WTM/RKA/IVD/NRO/154/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER
UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF
INDIA ACT, 1992 IN RESPECT OF MR. KALU RAM AGGARWAL
IN THE MATTER OF SHAMKEN MULTIFAB LIMITED.
1. Securities and Exchange Board of India (hereinafter referred to as SEBI) initiated investigations
in the unusual price movement in the scrip of Shamken Multifab Limited (hereinafter referred to
as SML / "the company") following an unusual sharp rise in price from `6/- on February 23,
2000 to `25.55/- on July 20, 2000 accompanied with an unusual rise in net traded quantity, from
average traded volume of 9,800 shares in the period May-June 2000 to 92,400 shares during the
period June 21, 2000 to July 18, 2000.
2. The investigation inter alia revealed that
(a) There was a price movement in the share price of SML from `6/- on February 23, 2000 to
`25.55/- on July 20, 2000. The analysis of trading has been carried out in two different trading
periods, i.e., February 23, 2000 to June 20, 2000 and June 21, 2000 to July 18, 2000.
(b) Trading in the scrip of SML was largely concentrated with two stock brokers, namely,
Maheshwari Technical & Financial Services Ltd. (hereinafter referred to as Maheshwari) and
Adroit Financial Services Ltd. (hereinafter referred to as Adroit) who had entered into large
number of cross and structured deals. These brokers were mainly trading for a common client
namely Vandana Securities Ltd. (hereinafter referred to as Vandana), who was acting as
unregistered sub-broker. Adroit had also traded for its clients, namely, Ms. Sonali Bansal, M/s
Shiv Vani Associates and Mr. Moti Ram. The affairs of firm Shiv Vani Associates and trades
of Ms. Sonali Bansal were handled by one Mr. Amit Bansal (husband of Ms. Sonali Bansal and
brother of Mr. Manish Bansal).
(c) Vandana was mainly trading for M/s. Prasneeta Constructions (hereinafter referred to as
Prasneeta) and M/s. Dhanvarsha Investment (hereinafter referred to as Dhanvarsha).
Both these entities were linked to each other. The proprietor of Dhanvarsha, namely, Mr. Jeev
Narain Mishra is an employee of director of Prasneeta. Both Dhanvarsha and Prasneeta had
admitted that they were trading for SML group. They have also stated that they were
introduced to SML group by Mr. P. K. Agarwal who is a Chartered Accountant and also a
friend of Mr. Praveen Juneja, director of SML. Mr. P. K. Agarwal reportedly played an
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(d)
(e)

(f)
(g)

instrumental role in managing the share price manipulation for SML. It has been contended by
Mr. I. C. Jindal of Vandana that Mr. P. K. Agarwal used to place orders on behalf of
Dhanvarsha and Prasneeta.
Mr. Kalu Ram Aggarwal had purchased 23,800 shares through Ms. Sonali Bansal and sold to
Mr. Pawan Mishra, who was a driver of Mr. Ajay Kumar Agarwal, Director, Prasneeta.
The entire trading in the shares by these clients was for various promoter group concerns of
SML. SML has admitted that their promoter group concerns had acquired shares from
Dhanvarsha. Fund flow trail has also shown that Dhanvarsha and Prasneeta had received
money from SML group concerns for the purpose of trading in the scrip of SML. SML had
also given funds to these entities for acquiring its own shares. It is clear that the SML
attempted to influence price rise of its scrip by trading effected through front entities.
Dhanvarsha, Prasneeta and Vandana who acted as sub brokers did not have certificate of
registration from SEBI to deal in securities.
Further, by creating false market in the scrip, the entities, i.e., the stock brokers/Vandana/
Dhanvarsha/Prasneeta/Mr. P. K. Agarwal/SML and its group concerns also apparently had
attempted to induce general public to deal in the scrip. The motive could be to exit from the
scrip (after booking profit) once general public had been lured into it.

