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WTM/RKA/IVD/NRO/29/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA


ORDER
Under section 11(1), 11(4)(b) and 11B of the Securities and Exchange Board of India Act,
1992.
In respect of 1.) M/s. Gagan Securities, 2.) Shri Ajay Jain, 3.) M/s. Unique Securities, 4.)
Shri Deepak Batra, 5.) M/s. G. K. Investments 6.) Shri Parveen Bansal 7.) Shri Rajesh
Kumar, 8.) Shri Asim Jain and 9.) Shri Sunil Gupta
In the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.
______________________________________________________________________________
1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) had conducted an
investigation in buying, selling and dealing in the shares of M/s. Kinetic Capital Services Limited
(hereinafter referred to as "Kinetic)" and M/s. Shubh International Limited (now known as M/s
Geetanjali Credit & Capital Ltd.) for the period February 23, 1999 to May 21, 1999
(Investigation Period).
2. It was observed that during the investigation period:i.

The price of the shares of Kinetic increased from a low of ` 20.60/- on December 22, 1998
to a high of ` 65/- on May 17, 1999 and the price of the shares of M/s. Shubh International

ii.

iii.

iv.

Limited (hereinafter referred to as 'Shubh') increased from ` 19/- on February 23, 1999 to `
48/- on May 21, 1999 at Delhi Stock Exchange (DSE).
Majority of the trades in the scrip of Kinetic and all the trading in the scrip of Shubh at DSE
was carried out by two brokers namely M/s. Indus Portfolio Private Ltd. (hereinafter
referred as "Indus") and M/s. V. H. Securities Ltd. (herein after referred as "VH"). Trading
in the scrip of Shubh was circular in nature.
Indus had traded in the scrip of Kinetic as well as Shubh, on behalf of its unregistered subbroker, M/s Gagan Securities, who dealt on behalf of M/s. G. K. Investments, who in turn
traded on behalf of Shri Deepak Batra, who had traded on behalf of Shri Parveen Bansal and
Shri Rajesh Kumar.
VH had traded in the scrip of Kinetic as well as Shubh, on behalf of its unregistered subbroker, Shri Ajay Jain trading as an individual as well as his proprietary concern viz; M/s.
Unique Securities. Shri Ajay Jain traded on own account and on behalf of his clients namely
Shri Rajesh Kumar, Shri Asim Jain and Shri Sunil Gupta. He traded as proprietary concern

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Order in the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.
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M/s. Unique Securities on his own account and on behalf of his client Shri Asim Jain. The
same has been presented in the following flow chart :
M/s. V. H.
Securities Ltd.
Ajay Jain

Proprietary

Asim Jain

v.

vi.

Unique Securities

Rajesh Kumar

Ashim Jani

Proprietary

Sunil Gupta

The price of shares of Shubh increased due to single trade at a price more than last closing
price, on 18 trading days. Further, it was observed that in the scrip of Kinetic as well, the
price increased due to single trade each on 19 trading days and two to four trades on 6 other
trading days.
It was observed that M/s. Gagan Securities, Shri Ajay Jain, M/s. Unique Securities, Shri
Deepak Batra, M/s. G. K. Investments, Shri Parveen Bansal, Shri Rajesh Kumar, Shri Asim
Jain and Shri Sunil Gupta were acting in concert with the object of manipulating the scrip
prices, thereby violated regulation 4(a) of SEBI (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Markets) Regulations, 1995 (PFUTP Regulations). Further,
M/s. Gagan Securities acted as sub-broker of M/s. Indus, Shri Ajay Jain and M/s. Unique
Securities acted as sub-broker of M/s. VH, without being registered with SEBI in
contravention of rule 3 of SEBI (Stock Broker and Sub-broker) Rules, 1992 (Stock Broker
and Sub-broker Rules).

