Market regulator Securities and Exchange Board of India (SEBI) has imposed a total penalty of Rs2.64 crore in a case involving price and volume manipulation in the shares of Quasar India Ltd. Of this, Rs2.50 crore has been imposed on 18 entities, to be paid jointly and severally. In addition, SEBI has levied a penalty of Rs7 lakh each on Mrugesh Natwarlal Ruparel (noticee 19) and Arpit Piyushbhai Shah (noticee 20) for aiding the manipulation and obstructing SEBI’s investigation.
The other entities penalised are: Chandrima Mercantiles Ltd (noticee 1), Pranav Kamleshkumar Trivedi (noticee 2), Nayan Mahendrabhai Thakkar (noticee 3), Kuntal Jitendra Trivedi (noticee 4), Jigneshkumar P. Patel (noticee 5), Rohit Bairwa (noticee 6), Ankit Ajitbhai Panchal (noticee 7), Hardik Himmatbhai Munjpara (noticee 8) and Jagdish Chhanabhai Vaghela (noticee 9).
The remaining noticees include: Usha Devi (noticee 10), Parth Rajanikant Pandya (noticee 11), Manish Jethabhai Bhaskar (noticee 12), Nitinkumar Laljibhai Bharvad (noticee 13), Babubhai Bhikhaji Godha (noticee 14), Narmadaben Pravinbhai Parmar (noticee 15), Pravinbhai Lakhabhai Parmar (noticee 16), Shvetalben Sagarbhai Dataniya (noticee 17), and Sagarkumar P. Dataniya (noticee 18).
SEBI’s investigation, covering the period from 1 May 2022, to 31 December 2023, revealed that the 20 connected entities had engaged in a coordinated scheme to artificially inflate the trading volumes and the price of Quasar India shares. Collectively, these entities accounted for 16.86% of the buy volume and 19.74% of the sell volume during the investigation period, misleading investors into believing there was genuine market interest in the scrip.
The regulator also found that several entities, led by Pranav Trivedi, managing director (MD) of Chandrima Mercantiles Ltd, were actively involved in executing circular trades across different phases, referred to as patch 1, patch 2, and patch 3, to create an illusion of active trading.
During patch 1, between May 2022 and March 2023, nine entities accounted for about 75% of the total market volume and collectively caused the stock’s price to rise by Rs2.37, an increase of 11.77%.
In patch 2, which spanned from March to May 2023, the share price shot up from Rs8.65 to Rs42.36 as all 18 entities engaged in manipulative trading activities. On several trading days, these entities accounted for up to 68% of the total volume, with nine of them executing circular trades among themselves.
By the third phase, from May to December 2023, most of these entities offloaded their holdings to retail investors, booking profits of around Rs1.96 crore. The investigation showed that the manipulative activity in the earlier phases was designed to attract retail participation before unloading the shares.
SEBI's investigation uncovered extensive evidence of collusion among the entities, including the use of common bank accounts, shared IP and MAC addresses, overlapping call records and matching geo-locations. SEBI found that many of the trading accounts were operated from the office premises of Chandrima Mercantiles in Ahmedabad, and several entities used internet connections registered at the same address.
Financial analysis revealed direct and indirect fund transfers among the entities through various proprietorship firms such as Prime Trading Co, Vinit Enterprises and Sara Enterprises. These firms acted as intermediaries to circulate money among the noticees for trading in Quasar India shares. Geo-location data further confirmed that key participants, including Pranav Trivedi, Mr Ruparel and Mr Shah, were repeatedly found at common locations in Ahmedabad and Mumbai, strengthening evidence of their coordinated efforts.
Mr Ruparel and Mr Shah were found to have operated or accessed the bank accounts of multiple entities involved in the manipulation but failed to appear before SEBI for statement recording despite repeated summons on 31 July, 26 September and 3 October 2024. Their continued non-compliance was deemed a violation of Section 11C (5) of the SEBI Act, constituting obstruction of the regulatory investigation.
After examining the evidence, SEBI concluded that the noticees violated Sections 12A(a), (b), and (c) of the SEBI Act, 1992, along with Regulations 3(a) to (d), 4(1), and 4(2)(a), (b), (e), (g), and (n) of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003. The regulator observed that the consistent use of shared IPs, coordinated fund transfers, synchronised trades and linked communications established a deliberate plan to mislead investors and distort market integrity.
SEBI also noted that claims made by the noticees about trading based on technical analysis or rumors of a corporate acquisition were baseless and unsubstantiated. The explanations provided were inconsistent with trading data and the interconnected evidence uncovered during the investigation.
Accordingly, SEBI imposed a total penalty of Rs2.64 crore, comprising Rs2.50 crore jointly and severally on noticees 1 to 18, and Rs7 lakh each on Mr Ruparel and Mr Shah.
