Chairman UK Sinha says following the direction of the Supreme Court, it will get the country’s largest depository to comply with the findings of the investigation
Mumbai: In an unprecedented move that revives charges against the National Securities Depository Limited (NSDL) that were earlier dismissed as "null and void", the Securities and Exchange Board of India (SEBI) has decided to implement a special committee report that indicted NSDL and others for committing irregularities in the IPO scam of 2003-2006.
Speaking to journalists after a meeting of the SEBI board last evening, chairman UK Sinha said that the regulator has decided to implement the report by the two-member Mohan Gopal committee on the role of the NSDL in the scam.
"Pursuant to the order dated 9 May 2011 of the Supreme Court, the board decided to release the orders of the two-member committee, in the matter of IPO irregularities and DSQ Software, to NSDL for compliance," Mr Sinha said. "We will send it to the company," he said, and added that they would have to implement it.
The committee, comprising of the then SEBI board members G Mohan Gopal and V Leeladhar, was constituted in 2008 to look into NSDL's role in the IPO scam and it found various lapses on the part of the depository, as well as SEBI itself.
At the time, the SEBI board declared the committee’s findings as "null and void" on the ground that the committee had breached its mandate in making these charges. SEBI also dropped its proceedings against NSDL in the DSQ Software share allotment case, in which the depository was accused of lapses in dematerialising 1.30 crore shares of DSQ Software, which were later sold in the market without listing.
But the market regulator, under the charge of a new chairman, agreed to revisit these matters after an intervention by the Supreme Court earlier this year.
NSDL first came under the scanner in 2006, in connection with the IPO scam, wherein various entities fraudulently cornered shares reserved for retail investors and sold them after the listing.
The depository was accused of not following best practices to detect the opening of thousands of fictitious accounts in the name of retail investors for share allotment in IPOs between 2003 and 2006.
This is the first instance of SEBI revisiting an issue previously dismissed by it, as also unprecedented in that it has reopened a report that has also criticised its role.
While it is not clear to what extent the fresh probe into the IPO scam will go, the issue could still open a Pandora's box, as the charges were made against NSDL for acts committed during the period when CB Bhave was heading the depository. Further, Mr Bhave subsequently became chairman of SEBI and it was during his tenure that the SEBI board dismissed the Mohan Gopal committee report.
While Mr Bhave recused himself from the meetings that discussed the NSDL matter, it has been still alleged in various court petitions that he may have influenced the decision of other SEBI board members.
Mr Bhave was SEBI chairman for three years till 17 February 2011. Before his stint with SEBI, he headed NSDL, the country’s largest depository which enables investors to hold shares and other securities in the demat or electronic form.
It was reported that Mr Mohan Gopal has written to the prime minister in December 2010 that the SEBI board had abused its powers in trying to protect Mr Bhave from facing an independent inquiry for his actions as NSDL chairman during the IPO scam.
Mr Mohan Gopal was an independent member of the SEBI board, while Mr Leeladhar was the RBI nominee on the board.
The prime minister’s office is believed to have passed on Mr Gopal’s letter to the finance ministry, which in turn forwarded it to SEBI, but he did not get any reply despite three reminders.
The Mohan Gopal committee submitted in December 2008 that NSDL had failed in its duty and it also made adverse remarks against SEBI for the manner in which it mishandled the IPO scam.
The matter came up before the Supreme Court earlier this year, in the form of a special leave petition challenging SEBI’s dismissal of the committee report.
The Court expressed its unhappiness at the outright rejection of the report, and it asked SEBI to reply on whether it would revisit its decision to give a clean chit to NSDL.
Subsequently, SEBI called a special board meeting on 26th April, wherein it was decided to reconsider the Mohan Gopal committee report. And SEBI informed the Court about this decision on 9th May, after which the Court listed the matter for further hearing in August.
Following some serious investigations against the MLM company that operates through virtual existence in India, the EOW of Mumbai Police has finally detained Speak Asia's chief operator and three others
The Economic Offenses Wing (EOW) of Mumbai Police has detained Singapore-based Speak Asia online Pte Ltd's chief operating officer (COO) Tarak Bajpai and three other people regarding the multilevel marketing company's affairs. Mr Bajpai was detained late last night at Indore. The Esplanade Court remanded all four accused in police custody till 4th August.
The other three arrested are Rajeev Mehrotra, technical head for the portal, Shaikh Rais Latif, assistant for daily portal operations and in-charge of regular pop-ups, and Ravi Janakraj Khanna, accountant.
In a statement on its website confirming the incident, Speak Asia said, “We face the biggest challenge of our times today. Our COO Tarak Bajpai along with a number of vendors who support us in India have been taken into custody by the EoW Mumbai at Indore and other places across the country.”
According to media reports, two days ago, the Criminal Investigation Department (CID) had frozen bank accounts of the online survey company. However, following the enquiry by the Income Tax and Service Tax departments, many banks had already frozen several bank accounts of Speak Asia's distributors. The company does not have any bank account under its name in India.
The Registrar of Companies (RoC) Delhi, too, is investigating the company under section 591 of the Companies Act, 1956, which deals with companies not registered in India but having established business in the country and represented by an Indian citizen or firm.
