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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. IVD-ID5/ADPL- CSC/AO/DRK-AKS/EAD3-587/131 -2014]
__________________________________________________
UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA
ACT, 1992 READ WITH RULE 5(1) OF SECURITIES AND EXCHANGE
BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING
PENALTIES BY ADJUDICATING OFFICER) RULES, 1995
Against:
Shri C Shah Champaklal
B-81, Konark Karishma
Oppo Renuka Hall, Vastrapur
Ahmedabad- 380015
PAN No. AURPS4385B

FACTS IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as SEBI)
conducted an investigation into the trading in the scrip of Aarey Drugs and
Pharmaceuticals Ltd. (hereinafter referred to as ADPL) during the period
J anuary 1, 2009 to August 31, 2009 (hereinafter referred to as Investigation
Period). The scrip is listed on BSE Ltd. (hereinafter referred to as BSE). It is
noted from the findings of the investigation report (hereinafter referred to as
IR) and the table depicted below that price as well as volume of all the scrip
increased significantly during the investigation period as compared to pre
investigation period.



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Aarey Drugs and
Pharmaceuticals Ltd.
Pre Investigation
Period
(1.10.2008
31.12.2008)
Open
(1.10.2008)
44.7
High
44.7
(1.10.2008)
Low 15.15
(5.12.2008)
Close
(31.12.2008)
17.6

Average Volume

7392
Investigation Period
(1.1.2009
31.8.2009)
Open
(1.1.2009)
18.35
High
52.3
(18.8.2009)
Low 15
(22.1.2009)
Close
(31.8.2009)
45.1

Average Volume

55174

% change in Average Volume (Approx)

746%

APPOINTMENT OF ADJUDICATING OFFICER
2. I was appointed as Adjudicating Officer under Section 15 I of the Securities
and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act),
read with Rule 3 of Securities and Exchange Board of India (Procedure for
Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995
(hereinafter referred to as Adjudication Rules) to inquire into and adjudge
under Section 15 HA of the SEBI Act for the violation of Regulations 3 (a), (b),
(c), (d), 4 (1), 4 (2) (a), (b), (e) and (g) of SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to Securities Market) Regulations, 2003
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(hereinafter referred to as PFUTP Regulations) alleged to have been
committed by Shri C Shah Champaklal (hereinafter referred to as noticee)
and the same was communicated vide proceedings of the Whole Time
Member appointing Adjudicating Officer dated 12.04.2013.

SHOW CAUSE NOTICE, REPLY AND HEARING

3. A Show Cause Notice No. A&E/EAD3/DRK-AKS/20848/2013 dated
16.08.2013 (herein after referred to as SCN) was served on the noticee by
Registered Post Acknowledgement Due in terms of the provisions of Rule 4 of
the Adjudication Rules requiring the noticee to show cause as to why an
inquiry should not be held against the noticee and why penalty, if any, should
not be imposed on the noticee under Section 15 HA of the SEBI Act. Proof of
service of SCN is on record. In the said SCN, it was alleged that the noticee in
collusion with the group had executed circular trades, synchronised trades,
reversal trades and self trades in the scrip of ADPL which had resulted in
creation of artificial volume in the said scrip leading to false and misleading
appearance of trading in the scrip. Further, this has also artificially increased
the price in the scrip and hence is fraudulent in nature.

4. However, no reply was received from the noticee, therefore vide hearing
notice dated 05.11.2013, noticee was advised to submit a reply to the SCN on
or before 20.11.2013 and attend the hearing on 25.11.2013 at 04:00 pm at
SEBI Bhavan, Mumbai. Proof of service of the hearing notice is also on
record. However, the noticee failed to attend the hearing without furnishing
any reason. Therefore, vide final hearing notice dated 23.12.2013 noticee
was granted a final opportunity of hearing on 06.01.2014 at 03:00 pm at SEBI
Bhavan, Mumbai. Proof of service of this hearing notice is also on record. In
the said hearing notice it was mentioned that if the noticee failed to attend the
final hearing, the matter shall be proceeded based on material made available
on record. However, the noticee again failed to attend the hearing without
furnishing any reason.

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5. From the records it is noted that the noticee has neither replied to the SCN
nor attended any of the personal hearings granted to him inspite of service of
SCN and hearing notices as stated above. In light of this fact, I am convinced
that the Principles of Natural J ustice have been complied with and I am
compelled to pass an ex-parte order against the noticee based on the
material made available on record.
CONSIDERATION OF EVIDENCE AND FINDINGS
6. I have taken into consideration the facts and circumstances of the case and
the material made available on record.

