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.
The domestic market will rely on global cues for directions
The domestic market is likely to see a subdued opening as the markets in Asia were trading lower in early trade on Friday on the growing uncertainty about US political leaders finalising a deal to hike the nation’s debt ceiling. Earlier, Wall Street settled mixed after erasing early gains on growing worries about the impasse over a consensus about increasing the debt ceiling to avoid a default. The SGX Nifty was 28.50 points lower at 5,470.50 against its previous close of 5,499.
The market was range-bound and the indices stayed below Wednesday’s close through the entire trading session yesterday. The Nifty's intra-day high and closing levels were the lowest over the past 24 days. Thursday’s fall was on large volumes. The Nifty is currently trading below the 50-day moving average of 5,520. We expect the Nifty to remain weak over the next few days.
Earlier, the Nifty opened 54 points lower at 5,492 and the 30-share BSE Sensex resumed at 18,301, down 131 points from its previous close. Reliance Industries, State Bank of India and HDFC led the losses as financials, realty, auto and oil & gas stocks were on the sellers' radar.
The indices made insignificant highs early on, as the Nifty touched 5,512 and the BSE Sensex moved to 18,328. The indices traded sideways for a major part of the session as other stocks like Jaiprakash Associates, Sterlite Industries and Hindalco were also under selling pressure. ITC was the exception, gaining over 2% following the announcement of 25% rise in quarterly earnings.
Volatility associated with the expiry of the July futures and options (F&O) contract was also evident. There was a little recovery on the release of food inflation data for the week ended 16th July that was marginally lower at 7.33%, as compared to 7.58% in the previous week. But this did not give enough momentum to lift the indices into the green.
The indices closed in the red for a third consecutive day with the Nifty losing 59 points to end at 5,488 and the Sensex ended the day at 18,210, down 223 points, extending its losses to 3.5% over the three days.
The US markets closed mixed overnight after erasing early gains as investors were unconvinced that a key vote by Congress would lead to a deal to avoid a US default. A vote on a Republican-led bill to raise the debt limit was expected in the US House of Representatives after the market closed on Thursday, but fears that it would get defeated by the Senate led investors to sell stocks. The impasse overshadowed some positive economic news.
Weekly jobless claims fell more than expected last week, dropping below the key 400,000 level for the first time since early April, according to the Labor Department. Also, pending sales of existing US homes unexpectedly rose in June from May and jumped sharply from a year ago, according to the National Association of Realtors.
Among stocks, DuPont added less than 0.1% after raising its full-year earnings forecast and posting better second-quarter profit. Cisco gained 2% after Goldman Sachs Group raised the networking gear maker’s rating to to “buy” from “neutral” citing the outlook for higher earnings estimates. Akamai Technologies Inc, which operates a server network that helps websites load faster, slumped 19% after third-quarter revenue and earnings forecasts missed estimates. Exxon Mobil declined 2.2% as its results that fell short of expectations.
The Dow declined 62.44 points (0.51%) at 12,240.11 and the S&P 500 shed 4.22 points (0.32%) at 1,300.67. On the other hand, The Nasdaq closed up 1.46 points (0.05%) at 2,766.25.
Markets in Asia were lower on fears of a possibility of a downgrade of the US credit rating as the country’s policymakers are yet to find a solution to raise the debt ceiling. Meanwhile, Japan’s industrial output rose 3.9% in June. However, the rise was slower than a 6.2% rise in the previous month.
Among stocks, Sony Corp declined 2.5% after cutting profit forecasts and Nintendo Co dived 20% after announcing its forecast cut and discounting devices. On the positive side, Japanese lender Shinsei Bank surged 6.7% after reporting a 31% jump in net income.
The Shanghai Composite declined 0.18%, the Hang Seng tanked 0.89%, Jakarta Composite was down 0.04%, the KLSE Composite fell 0.39%, the Nikkei 225 shed 0.08%, the Straits Times slipped 0.52%, the Seoul Composite was down 0.49% and the Taiwan Weighted sank 1.02%.
Back home, India and EU have reached an ‘interim settlement’ under which none of its 27 members will detain Indian generic medicines transiting through Europe on suspicion of intellectual property right (IPR) violations.
However, New Delhi will not withdraw its case against EU in the World Trade Organisation (WTO) filed in May 2010, which was triggered by repeated detentions and seizures of Indian pharmaceutical products at EU ports particularly in the Netherlands.