington & Wakefield were purchased vide cross deals through CSFB.From the attendant circumstances, it is clear that this was done with a view to transfer these shares from these OCBs to KKIL for the purpose of parking and to ensure that the beneficial ownership does not change from KP entities.
4.8 KKIL sold a part of the shares acquired till November 29, 2000, on December 27 & 29, 2000. It sold 22 lacs shares in BSE @ Rs. 79.41 per share through CSFB. The buying broker for this transaction was TSL while the client was Classic Credit. Both these entities were admittedly Ketan Parekh entities. It appears that through this transaction KKIL had actually transferred the 22 lacs shares acquired from OCBs to this particular Ketan Parekh entity. Again on December 29, 2000 KKIL had sold another 15 lacs shares through CSFB and for this transaction also the counter party broker was TSL and the client was Kensington. It may be noted that Kensington had sold 20 lacs shares to KKIL on November 29, 2000. This shows this was only a parking arrangement. Due to the two sale transactions as mentioned above, on December 29, 2000 KKIL was left with 79.80 lacs shares of Global Trust Bank. On January 24 & 25, 2001 KKIL had purchased another 6 lacs shares from the market. Hence, as on January 25, 2001 KKIL held 85.80 lacs shares of Global Trust Bank.
4.9 KKIL started selling shares from March 13, 2001 onwards. On this day, it sold 60 lacs shares through CSFB. This transaction was done in NSE @ Rs. 94.59 per share. The counter party buying brokers for this transaction were as follows: Claridges had purchased 50 lacs shares for OCBs namely European Investment (40 lacs) & Far East Investments (10 lacs). Classic share & Stockbrokers had purchased 5 lacs shares for PFMS, a Ketan Parekh entity. Similarly NH Securities had purchased 5 lacs shares for PFMS.Again on March 2, 2001 KKIL sold 5 lacs shares of Global Trust Bank through CSFB @ 72.17 per share in NSE. The buying broker & the client for the transaction were TIFIL & Classic Credit respectively. Thus it can be seen from the above that KKIL had sold 65 lacs shares between February 13, 2001 and March 2, 2001. On March 2, 2001 KKIL was left with 20.8 lacs shares of Global Trust Bank.
4.10 From the transaction details, it can be seen that KKIL had acquired 89.8 lacs shares from PFMS & the OCBs namely Wakefield, Kensington & Brentfield. It also had acquired 31 lacs shares from the market. Large parts of these shares were offloaded later by KP entities or through KP entities as discussed earlier. To sum up, it sold 50 lacs shares to European & Far East, 35 lacs shares to Ketan Parekh entities and 15 lacs shares back to Kensington. Out of 35 lacs shares purchased by Ketan Parekh entities, they sold 15 lacs shares to Kensington. It is to mention here that Kensington has made payment for these 15 lacs shares but did not receive the delivery of these shares and it is observed that these shares had gone to Ketan Parekh entities. Out of the 85 lacs shares acquired by Ketan Parekh entities from ADB, Ketan Parekh entities initially parked these shares with Wakefield, an OCB which in turn shifted these shares to Copthol and KKIL, two sub Accounts. KKIL has admitted to SEBI that it has issued Participatory Notes against the shares acquired in India as underlying. However, it is not possible to identify the actual beneficiaries of the PNs.
4. 11 On a conspectus of the sequence of serried transactions as brought out in vivid details supra, it is evident that KKIL was used by Ketan Parekh entities to park shares for a short period and for circular trades. On many occasions trades were done through cross deals. It was also seen that these transactions were synchronised deals and the orders were placed in such a way that shares sold by Ketan Parekh entities were purchased by a particular promoter group entity/OCB/Sub Account and when these promoter group entity/OCB/Sub Accounts sold back shares through synchronised transactions these were purchased only by Ketan Parekh entities. Such matched transactions in a cosy arrangement ensured that the movement of shares were restricted to select group of OCBs, Sub Accounts & Ketan Parekh entities only. These cross & matched deals were in gross abuse of the trading system and they hampered efficient price discovery, in as much as such transactions used to be at a predetermined price.
In appeal No. 54 of 2002 - Nirmal Bang Securities Pvt. Ltd v. SEBI, the Hon'ble Securities Appellate Tribunal has held as under with regard to synchronized deals "BEB has been charged for synchronized deals with First Global. I have examined the data provided by the parties on this issue. I find many transactions between BEB and FGSB. There are many instances of such transactions. I find the scrip, quantity and price for these orders had been synchronized by the counter party brokers.
Such transactions undoubtedly create an artificial market to mislead the genuine investors. Synchronized trading is violative of all prudential and transparent norms of trading in securities. Synchronized trading on a large scale can create false volumes. 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 that in the online trading system, confidentiality of counter parties is ensured, is untenable. It was submitted by the Appellants that it was not possible for the broker to know who the counter party broker is and that trades were not synchronized but it was only a coincidence in some cases. Theoretically this is OK. But when parties decide to synchronize the transaction the story is different. There are many transactions giving an impression that these were all synchronized, otherwise there was no possibility of such perfect matching of quantity price etc. As the Respondent rightly stated it is too much of a coincidence over too long a period in too many transactions when both parties to the transaction had entered buy and sell orders for the same quantity of shares almost simultaneously." 4.12 By entering into these trades Ketan Parekh entities tried to induce people to trade in the scrip by creating artificial volumes.
