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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA
[ ADJUDICATION ORDER NO. EAD-2/DSR/VVK/ RG/ 199-200 /2014 ]
__________________________________________________________________

UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA
ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING
INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES,
1995
In respect of :

1. Shri Vasantlal Mohanlal Vora [PAN AAAPV5230F]
2. Arcadia Shares & Stock Brokers Private Limited [ PAN AAACA4562G]

In the matter of
Veritas (India) Ltd.

BACKGROUND :
1. Securities and Exchange Board of India (hereinafter referred to as "SEBI ") had
conducted an investigation into the alleged irregularity in the trading in the
shares of Veritas (India) Limited (hereinafter referred to as "VIL"), a company
listed on the Bombay Stock Exchange Limited (hereinafter referred to as "BSE")
and into the possible violation of the provisions of the SEBI Act, 1992
(hereinafter referred to as the Act) and various Rules and Regulations made
there under during the period from J anuary 01, 2009 to March 31, 2012.

2. On the basis of Integrated Market Surveillance System (IMSS) alert touching
circuit filters, two snap investigations were carried out by SEBI in the scrip of VIL
for the period from May 26, 2008 to October 30, 2009 and November 03, 2009
to February 06, 2010. During the period of investigation, it was observed that the
price of the scrip had increased from ` 100/- as on April 06, 2009 to ` 825.63/-
as on May 10, 2010. It was further observed that one entity viz. Kamalasini
Tradelinks Private Limited (KTL) had approached the shareholders of VIL and
acquired around 6.08% shares of VIL through off-market transfers from various
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shareholders. As on March 2010, it was observed that the share capital of VIL
was only 9,96,000 shares, out of which 6,71,310 shares (67.4%) were held by
one promoter and remaining 3,24,690 shares (32.60%) were held by 106 non-
promoter entities.

3. The investigation, inter alia, revealed that one Shri Vasantlal Mohanlal Vora
(hereinafter referred to as the "Noticee No. 1") had traded in the scrip of VIL
through his stock broker Arcadia Share and Stock Brokers Pvt. Ltd. (hereinafter
referred to as "Noticee No. 2"). The Noticee No. 1 while trading in the scrip
through Noticee No. 2 had indulged in fictitious trades on 6 instances and traded
12 shares of VIL in a self-trade manner during the period September 22, 2010 to
March 30, 2012. Further, in 4 instances Noticee No. 1 was observed to have
placed the orders near to the Last Traded Price (LTP) and in other 2 instances
placed orders over the LTP. Further, it was observed that out of 6 instances of
self trades, in 2 instances the Noticee No. 1 had placed orders through Noticee
No. 2 and in 01 instance Techno Shares & Stocks Limited (Techno) acted as
Noticee No. 1's broker and counterparty broker.

4. It was, therefore, alleged that the Noticee No. 1 by indulging in self trades had
violated the provisions of Regulation 3(a), (b), (c), (d) and Regulation 4(1),
4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of the SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to Securities Market) Regulations, 2003
(hereinafter referred to as "PFUTP Regulations"). Further, it is also alleged that
the Noticee No. 2 by acting as a broker and counter party broker in executing
the alleged self trades had assisted its client in placing the fictitious trades thus,
violated the provisions of Regulation 3(a), (b), (c), (d) and Regulation 4(1),
4(2)(a) and 4(2)(e) of the PFUTP Regulations and Clauses A(1), A(3), A(4) and
A(5) of the code of conduct as specified in Schedule II under Regulation 7 of the
SEBI (Stock Broker and Sub-Broker) Regulations, 1992 (hereinafter referred to
as Broker Regulations).


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APPOINTMENT OF ADJUDICATING OFFICER
5. SEBI has, therefore, initiated Adjudication proceedings against the Noticees and
I have been appointed as the Adjudicating Officer vide order dated the August
26, 2013 under Section 15-I of the SEBI Act read with Rule 3 of the SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer)
Rules, 1995 (hereinafter referred to as the said Rules) to inquire into and
adjudge under Section 15HA of the SEBI Act the alleged violation of the PFUTP
Regulations by the Noticee Nos. 1 and 2 and under Section 15HB for the alleged
violations of Broker Regulations by Noticee No. 2 .

