Moneylife Events
One needs to file strong RTI application in financial sector, says Krishnaraj Rao

For financial sectors, one should collect all available information from public domain and after studying it in details should only file a strong RTI application, says Mr Rao

“The banking sector is one of the most derelict in terms of their services. In my experience, they run away from Right to Information (RTI). This also may be the reason why they attract so many RTI applications,” said Krishnaraj Rao, speaking at an event organised by Moneylife Foundation.

The session on RTI, seventh on the subject organised by the Foundation, focused on the sector of banking and finance along with regulatory bodies like the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), the pension regulator, capital markets, the stock exchanges (BSE, NSE, MCX-SX and USE) and banks.
Mr Rao, a well known RTI activist says, “Private banks are exempted under RTI, while nationalised banks think that their job is to keep the information secret. Co-operative banks have a hazy and confusing position on shelling out information under RTI. This all leads to people wanting to know the truth.”
Apart from lucidly explaining the RTI Act, Mr Rao also helped people with framing questions in an RTI application, and also briefed about the kind of information that should be asked and how carefully it should be worded. He also cautioned on wrongly framed questions that can lead to rejection of the RTI application.
For instance, on query on usage of RTI on finding out why private banks are charging for closing the account, Mr Rao said that these banks are exempted under RTI and RBI has a policy of forbearance, and has given a freedom to banks for deciding charges and interest. In such case, he explained, one should seek all the manuals, circulars from the RBI on subject of forbearance. But before that one should make a complaint and then create awareness on the subject and then leverage this with an RTI. This will lead to class action and accordingly the regulator can be approached, Mr Rao explained.
On the subject of forex cheques taking a lot of time for clearance, a question was poised on how the amount is debited from drawee’s account from the scanned copy immediately, but is not credited, leaving banks to sit on the float and earn on it. Mr Rao said it would be a good case for an RTI application and one should ask different questions through various applications before approaching higher authorities to resolve the issue.
According to Mr Rao, a lot of RTI applications, despite getting a reply, are left for no use. But the act of filing an RTI itself is like a show-cause notice for that particular department and it helps in keeping a check on the system, he added.
Mr Rao cleared all the doubts of people wishing to file an RTI and appealed to the people to first use the information available in the public domain and then make a strong application. He also gave reference few RTI websites like and other groups.



P M Ravindran

5 years ago

Good going Krish! Hope at least some from the audience will start using RTI Act and assert citizen oversight over public servants!

IPO Crackdown-4: PG Electroplast

PGEL in a bid to boost its share price on day one, had intentionally chosen select companies vis-a-vis ICDs and ordered them to divert the IPO money to entities who would eventually buy its shares in the open market on day of listing, and for the next few days, swindling investors in the process

The Securities Exchange Board of India (SEBI) recently, as part of its concerted efforts to curtail initial public offering (IPO) frauds, had prohibited PG Electroplast (PGEL) and select individuals & management personnel from participating in the securities market. It has also barred the merchant banker Almondz Global Securities (AGSL) from taking up any new assignments due to gross negligence in its duty as a merchant banker.

PGEL wanted to raise as much as Rs120 crore, through an IPO for the purpose of prepayment of a portion of its term loan (Rs24.10 crore), expansion of manufacturing facilities (Rs51.13 crore), long term working capital requirements (Rs15 crore) and general corporate purposes (Rs21.39 crore).

On the day of listing, 26 September 2011, the momentum in the PGEL scrip, provided by group of buyers, led to an increase in the price on the next day (27 September 2011) to Rs483.20. However, the price decreased sharply by 56%, to close at Rs212.30 on 5 October 2011.

SEBI had found out that roughly 31.6% of the issue size, or Rs42.50 crore, had been acquired by a few entities over the course of the period extending from 26 September 2011 till 5 October 2011. Thus, they decided to investigate into the matter.

One of the Qualified Institutional Buyer (QIB) based in London sold off its entire stake of 4,41,630 shares in PGEL mainly to two counter-parties namely Dave Chetan and Overall Financial Consultants (OFCL). The broker through which Mr Chetan transacted was Grishma Securities Pvt Ltd, the same stock broker who was part of the Tijaria Polypipes scam (, which happened just one day after the IPO (27 September 2011). Similarly, OFCL was involved in the Brooks Laboratories scam (, which happened in August 2011. Strangely, both the counter-parties were not implicated in this scam despite evidence of such transgressions.