3. Based on the findings of the investigation, Show Cause Notices (SCNs) dated November 27,
2001 were issued under section 11B of the SEBI Act, 1992 read with regulation 11 of PFUTP
Regulations to M/s. Gagan Securities, Shri Ajay Jain, M/s. Unique Securities, Shri Deepak Batra,
M/s. G. K. Investments, Shri Parveen Bansal, Shri Rajesh Kumar, Shri Asim Jain and Shri Sunil
Gupta (hereinafter collectively referred as "the noticees") calling upon them to show cause as to
why suitable directions including direction of prohibiting access to capital market and dealing in
securities for a suitable period should not be issued against them.
4. SCNs issued to Shri Asim Jain, Shri Rajesh Kumar and Shri Sunil Gupta were returned
undelivered. Accordingly, on July 19, 2014, SCNs were served on Shri Ashim Jain and Shri Sunil
Gupta by way of affixture on their last known addresses. The last known address of Shri. Rajesh
Kumar could not be located. Therefore, the SCN to Shri Rajesh Kumar was served through
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Order in the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.
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publication in newspapers on December 11, 2014. The SCN was also published on the SEBI
website.
5. Shri Anil Batra , vide letter dated February 15, 2002, submitted the reply to the SCN for
himself and his proprietary concern M/s. Gagan Securities stating inter alia that:
a) The alleged transactions were executed on their terminal over a period of 6 months with low
volumes on behalf of M/s. G. K. Investments which was managed by Shri Deepak Batra and
his wife Ms. Vanita Batra. The transactions were bona fide transactions and they had no means
to suspect their nature.
b) They did not have personal interest in the said transactions except earning normal brokerage
on the said transactions.
c) They did not have any means to check the transactions after deliveries were given to M/s. G.
K. Investments.
6. Shri Deepak Batra, vide letters one dated nil but received on December 18, 2001 and another
dated February 15, 2002, submitted reply for himself and his proprietary concern M/s. G. K.
Investments stating , inter alia that:
a) The allegations are based on arbitrary grounds.
b) He had dealt in the scrip of M/s. Kinetic and M/s. Shubh only on behalf of Shri Praveen
Bansal and he does not know Mr. Deepak Gupta, Mr. Asim Jain, Mr. Sunil Gupta and Shri
Ajay Jain.
7. Shri Ajay Jain, vide letter dated Dec 6, 2001, submitted reply for himself and for his proprietary
concern M/s. Unique Securities stating inter alia that:
a) He was trading in equity shares in less quantity and has stopped equity trading activities since
last one year.
b) He further claimed ignorance of law and submitted that his actions were not intentional or
deliberate.
8. Shri Parveen Bansal replied to the SCN vide his letter dated Dec 6, 2001, inter alia as below:
a) He has denied the allegation of his involvement in price manipulations through structured
trade in the market and stated that the allegation was on arbitrary ground.
b) He also stated that he and Shri Deepak Gupta were regional council members of the ICAI
and know each other in that capacity and did not have any business association.

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c) Observation that M/s. Gagan Securities, M/s. G. K. Investments and Mr. Rajesh Kumar are
all based at Rohtak does not establish a nexus to manipulate the stock prices of M/s. Kinetic
and M/s. Shubh.
9. Shri Asim Jain, Shri Rajesh Kumar and Shri Sunil Gupta have not submitted their reply to the
SCN issued to them and served through substituted service as aforesaid.
10. Several opportunities of personal hearing were granted to the noticee on various occasions
before the then Whole Time Members. However, the noticees failed to appear on the scheduled
dates. An opportunity of personal hearing was given the noticees before me on November 23,
2012, the noticees once again failed to appear on the scheduled date. Further, even after
publication of notice about the SCN to Shri Rajesh Kumar was done in newspapers on
December 11, 2014 and the SCN was also hosted on the SEBI website, Shri Asim Jain, Shri
Rajesh Kumar and Shri Sunil Gupta have failed to submit their reply to the SCN. Considering
these facts, I am of the view that enough opportunities of personal hearing have been provided
to the noticees and they do not want to avail the opportunity of personal hearing. I, therefore,
proceed with on the basis of material available on record.
11. I have carefully considered the SCN, replies of the noticees and other material on record.
Before dealing with the merit of the case, it is deemed relevant to refer to the provisions of rules
and regulations that are alleged to have been violated by the noticees. Those provisions are
reproduced hereunder:
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 1995.
4. No person shall (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;
SEBI (Stock brokers and sub-broker) Rules, 1992
Rule 3 - No stock-broker or sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by
the Board under the Regulations:
Provided that such person may continue to buy, sell or deal in securities if he has made an application for such
registration till the disposal of such application.
12. I have carefully considered the SCN and, replies of the noticees. It is undisputed fact that the
price of the scrip of Kinetic had increased from ` 20.60/- on December 22, 1998 to ` 65/- on
May 17, 1999 by way of a single trade each on 19 trading days and by way of 2 to 4 trades on 6
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Order in the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.
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other trading days during the period. Further, the price in the scrip of Shubh also increased from
`19/- on February 23, 1999 to ` 48/- on May 21, 1999 by way of a single trade each on 18
trading days. It is also undisputed fact that stock brokers viz., Indus and VH dealt in the scrips
for M/s. Gagan Securities and Shri Ajay Jain, respectively. Further, M/s Gagan Securities dealt
for G.K. Investments, which in-turn dealt for Shri. Rajesh Kumar and Shri. Praveen Bansal.
Furthermore, Shri. Ajay Jain dealt in his and his firm's name M/s Unique Securities and also on
behalf of his clients, namely, Shri. Rajesh Kumar, Shri Asim Jain and Shri Sunil Gupta. The trade
details as described in the SCNs have not been disputed the noticees and are as following:
Kinetic Capital Services Limited
Broker

