The Telegraph
Since 1st March, 1999
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Sebi cracks whip on scamsters

Calcutta, May 14: Better late than never. The Securities and Exchange Board of India (Sebi) has initiated criminal proceedings against stockbrokers found guilty of manipulating the market in 2000-01. More than two years after the market crashed, these cases are coming up for hearing.

The cases filed by the market regulator against the three defaulter groups of Calcutta — led by Dinesh Kumar Singhania, Harish Chandra Biyani and Ashok Kumar Poddar — came up for hearing for the first time in the chief metropolitan magistrate’s court on Tuesday.

Explaining the delay, lawyers representing the market regulator said the ‘summons’ — or the notice for personal appearance in the court — could not be delivered to the brokers because they were in detention until recently.

It is understood that Sebi filed these cases in keeping with the recommendations of the Joint Parliamentary Committee that probed the scam. The panel held Ketan Parekh, the Mumbai-based stockbroker, as the protagonist of the scam.

Though Sebi officials are absolutely tight-lipped about its action against errant brokers, it is understood that similar proceedings have been filed against several other brokers in Mumbai.

The Reserve Bank, too, has filed criminal cases against directors of a number of co-operative banks that were found to have colluded with stockbrokers. A number of co-operative banks had lent to stockbrokers and went bust.

A senior RBI official, however, pointed out that its efforts to book these offenders were of little or no consequence to them. “Most of our efforts came to a nought,” she said.

On a visit to Calcutta in October last year, Sebi secondary market chief Pratip Kar had said the market regulator supported the action taken by Calcutta Police against the defaulters and their allies, on the basis of the complaint filed by the Calcutta Stock Exchange.

The bourse’s complaint led to the arrest of the three defaulters, some of their allies and Ketan Parekh. Each of them were detained for nearly 90 days — the maximum length of time for which a person could be detained for investigation.

Parekh was accused to have duped his allies in Calcutta — Singhania, Poddar and Biyani among others — and led to the Rs 120-crore payment crisis that hit the bourse in March 2001.

The bourse had also implicated Dinesh Dalmia, the promoter and managing director of DSQ Software and other group companies, but the police could not arrest him.

The chief metropolitan magistrate of the city recently declared him a ‘proclaimed offender’, which implies that anyone could now detain him and hand him over to the police.

This, by far, is the only criminal proceeding that has been initiated against a promoter of a company. However, it was evident to the parliamentary panel that promoters of a number of companies had lent to stockbrokers to rig the price of their firms’ stock.

The police are yet to file chargesheets in the cases initiated against the brokers, and the trial of the cases is yet to begin.

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