Adjudication Order against Blue Peacock Securities Pvt. Ltd. in the matter of dealings of Mr. Vishal Kishore Bhatia

8/11/2019 Adjudication Order against Blue Peacock Securities Pvt. Ltd. in the matter of dealings of Mr. Vishal Kishore Bhatia

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Adjudication Order in respect of M/s Blue Peacock Securities Ltd. August 27, 2014

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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. ASK/AO-77/2014-15]

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

M/s Blue Peacock Securities Pvt. Ltd.

(PAN: AADCB8850F)

In the matter of

Dealings of Mr. Vishal Kishore BhatiaBACKGROUND IN BRIEF

1.

Based on NSE alerts in the matter of dealings of Yes Investments

(Proprietor: Mr. Vishal Kishore Bhatia) and M/s Blue Peacock Securities

Pvt. Ltd. (hereinafter referred to as BPSL/"Noticee"), in which Vishal

Kishore Bhatia is one of the directors, Securities and Exchange Board of

India (hereinafter referred to as SEBI) conducted an investigation for the

period of July 01, 2009 to December 31, 2010 into the dealings of Mr.

Vishal Kishore Bhatia.

2. It was observed during the investigation that the Noticee, trading

through Religare Securities Ltd., was continuously entering and deleting

orders and then taking reverse position in the cash market. Investigation

further revealed from the trade and order data of NSE of 31 scrip days1, that

on 25 scrip days the noticee placed orders at a price variation from last

traded price while doing activity on the opposite side. Investigation further

revealed that the during the time slot wherein majority of the selling was

done by the noticee, its concentration was significant to market net and

1 "Scrip days" is defined as a count of scrips and days on which client has traded. For

example, if the client trades in scrip X from 1.1.2012 to 2.1.2012 and scrip Y from 1.1.2012

to 3.1.2012, there will be 5 scrip days.

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gross in the respective scrips. On analyzing the noticees contribution to the

market pending quantity it was observed that when major selling

transactions were executed the noticee's concentration to market pending

orders was significant on buy side. It was further noted during the

investigation that the buy orders placed by the noticee (which were placed

significantly below the market prices and subsequently deleted) were with

fully disclosed quantities whereas the sell orders were placed at partially

disclosed quantities.

APPOINTMENT OF ADJUDICATING OFFICER

3. Vide order dated April 16, 2012, Shri Parag Basu was appointed as

Adjudicating Officer under section 15I of the SEBI Act to inquire andadjudge under section 15HB of the SEBI Act, 1992, the alleged violations

of provisions of Regulation 3(a), (b), (c), (d) and 4(1) & 4(2)(a) of SEBI

(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities

Market) Regulations 2003 (hereinafter referred to as "PFUTP

Regulations") by the Noticee. Consequent upon transfer of Shri Parag Basu,

Shri Piyoosh Gupta was appointed as Adjudicating Officer in the present

matter vide order dated August 16, 2012. Subsequently, upon the transfer of

Shri Piyoosh Gupta, I have been appointed as Adjudicating Officer, in the

present matter, vide order dated November 08, 2013.

SHOW CAUSE NOTICE, REPLY AND HEARING

4. Show Cause Notice No. EAD-5/ADJ/PG/AA/OW/5452/2013 dated

March 4, 2013 (herein after referred to as SCN) was issued to the Noticee

under rule 4 of SEBI (Procedure for Holding Inquiry and imposing penalties

by Adjudicating Officer) Rules, 1995 (hereinafter referred to as Rules) to

show cause as to why an inquiry should not be held against it in terms of

rule 4 of the Rules read with section 15I of SEBI Act, 1992 and penalty be

not imposed under section 15HA of SEBI Act, 1992 for the violations

specified in the SCN. The copies of the documents relied upon in the SCN

were provided to the Noticee along with the SCN.



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considering the market moves, (e)small tick profit /losses and (f)

initiate open trades within a range to take advantage of the price

fluctuations.

In the scrips mentioned , it is alleged that our concentration

during the time slot ranged from 1.15% to 32.94% to the marketnet and 0% to 10.45% market gross and we were involved in

BAIT and SWITCH activity across various scrips and for several

days.

The rationale can be explained that as day traders we select

scrips for the day and put in the range bound orders either on the

buy or sell side. This helps us to take advantage of the gap-up or

gap-down open trade. And later on, as the market progresses,

trades are initiated based on the market movements. These trades

need not follow the open trades. Then through out the day, the

trades are done one after another and the pattern can be buy-sell

or sell-buy depending upon the market. However, since there isvolume, the trades are squared off with minor price gaps which is

generally 1% or below. The unexecuted orders are subsequently

removed from time to time.

4)

Our trades in the alleged scrips are insignificant considering the

volume of trading in these scrips and all the scrips stated are

companies with high market cap, high float and volumes, shares

which are generally traded by Institutions, FIIs and HNIs. Infact,

since these scrips have large market caps, huge volumes and

Institutional trades the day traders like us trade only in such

scrips since only such scrips meet the inherent requirements (as

mentioned above) of day trading business.