PGEL had blatantly lied in its prospectus that it “had not raised any bridge loan against the proceeds of the present issue.” The truth was that PGEL had taken Inter-Corporate Deposits (ICDs) aggregating roughly Rs52 crore, or 43% of the size of the IPO, out of which Rs46.40 crore was repaid from the proceeds of the IPO.

The company used ICDs as a guise for looting, diverting and transferring public money; what follows below is nothing but daylight robbery.

*PGEL had ICDs prior to the IPO and diverted approximately Rs12.95 crore to Wonder Vincom, which in turn had funded Rs94 lakh to the IPO allottee namely Chin Info and had also made payments of Rs3.99 crore to two other entities who were buyers of the shares of PGEL on the day of listing.

*PGEL had also routed Rs9.4 crore of the IPO proceeds to ETL Infrastructure Finance (ETL), through refund of ICDs. ETL had made payments of Rs1.5 crore to its broker Destiny Securities and had also made payments of a total of Rs1.2 crore to Paradise and Jasmine. Paradise and Jasmine had purchased 1 lakh shares and 50,000 shares of PGEL respectively on the date of listing.

*PGEL additionally diverted Rs8 crore to Saptrishi through Prraneta in the form of refund of ICDs which was routed further to several buyers of shares of PGEL on the day of listing. Prraneta Industries, a publicly listed company on BSE, was one of the beneficiaries of IPO siphoned off by Saptrishi. If one looks at Prraneta’s history, the company had failed to submit a corporate governance report back in 2008.

Thus we see a common theme here—PGEL in a bid to boost its share price on day one, had intentionally chosen select companies vis-a-vis ICDs and ordered them to divert the IPO money to entities who would eventually buy its shares in the open market on day of listing, and for the next few days, swindling investors in the process.

Not only did PGEL use ICDs to divert money, but it also resorted to questionable means to ‘acquire’ land, in order to add yet another layer of camouflage. Using ICDs as a guise, it merely transferred Rs10 crore to Saptrishi towards “advance for purchase of land”, with the aim of aiding and abetting Saptrishi. PGEL had also disguised the fact that the ICDs were of “high quality” since Saptrishi had incurred losses in 2010.

Shockingly, PGEL had merely plundered empty farmland as pretence for making sham monetary payments. Additionally, according to the Memorandum of Understanding (MoU) between PGEL and Saptrishi, the conversion of land, from agricultural to industrial, must be completed before making the payment. However, despite this, PGEL had paid Saptrishi Rs10 crore as though the land was converted. What seems to have happened was merely a monetary transaction between the two parties using land as a conduit.

Incidentally, Saptrishi transferred Rs25 lakh to an IPO allotee, MJ Commodities Pvt Ltd, which was allotted 1,17,047 shares in the NII category. Further, it transferred the money received from the IPO to Jaimini Trading Pvt Ltd and Cellworth Mercantile Pvt Ltd, all of whom collectively made purchases in PGEL on the opening day.

MJ Commodities Pvt Ltd shared the same address and directors with Agarwal Holdings (AHL), another benefactor of the IPO spoil and a public listed company on BSE. It was found out that AHL had failed to comply with shareholder disclosure norms laid out by BSE in 2009.

PGEL had brazenly siphoned off around Rs7.25 crore through Nimbus Industries (Nimbus) and Supreme Communication in the form of advance for purchase of ‘plastic granules’ from them. What seems like a glaring overlook is the fact that Nimbus had flouted BSE norms several times in the past. Nimbus, supposedly a supplier, was not mentioned in the prospectus. The money that passed through Nimbus finally reached Wonder Vincom who had purchased shares on the first day of the IPO.

We notice that some of the companies mentioned here are publicly listed ones and yet have managed to escape scrutiny despite past violations.

In a bid to recover public money, SEBI has ordered PGEL to call back Rs32 crore, which have been given as ICDs, and the same will be kept in a separate interest-bearing escrow account, until further notice. It can be safely assumed that the investors will not be getting their money back, thanks to AGSL’s shoddy and unprofessional job of neglecting to investigate thoroughly, certain material facts, which would have otherwise saved a lot investors’ money.


Small correction imminent: Tuesday Closing Report

But the uptrend is strong for now

Global cues and a positive set of earnings reports helped the market close with gains for the third consecutive day. The Nifty recorded a huge gain of 93 points on a high volume of 75.10 crore shares on the National Stock Exchange (NSE).

