BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

                        Appeal No. 42 of 2011  
                             Date of decision: 9.9.2011 

Dinesh R. Vijla
D/1, Gokul, Evershine Nagar,
Malad (West), Mumbai – 400 064.

                           … Appellant 

Versus

Adjudicating Officer,
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai – 400 051.

                              … Respondent  

Dinesh R. Vijla, Appellant in person.
Mr. Advait Sethna, Advocate for the Respondent.
CORAM : Justice N. K. Sodhi, Presiding Officer
P. K. Malhotra, Member
S. S. N. Moorthy, Member
Per : Justice N. K. Sodhi, Presiding Officer (Oral)
This order can conveniently dispose of three Appeals no. 42, 43 and 51 of
2011 all of which have arisen out of the sa me set of facts. Dinesh R. Vijla and
Abhijit Todi (referred to hereinafter as Vijla and Todi respectively) are persons
who claim to be day traders and traded in the scrip of Hit Kit Global Solutions
Limited (for short the company). Shri Hari Hira Stock Broking Pvt. Ltd. (for
short the broker) was the common broker when Vijla and Todi executed trades in
the scrip of the company (through their respective brokers). Vijla and Todi were
served with separate show cause notices alleging that they executed
synchronized/matched trades in the scri p of the company in connivance with
Eaugu Udhyog Limited (promoter) which is a major promoter of the company. It
was alleged that the promoter off-loaded the shares of the company in the market
and made good profits and that Vijla and Todi had purchased them who thereafter

2
executed synchronized trades between th em through the broker. Adjudication
proceedings were initiated against Vijla, Todi and the broker. The charge against
the broker is that it aided and abetted Vijla and Todi in executing the matched
trades in the scrip of the company. A ll the three noticees filed their separate
replies denying the allegations levelled against them and on a consideration of the
material collected during the course of the investigations and the enquiry
conducted by the adjudicating officer she co ncluded that Vijla and Todi executed
synchronized and matched trades through the stock exchange mechanism and that
the broker had aided and abetted the execution of those trades being the common
broker. By two separate orders dated December 30, 2010 in the case of Vijla and
Todi and order dated January 19, 2011 in the case of the broker the adjudicating
officer found them guilty of the charges levelled against them. A sum of 6 lacs each is the monetary penalty imposed on Vijla and Todi and a sum of 2.5 lacs
on the broker. The three appeals are directed against these orders.

2. We have heard Vijla and Todi in person and Mr. Prakash Shah Advocate
   on behalf of the broker and Mr. Advait Sethna Advocate for the respondent Board
   who have taken us through the impugned orders and the record. We have on
   record the details of the trades executed between Vijla and Todi and this is what
   they reveal. On December 16, 2004 V ijla purchased 25000 shares of the
   company from Todi. The buy order was put into the system by the broker on
   behalf of Vijla and by another broker on behalf of Todi. The time, price and order
   are the same. The buy order was placed at 10:58:17 hrs. and the sell order had
   been put into the system one second earli er. The price at which both the orders
   were put into the system was 1.9 per share, the face value of which was 2.
   This order resulted in several trades which matched between Vijla and Todi.
   These trades though emerging from the sa me order are not the only trades
   executed between two of them. We find on December 21, 2004, Vijla again
   purchased 10,000 shares and his buy order again matched with sell order of Todi.
   This happened on December 23, 2004 as well. Such matching of trades on the
   trading system of the stock exchanges cannot happen unless there is manipulation. 3
   When we look at the time at which the buy orders were put in and also the time of
   the sell orders we find they are the same. Again, the orders were put for the same
   quantity and at the same price. All this cannot be a coincidence. Parties inform
   us that the scrip of the comp any is highly liquid. This be ing so, it is all the more
   unlikely that the trades would match be tween the same parties. Buy and sell
   orders match on the trading system on the basis of price, time, priority and the
   trading system being anonymous, trad ing cannot normally happen between the
   same parties unless there is manipulation. In the instant case, the manipulation is
   writ large. When we see the time of th e buy and sell orders the quantity and the
   rate, we find they are all the same. It is obvious that the trades were matched and
   synchronized through the brokers. Surpri singly, the Board has not proceeded
   against the broker of Todi. There is no apparent reason on the record to show
   why his broker was let off. Be that as it may, that would not imply that the three
   appellants are not guilty of the charge levelled against them.
3. A penalty of ` 6 lacs has been imposed on Vijla and Todi on the ground
   that they executed the matched/synchr onized trades in connivance with the
   promoters. We have seen the chart which was sent to the appellants alongwith
   their show cause notices showing their so called connection with the promoter of
   the company. Taking the chart at its f ace value, we do not find any connection
   between these two appellants and the promoter. Todi is said to be connected with
   the promoter because he purchased sh ares from a company called Penta
   Electronis and Foods Pvt. Ltd. which, in turn, has purchased them from the
   promoter in off-market transactions. Off-market transactions per se are not illegal
   and the connection referred to in the char t does not really link Todi with the
   promoter. The details of those off-market transactions are not on the record. As
   regards Dinesh Vijla, the chart does not show any connection whatsoever with the
   promoter and we wonder how the adjudicati ng officer recorded a finding to that
   effect. Having carefully gone through the ch art, we are satisfied that it does not
   link Vijla and Todi with the promoter and we cannot uphold the finding of the
   adjudicating officer in this regard. However, as already observed, Vijla and Todi 4
   executed synchronized/matched trades. Ha ving regard to the frequency of the
   matched/synchronized trades, we reduce the penalty imposed on Vijla and Todi to
   ` 2.5 lacs each. The impugned orders stand modified accordingly. In the case of
   the broker, we find no ground to interfere with the quantum of penalty.
   For the reasons recorded above, the appeals stand disposed of as above
   with no order as to costs. Sd/-
   Justice N. K. Sodhi
   Presiding Officer
   Sd/-
   P. K. Malhotra
   Member
   Sd/-
   S. S. N. Moorthy
   Member
   9.9.2011
   Prepared & Compared by
   ptm
   • Download Order Copy