5)

Sir, the volumes may be high but the profits/losses, considering

the day trading risks involved are very low and insignificant and

we cannot be involved in any act which is unfair or fraudulent

when we square up the trade at gap of 0.25 ps ,0.50 ps and Re 1.

6) We are day traders and my delivery trade is hardly 2 to 5% of our

total trade. Further the scrips traded are of reputed corporate

with large floats and market players. Hence our trades are

insignificant. We are in no way connected to any of the companies

alleged. There are no huge delivery trades nor any circulartrading which can create doubts of profiting from the abnormal

trade orders. There is no intention to earn big profits since the

positions are squared-up with wafer thin gaps.

7)

We have exercised due care, skill and diligence as expected of

any day trader in respect of the alleged scrips and have not done

any act detrimental to the interest of the Investors or Securities



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Market or indulged in any act of market manipulation or

malpractices in the Securities Market.

8)

We therefore submit that we are in no manner responsible for any

alleged violations of SEBI Act, Rules and Regulations in respect

of the alleged scrips and have acted in good faith according tosound business ethics, trading rules and ethics.

.........................................."

7.

In the interest of natural justice and in order to conduct an inquiry in

terms of rule 4(3) of the Rules, the Noticee was granted an opportunity of

personal hearing on March 22, 2013 at SEBI, Head Office, Mumbai, vide

notice dated March 14, 2013. The said notice returned undelivered with the

comments "person shifted".Another opportunity of hearing was granted to

the Noticee on April 08, 2013 vide notice dated March 26, 2013. On thedate of hearing, Shri Vishal Bhatia, Director of the Noticee attended the

hearing on behalf of the Noticee and reiterated the submissions made in the

reply to SCN.

8.

The undersigned, after being appointed as Adjudicating Officer in the

present matter, also gave an opportunity of hearing to the Noticee on

February, 21, 2014. Noticee did not appear on the scheduled date of hearing.

Another opportunity of hearing was given to the Noticee on March 12,

2014. Again the noticee did not appear on the said date of hearing. A final

opportunity of hearing was given to the Noticee on March 21, 2014. On the

date of hearing, Shri Vishal Bhatia, Director of the Noticee attended the

hearing on behalf of the Noticee and reiterated the submissions made in the

reply to SCN. In the said hearing, Noticee was asked to to justify, duly

supported by financial statements, Bank statements, IT/WT returns and also

necessary certificates/statements from the broker concerned, as to whether it

had the necessary financial capacity/background to meet the payment

obligations had these alleged orders resulted into trades. Noticee undertook

to submit the necessary justification and documents by April 01, 2014.

Noticee merely forwarded its IT Return for the Assessment Year 2010-11

and 2011-12, Statement of Accounts for the year ending March 31, 2010



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and March 31, 2011, and bank statement for the period April 01, 2009 to

March 31, 2012. However, no justification as regards the financial capacity

to meet the payment obligations had these alleged orders resulted into

trades, was submitted by the noticee.

CONSIDERATION OF ISSUES AND FINDINGS

9.

The issues that arise for consideration in the present case are :

a)

Whether the Noticee had violated the provisions of Regulations 3

(a), (b), (c), (d) and 4 (1) and (2) (a) of PFUTP Regulations?

b) Does the violation, if any, on the part of the Noticee attract

monetary penalty under Section 15 HA of SEBI Act?

c)

If so, what would be the monetary penalty that can be imposedtaking into consideration the factors mentioned in Section 15J of

SEBI Act?

10. Before moving forward, it is pertinent to refer to the provisions of

Regulations 3(a), (b), (c), (d) and 4 (1) & (2) (a) of PFUTP Regulations.

The said provisions state as under:

"3. Prohibition of certain dealings in securitiesNo 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 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 theAct 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.



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(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;"

11.

From the material available on record, I note that on 25 scrip days

noticee was observed to have placed huge buy orders away from market

price and that majority of its sell transactions were executed while its

previously placed huge buy orders were pending. Further, Noticee was

observed to have executed majority of the buy transactions after cancelling

previously placed huge buy orders which were away from market price.

12. Summary of the order level analysis of the trading done by the

Noticee is as under:

TABLE I

Date Scrips Type

No of

orders

placed

Sum of

Max of

Orig Vol

Sum of

Traded

Quantity

Conversion

%

Min of

MOD LTP

for buy

orders/

Max of

MOD LTP

for sell

orders

Count of buy

orders

wherein LTP

variation is

less than or

equal to

(4%)/ Count

of sell orders

wherein LTP

variation is

more than orequal to 4%

24-Dec-09 3IINFOTECH BUY 43 1495753 300000 20.06 (7.37) 10

24-Dec-09 3IINFOTECH SELL 18 457504 300000 65.57 0.63 0

Remarks - 62.70% of days sell between 09:55:00 to 11:03:00 till this time only 16.53% of days buy qty bought

31-Dec-09 NTPC BUY 28 556580 200000 35.93 (7.15) 6

31-Dec-09 NTPC SELL 9 250120 200000 79.96 0.17 0

Remarks - 100% of days sell between 10:10:42 To 11:13:40 till this time no buying had been done.