The index today broke its resistance of 4,960 and closed above it. The benchmark closed at its best in the past 30 days (including today). From here we may see the benchmark reaching the level of 5,045 if it holds itself above the day’s low. Otherwise we may see some correction with the first support at 4,845.  
The market opened in the positive, tracking the positive trend in the Asian region. Easing of the headline inflation to 7.47% in December and China’s better-than-expected 8.9% growth in the December quarter supported the gains. The Nifty started the day with gain of 31 points at 4,905 and the Sensex resumed trade at 16,271, up 82 points over its previous close. The opening figures on both benchmarks were their intraday lows.

The market continued its northbound journey on across-the-board buying as the day progressed. Upbeat performance by IT major HCL Technologies in the December quarter also supported investor confidence. The company reported a 43.3% jump in net profit to Rs572.70 crore for the quarter ended 31 December 2011 compared to Rs 399.70 crore in the October-December quarter of 2010. TCS is expected to announce its earnings numbers after the market closes for the day.

A firm opening of the European markets, brushing aside concerns about the recent ratings downgrades, added more support to the local market in the noon trade. The benchmarks hit their intraday high in post-noon trade with the Nifty rising to 4,976 and the Sensex scaling 16,501.

Buying support in heavyweights ensured a positive close for the third day in a row. At the close, the Nifty jumped 93 points to 4,967 and the Sensex surged 277 points to settle at 16,466.

The advance-decline ratio on the NSE was in favour of the decliners at 1289:519.

Although the broader indices also ended higher, they underperformed the Sensex today. The BSE Mid-cap index gained 1.34% and the BSE Small-cap index rose 1.07%.

Among the sectoral indices, BSE Capital Goods (up 3.73%); BSE Metal (up 3.66%); BSE Realty (up 3.46%); BSE Oil & Gas (up 2.79%) and BSE Auto (up 2.62%) were the top gainers. There were no losers today.

The Sensex toppers were Maruti Suzuki (up 10.48%); Hindalco Industries (up 6.04%); Larsen & Toubro (up 5.23%); Tata Steel (up 5%) and Reliance Industries (up 3.78%). Tata Power (down 0.82%); ICICI Bank (down 0.75%); GAIL India (down 0.44%); ITC (down 0.38%) and TCS (down 0.28%) settled lower.

The top performers on the Nifty were Maruti Suzuki (up 10.11%); Hindalco Ind (up 5.47%); Jaiprakash Associates (up 5.40%); L&T (up 5.10%) and Tata Steel (up 4.98%). The laggards were led by Ranbaxy (down 0.92); ICICI Bank (down 0.83%); GAIL India (down 0.52%); TCS (down 0.37%) and Dr Reddy’s (down 0.19%).

The Asian pack settled in the positive on better-than-expected GDP numbers for the December quarter. The optimism led the Chinese benchmark close 4.18% higher, its highest closing level since December 2011. Good demand at a French short-term treasury bill auction on Monday, the first one after the country’s rating downgrade, also supported investor sentiment.

The Shanghai Composite jumped 4.18%; the Hang Seng climbed 3.24%; The Jakarta Composite advanced 1.15%; the KLSE Composite gained 0.68%; the Nikkei 225 rose 1.05%; the Straits Times surged 2.15%; the Seoul Composite gained 1.80% and the Taiwan Weighted finished 1.65% higher. At the time of writing, key European markets were trading with gains of over 1% and US stocks futures were in the positive.

Back home, foreign institutional investors were net buyers of equities amounting to Rs357.68 crore on Monday while domestic institutional investors were net sellers of shares totalling Rs229.55 crore.

State-run explorer and refining major Oil and Natural Gas Corporation (ONGC) is in talks with US energy firm ConocoPhillips to explore possibilities of joining hands for exploration of oil and gas in Indian deepsea and shale gas in North America. The company had approached 12 companies working in South East Asia including ConocoPhillips for potential farm-in and a deep water flyer for east-coast blocks was sent to them. ONGC gained 2.34% to close at Rs262.25 on the NSE.

IT service provider Mahindra Satyam today signed a memorandum of understanding (MoU) with Intertek to collaborate on 'Smart Grid', a power grid using technology to enhance monitoring and management of power flow. The MoU outlines plans to jointly improve advisory, inspection and certification services for end-to-end engineering solutions to smart grid clients of Mahindra Satyam. Satyam Computer Services closed 0.98% higher at Rs72.20 on the NSE.

FMCG firm Marico on Tuesday said it is looking at acquisitions worth up to Rs1,000 crore both in the domestic and overseas markets as part of its strategy to maintain a growth of 26%-27% in the coming years. The stock settled at Rs153.65, up 1.42% on the NSE.


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