Sub-broker

Clients

Clients

Indus Portfolio
Buy
Sell

Gagan Securities
Buy
Sell

G K Investments
Buy
Sell

Parveen Bansal
Buy
Sell

2700

2700
Deepak Batra
Buy
Sell

2700

600

2700

600

600

VH Securities
Buy
Sell

Ajay Jain
Buy
Sell

Asim Jain
Buy
Sell

2400

2400

2000

2600

2300

600

2000

Sunil Gupta
Buy
Sell
400
Unique Securities
Buy
Sell
-

1200

300

Asim Jain
Buy
Sell
-

1200

Shubh International Limited


Broker

Sub-broker

Clients

Clients

Indus Portfolio
Buy
Sell

Gagan Securities
Buy
Sell

G K Investments
Buy
Sell

Parveen Bansal
Buy
Sell

4800

4800

4800

4000
Rajesh Kumar
Buy
Sell
-

800

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Order in the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.
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VH Securities
Buy
Sell

Ajay Jain
Buy
Sell

Rajesh Kumar
Buy
Sell

4700

2500

1000

Ajay Jain
Buy
Sell
1500

Unique
Securities
Buy
Sell
2200

13. It is noted from the SCN that shares of Shubh were traded amongst Shri Praveen Bansal, Gagan
Securities, Indus, VH, Shri Ajay Jain/Unique securities and Shri Rajesh Kumar through circular
trading as described herein below:-

Parveen
Bansal

Rajesh
Kumar
6

5
Ajay Jain

Gagan

4
8

Indus

Unique

V. H.
3

14. It is also noted that such pattern of circular trading in the scrip of Shubh was repeated on many
occasions during the investigation period. I further note that both the scrips in question were
illiquid scrips. During the investigation period the entire dealings in the scrip of Shubh was
between the aforesaid clients through two identified stock brokers i.e. Indus and VH. Further,
major dealing in the scrip of Kinetic also was between common clients through the same set of
stock brokers. Further, all the trades amongst these clients in both scrips were executed at a
price higher than the previous day price. I also note that during the investigation period, the
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pattern of price movement in both the scrips was same when same set of stock-brokers,
unregistered sub-brokers and clients were trading in the scrips.
15. The noticees have failed to give any plausible explanation to the allegations and have contended
that mere fact that they are all based at Rohtak cannot establish a nexus to manipulate the prices
of the shares of Kinetic and Shubh. I am of the view that same city of residence of the entities
may not be the sole ground to allege connection amongst them. However, the facts and
circumstances such as conduct of involved parties, pattern of their transductions and trading on
two illiquid scrips in the same manner during same period through common stock-brokers, etc.
may indicate concerted actions amongst the transaction parties. Considering the facts and
circumstances as described in the SCN, I am of the opinion that the above trades of the noticees
are of too much of a coincidence in anonymous screen based trading system. Such repeated
transactions in illiquid scrips in anonymous screen based trading are possible only through
coordinated and deliberate matching of orders by the involved parties acting in league/concert
with a premeditated understanding. I, therefore, find that the noticees dealt in the illiquid scrips
of Kinetic and Shubh with intent to tamper with the free, fair and transparent price discovery
system of the stock exchange and manipulate the prices of the scrips of Kinetic and Shubh. I,
therefore, find that the noticees have violated the provisions of regulation 4(a) of PFUTP
Regulations .
16. Apart from the above, M/s. Gagan Securities, Shri Ajay Jain/ M/s. Unique Securities were
acting as unregistered sub-brokers. They have not disputed this allegation. It is also noted that
M/s. Gagan Securities had issued purchase and sale bills for transactions of its clients. I,
therefore, find that M/s. Gagan Securities, Shri Ajay Jain and M/s. Unique Securities have
contravened the then applicable rule 3 of Stock Broker and Sub-broker Rules.
17. As the transactions of the noticees had potential to distort the price discovery process at the
stock exchange and disturbs the market equilibrium and had manipulated the price of both the
scrip and some of the noticees had also acted as unregistered sub-brokers, consequences of such
contravention should follow. In this regard, I have also taken note that the transactions in
question related to the year 1999. There are no allegations in the SCN of creation of artificial
volume, loss to the investors, gain or loss to the noticees, if any, etc have also not been
quantified or alleged.
18. Considering the above, I, in exercise of the powers conferred upon me by virtue of section 19
read with sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992
and regulation 11 and 12 of the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 and
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regulation 11 and 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent
and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, hereby restrain the
following entities from accessing the securities market and further prohibit them from buying,
selling or otherwise dealing in securities, directly or indirectly, or being associated with the
securities market in any manner for the period indicated in the following table:Sl. No.

Name of the entity

Period

1.

M/s. Gagan Securities

3 years

2.

Shri Ajay Jain

3 years

3.

M/s. Unique Securities,

3 years

4.

Shri Deepak Batra,

1 year

5.

M/s. G. K. Investments

1 year

6.

Shri Parveen Bansal

1 year

7.

Shri Rajesh Kumar

1 year

8.

Shri Asim Jain

1 year

9.

Shri Sunil Gupta

1 year

19. A copy of this order shall be served on all recognized stock exchanges and depositories to
ensure that the above directions are complied with.
20. This order shall come into force with immediate effect.

th

DATE : April 13 , 2015


PLACE: MUMBAI

Sd/RAJEEV KUMAR AGARWAL


WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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Order in the matter of M/s. Kinetic Capital Services Limited & M/s Shubh International Limited.
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