NOTICE, REPLY AND PERSONAL HEARING
6. The Noticees were issued separate Show Cause Notices dated September
25, 2013 (hereinafter referred to as SCN/s ) under Rule 4(1) of the said
Rules to show cause as to why an inquiry should not be held and why penalty
be not imposed on the Noticees for the said violations. The Noticee No. 1 vide
its letter dated October 07, 2013 informed that he will be filing a reply in due
course of time. Further, vide letter dated October 11, 2013, the Noticee No. 1
submitted his preliminary reply and requested for 3 weeks' time to file a detailed
reply in the matter. Subsequently, the Noticee filed its reply dated February
24,2014.

7. With respect to the SCN issued to Noticee No. 2, vide letter dated October 14,
2013 it sought two weeks' time to submit its reply. Further, vide letter dated
October 28, 2013, the Noticee No. 2 filed its preliminary reply in the matter and
further requested for an opportunity to inspect documents in the matter. The
said request was acceded to and accordingly, vide letter dated December 09,
2013 Noticee No. 2 was granted an opportunity of inspection of documents.
Ultimately, the Noticee No. 2 carried out the inspection of documents and vide
letter dated February 10, 2014 the same was intimated by Investigation
Department, SEBI. Further, vide letter dated February 27, 2014 the Noticee No.
2 submitted its detailed reply in the matter.
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8. Thereafter, in the interest of natural justice and in order to conduct an inquiry as
per Rule 4 (3) of the said Rules, an opportunity of personal hearing was
granted to the Noticees on May 26, 2014. The authorized representatives of
the Noticees attended the scheduled hearing and reiterated the submissions
made vide their replies dated the February 24, 2014 and February 27, 2014,
respectively.

CONSIDERATION OF EVIDENCE AND FINDINGS
9. I have carefully perused the charges leveled against the Noticees in the SCNs,
the written submissions made by them and the documents available on record.
In the instant matter, the following issues arise for consideration and
determination :-
a) Whether the Noticee No. 1 has violated the provisions of Regulation
3(a), (b), (c), (d) and Regulation 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of
the PFUTP Regulations?

b) Whether the Noticee No. 2 has violated the provisions of Regulation
3(a), (b), (c), (d) and Regulation 4(1), 4(2)(a) and 4(2)(e) of the PFUTP
Regulations and Clauses A(1), A(3), A(4) and A(5) of the code of conduct
as specified in Schedule II under Regulation 7 of the Broker Regulations?

c) Do the violations, if any, on the part of the Noticees attract any penalty
under Section 15HA and 15HB of the SEBI Act ?

d) If yes, what should be the quantum of monetary penalty?


10. Before proceeding further, I would like to refer to the relevant provisions of the
PUFTP Regulations and Broker Regulations which reads as under :-

Relevant provisions of PFUTP Regulations.
Prohibition of certain dealings in securities
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3. No person shall directly or indirectly -
(a) buy, sell or otherwise deal in securities in a fraudulent manner;
(b) use or employ, in connection with issue, purchase or sale of any security
listed or proposed to be listed in a recognised stock exchange, any manipulative
or deceptive device or contrivance in contravention of the provisions of the Act or
the rules or the regulations made thereunder;
(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 recognised
stock exchange; and,
(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 recognised stock
exchange in contravention of the provisions of the Act or the rules and the
regulations made thereunder."

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;
(b) dealing in a security not intended to effect transfer of beneficial ownership
but intended to operate only as a device to inflate, depress or cause fluctuations
in the price of such security for wrongful gain or avoidance of loss;
c) ........
d) ........
(e) any act or omission amounting to manipulation of the price of a security;
(f) .........
(g) entering into a transaction in securities without intention of performing it or
without intention of change of ownership of such security.

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Relevant provisions of Broker Regulations
Stock brokers to abide by Code of Conduct
7. The stock brokers holding certificate shall at all times abide by the Code of
Conduct as specified in Schedule II.
SCHEDULE II
CODE OF CONDUCT FOR STOCK BROKERS
[Regulation 7]
A. General
(1) Integrity: A stock-broker, shall maintain high standards of integrity,
promptitude and fairness in the conduct of all his business;
(2) .................
(3) Manipulation: A stock broker shall not indulge in manipulative, fraudulent
or deceptive transactions or schemes or spread rumours with a view to
distorting market equilibrium or making personal gains;
(4) Malpractices : A stock broker shall not create false market either singly or in
concert with others or indulge in any act detrimental to the investors interest or
which leads to interference with the fair and smooth functioning of the market.
A stock broker shall not involve himself in excessive speculative business in the
market beyond reasonable levels not commensurate with his financial
soundness; and,
(5) Compliance with statutory requirements: A stock broker shall abide by all the
provisions of the Act and the Rules, regulations issued by the Government, the
Board and the Stock Exchange from time to time as may be applicable to him."