6-Jan-10 GUJNRECOKE BUY 47 1617820 271159 16.76 (3.58) 0

6-Jan-10 GUJNRECOKE SELL 21 433960 247529 57.04 2.69 0

Remarks - 62.67% of days sell between 10:12:18 AM to 10:43:25 AM till this time only 9.58% of days buy qty bought

7-Jan-10 SATYAMCOMP BUY 60 2712989 420506 15.50 (5.20) 19

7-Jan-10 SATYAMCOMP SELL 13 480978 348189 72.39 0.32 0

Remarks 99.17% of days sell between 9:39:49 AM to 11:53:42 AM till this time only 22.59% of days buy qty bought

20-Jan-10 HINDCOPPER BUY 83 451480 89818 19.89 (12.08) 10

20-Jan-10 HINDCOPPER SELL 36 101155 89818 88.79 3.62 0

Remarks 51.42% of days sell between 9:02:07AM to 10:10:04 AM till this time only 17.03% of days buy qty bought



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20-Jan-10 NMDC BUY 57 436186 68290 15.66 (5.74) 9

20-Jan-10 NMDC SELL 19 98881 68290 69.06 4.31 1


21-Jan-10 JAICORPLTD BUY 84 985200 213820 21.70 (9.94) 6

21-Jan-10 JAICORPLTD SELL 30 302256 213820 70.74 1.92 0


27-Jan-10 JAICORPLTD BUY 64 838915 84840 10.11 (11.56) 12

27-Jan-10 JAICORPLTD SELL 19 122500 84840 69.26 1.74 0


18-Mar-10 ARSSINFRA BUY 43 240154 72095 30.02 (11.22) 10

18-Mar-10 ARSSINFRA SELL 24 108827 72095 66.25 1.03 0

Remarks 55.20 % of days sell between 9:17:23 AM to 11:39:21 AM till this time only 14.94% of days buy qty bought

6-Apr-10 AMRUTANJAN BUY 57 213906 36855 17.23 (14.90) 18

6-Apr-10 AMRUTANJAN SELL 24 43805 36855 84.13 2.95 0


8-Apr-10 PIPAVAVYD BUY 42 1777767 307500 17.30 (8.41) 5

8-Apr-10 PIPAVAVYD SELL 12 433500 307500 70.93 0.70 0


9-Apr-10 SGJHL BUY 100 1909650 490500 25.69 (0.22) 0

9-Apr-10 SGJHL SELL 39 509289 490500 96.31 7.60 3


16-Apr-10 3IINFOTECH BUY 64 2158751 401500 18.60 (8.87) 6

16-Apr-10 3IINFOTECH SELL 18 518094 405100 78.19 1.21 0


23-Apr-10 WIPRO BUY 53 515712 73500 14.25 (8.04) 6

23-Apr-10 WIPRO SELL 22 130196 73500 56.45 13.94 1


26-Apr-10 ICICIBANK BUY 62 487534 57587 11.81 (5.08) 21

26-Apr-10 ICICIBANK SELL 9 57587 57587 100.00 0.96 0


7-May-10 RNRL BUY 23 340005 245000 72.06 (11.15) 6

7-May-10 RNRL SELL 10 245000 245000 100.00 0.44 0


10-May-10 ENGINERSIN BUY 40 385840 43500 11.27 (6.41) 9

10-May-10 ENGINERSIN SELL 20 77813 43500 55.90 1.16 0


12-May-10 TALWALKARS BUY 96 2001725 216016 10.79 (11.23) 29

12-May-10 TALWALKARS SELL 37 216016 216016 100.00 1.07 0


21-May-10 PIRHEALTH BUY 62 496421 86000 17.32 (18.21) 21



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21-May-10 PIRHEALTH SELL 22 92000 86000 93.48 0.40 0


28-May-10 TATAMOTORS BUY 35 304316 95500 31.38 (3.20) 0

28-May-10 TATAMOTORS SELL 15 77287 95500 123.57 0.20 0


1-Jun-10 KTKBANK BUY 46 1126656 187000 16.60 (6.19) 4

1-Jun-10 KTKBANK SELL 20 212613 187000 87.95 2.41 0


2-Jun-10 JMFINANCIL BUY 31 999482 225000 22.51 (4.64) 7

2-Jun-10 JMFINANCIL SELL 11 225000 225000 100.00 6.97 3

Remarks - 100% of days sell between 9:00:53 AM To 9:24:58 AM till this time only no buying had been done.

8-Jun-10 RCOM BUY 34 900488 109000 12.10 (5.48) 15

8-Jun-10 RCOM SELL 5 109000 109000 100.00 0.72 0


15-Jun-10 HINDCOPPER BUY 23 202000 71788 35.54 (7.89) 3

15-Jun-10 HINDCOPPER SELL 13 94106 71788 76.28 0.79 0


25-Jun-10 RNRL BUY 35 1635500 1030105 62.98 (5.97) 2

25-Jun-10 RNRL SELL 24 1311041 1030105 78.57 5.70 1

Remarks 70.87% of days sell between 1:30:43 PM to 1:52:31 PM till this time only 14.64% of days buy qty bought

13.