Last month, acting on a complaint by a non-governmental organisation (NGO), the Andhra Pradesh police had arrested two agents of Speak Asia. Following the arrests, Charan Kumar, Speak Asia’s regional manager, filed a petition in the Andhra Pradesh High Court, to stay the process and any further arrests. The High Court granted an interim stay on the arrest of any officials or employees of the company, but allowed the police to continue with the investigation into the matter.
This probably was the HC order, Mr Bajpai had spoken about while he was being detained by the Police at Indore. However, according to legal experts, as the jurisdiction of one HC is limited to particular area, in this case the interim stay by Andhra Pradesh HC may not be binding in other areas other than its jurisdiction.
Mr Bajpai and Vivek Gautam (Speak Asia's chief marketing officer, who according to our sources has been sacked from the company for his 'loud' claims in the media about its clients), spearheaded the Singapore-based company’s MLM business in the country. Mr Bajpai is said to be a skillful orator and motivator, who skillfully mobilised agents through seminars across the country, although he did not say anything at the news conference called by the company on 16th May. Mr Gautam, according to our sources, has been sacked for making unnecessarily loud claims about the company’s clients.
Manoj Kumar, who was hired as chief executive officer (CEO) for the company in India just a day before the news conference, could not do much within a short time and veterans like Mr Bajpai and Mr Gautam chose to keep mum. In our interactions, many agents even asked us who is Manoj Kumar or who is the fellow giving answers in the press conference on behalf of Speak Asia.
Mr Bajpai’s role in the company affairs was confirmed in a recent communication he wrote to ING Vyasa Bank to open a liaison office (LO) in India for Speak Asia. He stated, “I am writing to you as the duly authorised person on behalf of Speak Asia w.r.t. the setting up of an LO as soon as possible.”
According to the Reserve Bank of India (RBI), any foreign company or entity must submit an application for opening an office in India through an authorised dealer bank, like ING Vyasa Bank. The RBI checks the application—whether it fits into its criteria—and only then will it grant permission to the entity to set up an office in the country.
Speak Asia is unlikely to be able to set up a LO in India as the conditions require that the entity should have a profit-making record for the preceding three financial years in the home country. But the company is a new entity and would not be able to meet this criteria, unless it can convince the authorities on the change of name and business activity. Singapore registered Speak Asia was previously known as Haren Technologies Pte Ltd and Pan Automotives Pte Ltd and had a business profile, other than surveys.
As Moneylife has already reported, Speak Asia now owes around Rs2,280 crore as payment to about 19 lakh panelists it has enrolled. This is as of 13th May and there could be other dues piled up from before this date. Some panelists explained that the company was offering products in lieu of reward points (1 reward point=Rs50). But since Speak Asia had very few products, many have not been happy about buying what is available and they have also been describing their concerns on the internet.
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The stock has been rallying by 126% since February 2011, six months before the US entertainment giant announced its plan to buy out the Indian company and subsequently delist it, but the market watchdog has been looking elsewhere
US-based entertainment giant Walt Disney recently announced the buyout of UTV Software Communications by acquiring the shares held by promoters and public, and the delisting of the company. Reacting to the news, the stock jumped by 5.39% and closed at Rs950.45 on 26th July on the Bombay Stock Exchange (BSE). But little did people notice that the scrip has been rallying since February 2011, six months before the big announcement.
Surprisingly, market regulator Securities and Exchange Board of India (SEBI), has not taken any note of the upward movement of the company's stock, which is without any specific reason.
On 9 February 2001, company's stock closed at around Rs437.50. Since then it continued to climb, till 27th July, where it closed at Rs987.85. In six months, the scrip has gone up by 126%. During this period the Sensex was flat.
Market experts point out that such a steady rise in the stock price, followed by a major announcement is highly unusual and needs investigation by SEBI. There was no fundamental reason for the stock to have steadily moved upwards.
Walt Disney, a group promoter, currently holds 50.44% paid-up equity share capital of the company. It has now offered to acquire shares held by the public and original promoters. UTV's managing director Ronnie Screwvala, Unilazer Export and Management Consultants Limited, Unilazer (Hong Kong) Limited and Zarina Mehta are the promoters of the company who hold 19.82% of the equity.
Interestingly, on 10th February, Unilazer Export bought 44,000 shares of the company. This is just a day after when the scrip started moving up.
In a filing to the BSE, UTV said, "The company's board of directors has approved the delisting offer and is acquiring shares from public at a price not exceeding Rs1,000 per equity share. Walt Disney will also acquire 80,53,480 equity shares representing 19.82% of the current paid-up equity share capital from its other promoters of the company at the same price as discovered pursuant to the delisting offer."
Importantly, the company has further mentioned that Walt Disney has informed them that, "if for any reason, the delisting offer is not successful, the Acquirer (Walt Disney) shall evaluate all potential strategies and opportunities in relation to the acquirer's investment in the company."
Such a statement, market participants say, raises speculations over the buyout offer. Small-time investors are already in doubt over the deal. SEBI, so far, has failed to act and ascertain the reason for the rise in the company's stock. At least the regulator should now keep a tight vigil on the company's activity, to protect investors.