___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited WTM/GM/EFD-I/DRA-II/80 /202021 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER REGULATION 27(5) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) REGULATIONS, 2008. IN RESPECT OF NOTICEE ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED MEMBER, INTER-CONNECTED STOCK EXCHANGE OF INDIA LTD. SEBI REGISTRATION NO. - INB 241104935 BACKGROUND

1. Alliance Intermediaries and Network Private Limited (hereinafter referred to as Noticee) is registered with Securities and Exchange Board of India (hereinafter referred to as SEBI) as a member of Inter-Connected Stock Exchange of India Limited (hereinafter referred to as ICSEIL) having SEBI registration number INB241104935. The Noticee was also a sub-broker (INS230783537) of National Stock Exchange (NSE) affiliated to ISE Securities & Services Limited, a member of NSE. However, the Noticees registration as sub-broker of NSE was cancelled on February 19, 2004.

2. SEBI received a letter dated November 27, 2013 from the Office of the Assistant Commissioner of Income Tax, Mumbai, seeking information regarding certain transactions purportedly executed by an assessee Virendra ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited Bhupati Doshi HUF with a Stock Broker (Noticee). The said letter enclosed bills for purchase or sale of shares (Contract Notes) issued by the Noticee to Virendra Bhupati Doshi HUF. SEBI received another letter dated December 06, 2013 from the Income Tax Authority inter alia informing that a search action conducted by the Mumbai Investigation Wing in the case of Mahasagar Group of cases had revealed instances where certain brokers including the Noticee were engaged in fraudulent billing and making accommodation entries for clients in order to enable them to book speculative profits and short term / long term capital gains / losses. Such help was provided by the brokers including the Noticee to their clients by feeding bogus saudas in the system and generating bogus bills. The transactions mentioned in those bills were not done through the stock exchange, but the bills showed them to be so, in order to make them appear as genuine transactions done through the stock exchanges. The brokers used to accept cash from the clients against these bills and thereafter they used to issue cheques to the clients. The said letter from Income Tax Authority further stated that Shri Mukesh Choksi, one of the directors of the Noticee, in his statement under Section 131 of Income Tax Act on January 01, 2013 had confessed that he was providing accommodation entries to any person who approached him and had floated around 36 companies from his office to facilitate the same. ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited

3. Subsequently, Mr. Mukesh Choksi appeared before the Investigating Authority, SEBI, on December 27, 2013 and in his statement recorded before the Investigating Authority, he submitted inter alia the following: (a) As on date, the Noticee was a member of ICSEIL having registration no. INB241104935. The registration of the Noticee as a sub-broker of NSE was cancelled in 2004. (b) Mihir Agencies Private Limited, Alpha Cheme Trade Agencies Private Limited, Buniyad Chemical Limited, Talent Infoway Ltd. and Richmond Securities Private Limited were associate entities / companies of the Noticee. As on date, there was no business in these companies. (c) During 2004 to 2007, contract notes were issued by intermediaries (i.e. person of any business in the market) to clients (individual entities) on behalf of the Noticee on accepting cash from intermediaries and giving cheques by the Noticee to intermediaries. The Noticee was earning commission of 0.15% for the deposit of cash in its various companies. (d) As regards the process of passing accommodation entries, cheques were issued against cash and vice-versa without any transaction. These were adjustment entries and the client was at liberty to use them the way he wanted. (e) The modus operandi followed for issuing fake contract notes for speculative profits / losses on behalf of clients was as follows. The intermediaries (persons of any business in the market) used to contact ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited the Noticee. Thereafter, the Noticee used to open bank accounts in the intermediaries vicinity. The Noticee then used to give signed cheque books of its companies and the intermediaries used to manage these accounts. The Noticee used to get commission of 0.15% on the total deposits in such accounts. This was done to convert money from black to white and vice-versa. The Noticee had stopped doing the same since November 2009 after the Income Tax search.

4. Further, it was observed that the contract notes issued by the Noticee to Virendra B Doshi HUF were unsigned i.e. did not bear the signature of Authorized Person of the Noticee. The name of the stock exchange where the trades had taken place had not been specified in any of the contract notes issued by the Noticee to several persons. In all the contract notes issued by the Noticee, it mentioned its SEBI Registration number as INB- 230783537/23/10777 which was not the correct registration number as the Noticee was not a sub-broker of NSE at the time of issuance of the said contract notes. The Noticee in certain contract notes had shown itself as a broker of NSE whereas in reality it was neither a broker nor a sub-broker of NSE at the time when the contract notes were issued. The Noticees registration as sub-broker of NSE was cancelled on February 19, 2004 i.e. much before the issuance of the said contract notes. Further, certain contract notes mentioned the Noticee as a dealer of ICSEIL and sub-broker of NSE whereas ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited in reality the Noticee was a broker of ICSEIL and not a dealer and its sub- brokership with NSE was already cancelled at the time of issuance of such contract notes.