7. It is observed from the IR that a group of 25 entities including the noticee
were connected to each other by common address, common introducer or
introduced by other group members, transferred shares in off market to each
other etc. The name and linkages among various entities is given below:
S.No PAN NO Name Linkages
1 ABCPP211M Shailesh
Somabhai Patel
Shailesh Patel, Nitaben Patel & Kapilaben Patel have common
address viz. A 14 Snehadri Apts, Ambawadi Shreyas Tekra,
Ahmedabad, Gujarat, 380051.

Ronak Choksi introduced Nitaben Patel and Shailesh Patel (KYC by
Guiness Sec Ltd.)

Ronak Chokasi signed as witness to Shailesh Patel & Nitaben Patel
(KYC by Networth Stock Broking Ltd.)

Shailesh Somabhai Patel and Nitaben Shaileshbhai Patel received
shares in preferential allotment in Winsome in the year 2008.

Common Introducer - The following set of entities had a common
introducer:

Shailesh Patel, Nitaben Patel, Nikhilbhai Shah and Shaishil J haveri by
one Premal Shah (KYC by Brics Securities Ltd.)

Kapilaben Patel and Nitaben Patel by one Samir Shah (KYC by
Comfort Securities Pvt. Ltd.)

Shailesh Patel and Shaishil J haveri by one Macwan J oel J (KYC by
Mangal Keshav Securities Ltd.)
2 AGXPP3551G Nitaben
Shaileshbhai
Patel
3 AYQPP7574A Kapilaben
Somabhai Patel
4 ADDPC2938D Ronak Ashwin
Choksi
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S.No PAN NO Name Linkages

Shailesh Patel and Kapilaben Patel by one Prakash Kadiya (KYC by
MTL Share and Stock Brokers Ltd.)

Nitaben Patel and Shailesh Patel by one Narayan Equity Broking and
Advisory Ser Ltd. (KYC by SMC Global Sec Ltd.)

Nitaben Patel and Shailesh Patel by one Nitin Patil (KYC by SSJ
Finance and Sec Pvt. Ltd.)

Manish Shah, Nikhilbhai Shah and Shailesh Patel by one Ashish
Dapki (KYC by Nirmal Bang Sec Ltd.)

Kumkum Stock Brokers Pvt. Ltd. and Nitaben Patel by one Ripple K
Shah (KYC by Nirmal Bang Sec Ltd.)

Nitaben Patel and Shailesh Patel by one A.R. Patel (KYC by Anand
Rathi Share & Stock Brokers Ltd.)

5 ACIPS6166P Nikhilbhai Shah Nikhilbhai Shah, Shaishil T. J haveri and Bela T J haveri are Directors
of Kumkum Stock Brokers Pvt. Ltd. (KYC by Nirmal Bang Sec Pvt.
Ltd.)

Manish Ratilal Shah & Nikhilbhai Shah have common Address - B-81,
Pariseema Complex, C.G. Road, Ellisbridge Ahmedabad.

Bela J haveri introduced to Nikhil Shah (KYC by SSJ Finance &
Securities Pvt. Ltd.)

Shaishil J haveri introduced Manish Shah and Nikhil Shah (KYC by
SPFL Sec Ltd.; Siddhi Shares Pvt. Ltd.)

Common introducer:

Shailesh Patel, Nitaben Patel, Nikhilbhai Shah and Shaishil J haveri by
one Premal Shah (KYC by Brics Securities Ltd.)

Bela J haveri and Nikhil Shah by one Hardik Shah (KYC by Religare
Securities Ltd)

Shailesh Patel and Shaishil J haveri by one Macwan J oel J (KYC by
Mangal Keshav Securities Ltd.)

Manish Shah, Nikhilbhai Shah and Shailesh Patel by one Ashish
Dapki (KYC by Nirmal Bang Sec Ltd.)

6 AGQPJ 8664F Shaishil T. J haveri
7 AABPZ2800L Bela T J haveri
8 AACCK6784E Kumkum Stock
Broker Pvt. Ltd.
9 AZMPS2291J Manish Ratilal
Shah
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S.No PAN NO Name Linkages
Kumkum Stock Brokers Pvt. Ltd. and Nitaben Patel by one Ripple K
Shah (KYC by Nirmal Bang Sec Ltd.)