From the above table, it was observed that noticee placed majority of

the unexecuted orders on the buy side and the conversion of buy orders into

trades was significantly less as compared to conversion of sell orders intotrades. I further note that on majority of the sell transactions were executed

during a particular time slot. When I analyze these sell transactions along

with the trade an order data, I find that majority of the sell transactions were

executed when the large buy orders away from the prevailing market price

placed by the noticee were pending in the system for execution. For

example, I find that on December 24, 2009 in the scrip of 3I Infotech

between 09:55:00 AM to 11:03:00 AM, when the Noticees large buy orders

were pending in the market, the Noticee was actually selling the shares and

62.70 % of its days total sale quantity in this scrip was sold during this

period. Similarly, on April 06, 2010 in the scrip of Amrutanjan between

09:04:45 AM to 09:45:59 AM , when the Noticees large buy orders were

pending in the market, it was actually selling the shares of Amrutanjan and



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54.60 % of its days total sale quantity was sold during this period. The

above table along with the trade an order data indicates that the noticee was

following the similar pattern/strategy in respect of other scrips also.

14.

The noticee's concentration to the market on the 25 scrip days was as

follows:

Table II

Trade Date Scrip Time slot

% selling

during

the slot

Noticee's

concentration to

Market net

Noticee's

concentrati

on to

Market

gross

24-Dec-09 3IINFOTECH 09:55:00 AM to 11:03:00 AM 62.70 7.79 2.12

31-Dec-09 NTPC 10:10:42 AM To 11:13:40 AM 100.00 12.49 4.87

6-Jan-10 GUJNRECOKE 10:12:18 AM to 10:43:25 AM 62.67 13.47 6.02

7-Jan-10 SATYAMCOMP 9:39:49 AM to 11:53:42 AM 99.17 8.27 4.0920-Jan-10 HINDCOPPER 9:02:07AM to 10:10:04 AM 51.42 7.30 2.18

20-Jan-10 NMDC 9:00:18 AM to 10:32:53 AM 69.72 9.22 2.39

21-Jan-10 JAICORPLTD 9:02:08 AM to 9:35:27 AM 51.23 9.90 2.02

27-Jan-10 JAICORPLTD 9:04:54 AM to 9:13:31 AM 50.11 9.08 2.77

18-Mar-10 ARSSINFRA 9:17:23 AM to 11:39:21 AM 55.20 6.76 1.24

6-Apr-10 AMRUTANJAN 9:04:45 AM to 9:45:59 AM 54.60 20.03 2.57

8-Apr-10 PIPAVAVYD 9:28:09 AM to 9:40:58 AM 62.60 24.44 10.45

9-Apr-10 SGJHL 9:07:27 AM to 9:58:31 AM 44.32 7.25 1.95

16-Apr-10 3IINFOTECH 9:55:26 AM to 11:10:15 AM 61.00 17.66 4.92

23-Apr-10 WIPRO 9:00:11 AM to 9:56:18 AM 76.74 9.13 2.14

26-Apr-10 ICICIBANK 9:04:37 AM to 9:28:59 AM 42.17 4.28 1.577-May-10 RNRL 11:17:00 AM to 11:26:50 AM 71.43 1.15 0

10-May-10 ENGINERSIN 9:00:23 AM to 9:04:10 AM 40.23 18.29 5.60

12-May-10 TALWALKARS 9:00:11 AM to 10:00:21 AM 45.48 4.22 1.11

21-May-10 PIRHEALTH 9:05:57 AM to 11:37:19 AM 45.93 1.57 1.05

28-May-10 TATAMOTORS 9:02:45 AM to 10:17:37 AM 76.44 5.87 1.58

1-Jun-10 KTKBANK 9:00:24 AM to 9:13:56 AM 65.78 10.75 3.55

2-Jun-10 JMFINANCIL 9:00:53 AM To 9:24:58 AM 100.00 32.94 8.33

8-Jun-10 RCOM 9:04:20 AM to 9:10:15 AM 68.81 9.29 3.55

15-Jun-10 HINDCOPPER 11:10:03 AM to 11:15:28 AM 51.26 12.93 4.22

25-Jun-10 RNRL 1:30:43 PM to 1:52:31 PM 70.87 8.77 2.29

15. The above table shows the daywise time slots when majority of the

selling was done by the noticee which ranged from 40.23% to 100%.

Noticees concentration during the time slot wherein majority of the selling

was done ranged from 1.15% to 32.94% to market net and 0% to 10.45% to



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market gross. For instance, on December 24, 2009, 62.70% of noticee's sale

in the scrip of 3I Infotech was done within the time slot of 09:55:00 AM to

11:03:00 AM and at that time the noticee's concentration to market net and

gross was 7.79% and 2.12% respectively. Similarly, on December 31, 2009,

100% of noticee's sale in the scrip of NTPC was done within the time slot of

10:10:42 AM to 11:13:40 AM and at that time the noticee's concentration to

market net and gross was 12.49% and 4.87% respectively. Again on April

06, 2010, 54.60% of noticee's sale in the scrip of Amrutanjan was done

within the time slot of 09:04:45 AM to 09:45:59 AM and at that time the

noticee's concentration to market net and gross was 20.03% and 2.57%

respectively. Similar observations were made for other scrips also as

mentioned in the above table.