11. I find from the SCN that the Noticee No. 1 had traded in the scrip of VIL and had
indulged in fictitious trades which were self trades in nature through its broker
Noticee No. 2. The Noticee No. 1 had indulged in self trades on 6 instances and
had traded 12 shares of VIL in fictitious manner during the period from
September 22, 2010 to March 30, 2012 and on 4 instances the Noticee No. 1
had placed the orders near to the LTP and in other 2 instances the Noticee No.
1 had placed orders over LTP. Out of 6 instances of self trades, the Noticee No.
1 in 2 instances, had placed the self trades through Noticee No. 2 who acted as
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both, a broker and counter party broker. In one instance the Noticee No. 1 had
placed the orders through broker Techno and in the remaining 3 instances, he
had placed orders through different brokers.

12. I further find from the investigation report that the Noticee No. 1 had purchased
680 shares and sold 526 shares of VIP and he was one of the top buyers during
the period from J anuary 01, 2009 to March 31, 2012. One Shri J ignesh Damji
Rambhia appeared to be a major sell client with 102 shares and one Shri
Umangkumar Patel appeared as a major buy client with 74 shares. The details
are as under :-

Client Name PAN Gr
Buy
Volu
me
Gr Buy
volume
%age
of Buy
to Mkt.
Gr sell
volume
Gr.Sell
Value
% of
sell to
Mkt.
Gr
volume
%age
Trade
Volume
VASANTLAL
MOHANLAL
VORA
AAAPV5230F 680 224633.
90
2.75 526 174428.25 2.13 1206 4.88

13. I also find from the SCN that the Noticee No. 1 was one of the top 10 LTP
contributors during the period J anuary 01, 2009 to March 31, 2012 and the
details of the same are as under :-
Client
Name
PAN Nega
tive
LTP
Positive
LTP
Overall
LTP
No. of
trades
above
LTP
No.of
trades
below
LTP
Total
Trades
as a
Buyer
Total
Trades
as a
Seller
Total
Trades

VASANTLA
L
MOHANLAL
VORA

AAAPV5230F

306.25

650.5

344.25

20

28

154

221

375

14. Further, the Noticee No. 1 had also contributed in establishment of new high
price during 1st J anuary 01, 2009 to March 31, 2012 as he traded in the scrip of
VIL on 375 instances and out of the said instances on 87 instances, he had
contributed in establishing new high price in the scrip and on 50 instances he
was alleged to have contributed in establishing new low price. The details of the
same are as under: -



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Client
Name
PAN No. of
instances
establishing
new high
Total
contribution
to new high
%age of
contribution
No. of
instances
establishing
new low
Total
contribution
to new low
%age
of
contrib
-ution


VASANT
LAL
MOHANL
AL VORA

AAAPV5230F

87

435.45

12.02

50

193.15

15.08

15. Further, following are the details of the total quantities transacted by Noticee No.
2 on behalf of Noticee No. 1 during the investigation period :-

Stock
Broker
Name
Gr.Buy
Qty.
Gr.Buy
Value
% of
Gr.Market
Buy
Gr.Sell
Qty.
Gr.Sell
value
% of
Gr.Market
Sell
Gr.Trd.Qty. % to
Total
Market
Trades

ARCADIA
SHARE
AND
STOCK
BROKERS
PVT.LTD.

623

250738.95

2.52

573

214000.15

2.32

1196

2.42

16. The Noticee No. 1 vide his reply dated October 11, 2013 submitted that he is a
retired person and a small investor. He was buying and selling in multiple scrips
during the relevant period and VIL was one of them. He was dealing purely on
delivery basis only. As the share markets open he puts his sauda telephonically.
He is not aware as to how the price mechanism system works. He does not
directly operate on Bolt Screen. On health ground the noticee submitted that he
has completely stopped the above activity.

