WTM/PS/198/EFD/MAR/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992
In respect of
1. Mr. Dipak Jashvantlal Panchal and
2. Ms. Devangi Dipak Panchal
In the matter of IPO irregularities.
1.

Securities and Exchange Board of India (SEBI), vide Order dated February 25, 2011 (the

Order), inter alia directed Dipak J. Panchal and Devangi Panchal (collectively referred to as
noticees) not to buy, sell or deal in the securities market in any manner whatsoever or access the
securities market, directly or indirectly, for three months from the date of the Order. This Order was in
respect of the SCN dated December 01, 2009 issued to the noticees including 4 other persons. These
noticees were also directed to disgorge Rs.13,51,57,917/- and 10,74,97,161/- respectively. This Order
directed that in case the aforesaid amounts are not received by SEBI within the specified time, they
shall be restrained from buying, selling or dealing in securities market in any manner whatsoever or
accessing the securities market directly or indirectly for a further period of nine years, without prejudice
to SEBIs right to enforce disgorgement and that until the said amounts were realized by SEBI, the
securities in the demat accounts of the noticees shall remain frozen. The Order superseded all the
directions issued against noticees vide interim Ordersdated December 15, 2005, dated January 12, 2006,
and dated April 27, 2006 and theconfirmatory order dated November 12, 2008 issued in the matter.
2.

The noticees challenged the Order in separate appeals in Appeals nos. 12 (Dipak J. Patel vs.

SEBI) and 15 (Devangi D. Panchal) of 2013 before the Honble Securities and Appellate Tribunal
(Honble SAT). The Honble SAT, vide Order dated October 21, 2014 disposed off the appeals with
the following observations/direction:

Page1of17

2.

In view of certain discrepancies in facts/contentions are noticed in the impugned order, counsel on both sides state

that without recording any reason, impugned order be quashed and set aside qua the appellants herein and the matter be
remanded back for passing fresh order on merits in accordance with law. Accordingly, the impugned order is quashed and
set aside qua the appellants and restored to the file of Whole Time Member of SEBI for passing fresh order on merits in
accordance with law. Needless to say, Whole Time Member of SEBI would pass fresh order after considering the reply filed
by appellants and also arguments that may be advanced by the counsel for appellants at the personal hearing. Whole Time
Member of SEBI is directed to pass fresh order on merits as expeditiously as possible preferably within a period of six
months from today.

.
3.

The noticees, vide letter dated January 17, 2015 requested the following before conducting the

personal hearing:
(a) Inspection of original documents
(b) Copies of documents sought in paragraph B of their e-mail dated October 09, 2010
(c) Cross-examination of all persons whose statements, replies, letters, averments etc., are relied
upon.
4.

The noticees were afforded an opportunity of personal hearing on May 25, 2015 and the

schedule of the same was informed vide SEBI letter dated May 07, 2015. The said letter informed the
noticees that all the documents that were relied upon have already been provided and no new
documents were relied upon against them in the present proceedings. The noticees were called to file
further reply to the show cause notice dated December 01, 2009, if they wish, before the date of the
scheduled personal hearing. The noticees were informed that if they fail to appear in the hearing, it
would be presumed that they have nothing to state and that the matter would be proceeded on the
basis of material available on merit.
5.

In response, the noticees, vide letter dated May 20, 2015, stated that their request dated January

17, 2015 requesting inspection, other documents and cross-examination was not replied. They also
referred to the statement made in the SEBI letter dated May 07, 2015 that all the relied upon
documents were provided and no new documents were relied, and reiterated their request for
inspection of original documents or furnish true/authenticated copies of the same. They further stated
that there may be many factual mistakes in respect of the date of opening of demat accounts in the

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SCN and the actual photocopy of the documents and therefore the veracity of the relied upon
documents were doubted. The following submissions were also made:
(a) The noticees also referred to the charges against them and requested for various documents
which according to them were vital for their defence. According to the noticees, such
documents were relevant as they would prove that the noticees did not involve or participate or
even had the knowledge of the irregularities in the IPO process with respect to
-

opening of so many bank and demat afferent accounts,

preparing and signing IPO application forms and IPO application form bidding,

fabricating bank introduction letters and attaching fabricated bank letters to demat account
opening forms,

preparing, signing, introducing and verifying bank loan agreements,

signing Delivery Instruction Slips (DIS) for transferring shares from afferent accounts,

preparing and lodging such DIS

issuing and receiving a single Refund Order (RO) and depositing such RO

master minding from germination of idea paper in such manner upto allotment of shares and
thereafter transfer of shares and noticees are not the key operators and kingpin in the entire
process.