16. I also note that the noticee's concentration to market pending orders

was significant on buy side when major selling transactions were executed

by the noticee and this is noticed on many scrip days as shown in the table

given below:

Table III

Trade Date Scrips Time slot % selling

during the slot

Range of noticee's

concentration to Market

pending

20-Jan-10 HINDCOPPER 9:02:07AM to 10:10:04 AM 51.42 29.81% to 71.19%

20-Jan-10 HINDCOPPER 10:34:03 AM to 10:58:53 AM 29.79 23.63% to 67.61%

20-Jan-10 NMDC 9:19:43 AM to 13:31:32 PM 26.25 52.57% to 76.38%

21-Jan-10 JAICORPLTD 9:17:12AM to 12:59:30 PM 95.93 67.52% to 77.55%

18-Mar-10 ARSSINFRA 9:17:23 AM to 11:39:21 AM 55.20 66.64% to 76.49%

6-Apr-10 AMRUTANJAN 9:04:45 AM to 9:45:59 AM 54.60 65.83% to 81.99%

9-Apr-10 SGJHL 09:08:00 AM to 14:01:22 PM 94.90 50.80% to 80.54%

21-May-10 PIRHEALTH 10:35:26 AM to 11:24:41 AM 29.65 32.08 % to 60.83%

17.

As can be seen from the above table that the noticee had sold51.42% of its days total sale quantity during the time slot 09:02:07AM to

10:10:04 AM in the scrip of Hindustan Copper Limited on January 20,

2010. In the said time slot, the percentage of noticee's pending buy orders to

the market pending buy orders ranged from 29.81% to 71.19%. Similarly,

the noticee had sold 54.60 of its total days sale quantity during the time slot



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09:04:45 AM to 09:45:59 AM in the scrip of Amrutanjan on April 06, 2010

and in the said time slot the percentage of its pending buy orders to the

market pending buy orders ranged from 65.83% to 81.99%. Similar

observations were also made for the remaining scrip days as mentioned in

the above table.

18.

From the material available on record and on an overall analysis of

the order placement/trading pattern of the Noticee, I note that mostly it was

first placing large fully disclosed buy orders at prices which were

substantially below the prevailing price / last traded price. Further, during

the period when these orders were pending in the system, Noticee was

placing sell orders at prices near the prevailing market prices, disclosingthem partially and actually selling the shares.

19.

Further at the time when majority of selling was done by the

Noticee, its concentration to market net and gross was significant in respect

of those scrips. Additionally, the range of concentration of noticee's pending

buy orders to market pending buy orders in respective scrips was also

significantly higher at the time when noticee was in fact involved in selling

those shares. When majority of its selling activity was over, it used to cancel

previously placed huge buy orders which were away from market price and

thereafter it executed majority of the buy transactions by placing partially

disclosed buy orders at prices near the prevailing market prices.

20.

To further explain order placement / trading pattern of the Noticee, a

few examples are given below:

Example I - Trading of the noticee in the scrip of 3I Infotech on 24-12-09 :-

At 09:55:13 AM, the noticee placed 6 buy orders in the scrip of 3I

Infotech for 50,000 shares each at order price ranging from`88.00 to

` 88.90 which (after modifications) were 3.38-7.37 % below the

prevailing price. These orders totaling 3,00,000 shares were fully

disclosed to the market. While the afore-mentioned orders were still



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pending in the market for execution, the noticee placed sale order for

30,000 shares of 3I Infotech at 09:55:17 AM disclosing it partially

which after modification was executed at a price of ` 95.00 at

09:55:29 AM. I further note that the noticee placed several fully

disclosed large buy orders away from the market price and during the

pendency of the buy orders in the system, it kept on placing partially

disclosed sell orders closer to prevailing prices and getting them

executed.

I further note from the tables given in the forgoing paragraphs that

while noticee's numerous large buy orders away from the prevailing

market prices placed between 09:55:00 AM to 11:03:00 AM was

pending, it actually sold 62.70 % of its days total sale quantity in thisscrip during this period and at that time the noticee's concentration to

market net and gross was 7.79% and 2.12% respectively.

I note that majority of these large buy orders at prices below

prevailing price were cancelled between 01:31:39 PM to 01:31:41 PM

with no execution. Thereafter, the noticee went about making its

purchases by placing buy order near the prevailing market prices and

through numerous buy orders executed between 01:37:57 PM and

03:21:37 PM it purchased 2,24,842 shares at prices ranging from `

90.60 to 92.65. These purchases coupled with purchases made earlier

squared off its total position of 3,00,000 shares of 3I Infotech.

Example II - Trading of the noticee in the scrip of Amrutanjan Ltd. on April

06, 2010:-

Between 09:03:28 AM to 09:03:33 AM, the noticee placed five

purchase orders for 5,000 shares each of Amrutnajan Ltd. The total

buy quantity was fully disclosed and the order price (after

modifications) was between 2.91-14.90 % less than the prevailing

market price. While the afore-mentioned orders were still pending in

the market for execution, the noticee placed partially disclosed sale

order for 2,000 shares of Amrutanjan Ltd. at 09:04:45 AM which was



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modified and thereafter executed between 09:04:45 AM to 09:07:03

AM for 2,000 shares at price between`1,240-1249 per share. Again at

09:08:44 AM and 09:08:45 AM, noticee placed another two fully

disclosed buy orders at prices (after modifications) which were

between 2.91-14.85 % less than the prevailing market price. I further

note that the noticee placed several fully disclosed large buy orders

away from the market price and during the pendency of the buy orders

in the system, it kept on placing partially disclosed sell orders closer

to prevailing prices and getting them executed.