17. Further, vide his additional reply dated February 24, 2014, the Noticee No. 1
submitted that he had carried out the transactions from November 23, 2009 and
continued trading upto J anuary 08, 2010 when the price was around `830/-.
Thereafter, the price was showing sharp upward trend. Only during the
intervening period, the price went up when he had not done any trading in the
share of VIL. Further, the Noticee submitted that he resumed his trading in VIL
only from J uly 29, 2010 when the price was around ` 600/-. Then market volume
during the investigation period was 11,628 shares (one side ) vis-a-vis his buy
and sell volume was 680 and 526, respectively, which is very meager i.e.
around 5% of the market volume. On daily basis, the Noticee's buy and sell
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volume is not significant to have any impact on the market. The Noticee further
stated that on the day of execution of alleged self trades he had carried out a
large number of trades. The Noticee stated that he had incurred loss of
`33,180/- while trading in VIL.

18. The Noticee No. 2 vide its reply dated October 28, 2013 submitted that it has no
relationship with Noticee No. 1 except that of a broker - client relationship. The
Noticee No. 1 is registered with the broker since August 2006 and was
introduced by one SEBI registered sub-broker. However, since November 2012,
the Noticee No. 2 has not carried out any trades in Noticee No. 1's account. By
trading for the said client, it has only made gains by way of brokerage and
nothing else. It stated that on perusal of the trading pattern, they understood that
Noticee No. 1 had carried out delivery based transactions through it and had not
defaulted in the pay in obligations of both shares and funds. Further, the Noticee
No. 2 also stated that the volumes traded by Noticee no. 1 through it was very
low as compared to the market volume in the scrip of VIL.

19. Further, vide letter dated February 27, 2014, the Noticee No. 2 submitted that
with respect to the alleged self trades on September 22, 2010 for 5 shares and
on March 16, 2012 for 2 trades, it is to be noted that buy order time is 9:09:11
a.m. whereas the sell order time is 2:09:44 p.m. Thus, there is vast time
difference between buy and sell order time. Further, the self trades were
executed at the then prevailing market price as there was hardly any difference
to the LTP. The LTP at the relevant time was ` 360/- whereas the transaction
price was ` 360/05. Further, the noticee No. 2 stated that the market volume on
the day was 45 shares and the buy quantity was 15 shares and the sell quantity
was 5 shares. Therefore, the said quantity was insignificant. The Noticee No. 1
on the relevant day had traded in many scrips in large numbers. Further, on
perusal of the trade log for March 16, 2012, the Noticee No. 2 submitted that
one buy order of 2 shares got matched with 2 sell orders of 1 share each
placed by the client through different terminal IDs. Hence, it is stated that the
dealer placing the order was not aware of the simultaneous order placed by the
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client at the relevant time. The Noticee No. 1 has sustained losses by executing
the said trades therefore, it cannot be alleged that the Noticee No. 1 made any
illegal gains by trading in the scrip of VIL.

20. The Noticee No. 2 further submitted that the orders for Noticee No. 1 were
mostly placed on the trading terminal of its sub-broker Shri Pinkesh Shah. The
orders in the trading terminal were mostly punched after viewing, informing and
considering the best available buy and sell order existing in the trading terminal
and at no time, price higher than the best available order price was put in the
system. Since, the scrip was illiquid and volume was thin, correlating and
matching of order price with LTP was not feasible, practical and relevant. The
Noticee No. 2 submitted that the alleged self trades were purely coincidental
and not an outcome of any design. Further, the said orders were placed during
the busy market hours in the ordinary course of business and without the
knowledge of existing pending unexecuted order of the client (Noticee No. 1) in
the scrip of VIL.

21. From the material available on record I find that the Noticee No. 1 is a small time
investor trading through various brokers. The Noticee No. 1 while trading in the
scrip of VIL, which was an illiquid scrip, had indulged in certain self trades (6
occasions) for 12 shares of VIL which are fictitious in nature and thereby did
participated in manipulative and fraudulent trading practices in the scrip of VIL.
Out of the said 6 instances of self trades, in 2 instances, the Noticee No. 1 had
traded through Noticee No. 2. By trading in a fictitious manner the Noticee No. 1
had contributed by 5% to the total market volume traded during the relevant
period. As the market volume during the relevant period was very less and the
scrip was an illiquid one, even a single share traded in a manipulative manner
will have an impact on the market and therefore, I do not find any merit in the
submissions of the Noticees that the volumes traded in fictitious manner were
meager and that they did not intend to manipulate the market. I find that the
Noticees by indulging and executing in such fraudulent and fictitious trades had
created artificial volumes in the scrip.