(b) The noticees also submitted that none of the charges against them were proved by the 896
pages of documents furnished to them by SEBI and requested SEBI to provide the exact page
nos. out of the said documents for proving the charges. The noticees also stated that it was
within the knowledge of SEBI that Karvy group of companies had come out with an Idea
Paper. SEBI Orders dated April 27, 2006, May 26, 2006, June 22, 2007, January 28, 2014 etc
have found that the alleged irregularity is committed at the end of Karvy group of companies
only and that the said documentary evidences are brushed aside. The noticees contended that
not a single relied upon document shows that they were involved or committed any
irregularity.

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(c) The noticees stated that it is trite law that inspection of original documents, additional
documents on which charges are alleged, cross examination etc., must precede the reply of the
noticees and personal hearing. The noticees requested that in case SEBI was not agreeable for
supply of additional documents as sought by them, then they should be intimated so that they
could challenge the refusal before the appropriate forum.
(d) The noticees further submitted that before passing of the Order dated February 25, 2011,
opportunities of inspection of documents were afforded on September 03, 2010 and October
08, 2010, however on both the occasions, not a single document was produced for inspection
or authenticated copies provided to Dipak Panchal and his advocate. Though the noticees
specifically requested on October 09, 2010 to provide certain documents, which were in
possession of SEBI and/or could be availed by SEBI by virtue of its powers, the same was
grossly ignored and not a single additional document was provided to the noticees till date.
(e) The noticees reiterated their request for inspection of original documents and additional vital
documents and post such inspection and perusing additional documents, stated that they
reserve their right to cross-examine persons whose statements/replies are relied upon. After
completion of legal formalities, they shall file effective replies.
(f) The noticee submitted that they do not have an idea to prolong or delay the proceedings as they
are also tired of such lengthy proceedings and were only pursuing their basic and legal right of
inspection of documents, additional documents and cross examination.
6.

Thereafter, vide letter dated June 05, 2015, the noticees inter alia stated that the decision of

conducting personal hearing without inspection of original documents and additional documents, cross
examination, and their reply was seriously flawed and not in accordance with law as directed by
Honble SAT in Order dated October 21, 2014.
7.

As SEBI had already provided copies of the documents relied in the matter and was also not

relying on new documents, the noticees were informed of the same vide SEBI letter dated July 22,
2015. They were also afforded a final opportunity of personal hearing on August 10, 2015. The noticees

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again failed to appear in the said hearing. From the same, it becomes clear that the noticees are only
prolonging the matter by making repeated request for inspection and additional documents, when they
have been clearly informed that SEBI would not rely on new documents. As sufficient opportunities of
hearing and for filing of further submissions have already been afforded in the matter, I find that
affording further opportunities would only prolong the case. Accordingly, I proceed further in the
matter based on material on record on merits.
8.

I have considered the SCN issued in the matter, the submissions of the noticees and other

material on record.
9.

The SCN had alleged that the noticees had adopted fraudulent, deceptive and manipulative

device and cornered substantial shares to the detriment of genuine RIIs in the IPOs, through a number
of afferent accounts made huge illegal gains to the detriment of the RIIs by sale of these shares. The
SCN had alleged that the noticees have violated the provisions of section 12A (a), (b) and (c) of the
SEBI Act and regulation 3 (a), (b), (c) and (d) and 4(1) of the PFUTP Regulations, 2003. The notice
also alleged that the conduct of the noticees was in violation of Guideline 1.2.2 (xxiva) read with
Guideline 7.6.1.2.1 of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 (as applicable) in
providing specific quota for RIIs so as to achieve large participation from RIIs. The notice also alleged
that the noticees have through afferent demat accounts, as narrated in the notice, manipulated the
allotment of shares in retail quota of IPOs and cornered shares for more than what they were otherwise
entitled to, had they applied individually.While referring to Guideline 7.6.1.2.1, the notice observed that
one cannot be allowed to usurp the retail investor quota by applying in retail category through multiple
applications/demat accounts. The SCN had called upon the noticees to show cause why directions
under sections 11, 11(4) and 11B of the SEBI Act including but not limited to all or any of the
following:
(a) Directions restraining the noticees from buying, selling or dealing in securities in any manner
and/or
(b) Directions to disgorge ill-gotten gains (Rs.8,70,72,003/- and Rs.6,82,30,549/- respectively from
Dipak Panchal and Devangi Panchal) along with interest, and/or