I further note from the tables given in the forgoing paragraphs that

while noticee's numerous large buy orders away from the prevailing

market prices placed between 09:04:45 AM to 09:45:59 AM waspending, it actually sold 54.60 % of its days total sale quantity in this

scrip during this period and at that time the noticee's concentration to

market net and gross was 20.03% and 2.57% respectively and the

range of noticee's concentration to market pending during this period

was 65.83% to 81.99%.

I note that majority of these large buy orders at prices below

prevailing price were cancelled between 09:46:14 AM to 09:46:16

AM with no execution. Thereafter, between 09:46:22 AM to 09:48:18

AM, noticee placed several partially disclosed buy orders at prices

near about the prevailing market price and purchased 7,375 shares at

prices (after modifications) ranging from` 1,164 to 1,211. It again

started placing numerous large fully disclosed buy orders between

09:57:48 AM to 09:58:12 AM at prices (after modifications), which

were between 4.55-6.80 % less than the prevailing market price.

Again when such large buy orders of noticee was pending, then

between 09:59:33 AM to 10:28:53 AM, it placed 8 other partially

disclosed sale orders which were modified and thereafter executed for

a total of 16,278 shares at price ranging from`1180 to 1246.55.

I note that all those large buy orders placed between 09:57:48 AM to

09:58:12 AM at prices below prevailing price were cancelled between



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Page 16 of 23

for making an investment decision for buying or selling securities. The

demand and the supply forces determine the market price and consequent

trading in the scrip. In my view, by placing a large buy orders at prices away

from the prevailing market prices and disclosing the entire quantity in one

instance, the noticee created artificial demand in the respective scrips. The

demand created by the noticee was artificial as the price quoted by it was

much below the prevailing market prices and a substantial number of those

large buy orders could not have resulted into trades and, in fact, did not

result into trades for this reason and most of these orders were deleted. The

said orders can be said to have made an impact on the lay investors in

making an investment decision and the noticee taking advantage of the

same, pending its unexecuted buy orders, fraudulently indulged in sellingthe shares. Thus the intention of placing buy orders away from the

prevailing market prices was not for genuine trading but only for artificially

enhancing the levels of demand, which constitutes a manipulative practice

in the market.

23. I further note that for the orders which were away from the

prevailing market price, full quantity was disclosed while for orders placed

close to market price, only a limited quantity was disclosed. It is pertinent to

mention here that as per trading norms laid down by exchanges, a

mechanism is provided whereby only a fraction of the total quantity (not

less than 10% of total) is revealed for orders of a large quantity. The system

then feeds this revealed quantity as order quantity and when this gets

exhausted another fraction is revealed automatically for display purposes

only, till the total quantity is exhausted. In the market picture window,

only the revealed quantity is displayed in the best five orders as well as in

the total depth of order book. Therefore, if fully revealed in one stroke, largeorders would significantly sway the demand-supply balance in the market at

that point in time. I further note that the noticee was successively

deleting/modifying the orders and placing fresh orders which were at much

below the prevailing market price. This prima facie demonstrates that the

noticee has repeatedly and knowingly placed buy orders much below the



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market prices even though its earlier order had not been executed. Further

such a process of deletion/modification of successive orders and placing of

fresh orders in that place is prima facie bound to misinform the lay

investors. The Noticee has thus manipulated the order book of the shares on

the trading days by giving false impression in the market about the demand

and supply of various scrips and thereby misled the market participants.

24.

I have carefully gone through the submissions made by the noticee

and I note that the noticee has accepted the trades and order placement /

trading pattern provided to it alongwith the SCN. However, the noticee has

contended that it is a day trader and was placing range bound orders so as to

take advantage of the gap-up or gap-down open trades. I am unable to agree

with the submission of the noticee. I am of the view that the noticee is free

to adopt any trading strategy but it has to ensure that whatever trading

strategy it adopts, it is in conformity with the regulatory framework. I have

noted that while the noticee was placing large fully disclosed buy orders

away from market price and when these orders were pending in the system

for execution, it was actually indulging in substantial selling activity. I have

also observed that at a certain time, the noticee would cancel all such large

buy orders and only thereafter, it would start buying the shares of the

particular company by placing partially disclosed buy orders at prices near

the prevailing market prices. I have no hesitation to say that the noticee had

deliberately chosen to disclose full quantities in respect of large buy orders

which were placed at prices away from the prevailing market prices only to

mislead the investors by manipulating the order book and to create

artificiality in the market so as to serve its own collateral purposes.

Therefore, the contentions of the noticee is not acceptable.

25.

