An inquiry, conducted by an independent person appointed by market watchdog the Securities and Exchange Board of India, has concluded that the alleged nexus between five officials of Stock Holding Corporation of India Ltd and stock broker H C Biyani has not been established.
The finance ministry's action taken report on the 2001 stock market scam, tabled last week, says enquiry officer, S Doreswamy, has "come to the conclusion that charges in respect of the five officials were either not established or not conclusively established."
Doreswamy is former chairman and managing director of Central Bank of India and former member of advisory board for banking and commercial and financial frauds.
Sebi had ordered the probe to ascertain if there was any nexus among SHCIL officials, Calcutta Stock Exchange broker H C Biyani and DSQ Industries promoter Dinesh Dalmia.
The enquiry concerned sale of DSQ Industries shares by Biyani under sell-n-cash scheme of SHCIL on March 2, 2001 for Rs 24.45 crore (Rs 244 million) where the counter-party broker was Biyani himself.
"SHCIL Board felt that since charges levelled against the five officials had not been established, the matter was treated as closed," the ATR said.
The government had asked SHCIL board to take action against the five officials and also its former managing director and CEO B V Goud n view of gross irregularities in the transaction. The five SHCIL officials are J V Murthy, R H Mewawala, L Vishwanathan, K S Murthy and A S Bagchi.
As regards Goud, SHCIL board had unanimously resolved that in so far as SHCIL's fact finding enquiry was concerned, the matter be treated as closed.
The board also resolved that in the event of Goud being found guilty by Kolkata High Court pursuant to investigation by Kolkata police, SHCIL will be at liberty to take action as it may deem fit.
The report said since Goud was on deputation from parent Industrial Development Bank of India, the bank should place the matter at the board and send its recommendations to the government.
KP group tax arrears stand at Rs 1369 cr
The tax arrears of stock broker Ketan Parekh group as on October 31, 2004 amounted to Rs 1,369 crore (Rs 13.69 billion). The income tax department has thus far recovered Rs 928.79 crore (Rs 9.28 billion) of dues from the group since the 2001 stock scam.
The ministry of finance's latest action take report on the findings of the Joint Parliamentary Committee said recovery of taxes in the KP group of cases is difficult as Parekh is a notified person under the Special Court Act, 1992 and recoveries can be made only through the special court. The ATR was tabled in Parliament late last week.
The tax recovery officer has attached Parekh's 155 bank accounts.
Ketan Parekh still owes Bank of India Rs 121.43 cr
The 2001 stock scam kingpin Ketan Parekh still owes the Bank of India a sum of Rs 121.43 crore (Rs 1.21 billion). The bank has thus far recovered Rs 21.78 crore (Rs 217.8 million) from Parekh. The action taken report on the findings of the Joint Parliamentary Committee, said BoI has imposed "a major penalty" on its assistant general manager U H Somaiya.
Somaiya was accused of allowing large scale discounting of high value pay-orders issued particularly in favour of Ketan Parekh group of companies by Madhavpura Mercantile Cooperative Bank.
The discounting of pay orders had resulted in a pecuniary loss of Rs 129.66 crore (Rs 1.3 billion) to the bank on July 25, 2001. The penalty imposed on Somaiya has not been disclosed in the report.
BoI has filed a complaint with Central Bureau of Investigation and also filed a recovery suit with the debt recovery tribunal.
The government subsequently gave a "no objection" to the bank to negotiate a compromise settlement with the Ketan Parekh group, on the condition that a clause be included that the compromise will be without prejudice to the criminal case against Parekh.
Parekh has not agreed for inclusion of the clause in the compromise agreement. The bank's advocates have opined that legally it is not necessary to insert such a clause in the consent terms as criminal proceedings are separately being pursued by CBI. BoI is still considering the matter in consultation with the government, the ATR said.
Action against erring Sebi officials soon
The Union finance ministry has said a decision on the action against officials of the Securities and Exchange Board of India for their failure to curb malpractices at the Calcutta Stock Exchange will be taken shortly.
"The matter relating to the action against Sebi officials is in the final stage and action shall be completed shortly," the ministry said in its action taken report on the findings of the Joint Parliamentary Committee on the 2001 stock market scam. The ATR was tabled in parliament last week.
The JPC had said "Sebi should have played a more proactive role in the affairs of CSE and curbed malpractices well in time."
Sebi failed to do so. Officials of surveillance department of Sebi are also similarly responsible. Sebi's lapses should be investigated and accountability fixed."
The then Sebi executive director-surveillance (L K Singhvi) has since been repatriated to his parent department, the Central Board of Direct Taxes. CBDT has been asked to take "further appropriate action" against the former Sebi executive director.
A reminder on the issue was sent to CBDT on May 21, 2004. Sebi is in touch with the CBDT on further progress as regards action against him, the ATR said.
A Sebi report in the early 1990s had found numerous deficiencies at the CSE including absence of a mechanism for monitoring margins. A Sebi enquiry in April 1994 into the affairs of CSE had recommended that the board of the exchange should be suspended, but the market regulator did not act on it, the JPC had noted.