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(c) Any other directions as deemed appropriate including directions to realize the shares, if any, in
the frozen demat accounts and also be jointly and severally liable for disgorgement of ill-gotten
gains of facilitated to financiers and other entities.
10.

The matter has been remanded to SEBI for passing of fresh order on merits in accordance with

law in view of certain discrepancies in facts/contentions noticed in the SEBI Order dated February 25,
2011, which has been set-aside by the Honble SAT.
11.

I have perused the SCN dated December 01, 2009 issued to the noticees. From the same, I note

that the SCN alleged that the noticees in collusion with the others of the Panchal family had
(a) Created demat accounts with various combinations of fictitious surnames using forged bank
letters and had control over such accounts;
(b) Acted in concert with financiers and received finance, paid refunds and transferred cornered
shares to them;
(c) Availed IPO finance on behalf of thousands of fictitious entities
(d) Applied in various IPOs through the afferent accounts and cornered shares through
synchronized off-market transfer from the applicant demat accounts to demat accounts of
noticees before listing date
(e) Sale of cornered shares in the market and made ill-gotten gains by noticees and financiers.
The SCN alleged that these action and conduct was in violation of section 12A (a), (b) and (c) of the
SEBI Act and regulations 3 and 4(1) of the PFUTP Regulations, 2003 and the DIP guidelines. These
allegations and charges were also the charges broadly in the adjudication proceedings initiated by SEBI
against the noticees.
12.

In this regard, I note that SEBI also initiated adjudication proceedings against the noticees in

the matter and the same were decided by the AOs common order dated May 31, 2011, wherein the
SEBI AO held them guilty of violating the provisions of section 12A(a), (b) and (c) of the SEBI Act
and regulations 3(a), (b), (c), (d) and 4(1) of the PFUTP Regulations and a penalty of Rs. 20 crore was
imposed on Dipak Panchal and a penalty of Rs.25 crore imposed on Devangi Panchal. The noticees
challenged the AO Order in appeals (Appeal no. 198/2011 Dipak Panchal vs. SEBI and Appeal no.

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200/2011 Devangi Panchal vs. SEBI) before the Honble SAT. These appeals were disposed off by
the Honble SAT, vide Order dated November 12, 2012, whereby the findings of the AO were upheld
and the penalties were reduced to Rs.2 crore on each of the noticee. I note that SEBI, vide the
aforesaid adjudication orders had already found the noticees guilty of committing the violations. The
said violations are the same as alleged in this proceedings before me. These finding of SEBI have
already been upheld by the Honble SAT, as observed above.
13.

Further, it would be relevant to note the following observations and findingsof the Honble

SAT:

We have already noted that the findings of the Board are that some entities of Panchal group opened afferent accounts,
some used them for making applications in retail category of IPOs, some helped in transfer of shares to the financiers and
some disposed of the shares. We have also noted that all of them did not play the same role but they complemented one or
the other in executing the game plan. The appellants fall in the category of those who are the

beneficiaries of these shares and who made money by selling the shares which were transferred
to their demat accounts by the key operators or the financiers. The definition of fraud, as contained in
regulation 2(c) of the FUTP regulations, is wide enough to encompass the activity of the appellants within its fold. Penalty
under Section 15HA can be imposed on any person who indulges in a fraudulent activity. The provisions of this section
are not confined to intermediaries alone. Therefore, this argument of learned counsel for the appellants is also rejected.
.
15. We are unable to accept these submissions of learned counsel for the appellants. As per the records available, the
investigation was not confined to the alleged fictitious bank accounts or the demat accounts but was pertaining to the IPO
scam. As discussed in the earlier part of this order, various entities have played different roles to make the whole IPO
scam successful. The role of the appellants, as discussed above, pertains to permitting use of their