10 AKQP8635P Daxaben
Vasantkumar
Shah
Nita B Bhavsar, J ipal Shah, Dhavalkumar Soni , C Shah Champaklal
and Shailesh Somabhai Patel, have common contact number i.e.
9825011486 and email ID (KYCs by Emkay Share and Stock Brokers
Ltd.)

Dhavalkumar Hastimal Soni & Hastimal Gulabchand Soni have
common address viz. Mota Nagar Wada, At Kapadwanj, Nadiad,
Gujarat 387620.

J ipal Shah introduced Kapilaben Patel and Nita Bhavsar (KYC by
Arcadia Share & Stock Brokers Ltd.)

Daxaben Shah introduced Apexa Patel (KYC by Arcadia Share &
Stock Brokers Pvt. Ltd.)

Common Introducer:
Daxaben Shah, J ipal Shah and Nita Bhavsar by one Pranav Vora
(KYC by ANS Pvt. Ltd.)
11 ANNPB8668D Nita B Bhavsar
12 BMWPS2515R J ipal Pineshkumar
Shah
13 AURPS9165R Dhavalkumar
Hastimal Soni
14 AGMPS1204L Hastimal
Gulabchand Soni
15 AURPS4385B C Shah
Champaklal
16 AFXPP3167P Apexa
J agdishbhai Patel
Apexa J agdishbhai Patel & J agdish Ramanlal Patel have common
address viz. C/44, Greenwood Society, Opp:Sarvoday-2, Sola Road,
Ahmedabad, 380061.

Daxaben Shah introduced Apexa Patel (KYC by Arcadia Share &
Stock Brokers Pvt. Ltd.)

J agdishbhai Patel introduced Sonal Kiritbhai Patel (KYC by Arcadia
Share & Stock Brokers Pvt. Ltd.)

Common Introducer:
Apexa Patel and J agdish Patel by one Tejas Shah (KYC by SSJ
Finance and Securities Pvt. Ltd.)


17 AAWPP0600R J agdish Ramanlal
Patel
18 AOEPP2753D Sonal Kiritbhai
Patel
19 AAACC2255N Chase Marketing
Pvt. Ltd

The email id is given as supertex@vsnl.com. Further, it received
shares in preferential allotment from Supertex Industries Ltd. It
transferred 350,000 shares of Supertex to Manish Ratilal Shah and
500,000 shares of Supertex to Nikhil V Shah in off market.

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S.No PAN NO Name Linkages
20 AAAPA7605D Amrita Agrawala She received shares in preferential allotment from Supertex Industries
Ltd. She transferred 300,000 shares of Supertex to Kapilaben
Somabhai Patel in off market.
As stated in her reply dated 15.1.2013, she had transaction with
Kapilaben Somabhai Patel. It was a friendly loan.
21 AFYPM7292R Danish Merchant He received shares in preferential allotment from Supertex Industries
Ltd. He transferred 150,000 shares of Supertex to Kapilaben
Somabhai Patel in off market.

Letters dated 14.1.2013 from Amrit L Gandhi and Danish Merchant
requesting for one month time are identical letters and signed by
common person, indicates connection between the two entities
22 ADPPB9428F J agdish Bhagat
He received shares in preferential allotment from Supertex Industries
Ltd. Further, he received 10,000 shares of Supertex from Kumkum
Stock Broker Pvt. Ltd in off market.
23 AAUPV2876R J igish Vasa He transferred 55,000 shares of Supertex to Bela Tushar Zaveri in off
market. Further, he received 30,000 shares of Supertex and 59,200
shares of Winsome from Shaishil J haveri in off market.
24 AADCP2649G Parameshwar
Exports Pvt Ltd
It received shares in preferential allotment from Supertex Industries
Ltd. It transferred 300,000 shares to Manish Ratilal Shah in off market.

25 AACPG5265H Amrit L Gandhi He received shares in preferential allotment from Supertex Industries
Ltd.
Letters dated 14.1.2013 from Amrit L Gandhi and Danish Merchant
requesting for one month time are identical letters and signed by
common person, indicates connection between the two entities

8. Out of the above entities, several entities also entered into off market
transactions with each other that indicates their connection. The off market
transactions in the scrip of RTL was for 1,094,439 shares, in SIL for
2,646,181 shares, in ADPL for 79,224 shares and in WTIL for 178,196
shares.