Noticee has further contended that trades in the alleged scrips are

insignificant considering the volume of trading in these scrips. This

contention of the noticee is again devoid of merits. It has been clearly

brought out in the forgoing paragraphs that at the time when majority of

selling was done by the Noticee, its concentration to market net and gross



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was significant in respect of those scrips. Further, the noticee's

concentration to market pending orders was significant on buy side when

major selling transactions were executed by the noticee and this in fact was

noticed on many scrip days.

26. When we look at the large fully disclosed buy orders placed by the

noticee which were away from the market price in isolation, it might appear

that the noticee wanted to buy a large quantity of shares at lesser prices and

that it could only buy a small quantity. Further, this may prima facie appear

to be range bound orders and may not be objectionable. However, when we

look into the order placing pattern of the noticee in totality, only then its

ulterior motive behind placing such buy orders becomes evident. I have

noticed that on the same day the noticee had placed two sets of buy orders at

different times. One set of buy orders was for fully disclosed larger quantity

away from the market price and another set of order for partially disclosed

small quantity at prices close to market prices. The former set of orders

were placed only to be cancelled at the later stage and the later set of buy

orders were placed when it had the real intention to execute the trades and

that is how the later set of orders which the noticee placed close to market

price mostly resulted into trades. More importantly, the large buy orders

were cancelled by the noticee not because it did not result into trades but

because it served its purpose which would be more evident when we look at

the order placing behavior of the noticee during the time between the

placement and cancellation of such orders. I note that while noticee placed

such large orders away from the market price and it was pending the system,

the noticee was mainly selling the shares by placing orders close to market

prices taking advantage of artificial demand created as a result of large buy

orders placed by it at prices away from the market prices. When majority ofits sell orders were executed in this fashion, the noticee cancelled those

large buy orders where its intention was only to induce lay investors into

believing that there existed a large demand in the scrips so that it could

fraudulently indulge in selling the shares by placing orders close to market

prices and only thereafter, it would start buying the shares of the particular



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company by placing partially disclosed buy orders at prices near the

prevailing market prices. I have noted that this pattern was repeatedly

followed across various scrips and for several days. This assumes serious

proportion when we take into account the fact that significant quantity of

noticee's sale, on some days as high as 100%, happened during the time slot

when the noticee's large buy orders were pending as shown in table I and II.

The intention of creating false demand by the noticee by its large buy orders

at prices away from the market price is again quite clear when we take into

account the fact that pending buy orders of the noticee to the market

pending buy orders was substantial during the particular time slot in the

respective scrips when majority of selling was done by the noticee as shown

in table III. As found above, the order placement/trading pattern followed bythe noticee clearly establishes the fraudulent intent on its part and the same

deserves to be viewed seriously.

27. I am also aware that on May 12, 2011, SEBI had passed an

adjudication order no. BM/AO-66/2011 against Shri Vishal Kishore Bhatia

(Director of the Noticee) on similar charges. I note that order dated May 12,

2011 considered the trading of Shri Vishal Kishore Bhatia for only 1 day

and gave him benefit of doubt as there were no corroborative evidences on

record to prove that the trading of the noticee was manipulative in nature. In

the present case, however, the Noticees trading pattern has been analyzed

over many days and various scrips and as has been found above the real

intention behind placing all the away from the prevailing market prices fully

disclosed buy orders by the noticee was not for genuine trading but only to

create artificial demand and induce lay investors into believing that there

existed a large demand in the scrips so that the noticee, taking advantage of

the same, pending its unexecuted buy orders, could fraudulently indulge inselling the shares by placing orders close to market prices. I have also

observed that at a certain time, the noticee would cancel all such large buy

orders and only thereafter, it would start buying the shares of the particular

company by placing partially disclosed buy orders at prices near the

prevailing market prices. I have further noted that this pattern was



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Page 21 of 23

30. The aforesaid violations of Regulations 3 (a), (b), (c), (d) and 4 (1)

and (2) (a) of PFUTP Regulations by the Noticee make it liable for penalty

under section 15HA of SEBI Act, 1992 which reads as under:

"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."

31. The Honble Supreme Court of India in the matter of Chairman,

SEBI v.. Shriram Mutual Fund {[2006] 5 SCC 361} held that In our

considered opinion, penalty is attracted as soon as the contravention of the

statutory obligation as contemplated by the Act and the Regulations isestablished and hence the intention of the parties committing such violation

becomes wholly irrelevant.

32. While imposing monetary penalty it is important to consider the

factors stipulated in Section 15J of SEBI Act which reads as under:

15J -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, whereverquantifiable, 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.

33. It is difficult in cases of such nature, to quantify exactly the

disproportionate gains or unfair advantage enjoyed by an entity and the

consequent losses suffered by the investors. However, an attempt has been

made, taking into account the positive square off difference made by the

noticee on various scrip days and also the extent of net sales made by it

during the time when the noticee's large buy orders were pending in the

market, to arrive at an estimate of the profit made by the noticee from the

aforesaid fraudulent act as under:



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Trade

Date

(A)

Scrip

(B)

Time slot

(C)

%

selling

during

the slot

(D)

%

buying

during

the slot

(E)

% net

selling

during

the slot

(F)

Square off

difference

(in lakhs)

(G)

Estimated

Profits (in

lakhs)

(G * F)

(H)