bank accounts for opening fictitious demat accounts and arranging finance using these bank
accounts, getting the shares allotted in the IPO to their accounts and ultimately selling these
shares in the market thereby earning profit. In the facts and circumstances of the case, it
cannot be said that it was a purchase simplicitor of the shares by the appellants from
Roopalben Panchal who was another active member of the Panchal group in making the IPO
scam successful. We are inclined to agree with the learned counsel for the respondent Board that the confirmation

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letters submitted by Roopalben Panchal with regard to the number of shares sold, price at which they were sold and
acknowledgement of consideration received from the appellants are self serving documents which were not produced at the
first available opportunity. In none of these documents, amounts tally with the consideration for the shares purchased. The
declaration given by Roopalben Panchal confirming dealings of the shares other than IPO and transactions in 1999 does
not, in any way, mitigate the case against the appellants with regard to transactions in respect of shares under the IPO
scam. On the basis of material placed on record, the transfer of shares from Roopalben Panchal to appellants is not in
dispute. These were the shares which were purchased using fictitious demat accounts is also not

in dispute. If the earnings under these shares are shown in the income tax returns that by itself,
cannot be a mitigating factor if transactions are otherwise found to be violative of regulatory
framework. Learned counsel for the appellants have referred to certain judgments . to contend that the
charge levelled against the delinquent must be precise and unambiguous. Vagueness in the show cause notice is fatal to the
case. We have looked into these orders. While agreeing with the preposition that the charges in the show cause notice must
be clear and unambiguous, we find that there is no such infirmity in the impugned order. When a case is to be established
on the basis of circumstantial evidence, establishing the complicity of persons involved in fraudulent or unfair schemes is a
challenge. There are situations where different layers of the transactions, each of which may fall within the four corners of
law, but, if analysed cumulatively, may bring them within the fraudulent transactions as prescribed in the regulations.
Whether a transaction or series of transactions integrally connected with each other will fall within the purview of
fraudulent transactions, as defined in the regulations, will depend upon the facts brought out on record during the
investigation and the connection established between the parties. Examined in that perspective, the Board has

placed sufficient material on record to prove that the transactions entered into by the
appellants fall within the definition of fraud as provided in regulation 2(c) of the FUTP
regulations.
.
17. After perusing the material placed on record and after hearing learned counsel for the

parties, we are convinced that the appellants are part of the Panchal group. Some members of the
Panchal group opened bank accounts with Bharat Overseas Bank and Indian Overseas Bank and these bank accounts
were used to open several other afferent bank accounts and thousands of afferent demat accounts in the name of fictitious
persons. These afferent demat accounts were used by members of the Panchal group to make applications in various IPOs.
The applications were made on the basis of loans taken from the two banks or Karvy, the depository participant, in the
name of the afferent bank account holders or other demat account holders. Loans were also raised by members of the

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Panchal group from private financiers. On allotment of shares, these shares were transferred from the

afferent accounts to the accounts of the Panchal group who further transferred the shares either
in the demat accounts of the financiers or other members of the Panchal group including the
appellants. The appellants then sold these shares and made substantial profit. On the basis of
material placed on record, we cannot find any fault with the findings arrived at by the
adjudicating officer of the Board that the appellants have indulged in fraudulent/manipulative
activities and employed deceptive devise to corner the shares reserved for retail individual
investors in the IPOs to defraud the retail individual investors and such activity is not only in
breach the integrity of the market, but also violative of the provisions of section 12A (a), (b) and
(c) and Regulation 3 (a), (b), (c) and (d) and 4(1) of the FUTP regulations. There is a clear
finding of the Board that the provisions, as noted above, stand violated and it was not
necessary for the Board to give specific finding with regard to violation of each of the subregulation of the FUTP regulations or the sub-section of the Act.
21.
The appellants were restrained from trading in the market for a sufficiently long period and in the order passed
under Section 11 and 11B of the Act, they have been directed to disgorge an amount of more than `24.26 crores. Keeping
in view the order passed by the whole time member of the Board against the appellants, the quantum of penalty imposed on
other entities involved in the scam and also the fact that a large number of entities have been permitted to settle the matter
through consent proceedings, we are of the view that ends of justice would be met by reducing the penalty in the case of the
two appellants before us to `2 crores each.
22. While upholding the findings arrived at by the adjudicating officer, we reduce the penalty to ` 2
crores in respect of each of the appellants.
...
In view of the above observations made by the Honble SAT, the allegations made in the SCN dated
December 01, 2009 issued to the noticees Dipak Panchal and Devangi Panchal have already
beendecided against them. It is relevant to note that the Honble SAT had reduced the penalty also
taking into account the order for disgorgement passed against the noticees. It is noted that appeals filed
by them against the Order of Honble SAT are pending before the Honble Supreme Court.