3. In view of the above, a show cause notice ("SCN") was issued under section 11 and 11B of the
Securities and Exchange Board of India Act, 1992 ("the SEBI Act") read with regulation 12 of the
Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 1995 ("PFUTP Regulations, 1995") read with regulation
11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations, 2003") by SEBI
to Mr. Kalu Ram Aggarwal (hereinafter referred to as the noticee) calling upon him to show
cause as to why directions under section 11B of the SEBI Act, 1992 including, inter-alia, directions
of restraining him from accessing the securities market and prohibiting him from buying, selling
and dealing in securities, should not be issued. In the SCN issued to the noticee it was alleged
that
(a) Two stock brokers of NSE, namely, Maheshwari and Adroit accounted for approximately
95% of the total net traded quantity during the relevant period and that both these stock
brokers had mainly traded on behalf of their common client, namely, Vandana.
(b) Apart from Vandana, Adroit had also dealt for Ms. Sonali Bansal and M/s. Shiv Vani
Associates. M/s Shiv Vani Associates had bought 2,300 shares and sold 8,300 shares of SML
through the stock broker Adroit, and Ms. Sonali Bansal had bought 79,500 shares and sold
55,700 shares of SML through the stock broker Adroit.
(c) Mr. Amit Bansal who was trading admittedly for Ms. Sonali Bansal and for M/s. Shiv Vani
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Associates had stated that all the trading in SML was actually done on behalf of the noticee
who was also introduced to them by Mr. I C Jindal.
(d) The noticee had stated that he came to know Mr. I. C. Jindal, a client of Maheshwari, during
his visits to office of Maheshwari and was introduced to Mr. Amit Bansal by him only. During
one such visit Mr. I.C. Jindal introduced the noticee to Mr. Pavan Mishra who was interested
in purchasing the shares of SML but who would make payment in cash only and that Mr. Kalu
Ram Aggarwal was told that Mr. Amit Bansal would be ready to accept the cash. The noticee
had further stated that since Mr. I.C. Jindal would not deal in cash, the noticee accepted the
offer for a brokerage of `3,000/- and took cash from Mr. Pawan Mishra and gave the same to
Mr. Amit Bansal. Mr. Amit Bansal in turn gave the noticee the shares of SML which were
handed over to Mr. Pavan Mishra. The noticee also admitted that though he had purchased
shares through Ms. Sonali Bansal, he had never met her personally and he used to deal
through Mr. Amit Bansal only.
(e) Mr. Pavan Mishra was a driver of Mr. Ajay Kumar Aggarwal, director of Prasneeta and that
SML group was trading in the scrip through Prasneeta.
(f) The noticee had lent his name and thereby provided a link to SML apparently for rigging the
share price of SML. The noticee had thus aided and abetted the market manipulation in the
scrip of SML by Vandana, Mr. I. C. Jindal and SML group. The noticee had, therefore,
violated the provisions of regulation 4(a), (b) and (c) of the PFUTP Regulations, 1995 read
with regulation 4 (2) (a) and (e) of the PFUTP Regulations, 2003.
(g) Further, the said trading was done by the noticee without obtaining registration from SEBI as
a sub- broker. This is a violation of rule 3 of the Securities and Exchange Board of India
(Stock Brokers and Sub-Brokers) Rules, 1992 (the Stock Brokers Rules) (since rescinded) read
with Section 12(1) of the SEBI Act 1992.
4. An opportunity of personal hearing was granted to the noticee before the then Whole Time
Member of SEBI on November 7, 2008 and December 12, 2008. The noticee had appeared on
December 12, 2008. However, no order was passed in the matter. Following the principles of
natural justice further opportunities were granted to the noticee before me which he had availed
and submitted before me that one Mr. Amit Bansal had informed him to receive shares from Ms.
Sonali Bansal who is wife of Mr. Amit Bansal and handover the same to Mr. Pawan Mishra. He
further submitted that Mr. Pawan Mishra was introduced to him by Mr. I. C. Jindal, promoter
director of Vandana. He admitted that he had received 22,000 shares from Ms. Sonali Bansal and
the same were delivered to Mr. Pawan Mishra. He received `2.75 lakh in cash from Mr. Pawan
Mishra and handed over to Mr. Amit Bansal, in the process he received ` 2,700/- as commission.
He also submitted that he used to distribute primary issue forms on behalf of Mr. Amit Bansal
and Mr. I. C. Jindal. Other than this, he had done no other transactions in the scrip of SML.
Order in respect of Mr. Kalu Ram Aggarwal

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5. Before dealing with allegations and charges, I deem it necessary to refer to the provisions alleged
to have been violated by the noticee in this case. Those provisions are reproduced as under: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;
(b) indulge in any act, which is calculated to create a false or misleading appearance oftrading on the securities
market;
(c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine
trade transactions; "
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003
" 4. Prohibition of manipulative, fraudulent and unfair trade practices
(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;"
SEBI Act, 1992
"12. (1) No stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to
an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who
may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with,
the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under
this Act."
SEBI (Stock Brokers and Sub-Brokers) Rules, 1992
"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."
6. I have considered the SCN and replies/submissions of the noticee. In this case, however, the
complicity of the noticee in the entire plan and device can reasonably be inferred from his own
submissions as discussed hereinabove. Considering the facts and circumstances described in the
SCN holistically, I find that the noticee Mr. Kalu Ram Aggarwal aided other parties involved in
the manipulation and thus, he also violated provisions of regulation 4(a), (b) and (c) of the
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Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 1995 read with regulation 4 (2) (a) and (e) of the
Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 2003. However, the material available on record are not
sufficient to hold him guilty of violation of provisions of rule 3 of the Securities and Exchange
Board of India (Stock Brokers and Sub-Brokers) Rules, 1992 read with Section 12(1) of SEBI Act
1992.
7. From the facts and circumstances brought on record, I note that transaction of Mr. Kalu Ram
Aggarwal was not on any stock exchange. Such single off-market transaction cannot lead to
artificially raising or depressing the price of the security and thereby induce the sale or purchase of
securities by any person. Further, single off-market transaction cannot amount to the creation of
misleading appearance of trading in the securities market. I am also of the opinion that the act of
delivering shares of other person to some third entity and receiving consideration and forwarding
the same to the other person and receiving brokerage amount of `2,700/- does amount to subbroking activity. Further, the transaction in question had taken place long back in the year 2000.
8. Considering the fact and circumstances of this case, I, in exercise of powers conferred upon me
under section 19 read with section 11(4) and 11B of the Securities and Exchange Board of India
Act, 1992, regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent
and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with regulation 13
of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Market) Regulations, 2003 hereby restrain Mr. Kalu Ram Aggarwal
from accessing the securities market and prohibit it from buying, selling or otherwise dealing in
securities, directly or indirectly, in any manner, whatsoever, for a period of one year from the date
of this order.
9. A copy of this order shall be served on all recognized stock exchanges and depositories to ensure
that the direction given in this order are complied with. This order shall come into force with
immediate effect
Sd/DATE: DECEMBER 9th, 2014
PLACE: MUMBAI

Order in respect of Mr. Kalu Ram Aggarwal

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RAJEEV KUMAR AGARWAL

WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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