5. It was therefore alleged that the Noticee misused its SEBI registration certificate and issued bogus / fictitious contract notes against cash to several persons for the transactions that did not take place at the Stock Exchange and only used accommodation (adjustment) entries to enable its clients to show short term / long term profit / losses in their books for tax purpose etc. The Noticee was therefore alleged to have violated the provisions of Clauses A(1), A(2), A(3) and A(5) of Code of Conduct as specified in Schedule II read with Regulation 7 SEBI (Stock Brokers and Sub-brokers Regulations, 1992 (Stock Brokers Regulations in short), SEBI Circular No.SMD-1/23341 dated November 18, 1993, SEBI Circular No. SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003, Master Circular no. CIR/ISD/AML/3/2010 on AML/CFT guidelines dated December 31, 2010. It was further alleged that the Noticee had violated the provisions of Regulation 5(e) read with Regulation 5A of the Stock Brokers Regulations by not being a fit and proper person as per the criteria set out in the SEBI (Intermediaries) Regulations, 2008 (Intermediaries Regulations in short). ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited

6. Considering the above, SEBI initiated proceedings under Regulation 24(1) of the Intermediaries Regulations against the Noticee and appointed a Designated Authority (DA) to enquire into the aforesaid violations. The DA issued a show cause notice (SCN) dated July 24, 2018 to the Noticee under Regulation 25(1) of the Intermediaries Regulations and upon a consideration of the facts before him, found the Noticee to be in violation of the abovementioned provisions of law. Accordingly, the DA, vide her report dated August 29, 2018 (DA Report), submitted under Regulation 27 of the Intermediaries Regulations, recommended that the Noticees certificate of registration as a stock broker be cancelled. SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

7. Thereafter, a show cause notice dated September 11, 2018 (post-enquiry SCN) was issued to the Noticee, enclosing therewith a copy of the DA Report, calling upon the Noticee to show cause as to why action as recommended by the DA or any other penalty should not be imposed on it in terms of Regulation 28(1) and (2) of the Intermediaries Regulations, as deemed fit by the Competent Authority.

8. The post-enquiry SCN sent to the Noticee returned undelivered. Thereafter, a copy of the post-enquiry SCN was uploaded on the SEBI website under the section Unserved Summons / Notices that could not be served. Further, a notice regarding the post-enquiry SCN was also published in newspapers ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited (Hindustan Times English, Navbharat Times Hindi) on August 10, 2020. The said notice in the newspapers also contained an intimation about a personal hearing in the matter which was scheduled on September 16, 2020. However, even after the publication of the notice in newspapers, no response was received from the Noticee. Considering these facts and circumstances, I am constrained to proceed in the matter ex-parte, entirely on the basis of material available on record. CONSIDERATION AND FINDINGS

9. I have examined the facts of the case and the charges against the Noticee. I note that the Noticee is alleged to have violated Clauses A(1), A(2), A(3) and A(5) of Code of Conduct as specified in Schedule II read with Regulation 7 of Brokers Regulations, SEBI Circular No.SMD-1/23341 dated November 18, 1993, SEBI Circular No. SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003, Master Circular no. CIR/ISD/AML/3/2010 on AML/CFT guidelines dated December 31, 2010 and provisions of Regulations 5(e) read with Regulation 5A of the Stock Brokers Regulations read with Schedule II of the Intermediaries Regulations. I note that the erstwhile Regulation 7 which mandated compliance with the Code of Conduct by a stock broker has been omitted and the provisions thereof have now been incorporated under Regulation 9(f) with effect from 27-09-2013. Similarly, the provisions which have been part of Clause A(5) of the Code of Conduct prescribed under ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited Schedule II of the Stock Brokers Regulations have been further included under Regulation 9(b) with effect from 27-09-2013. However, I note that the alleged violations in this matter pertain to a period prior to the said amendments in the Stock Brokers Regulations, since the dates of the contract notes issued by the Noticee pertain to the years 2007 and 2008. Therefore, I deem it fit to refer to provisions of Stock Brokers Regulations as they existed then. The same are quoted below: SEBI (Brokers Regulations) Regulation 7. Stock brokers to abide by Code of Conduct- The Stock Broker holding a certificate shall at all times abide by the Code of Conduct as specified in Schedule II. SCHEDULE II SEBI (Brokers Regulations) (Regulation 7) A. GENERAL (1) INTEGRITY: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. (2) EXERCISE OF DUE SKILL AND CARE: A stock-broker, shall act with due skill, care and diligence in the conduct of all his business. (3) MANIPULATION: A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited (5) COMPLIANCE WITH STATUTORY REQUIREMENTS: A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the stock exchange from time to time as may be applicable to him.