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14.

It is a fact that numerous afferent demat accounts were opened for the purposes of cornering

the shares meant for retail investors in the IPOs. The SCN has clearly brought out the modus operandi
employed by the noticees and others of the Panchal group. The SCN has stated the noticees and other
persons (i.e. Roopalben Panchal, Bhargav Panchal, Hina Bhargav Panchal and Arjav Panchal) to whom
the SCN dated December 01, 2009 was issued, were closely related and had common addresses in their
demat accounts. The SCN has clearly mentioned the manner in which thousands of afferent demat
accounts were opened by first opening bank accounts in their names and list of fictitious names were
appended to these bank accounts. I note that on allotment and credit of shares (issued in the IPOs) in
such afferent accounts, the same were transferred to the accounts of the noticees, who thereafter sold
the same and made undue gains. The plea that the noticees had purchased shares from Roopalben
Panchal has already been rejected by the Honble SAT. The SCN has stated that such demat accounts
were opened with Karvy Stock Broking Limited, a depository participant. In this regard, I note that
SEBI vide Order dated January 28, 2014 had found that the said depository participant had acted in
concert with the key operators/financiers and others including the Panchal group and facilitated the
opening of demat accounts and cornering of shares. The SCN has also stated that the Panchal group
had made consolidated payments to the depository participant towards AMC charges and transaction
charges of numerous dematerialized accounts held with the said depository participant. This would
prove that the afferent accounts (used for cornering the retail portion and channeling the same to the
noticees/key operators) were under the control of the Panchal group including the noticees. It is also
observed that in all 18 IPOs, the shares from the afferent demat accounts were transferred to
Roopalben Panchal. As mentioned in the SCN, the transfer of IDFC IPO shares from the afferent
accounts held in names starting from Suresh Seth till Aditi Seth (i.e. list of 50 names attached to the
IOB account no.12140)would illustrate the manner in which the cornered shares in the afferent
accounts were transferred to the Panchal group. Thereafter, the shares held in the account of
Roopalben Panchal were transferred to the noticees, as mentioned in the SCN, and subsequently, the
noticees had either off-loaded them or retained them and made undue profits, as alleged in the SCN.
15.

In view of the foregoing and on consideration of the material on record and also in reliance of

the findings and observations made by the Honble SAT, as discussed above, I hereby find the noticees
i.e. Dipak J. Panchal and Devangi D. Panchal indulged in fraudulent and unfair trade practices

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relating to the securities market thereby violating section 12A (a), (b) and (c) of the SEBI Act and
regulations 3 (a), (b), (c) and (d) and 4(1) of the PFUTP regulations, 2003, as alleged in the SCN dated
December 01, 2009.
16.

I also note that the Honble SAT in its Order dated March 03, 2016 in Appeal no. 400/2015

(Roopal Nareshbhai Panchal and Arjav Nareshbhai Panchal vs. SEBI) had inter alia observed the following:
6.

Although the charge sheets filed by CBI and the Enforcement Department against Mr. Dipak

Panchal do not conclusively establish that the appellants were not involved in the offence, the said charge
sheets prima facie establish that Mr. Dipak Panchal had forged the signatures of 4 the appellants and
consequently, support the argument of the appellants that they were not involved in the offence committed
by Mr. Dipak Panchal.
17.

The noticees have made request for documents and no submissions were made as to how they

are relevant. As mentioned above, the Honble SAT has already upheld the findings of SEBI regarding
the fraudulent acts committed by the noticees herein. Therefore, considering the above and the facts
and circumstances of the case, it can be construed that such request for additional documents were
made only for delaying and protracting the instant proceedings. It is noted from the memorandum of
appeal of the noticees that they had raised an argument that joint bank or demat accounts cannot prove
the allegation unless the fraudulent trades are proven. This contention too has no merit in view of the
findings on violations made above in this Order.
18.

The SCN dated December 01, 2009 issued to the noticees, has also called upon them to show

cause why they should not be directed to disgorge the amounts illegally gainedby them through the
violations. In their appeal memorandum, Dipak Panchal has stated that Roopal received shares from
afferent demat accounts to her account and then transferred them to financiers and also sold shares to
him as well as Devangi Panchal. This submission has no credence as it already observed that the
noticees received the cornered shares and offloaded them and made undue profits. Further, the
contentions that shares were purchased from Roopal Panchal and that the profits/consideration were
accounted for in the Income Tax Returns have no relevance or bearing in the matter while deciding on

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the amounts to be disgorged. The Honble SAT has clearly observed the following, while disposing off
the appeals filed by this noticees (when they challenged the adjudication orders), as mentioned above:
15. .. In the facts and circumstances of the case, it cannot be said that it was a purchase
simplicitor of the shares by the appellants from Roopalben Panchal who was another active member of the
Panchal group in making the IPO scam successful. We are inclined to agree with the learned counsel for the
respondent Board that the confirmation letters submitted by Roopalben Panchal with regard to the number of
shares sold, price at which they were sold and acknowledgement of consideration received from the appellants are
self serving documents which were not produced at the first available opportunity. In none of these documents,
amounts tally with the consideration for the shares purchased. The declaration given by Roopalben Panchal
confirming dealings of the shares other than IPO and transactions in 1999 does not, in any way, mitigate the
case against the appellants with regard to transactions in respect of shares under the IPO scam. On the basis of
material placed on record, the transfer of shares from Roopalben Panchal to appellants is not in dispute. These

were the shares which were purchased using fictitious demat accounts is also not in
dispute. If the earnings under these shares are shown in the income tax returns that by
itself, cannot be a mitigating factor if transactions are otherwise found to be violative of
regulatory framework. {Emphasis supplied}
19.

As regards the contemplated direction for disgorgement, I note that:

(i)

The SCN dated December 01, 2009 has alleged that the noticees adopted fraudulent,
deceptive and manipulative device and cornered substantial shares to the detriment of
genuine RIIs in the IPOs through a number of afferent accounts and made huge illegal
gains by sale of those shares. The SCN alleged that Devangi Panchal made illegal gains to
the tune of Rs.8,70,72,003/- and Dipak Panchal made illegal gains to the tune of
Rs.6,82,30,549/-.

(ii)

As per the SCN, Devangi Panchal received shares from Roopal Panchal, a key operator
and allegedly sold the same and earned illegal gains of Rs.8,70,72,003/-. The following table
in this regard is extracted below from the SCN:
Name
IPO

of

Key
operator
from

No.
of
shares
received

Issue
price Rs.
(3)

Date
sale

of

Page12of17

Market/off
market
transaction

No.
of
shares
sold

Sale
price

Actual profit

Amar
Remedies
TCS
NTPC
Shoppers
Stop
Nandan
Exim
Yes Bank
Nectar Life
Science
SPL
Industries
IL & FS
IDFC
Sasken
Suzlon
Patni
Computers

whom
shares
were
received
Roopal
Panchal
Roopal
Panchal
Roopal
Panchal
Roopal
Panchal
Roopal
Panchal
Roopal
Panchal
Roopal
Panchal

(1)

(2)

(1)* (2-3)

