Case Overview

The adjudication proceedings were initiated against Bhavin Sureshbhai Thakkar (PAN: AFCPT8628L) for alleged violations of Section 12A(a), (b), and (c) of the SEBI Act, 1992 read with Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(a), and 4(2)(e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations).

The case originated from a Suspicious Transaction Report (STR) received by SEBI from the Financial Intelligence Unit - India (FIU-IND) regarding trading concentration in certain scrips, including Evexia Lifecare Limited (formerly known as Kavit Industries Ltd. and Atreya Petrochem Limited). BSE conducted a preliminary analysis and recommended further investigation into possible PFUTP violations. The investigation period was from August 11, 2016, to November 11, 2016.

The principal allegations against Thakkar were that he:

  • Was the top Last Traded Price (LTP) contributor in Evexia scrip, contributing ₹59.48 to total market positive LTP (40.85% of total market positive LTP)
  • Executed 219 buy trades contributing to positive LTP, out of which 179 trades were for just 1 share each (81.73% of total buy trades)
  • These single-share buy orders contributed ₹53.16 to total market LTP (36.51% of total market positive LTP)
  • In 175 of these trades, placed buy orders for fewer shares despite higher quantities being available in sell orders
  • Contributed ₹5.02 to New High Price (NHP) through 15 trades, representing 37.80% of total market NHP of ₹13.28
  • The trading pattern indicated manipulative intent to set new high prices rather than genuine share acquisition

Thakkar defended himself by claiming he was a jobber/day trader testing market depth through small trades, a legitimate market practice. He argued:

  • SEBI failed to consider his negative LTP contributions and holistic trading pattern
  • He traded with 88 unique counterparties with no connections to suspected entities
  • His total trading volume was 11,15,880 shares (16.4% of exchange volume on days he traded)
  • He suffered a loss of ₹50,594 during the investigation period
  • All buy orders were limit orders matching existing sell order prices
  • Previous SEBI orders in similar matters (Blue Blends India Limited) had been dismissed
  • The SCN suffered from inordinate delay of 7 years causing prejudice

Final Outcome

The Adjudicating Officer found that Thakkar's trading pattern was consistent with jobbing activities where he bought and sold almost equal quantities of shares daily (total 5,57,947 shares bought and 5,57,933 shares sold during IP). The net LTP contribution was ₹44.49 after considering both buy and sell sides.

Critical findings leading to dismissal:

  • In 178 out of 179 single-share trades, buy orders were placed after sell orders were already available in the system
  • All buy order prices were equal to counterparty sell order prices (no orders above prevailing prices)
  • Thakkar traded substantial quantities following single-share trades (bought 5,57,767 shares through other trades)
  • No connection established with counterparties or suspected entities
  • Trading software limitations may have necessitated market depth testing
  • The preponderance of probabilities did not establish manipulative intent
  • The mandatory ingredient of inducement for fraud was not cogently established

The Adjudicating Officer concluded that the violations alleged were not established and disposed of the proceedings without imposing any monetary penalty under Section 15HA of the SEBI Act.

Topics: Market Manipulation, Jobbing Activities, SEBI Adjudication