9. The trading activity of the group clients across the scrip of ADPL during the
investigation period is as follows:
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Scrip A
Traded
Quantity
(Market)
B
Total Buy
of Group
C
% of
total
buy
of
Grou
p to
total
trade
d
quan
tity
(Mar
ket)
D
Total Sale
of Group
E
% of
total
sale
of
grou
p to
total
trade
d
quan
tity
(Mar
ket)
F
Trade
Amongst
Group*
G
% of
trade
amo
ngst
Grou
p to
total
trade
d
quan
tity
(Mar
ket)
H
Synchro
nised
Trades
among
Group**
I
% of
sync
hroni
sed
trade
s to
trade
amo
ng
Grou
p
J
% of
synch
ronis
ed
trade
s
amon
g
Grou
p to
total
trade
d
quant
ity
(Mark
et)
Aarey Drugs
and
Pharmaceuti
cals Ltd.
8883052 4589697 51.67 4439211 49.97 2486523 27.99 846184 34.03 9.53

Aarey Drugs and Pharmaceuticals Ltd.
10. It is observed from the IR that the noticee along with the group had executed
synchronised trades, reversal trades and circular trades in the scrip of ADPL.
It is noted that out of 161 days during which the scrip was traded during
period of investigation, the trades amongst group were executed on 145 days.
The individual contribution of the noticee in such trades is as mentioned
below:
Client Name
Total
Buy
(Market)
Buy
amongst
Group
Total
Sell
(Market)
Sell
amongst
Group
Synchronised
Trades
amongst
Group (Buy)
Synchronised
Trades
amongst
Group (Sell)
C Shah Champaklal 3,47,228 2,29,128 3,47,228 2,43,027 88,145 63,114

11. A few instances of synchronised trades of the noticee in the scrip of ADPL
within the group are as follows:
Trade
Date
Trade
Time
Buy Client
Name
Buy
Order
Time
Buy
Order
Qty
Buy
Order
Price
Sell Client
Name
Sell
Order
Time
Sell
Order
Qty
Sell
Order
Price
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27/02/09 10:32:40
Nita
Bhavsar
10:32:40 7,000 21.7 Champaklal 10:32:37 7,000 21.7
30/03/09 10:36:38 Champaklal 10:36:38 18,000 29.6
Nita
Bhavsar
10:36:30 18,000 29.6
13/04/09 15:19:36 J ipal Shah 15:19:36 4,900 34 Champaklal 15:19:35 4,900 34
06/05/09 10:20:52 Champaklal 10:20:51 2,200
38.75

Nita
Bhavsar
10:20:35 6,000
38.75


12. It is observed from the IR that noticee's 38.46% of buy amongst the group is
synschronised while his 25.96% of sell amongst the group is synchronised.
Further as seen from the order log trade log noticee's synchronised trades
were frequent in nature with the group members during the period February -
J une 2009.

13. The instance of reversal trade and circular trade provided in the IR does not
conclusively establish reversal trades and circular trades of the noticee in the
scrip of ADPL.

14. Further analysis of the aforesaid trades amongst Group is as follows:
Client Name No. of
Days
traded
amongst
group
No. of
Trades
amongst
group
LTP
Difference (%)

C Shah Champaklal

49 424 -2.26 to 7.14

15. The price impact of trades of the Group is as follows :
Scrip No. of
trades
with +
LTP
% of
trades
with +
LTP
Impact
of
trades
with +
LTP (`)
No. of
trades
with -
LTP
% of
trades
with -
LTP
Impact
of
trades
with
LTP (`)
Net
LTP
impact
(`)
Sum of
NHP
Diff
(Market)
(`)
Sum of
NHP
Diff
(Group)
(`)
Aarey Drugs
and
Pharmaceuticals
Ltd.
1870 46.18% 780.9 1557 37.02% -360.35 420.55 33.95 20.6

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It is noted from the above that the trades of the Group resulted in significant
increase in price of the scrip.
16. At this juncture, I would like to quote the order of the Honble Securities
Appellate Tribunal in Sparkline Mercantile Co. Pvt. Ltd. Vs SEBI dated
16.01.2012 wherein it was held as follows:
..It is an admitted position that it is difficult to get direct evidence with
regard to synchronization of trades for the purpose of upsetting the market
equilibrium or to manipulate the market. It is only on the basis of
circumstantial evidence that such a connection can be proved

..A large number of trades were executed among the group entities within
a minute of placing the order. This cannot happen without prior meeting of
minds among the connected entities. From the details of the trades
executed and having regard to the trading system, we do not think that
such large number of trades could match between the same parties
unless the trading system was being abused..