204000
17000
52336

50.02
56.05
987.95

4492080
476850
7219751

221000

28

16.09.05

52336

850

Market
Off-market
Pledge

1500000

62

5775

238

05.11.04 to
24.12.04
13.07.05

Off-market
Pledge
Market

985918
514082
5775

75.5
75.5
372.60

13309893
6940107
777315

43750

20

10.06.05

257250

45

12.07.05

45625

240

20.07.05

1238200
83050
3120250
1299550
1152183

7100

70

26.07.05

41000
2750
175000
82250
31223
10000
4402
7100

50.20
50.20
62.83
60.80
267.95

Roopal
Panchal
Roopal
Panchal
Roopal
Panchal

Off-market
Balance
Market
Balance
Market
ASE
Balance
Market

260.1
104

88480
241400

106450

125

Balance

106450

185.15

6402967

1080169

34

12.08.0518.08.05

Roopal
Panchal
Roopal
Panchal
Arjav
Panchal

10800

260

09.09.05

1248

510

Market
Off-market
Balance
Off-market
Balance
Off-market

575586
403063
101520
10450
350
1248

67.78
69.50
69.50
464.55
464.55
692.85

19443295
14308736
3603960
2137547
71592
228197

113000

230

Off-market

113000

233.20

361600

23.02.04
Total

(iii)

Rs.8,70,72,003/-

As per the SCN, Dipak Panchal received shares from the account of Roopal Panchal and
made illegal gains to the tune of Rs.6,82,30,549/-:
Name of
IPO

Dishman
Pharma
TCS
Datamatics
IDFC

Key
operator
from
whom
shares
were
received
Roopal
Panchal
Roopal
Panchal

No. of
shares
received

Roopal
Panchal
Roopal
Panchal

Issue
price
Rs.
(3)

Date
sale

17000

175

22.04.04

10842

850

13.09.05
to
11.10.05

8400

110

1710374

34

of

11.08.05
12.08.05
Total

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Market/off
market
transaction

No. of
shares
sold
(1)

Sale
price

Actual profit

(2)

(1)* (2-3)

ASE

17000

541.25

6226250

Off-market

10842

987.95

1495654

ASE

8400

127.20

144480

Market
Balance

1180374
530000

69.20
69.50

41549165
18815000
Rs.6,82,30,549/-

20.

The noticees have not made any contention regarding discrepancy in figures as per their appeal

memorandum (filed challenging the SEBI Order dated February 25, 2011). They had inter alia made the
following averments:
a. They were not aware of the actual unlawful gains made by the financiers. They did not
transfer shares to the financiers.
b. The noticees purchased shares from Roopal at the then prevailing market price.
c. Dipak made a gain of Rs.14,132/- on the sale of 17000 shares received from Roopal.
d. Dipak, through his proprietary concern, Grace Investment, had purchased Dishman
shares from Roopal on various dates at the market rate. Price in the range of Rs.414/to Rs.504/- was paid per share. Therefore, how could SEBI compute gains of
Rs.62,26,250/-.
e. Figures pertaining to TV Today and Patni Computers were not there in the SCN issued
by SEBI to Dipak.
f. Devangi Panchal had made payment of Rs.1,32,79,556/- to Roopal.
21.

However, I am apprised that the following discrepancies were pointed out by the noticees

before the Honble SAT during the proceedings:

a. In the scrip of Datamatics, the shares were not stated to be transferred to Dipak
Panchal as per Table A (page 6) of the SEBI Order dated February 25, 2011. However,
in Table B of the Order, Rs.1,44,480/- had been computed as unlawful gain made by
Dipak Panchal in respect of this scrip.
b. In the scrip of Patni Computers, Table A of the SEBI Order dated February 25, 2011
indicated that Arjav had received 1,27,050 shares and transferred 1,15,250 shares to
Dipak Panchal. However, as per the SCN (Table in para 61 at page 38), it is mentioned
that Devangi received 113000 shares of Patni Computers from Arjav and allegedly made
profit to the tune of Rs.361600/-.
c. As per Table A (page 6) of the SEBI Order dated February 25, 2011, Devangi had
cornered 86,200 shares of TV Todayand had transferred the entire quantity to Dipak
Panchal, financiers and others. However, in Table B (at page 6 of the SEBI Order), it is
stated that Devangi Panchal made a gain of 33,57,620/-.

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I am also apprised that the Honble SAT had observed during the proceedings that amount
already disgorged from the financiers and others and the balance to be disgorged from financiers and
others was not provided in the SCN.
22.