24-Dec-09 3IINFOTECH 09:55:00 AM to 11:03:00 AM 62.7 16.53 46.17 5.17 2.386989

31-Dec-09 NTPC 10:10:42 AM To 11:13:40 AM 100 0 100 5.74 5.74

6-Jan-10 GUJNRECOKE 10:12:18 AM to 10:43:25 AM 62.67 9.58 53.09 5.01 2.659809

7-Jan-10 SATYAMCOMP 9:39:49 AM to 11:53:42 AM 99.17 22.59 76.58 5.14 3.936212

20-Jan-10 HINDCOPPER 9:02:07AM to 10:10:04 AM 51.42 17.03 34.39 12.97 4.460383

20-Jan-10 NMDC 9:00:18 AM to 10:32:53 AM 69.72 20.69 49.03 9.98 4.893194

21-Jan-10 JAICORPLTD 9:02:08 AM to 9:35:27 AM 51.23 3.74 47.49 14.19 6.738831

27-Jan-10 JAICORPLTD 9:04:54 AM to 9:13:31 AM 50.11 1.23 48.88 6.57 3.211416

18-Mar-10 ARSSINFRA 9:17:23 AM to 11:39:21 AM 55.2 14.94 40.26 14.65 5.89809

6-Apr-10 AMRUTANJAN 9:04:45 AM to 9:45:59 AM 54.6 7.38 47.22 24.83 11.724726

8-Apr-10 PIPAVAVYD 9:28:09 AM to 9:40:58 AM 62.6 8.88 53.72 5.62 3.019064

9-Apr-10 SGJHL 9:07:27 AM to 9:58:31 AM 44.32 14.18 30.14 29.99 9.038986

16-Apr-10 3IINFOTECH 9:55:26 AM to 11:10:15 AM 61 0.66 60.34 7.14 4.308276

23-Apr-10 WIPRO 9:00:11 AM to 9:56:18 AM 76.74 6.27 70.47 8.55 6.025185

26-Apr-10 ICICIBANK 9:04:37 AM to 9:28:59 AM 42.17 1.1 41.07 7.08 2.907756

7-May-10 RNRL 11:17:00 AM to 11:26:50 AM 71.43 24.49 46.94 7.54 3.539276

10-May-10 ENGINERSIN 9:00:23 AM to 9:04:10 AM 40.23 0.06 40.17 7.78 3.125226

12-May-10 TALWALKARS 9:00:11 AM to 10:00:21 AM 45.48 17.81 27.67 6.97 1.928599

21-May-10 PIRHEALTH 9:05:57 AM to 11:37:19 AM 45.93 21.4 24.53 12.35 3.029455

28-May-10 TATAMOTORS 9:02:45 AM to 10:17:37 AM 76.44 2.82 73.62 6.99 5.146038

1-Jun-10 KTKBANK 9:00:24 AM to 9:13:56 AM 65.78 2.43 63.35 7.97 5.048995

2-Jun-10 JMFINANCIL 9:00:53 AM To 9:24:58 AM 100 0 100 5.46 5.46

8-Jun-10 RCOM 9:04:20 AM to 9:10:15 AM 68.81 9.46 59.35 6.13 3.638155

15-Jun-10 HINDCOPPER 11:10:03 AM to 11:15:28 AM 51.26 8.89 42.37 8.47 3.588739

25-Jun-10 RNRL 1:30:43 PM to 1:52:31 PM 70.87 14.64 56.23 5.46 3.070158

Total 114.523558

34. I have further noted that the Noticee has indulged in the fraudulent

practice as stated above on many days and hence the nature of default was

also repetitive. I cannot ignore the fact that such trades do affect the fair

functioning of the securities market and allow unscrupulous elements to

take undue advantage at the cost of other innocent investors. Therefore, it is

necessary that a justifiable penalty is imposed on the Noticee to meet the

ends of justice.



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P 23 f 23

Order

35.

In light of all the above stated facts and circumstances of the case,

more particularly considering the extent of involvement of the Noticee in

such fraudulent trades, in exercise of the powers conferred upon me under

Section 15I (2) of the SEBI Act read with rule 5 of the Adjudication Rules, I

hereby impose a penalty of ` 2,00,00,000 /- (Rupees Two Crore only)

under section 15HA of the SEBI Act, 1992 on the Noticee viz. M/s Blue

Peacock Securities Pvt. Ltd. for violation of Regulations 3(a), (b), (c), (d),

and 4(1) and (2) (a) of PFUTP Regulations. I am of the view that the said

penalty is commensurate with the violations committed by the Noticee.

36.

The Noticee shall pay the said amount of penalty by way of demand

draft 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 should be forwarded to The Division Chief (IVD-5), Securities and

Exchange Board of India, SEBI Bhavan, Plot No. C 4 A, G Block,

Bandra Kurla Complex, Bandra (E), Mumbai 400 051.

37.

In terms of rule 6 of the Rules, copies of this order are sent to the

Noticee and also to SEBI.

Date: August 27, 2014 A. Sunil Kumar

Place: Mumbai Adjudicating Officer

Documents

Adjudication Order against Blue Peacock Securities Pvt. Ltd. in the matter of dealings of Mr. Vishal Kishore Bhatia