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22. Further from the above paras, I find that it is difficult to conclude that the
Noticees by executing the self trades has contributed in establishing a new high
and low price in the scrip of VIL as the orders were punched in by the Noticees
at the relevant market price and the same cannot be concluded as price
manipulation. Therefore, I am of the view that the Noticees did not indulge in
price manipulation and thus, have not violated Regulation 4(2)(e) of the PFUTP
Regulations.

23. Therefore, I conclude that the Noticee No. 1 did violate the provisions of 3(a),
(b), (c), (d) and Regulation 4(1), 4(2)(a), 4(2)(b) and 4(2)(g) of PFUTP
Regulations thus, liable for imposition of monetary penalty under Section 15HA
of the Act. Further, I also conclude that Noticee No. 2 did violate the provisions
of 3(a), (b), (c), (d) and Regulation 4(1) and 4(2)(a) of the PFUTP Regulations
and Clauses A(1), A(3), A(4) and A(5) of the code of conduct as specified in
Schedule II under Regulation 7 of the Broker Regulations thus, liable for
imposition of monetary penalty under Section 15HA and 15HB of the Act. The
said provisions of law read as under:

Penalty for fraudulent and unfair trade practices.
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 not exceeding twenty-five crore rupees or three times the amount of
profits made out of such practices, whichever is higher."

Penalty for contravention where no separate penalty has been provided.
15HB. Whoever fails to comply with any provision of this Act, the rules or the
regulations made or directions issued by the Board there under for which no
separate penalty has been provided, shall be liable to a penalty which may
extend to one crore rupees.

24. I note that the Hon'ble Supreme Court of India in the matter of SEBI vs. Shri
Ram Mutual Fund [2006] 68 SCL (216), held that " once a violation of statutory
regulation is established, imposition of penalty becomes sine qua non of
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violation and the intention of the parties committing such violation becomes
totally irrelevant. Once the contravention is established then penalty is to follow".

25. Also, the Hon'ble SAT, in Chirag Tanna Vs The Adjudicating Officer, has
observed that:- ..we have on record the trade and order logs from which it has
been pointed out by the learned counsel for the respondent Board that the
appellant had executed self trades i.e. trades in which he was both the buyer
and the seller. Such trades are, admittedly, fictitious and create artificial volumes
in the traded scrip..

26. While determining the quantum of penalty under Section 15HA and 15HB of the
Act, it is important to consider the factors stipulated in Section 15 J of the Act
which reads as under :-

15-J Factors to be taken into account by the adjudicating officer :
While adjudging quantum of penalty under section 15-I, 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 result of
the default;
(c) the repetitive nature of the default.

27. I observe from the material available on record that the Noticee No. 1 had
incurred losses while dealing in the scrip of VIL in a fictitious manner. Further, I
note that the defaults on the part of the Noticees were repetitive in nature as the
said trades were observed on more than one instance. However, I note that
even if the Noticee No. 1 incurred losses after indulging in self trades, the very
act of executing fictitious trades is liable to be penalized under the securities
laws.



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ORDER
28. In view of the above, after considering all the facts and circumstances of the
case and exercising the powers conferred upon me under Section 15-I(2) of the
SEBI Act, 1992 read with Rule 5 of the said Rules, I hereby impose the following
penalties on the Noticees:

Sr.
No.
Name of the Noticee Penal provisions
as per SEBI Act,
1992
Monetary Penalty
(in `)
1. Shri Vasantlal Mohanlal
Vora
15HA 5,00,000
(Rupees Five Lakh Only)
2. Arcadia Shares & Stock
Brokers Pvt. Ltd.
15HA 3,00,000
(Rupees Three Lakh
Only)
15HB 2,00,000
(Rupees Two Lakh Only)

In my view, the penalty is commensurate with the default committed by the
Noticees.

29. The penalty amount shall be paid by the Noticees through a Demand Draft
drawn in favour of SEBI Penalties Remittable to Government of India and
payable at Mumbai, within 45 (forty five) days of receipt of this order. The said
Demand Draft should be forwarded to the Division Chief, Investigation
Department (ID-10), Securities and Exchange Board of India, SEBI Bhavan, Plot
No.C4-A, G Block, Bandra-Kurla Complex, Bandra (E), Mumbai 400 051.

30. In terms of Rule 6 of the said Rules, copies of this order are sent to the Noticees
and also to the Securities and Exchange Board of India.



Date : August 27, 2014 D.SURA REDDY
Place: Mumbai ADJUDICATING OFFICER
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