10. As regards the abovementioned circulars alleged to have been violated by the Noticee, I note that the provisions of SEBI Circular No.SMD-1/23341 dated November 18, 1993 and SEBI Circular No. SEBI/MRD/SE/Cir- 33/2003/27/08 dated August 27, 2003 clearly prohibit a broker from accepting / giving cash from / to the clients for purchase or sale of securities and prescribes that all payments received from / made to clients should be strictly by crossed account Payee cheques / demand drafts / ETF / any other mode allowed by RBI. As regards the provisions of Master Circular no. CIR/ISD/AML/3/2010 on AML/CFT guidelines dated December 31, 2010 allegedly violated by the Noticee, I note that the said Circular has been issued after the alleged violations.

11. I note from records that as per the findings of Income Tax Department, the Noticee was engaged in making accommodation entries for clients to facilitate speculative short term / long term profits / losses. Such help was provided by the Noticee to its clients by feeding bogus saudas in the system and generating speculative profit / loss entries without actually executing any underlying transactions on the recognized stock exchanges. The Income Tax ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited Department also provided to SEBI the copies of contract notes issued by the Noticee to its clients.

12. On examination of the abovementioned contract notes issued by the Noticee to Virendra Bhupati Doshi HUF which were forwarded by Income Tax Dept. to SEBI vide letter dated 27.11.2013 and were enclosed as Annexure B to the SCN dated July 24, 2018 issued by the DA, I note that the same were unsigned

i.e. did not bear the signature of the authorized person of the Noticee. Further, the said contract notes, which are shown to have been issued in 2007, describe the Noticee as Broker of N.S.E. Member having SEBI Registration number as INB-230783537/23-10777. However, as per the available records, the Noticee was neither a member nor a sub-broker of NSE in 2007. Further, the SEBI registration number mentioned on the said contract notes (i.e. INB- 230783537/23-10777) pertained to the Noticees registration as a sub-broker (affiliated to M/s. ISE Securities & Services Ltd., TM Code: 10777) with NSE (date of registration: October 12, 2000) which was cancelled on February 19, 2004 itself. Similarly, on examination of the contract notes issued by Noticee to Mr. Ashok Kumar, Dinesh Bhikhabhai Ghevariya, Radha Govind Lashkari and Radha Govind Lashkari HUF, which were enclosed as Annexure D and E to the SCN dated July 24, 2018 issued by the DA, I note that the same suffer from similar irregularities and factual inconsistencies as above. Further, a large number of contract notes also mentioned the Noticee as a dealer of ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited ICSEIL whereas in reality the Noticee is a broker of ICSEIL and not a dealer. I further note from records that ICSEIL vide email dated March 07, 2014 had informed SEBI that the Noticee had not done any trade as its trading member from the date of grant of certificate of registration till February 28, 2014. I further note that while some of the abovementioned contract notes refer to the applicability of Rules, Bye-laws and Regulations of the ICSEIL to the contracts mentioned therein, a number of contract notes do not show the name of the exchange on which the transactions mentioned therein were executed and simply refer to The Stock Exchange, Mumbai. The abovementioned observations clearly indicate that the said contract notes are fake and contain bogus details.

13. Apart from the above, I further note that Mr. Mukesh Choksi, a director of the Noticee, in his statement dated 27.12.2013 to the Investigating Authority of SEBI, which was enclosed as Annexure F to the SCN dated July 24, 2018 issued by the DA, has admitted that fictitious contract notes were issued against cash without execution of any transaction on recognized stock exchange. He has further admitted that these were mere accommodation entries which involved issue of cheques against cash and vice-versa without carrying out any transaction. He further admitted that the fake contract notes helped clients to book speculative profits / losses. I further note that though the Noticee has ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited not responded to the post-enquiry SCN, during the proceeding before the DA, it had, vide letter dated August 03, 2018 submitted inter alia the following: (a) The Noticee was doing the business of discounting and issuing of cheques wherein it used to open its bank accounts and give signed cheque books to its sub-brokers or intermediaries who then used to give the cheques to their clients and get the bills printed of their choice. The bills and contract notes were prepared by the clients themselves. The Noticee did not know who was using the cheques and what the nature and purpose of such transactions were. (b) The Noticee was paid 0.15 % commission on the amount of transaction done in the bank at the end of the month and it was earning Rs. 20,000/- to Rs. 25,000/- per month as commission. This method of earning income by the Noticee was accepted by the Income Tax department, which had made assessment on such income and had allowed 50% the expenses claimed against the income of commission. (c) The clients were using these entries to show profit from shares, short term gain, long term gain, one-time loan etc. The bills were prepared and printed by sub-brokers or intermediaries as per their choice. The Noticees role was limited to giving signed cheque books and receiving commission @0.15% and it had not printed or authorized the bills. ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited

14. From the above, it is very clear that the Noticee was actively and wilfully carrying out the business of issuing fake and bogus contract notes against receipt of cash to show fictitious transactions as genuine ones and enable its clients to book fictitious speculative gains and short / long term gains / losses for tax purposes. I note that the activities of the Noticee, as detailed above, were inherently fraudulent and were aimed at aiding and abetting tax frauds. In view of the same, I conclude that the Noticee, by indulging in the abovementioned activities as a broker, failed to exercise due skill, care and diligence, failed to maintain high standard of integrity, promptitude and fairness in conduct of its business and indulged in fraudulent and deceptive schemes with a view to make personal gains. Further, the Noticee by indulging in acts as mentioned above, which included acceptance of cash from clients, has also violated the provisions of SEBI Circular No.SMD-1/23341 dated November 18, 1993 and SEBI Circular No. SEBI/MRD/SE/Cir- 33/2003/27/08 dated August 27, 2003 which prohibit a broker from accepting / giving cash from / to the clients. Accordingly, the charges of violation of the Clauses A(1), A(2), A(3) and A(5) of Code of Conduct as specified in Schedule II read with erstwhile Regulation 7 of the Stock Brokers Regulations against the Noticee stand established.

15. It is further alleged that by virtue of being involved in the abovementioned violations, the Noticee was no longer a fit and proper person, and thereby ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited has violated Regulation 5(e) read with Regulation 5A of the Stock Brokers Regulations read with provisions of Schedule II of the Intermediaries Regulations. I note that the abovementioned provisions, as they existed at the relevant time, are as under: Stock Brokers Regulations

5. Consideration of application The Board shall take into account for considering the grant of a certificate all matters relating to buying, selling, or dealing in securities and in particular the following, namely, whether the stock broker (e) is a fit and proper person. 5A. Criteria for fit and proper person For the purpose of determining whether an applicant or the stock broker, sub-broker, trading member and clearing member is a fit and proper person the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. Schedule II of the Intermediaries Regulations Criteria for determining a fit and proper person For the purpose of determining as to whether an applicant or the intermediary is a fit and proper person the Board may take account of any consideration as it deems fit, including but not limited to the following criteria in relation to the applicant or the intermediary, the ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited principal officer, the director, the promoter and the key management persons by whatever name called (a) integrity, reputation and character; (b) absence of convictions and restraint orders; (c) competence including financial solvency and networth; (d) absence of categorization as a wilful defaulter.

16. I note that the requirement to be a fit and proper person has to be met by a stock broker on a continuous basis, since compliance with the same is mentioned as one of the conditions for grant of registration under sub- regulation (e) of Regulation 5 of the Stock Brokers Regulations. I further note that the provisions of Schedule II of the Intermediaries regulations specifically provide that SEBI may take into account the integrity, reputation and character of an entity in order to determine whether it qualifies to be a fit and proper person or not. In this context, I note that the abovementioned fraudulent acts and violations by the Noticee reflect very poorly on the integrity, reputation and character of the Noticee. The same has rendered the Noticee ineligible to qualify as a fit and proper person and its continuation as a registered intermediary has become untenable. Since the Noticee is no longer fit to continue as a registered intermediary of SEBI, any continuation of the same would be detrimental to the interests of the securities market. In view of the same, I am inclined to accept the recommendation that the certificate of registration of the Noticee as a stock broker be cancelled. ___________________________________________________________________________ Order in respect of Alliance Intermediaries and Network Private Limited Accordingly, this order is being passed under Regulation 27(5) of the Intermediaries Regulations, which substituted Regulation 28 of the Intermediaries Regulations, with effect from January 21, 2021. ORDER

17. In view of the above, I, in exercise of powers conferred on me under Section

12 (3) read with Section 19 of the SEBI Act and Regulation 27 (5) of the Intermediaries Regulations, and upon consideration of the facts and circumstances as above, hereby cancel the certificate of registration of the Noticee, bearing no. INB241104935, as a stock broker. PLACE: MUMBAI G. MAHALINGAM DATE: MARCH 09, 2021 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA