Regulations
SEBI disposes of enquiry proceedings against Adroit Financial

SEBI had alleged that Adroit Financial Services along with another broker had entered into a number of cross deals, structured deals and synchronised deals which resulted into "creation of false market" for Shamken Multifab shares

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has disposed of the matter against Adroit Financial Services after the entity made a payment of Rs10 lakh to settle charges related to fraudulent trade practices in shares of Shamken Multifab Ltd, reports PTI.
 
In an order dated 1st November, SEBI said that "this consent order disposes of the aforesaid enquiry proceedings initiated against Adroit Financial Services Ltd".
 
A probe by SEBI into the scrip of Shamken Multifab Ltd found an increase in price and volume of its shares during 23rd February to 20th July 2000.
 
SEBI noticed that Adroit Financial Services along with another broker were having major concentration in trading.
 
The regulator alleged that Adroit Financial Services along with another broker had entered into a number of cross deals, structured deals and synchronised deals which resulted into "creation of false market".
 
Pending proceedings, Adroit Financial Services under SEBI's consent order mechanism offered to make a payment of Rs10 lakh as settlement charges.
 
Thereafter, a High Powered Advisory Committee (HPAC) considered the consent terms and recommended the case for settlement on payment of the said amount. The same was approved by SEBI.
 
In a separate consent order, the regulator dismissed the matter against Keynote Corporate Services after the entity made a payment of Rs 5 lakh to settle charges for allegedly failing to abide by norms for merchant bankers in the public issue of Consortex Karl Doelitzsch (India) Ltd.
 
SEBI in its order dated October 31 said that " this consent order disposes of the proceedings initiated against Keynote Corporate Services Ltd...It is clarified that the settlement in this order shall extend only to the charges levelled against the applicant in the said SCNs (Show Cause Notices)".
 
The matter relates to an enquiry by SEBI in the public issue of Consortex Karl Doelitzsch (India) Ltd.
 
SEBI alleged that Keynote Corporate Services as a lead manager, failed to render high standards of service, by not verifying the records/contents of the certificate of the auditor independently and "thus failed to exercise due diligence, proper care and independent professional judgement in the public issue of Consortex Karl Doelitzsch (India) Ltd".
 

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SEBI declines to revoke ban on Grishma, its directors and CEO

Preliminary investigations by SEBI revealed that Grishma Securities had diverted substantial part of Tijaria Polypipes' IPO proceeds, 'through layered transactions', to certain entities who had allegedly provided an exit to the retail allottees and QIBs

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has declined to revoke a ban restraining Grishma Securities, its directors and chief executive (CEO) from the capital market with regard to alleged irregularities in Tijaria Polypipes' initial public offering (IPO), reports PTI.
 
In its order, SEBI declined to revoke the ban against the stock broker Grishma Securities and its directors -- Ketan C Shah, Chandrika H Gandhi, Chhabil C Shah -- and its CEO Mihir Ghelani.
 
"The submissions of Grishma, its directors and CEO do not give any plausible reasoning/explanation for their actions, at this stage," SEBI said.
 
According to the market regulator, no intervention is called for in either vacating the interim directions or modifying it, with respect to Grishma Securities, its directors and CEO.
 
In an interim order last year, SEBI had barred Grishma Securities from buying, selling or dealing in any securities, till further directions.
 
The IPO of Tijaria Polypipes was open from  27-29 September 2011.
 
SEBI had initiated a probe into the fall in price of Tijaria Polypipes' shares on the first day of its listing, 14 October 2011.
 
Preliminary investigations revealed that the company had diverted substantial part of the IPO proceeds, 'through layered transactions', to certain entities who had allegedly provided an exit to the retail allottees/Qualified Institutional Buyers (QIBs).
 
One of the entities Jivraj Zala had traded through Grishma Securities in the shares of Tijaria Polypipes on the listing day.
 
SEBI alleged that Grishma Securities had allowed Zala to take huge exposure in the shares of Tijaria Polypies at BSE and NSE, which was not "commensurate with his income". It was also prima facie observed that Grishma had manipulated the client ledger of Zala to give an impression that funds were available in his client account on the day of his trading.
 
SEBI in its order today said investigation in the matter has been completed and appropriate action would be initiated against Grishma, its directors and the CEO.
 

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Legislative committee cannot debar bank's recovery process: HC

The Bombay High Court also held that the Bank was free to pursue the recovery proceedings against 16 farmers in accordance with law, irrespective of a letter issued by the Maharashtra Legislative Secretary or the minutes of the meeting of the Committee on Petitions

 
Mumbai: The Bombay High Court has held that the Committee on Petitions, constituted under Maharashtra Legislative Council rules, has no jurisdiction to interdict recovery process resorted to by banks against farmers, reports PTI.
 
The court was hearing a plea filed by Sangli-based Dr Annasaheb Choughle Urban Cooperative Bank seeking a direction to the Committee on Petitions to refrain from entertaining an application filed by Mohan Joshi, MLA, and representation of 16 agriculturalists, who had to repay loans taken by them.
 
Justice RY Ganoo and Justice Ajay Khanvilkar also held that the Bank was free to pursue the recovery proceedings against 16 farmers in accordance with law, irrespective of a letter issued by the Maharashtra Legislative Secretary or the minutes of the meeting of the Committee on Petitions.
 
The judges, however, made it clear that they are not expressing any opinion either way with regard to the correctness and legality of the agreement arrived at for and on behalf of the bank by the Chairman, Vice Chairman and Chief Executive Officer to modify the rate of interest payable by the farmers.
 
If that action is challenged in any proceedings, being illegal or prejudicial to the interests of investors, members or creditors of the Bank, it will have to be considered on its own merits, in accordance with the law, the judges opined while disposing of a petition filed by the bank.
 
The bank had urged the Court to direct the Committee on Petitions to refrain from entertaining the applications of the farmers and Joshi.
 
The alternative relief claimed was to direct Secretary of Maharashtra Vidhan Bhavan to place the Bank's representation before the Committee with a guideline that the same be heard and disposed of in a time-bound manner.
 
The Bank had advanced Rs90 lakh to 20 borrowers on 29 March 2004. It advanced another sum of Rs9 lakh to three other borrowers on 30 March 2007. That sum was given against the security of mortgage created by each of the 23 persons in the Bank's favour. In due course, however, the loan amount became hopelessly irregular and non performing assets (NPAs).
 
As a result, the bank processed the proposal of the 23 borrowers and found that 16 of them fell in the category of small/marginal farmers as defined in loan waiver scheme of the Government. 
 
As on 31 December 2007, the 16 agriculturalists were collectively eligible for loan waiver of Rs30.33 lakh. The bank, accordingly, gave credit of the corresponding amount in the respective accounts of these persons.
 
After the said adjustment, as on 31 March 2010, a sum of Rs28.52 lakh still remained due and payable by them to the bank collectively.
 
So far as the seven remaining persons, who were not small farmers, they were eligible for a partial waiver of 25% of the outstanding amount in their accounts as on 31 December 2007.
 
However, all the seven failed to deposit the necessary amount of Rs1.17 crore in order to become entitled for loan waiver.
 
Since the payment became over due, the Bank initiated proceedings under Section 101 of the Maharashtra Cooperative Societies Act, 1960.
 
The Registrar of Cooperative Societies, after hearing the Bank and the 23 defaulters, issued Recovery Certificates under Section 101 of the Act.
 
On the basis of these Certificates, the Bank resorted to execution of Recovery under Rule 107 of Maharashtra Cooperative Societies Rules.
 
According to the bank, these were judicial proceedings and steps taken by it to recover the outstanding dues, against all its borrowers, as per law. It argued that the borrowers could have resorted to remedy of revision application under Section 154 of the Act, against these proceedings. Instead, however, the farmers, approached Joshi, an MLA, on 24 July 2010.
 
He, in turn, requested the chairman of the Committee on Petitions to place the application made by the 16 farmers before the committee.
 
Accordingly, the matter proceeded before the Committee which considered the said application and ordered stay of recovery of defaulted amount from the 16 farmers until further orders to be passed by it.
 
The Principal Secretary, Department of Cooperation, Government of Maharashtra, was summoned by the Committee on Petitions, which met on 8 September 2010.
 
The Committee, upon considering the submissions made before it, including by the Bank, ordered that recovery of the defaulted loan deserved to be stayed.
 
Being aggrieved, the bank moved the High Court.
 

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