I also note the following:

a)

With respect to receipt of shares of Datamatics, I note that in the SCN (at page
37/paragraph 60), it is mentioned in the table therein that Devangi Panchal had
received 8,400 shares. However, while computing the disgorgement amount in the
table at page 38 of the SCN, the same is not mentioned. However, the same is
mentioned as received by Dipak Panchal (reference table in paragraph 62 at page
39 of SCN).

b)

As regards Nectar Life Science, the number of shares transferred as per the SCN
(table in paragraph 60/page 37) to Devangi Panchal is 42,075 shares. However, in
table at paragraph 61 of SCN, it is mentioned that Devangi Panchal received 45,625
shares from Roopal Panchal and made illegal profit of Rs.12,40,663.

c)

As regards IL&FS, the number of shares transferred as per the SCN (table in
paragraph 60/page 37) to Devangi Panchal is 1,02,200 shares. However, in table at
para 61, it is mentioned that Devangi Panchal received 1,06,450 shares (from
Roopal Panchal and made illegal profit of Rs.6402967/).

d)

As regards FCS Software, the SCN (table in paragraph 60/page 38) has mentioned
that Devangi Panchal received 22,015 shares. However, her demat statement
indicates that she received a total of 41,386 shares and the closing balance as on
October 21, 2005 was 28,415 shares.

e)

Regarding shares of Patni Computers allegedly received by Devangi Panchal, it is

noted that as per the SCN, she is said to have received 1,13,000 shares from Arjav
and made off-market transfer and derived unlawful profit of Rs.3,61,600/-. As per

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the demat account (no. 11933458) of Devangi Panchal, it is noted that 29,200 shares
were received and transferred.
f)

Further, as regards the scrip of TV Today Network, the SEBI Order dated
February 25, 2011 had mentioned that Devangi received 86,200 shares on
application and transferred 35,500 shares to Dipak; 6900 shares to financiers and
43,800 shares to others. However, the same was not alleged in the SCN issued to
the noticees. On perusal of demat account of Dipak Panchal (no. 11933474), it is
noted that he had received 30,000 shares and that before such receipt already had
1,37,902 shares.

g)

The SEBI Order dated February 25, 2011 had also observed that Dipak Panchal had
received 1,15,250 shares of Patni Computers from Arjav Panchal and made illegal
gain of Rs.3,68,800/-.
It also observed that Dipak Panchal also received 35,500 shares of TV Today from
Devangi Panchal and made illegal gain of Rs.30,65,425/-.
These have not been alleged in paragraph 62 of the SCN (which mentions the
amounts to be disgorged by Dipak Panchal).

23.

As disgorgement is an action directing the offender to return the undue gains made by him

through his fraudulent acts/transactions, it becomes necessary that correct figures of shares which were
transferred and used for making gains are ascertained. The noticees have also disputed the price which
has been taken for computing the undue gains. Further, the undue profit made in other scrips which
have not been alleged in the SCN also needs to be included. SEBIs earlier decision (i.e. the SEBI
Order dated February 25, 2011) in the instant matter was set aside and was remanded in view of
inconsistencies and discrepancies in facts. As the inconsistencies noted above, needs to be addressed,
disgorgement on the basis of facts and figures as mentioned in the SCN dated December 01, 2009
cannot be done at this stage. In view of the above, it would be proper and in accordance with the
principles of natural justice that SEBI reconciles the figures on the basis of relevant material and
thereafter issue a notice to these noticees before determination of disgorgement.Needless to say, the

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noticees shall co-operate with SEBI during such examination and submit all documents in their
possession that may be called for by SEBI.
24.

For the reasons mentioned in this Order, SEBI is directed to initiate an enquiry/investigation in

order to reconcile the facts and figures with respect to the shares fraudulently received (in the IPO
irregularities)and sold/off-loaded,for a proper determination of action of disgorgement and issue a
show cause notice to the noticees, if necessary.
25.

This Order shall come into force with immediate effect.

26.

Copy of this Order shall be served on the recognized stock exchanges and depositories for

information and necessary action.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date: March 30th, 2016
Place: Mumbai

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