Further, KKIL aided KP entities in building up of concentrated positions, parking of shares, creation of artificial volumes and synchronized trades. Such transactions wherein the buy and sell orders are matched are highly irregular and defeat the purpose of normal order matching system in the price discovery process in the exchanges and would also be in violation of Regulation 4 (b) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to securities market) Regulations, 1995 which reads as under:- (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities markets; 4.13 As already noted above, the orders were placed in such a way that shares sold by Ketan Parekh entities were purchased by a particular promoter group/entity/OCB/sub-accounts and when these promoter group/OCB/sub-accounts sold back shares through synchronized trades, cross deals etc, the counter party for the trades were Ketan Parekh entities. CSFB in its reply dated 10th October 2005 raised the contention that there is no evidence against CSFB as to prove the synchronized transaction alleged to be coordinated by KP, which is found to be wrong, in view of the following extract from CSFB's letter dated 31.10.2003.
It sold shares on behalf of the six entities related to promoter's, namely, Anajanya Traders Private Ltd, Bombay Mahalakshmi Traders Private Ltd., Chiranjeevi Traders Private Ltd, Gajanan Financial Services Private Ltd, Gajmukh Investments Private Ltd and Kadrish Finance and Investments Private Ltd during November and December 1999. Since the sale orders were large, CSFB India synchronised the sales through KP. However, at no point was CSFB India aware who was the ultimate client of KP related brokers until SEBI informed about it. It is well established principle that no broker will disclose identity of his clients to another broker. The orders were entered into the trading system of the exchanges and matched in accordance with the order matching mechanism of the exchanges. The shares were synchronized with KP related brokers as he was considered to be a leading intermediary and bulge broker at the relevant time and there was no prohibition on synchronization.
CSFB, therefore, had admitted their linkage with the KP and KP entities in view of the aforementioned transactions. At the same time, it had stated that it was just instrumental in the trades without culpable knowledge of the enormity and intricacies of the game plan of KP as KP was treated with high regard by market participants during the relevant period. This contention of CSFB is a self serving denial and lacks merit, as at every stage of the said transactions, it knew the identity of counterparty as these were synchronised trades and likewise, it also knew the identity of the trading clients as there had been a series of cross deals executed by CSFB. Such a conduct undermines the basic concept of anonymity offered by the exchange trading system and also prohibits another investor outside the KP group from accessing the said scrip and also created false and misleading appearance of trading on the securities market. In the said circumstances and because of the hype surrounding the scrip an artificial market is created in the scrip. The gamut of transactions with underlying design of park and offload to which CSFB is a privy as a common broker besides being FII for the sub account KKIL clearly portends that the sub account of KKIL was used for the said purpose with the concomitant unfavourable impact on the fair practices followed by the market.
4.14 Acting in concert is something about which actual evidence is normally difficult to come. The Supreme Court had dealt with the issue in the case of CIT v. East Coast Commercial Co.Ltd. AIR (1967) SC 768 (Kedia Family case) in the context of Section 23A of the Indian Income Tax Act, 1922 wherein the question was whether Kedia family had acted in concert to control the affairs of the concerned company. In the facts of that case, there was no evidence of any overt act showing that they were acting in concert and thereby constituted and acted as a block. In para 14 of the judgement, the SC observed as follows: ... It is sufficient, if having regard to their relation, etc., their conduct and their common interest, that it may be inferred that they must be acting together, evidence of actual concerted acting is normally difficult to obtain and is not insisted upon.
(p.772) 4.15 Under the circumstances, it is concluded from the method and manner of execution of the aforesaid transactions, that KKIL, the sub-account of FII CSFB aided and abetted Ketan Parekh entities in parking of GTB shares, building up of concentrated positions and creating artificial volumes, giving misleading appearance of trades.
Hence, it can be inferred that KKIL have violated Regulation 4 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 as aforesaid. The evidence of connected circumstances and preponderance of probabilities, common course of natural events and combination of facts creating network and artificial volumes gives rise to a reasonable inference that the noticee acted unfairly and also not in good faith while entering into the aforesaid transactions. The standard of proof required in a proceeding of this nature is at variance with the standard of proof required in criminal cases. It is sufficient if the preponderance of probabilities suggests towards the indulgence of the delinquent in the misconduct. The strict rules of Evidence Act and proof beyond reasonable doubt are not applicable to a proceeding of this nature. The Supreme Court's decision in Gulabchand v. Kudilal AIR, 1966, SC 1734 and the decision of the Special Court for trial of offences relating to transactions in securities in the matter of National Housing Bank v.ANZ Grindlays Bank, 5.1 It is noted that CSFB (Mauritius) Ltd formerly known as Kallar Kahar Investments Ltd is no longer operative and holds no sub account licence. It, therefore, is disabled to undertake any transactions in securities in India. It is also noted that its application to renew the sub account licence was withdrawn by its letter dated August 30, 2004.
KKIL's registration expired in 2002 and SEBI vide its letter dated 27.11.02 refused to renew its registration. As per the interim order dated 31.12.02, KKIL was refrained from buying, selling or transacting, pledging or disposing or dealing in any manner in the shares of GTB pending investigations in the matter. The said interim order was revoked vide order dated 12.6.04.
5.2. Taking into account the relative role of KKIL as brought out, the submissions made, the facts and circumstances and the interim order dated 31.12.02 whereby the entities were restrained from dealing only in GTB shares and which was in operation for over 17 months pending investigations and that KKIL is no longer operative in the Indian capital market for the aforesaid reasons and the fact that the promoters of GTB were restrained from dealing in the shares of GTB for a period of 18 months vide SEBI Order dated 23rd March, 2004 and also considering that the scrip of GTB is not currently traded after its merger with Oriental Bank of Commerce, I am of the considered view that matter does not call for any further directions.