17. As observed in pre paras that trades executed by the noticee was not of one
instance but aforesaid transactions were repeatedly carried out over a period
of time within the group. It is pertinent to note that such trading patterns lead to
price fluctuation and creates false appearance of trading in securities market
and thereby tending to mislead the gullible investors.
18. In view of the above discussions and Hon'ble Securities Appellate Tribunal
Order, it can be concluded that noticee had executed synchronised trades in
the scrip of ADPL.

19. In view of the above facts and circumstances it can be concluded that the
noticee had violated Regulations 3 (a), (b), (c), (d), 4 (1), (2), (a) and (e) of
PFUTP Regulations in the scrip of ADPL. The text of the said provisions are
as follows:
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Market) Regulations, 2003
3. Prohibition of certain dealings in securities
No person shall directly or indirectly
(a) buy, sell or otherwise deal in securities in a fraudulent manner;
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(b) use or employ, in connection with issue, purchase or sale of any security
listed or proposed to be listed in a recognized stock exchange, any manipulative
or deceptive device or contrivance in contravention of the provisions of the Act or
the rules or the regulations made there under;

(c) employ any device, scheme or artifice to defraud in connection with dealing in
or issue of securities which are listed or proposed to be listed on a recognized
stock exchange;

(d) engage in any act, practice, course of business which operates or would
operate as fraud or deceit upon any person in connection with any dealing in or
issue of securities which are listed or proposed to be listed on a recognized stock
exchange in contravention of the provisions of the Act or the rules and the
regulations made there under.

4. Prohibition of manipulative, fraudulent and unfair trade practices
(1) Without prejudice to the provisions of regulation 3, no person shall indulge in
a fraudulent or an unfair trade practice in securities.

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade
practice if it involves fraud and may include all or any of the following, namely:

(a) indulging in an act which creates false or misleading appearance of trading in
the securities market;

(e) any act or omission amounting to manipulation of the price of a security;

20. The said violations attract penalty under Section 15HA of the SEBI Act which
provides that:
15HA. Penalty for fraudulent and unfair trade practices- 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.

21. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the
Rules require that while adjudging the quantum of penalty, 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
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Page 12 of 13

result of the default
c. the repetitive nature of the default

22. The IR has not quantified any gain or unfair advantage accrued to the noticee
as a result of noticee's trading in the aforesaid scrip. Further, there is no
material made available on record to assess the disproportionate gain or
unfair advantage and amount of loss caused to an investor or group of
investors as a result of noticee's violation.

23. In view of the abovementioned conclusion and after considering the factors
under Section 15J of the SEBI Act, I hereby impose a penalty of
` 3,00,000 /- (Rupees Three Lakh only) on Shri C Shah Champaklal under
Section 15HA of the Securities and Exchange Board of India Act, 1992 which
is appropriate in the facts and circumstances of the case.

ORDER
24. In exercise of the powers conferred under Section 15 I of the Securities and
Exchange Board of India Act, 1992, and Rule 5 of Securities and Exchange
Board of India (Procedure for Holding Inquiry and Imposing Penalties by
Adjudicating Officer) Rules, 1995, I hereby impose a penalty of ` 3,00,000 /-
(Rupees Three Lakh only) on Shri C Shah Champaklal (PAN No.
AURPS4385B) in terms of the provisions of Section 15HA of the Securities
and Exchange Board of India Act 1992 for the violation of Regulations 3 (a),
(b), (c), (d), 4 (1), 4 (2) (a) and (e) of SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to Securities Market) Regulations, 2003. In
the facts and circumstances of the case, I am of the view that the said penalty
is commensurate with the violations committed by the noticee.

25. The penalty shall be paid by way of Demand Draft drawn in favour of SEBI
Penalties Remittable to Government of India payable at Mumbai within 45
days of receipt of this order. The said demand draft shall be forwarded to
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Page 13 of 13

Chief General Manager- IVD, Securities and Exchange Board of India, Plot
No. C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.

26. In terms of the provisions of Rule 6 of the Securities and Exchange Board of
India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules 1995, copies of this order are being sent to Shri C Shah
Champaklal residing at B-81, Konark Karishma, Oppo Renuka Hall,
Vastrapur, Ahmedabad- 380015 and also to the Securities and Exchange
Board of India, Mumbai.





Place: Mumbai D. RAVI KUMAR
CHIEF GENERAL MANAGER &
Date: 10.09.2014 ADJUDICATING OFFICER



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