The Telegraph
Since 1st March, 1999
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Hunt for old fiends on penny trail

New Delhi/ Mumbai, Sept. 30: The frenzy in the stock markets and the strong suspicion of crooked deals in penny stocks have prompted the government and the market regulator to put the the scanner on yesterday’s rogue traders: Ketan Parekh and Dinesh Dalmia.

Parekh and Dalmia are the key protagonists behind the securities scam of 2000 in which thousands of retail investors saw their paper fortunes go up in flames.

There is a lurking suspicion that the duo are back again making smart plays in this year’s bull market. Both Parekh and Dalmia are barred from trading on the bourses. While Parekh prefers to stay out of the limelight, Dalmia has been a man on the run for several years with the Interpol hot on his trail.

Like the capital market watchdog Sebi, the department of company affairs (DCA) is now keeping a close watch on the market and its manipulators.

“The economy is doing very well and we feel the sensex rise is backed by strong macro-economic and corporate fundamentals. But in a booming economy there are always some black sheep,” company affairs minister P.C Gupta told The Telegraph.

“Market trends and known manipulators are being watched to track down these black sheep,” Gupta added.

Gupta refused to spell out what his department was really looking for, but officials in the department said the focus was on penny stocks to determine whether there had been any violation of the Companies Act, which Gupta’s department administers.

On Wednesday, the capital market watchdog cracked down on two penny stocks ' Minal Engineering and IFSL Ltd ' and barred their promoters and directors from dealing in these scrips.

The National Stock Exchange (NSE) got into the act on Friday and said it would be suspending trading in DSQ Software, Dalmia’s company, “as the company has failed to respond to the notice of the exchange for non-compliance with certain provisions of the listing agreement/secretarial audit report.”

Gupta also said the Special Frauds Investigation Office (SFIO) would be looking into the frauds committed five years ago by the 16 companies that were run by Parekh.

The DCA had been pulled up by the joint parliamentary committee (JPC) investigating the securities scam of 2000 for its lax investigation. The department had found that six of the 16 indicted firms had not violated any company law. The JPC had then said that more investigations were required.

Officials said NH Securities, Triumph International Finance, KNP Securities, Nakshatra Software, and Chitrakoot Computers were among the 16 Ketan Parekh companies that were being investigated by the SFIO.

While no one is ready to spell out the reason for trawling fraud cases dating back five years, one can only hypothesise that the investigators want to bone up on Ketan Parekh’s methods and determine whether there is any evidence of it this time round.

Dalmia has been absconding for many years and one report suggested that he was holed up in a Tudor-style mansion in New Jersey.

Even as Dalmia disappeared and the top professionals abdicated their positions on the board, the doughty DSQ Software continued to attract trades in the marketplace.

Mysteriously, the DSQ Software board continued to meet and the company also held shareholder meetings. The stock exchanges put out the information that was dished out to them without apparently verifying the details.

The DSQ's annual general meeting was held on March 31, 2005. The latest board meeting was held on August 4 where Nirmal Kumar Khaitan was appointed as a director. With Dalmia on the run, it is not known whether these meetings were actually held.

The DSQ Software scrip recently climbed to Rs 13 before slipping down again when the regulator started taking a closer look into the deals.

Meanwhile, the NSE has also issued notices to suspend Atcom Technologies, BS Appliances, BS Refrigerators and Haryana Sheet Glass Ltd.

Konkan Tyres

Sebi today barred promoters and directors of Konkan Tyres from dealing in the company’s securities after finding an unprecedented increase in its share price despite poor financial performance.

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