Justice DK Deshmukh of the Special Court—for the third time—has ordered sale of eight flats belonging to Harshad Mehta and his family in ‘Madhuli’ at Mumbai
For the third time since the saga began in 1992, the Special Court set up to try matters relating to the securities scam has asked the Custodian to initiate the process of selling eight out of nine flats belonging to Harshad Mehta at 'Madhuli'. This was once among the most sought-after addresses in Mumbai.
Spread over two floors and 10,400 sq ft, these interconnected flats at Madhuli Co-operative Society occupied by the extended Mehta family then spelt the ultimate in aspiration and achievement for investors and speculators in India’s recently liberalised economy. The property included a billiards room, a putting green and a mini theatre… things that were unheard of in 1992. The Mehtas owned five flats on the third floor and three flats on the fourth floor which were occupied by four brothers and their families and their mother.
The sale of the flats was first ordered in October 2003 after which the case has seen incredible twists and turns with multiple appeals and stay orders before being reverted to Justice DK Deshmukh's court. In an extremely detailed, 140-page order issued on 30th April, which is repeatedly underlined to highlight various aspects, the learned judge has spelt out the basis of his decision. It remains to be seen if this finally settles the issue or will Ashwin Mehta, the late Harshad Mehta's brother, continue his fight to retain the family home. It may be recalled that Harshad Mehta, once described as the Big Bull, died of a heart attack in December 2001 while still facing charges of having diverted several hundred crores of rupees from banks to the capital market. His brothers, Ashwin and Sudhir Mehta, are co-accused in many cases. Over the past 18 years, they have been embroiled in never-ending and messy litigation which includes some absurd tax claims by the government.
Justice DK Deshmukh says:”Because these properties are attached properties and as per the judgement of the Supreme Court in Jyoti Mehta's case, the Custodian is entitled to receive income from the attached properties and because the notified persons are occupying those properties, the Custodian is not getting any income from these properties, the Custodian shall initiate the process of sale immediately and complete it as soon as possible and submit a report to the Court."
The Special Court order also says that all the notified parties and entities operated in tandem with Harshad Mehta in conducting the securities transactions as members of one family constituting a group. Since the various notified parties in the petition are members of the Harshad Mehta group, the properties of each notified party and entity can be sold for discharge of the liabilities of Harshad Mehta, the court order said.
Last year in July, the Supreme Court had ordered that the sale of these eight flats owned by Harshad Mehta’s family shall be confirmed by the Special Court.
Members of the Mehta family had been trying to stall the auction of ‘Madhuli’ by filing various litigations. However, all of them, after reaching the apex court, have come back to the Special Court. Earlier in January, the Special Court had even said that the Mehta family was adopting delaying tactics to stall the sale of these eight flats.
Each notified member of the Mehta family had said that since their property or share in the said property is not funded by Harshad Mehta or brought before the securities scam, it should not be attached or termed as ‘benamidar’ of Harshad Mehta by the Custodian.
Rejecting these arguments at the outset, the Special Court said:"In our opinion, the attachment of all the properties in terms of sub-section (3) of Section 3 of the Special Act is automatic. The said sub-section does not provide for any qualification that the properties which are liable to be attached should relate to the illegal securities transactions in respect of which the Act was enacted."
The Court said that it came to the conclusion that Harshad S Mehta had funded all the residential properties and they could therefore be disposed of accordingly. In this regard, the Court said, it relied on the report of the auditors Vyas and Vyas, who had considered the flow of funds from Harshad Mehta to various notified parties. “This was the fact that the funds had specifically been transferred for purchase of the properties just before the purchase. There was also a huge amount outstanding in the accounts of the notified parties to Harshad Mehta on 1-4-1990 and 1-4-1991,” the Court said.
An interesting aspect of the judgement is the detailed recording of various charges made by Harshad Mehta's widow Jyoti Mehta, while challenging Justice DK Deshmukh's earlier order in the Supreme Court. Some of Jyoti Mehta's arguments were that the judge had "misread" and "misconstrued" the Supreme Court directions in the Ashwin Mehta case, that the judge had "committed a serious illegality in so far as he relied upon the Janakiraman Reports and other reports which are wholly inadmissible as evidence" and that the judge had "reproduced large amounts of the Custodians' report" raising the question "as to whether he took into account the arguments of the appellants in the case". The rejection of each of these contentions forms a big chunk of the report.
The Mehta property, at its current market price (about Rs40,000 per sq ft), could fetch around Rs42 crore. According to the Supreme Court ruling, a part of the proceeds from the sale would be used to pay off income tax, banks and other debts of Harshad Mehta.
In the first month of FY11, the trend continued to be supported by the availability of retail finance and industry experts see the uptick continuing for the rest of the financial year
There has been an increase in sale of two-wheelers and four-wheelers over the past few months. In the first month of FY11, the trend continued to be supported by mainly the availability of retail finance and industry experts see the uptick continuing during the rest of the financial year.
“This trend is likely to continue in the future. If you look at annualised growth, there is an increase over pre-2007 levels. The growth will not be as strong as it is now, but it will continue,” said a research analyst from a leading brokerage who does want to be named.
The Bharat Stage-IV norms have not affected sales as most two-wheelers and
four-wheelers are already compliant with the new emission standards.
The analyst further said that due to increased availability of finance and lower interest rates, a lot of people, who had earlier postponed their plans to buy a two- or four-wheeler, have now decided go in for purchase. “Due to the economy picking up, the main growth in car sales has been in the urban sector. On the other hand, higher crop prices and the Sixth Pay Commission’s recommendations have increased income in rural areas, which has led to increase in auto sales,” he added.
During April, Tata Motors Ltd, India’s largest vehicle maker, reported a 52% increase in sales, including exports. The company sold 57,202 vehicles compared with 37,518 vehicles sold in the same month a year ago. Maruti Suzuki, the country’s largest carmaker, sold 93,058 units, including exports, up 29.7% from 71,748 units sold in April last year. Hyundai Motor’s total sales for April rose 17.24% at 52,020 units against 44,370 units in the year-ago period. Car manufacturing companies such as General Motors India and Ford India have also indicated an increase in sales.
Factors that will impact the sales growth in the future are the massive
under-penetration in Indian markets, aside from metros, and the non-availability of public transport. As the income and standard of living of people go up, so will the demand for cars increase.
Sandeep Singh, deputy managing director for marketing, Toyota Kirloskar Motors said, “I believe, if the interest rate in the case of retail finance continues at this level, and market sentiments remain positive, the pace of growth will continue, but may decline a little bit.”
Two-wheeler makers also reported higher sales during April. Hero Honda sold 3.71 lakh units of two-wheelers compared to 3.7 lakh in April 2009. Bajaj Auto Ltd, the country’s second largest two-wheeler maker, sold 2,79,095 units in April compared with 1,49,733 units in the same month last year. Also, the two-wheeler sales of TVS Motor Co in April rose 28% to 1,44,689 units from 113,119 units in the same period a year ago. Its domestic sales rose about 22% in April to 125,471 units from 102,985 units in the same period a year ago. Companies such as India Yamaha Motor and Suzuki Motorcycle India also showed an increase in sales of two-wheelers.
According to Sudhir Kukreja, an auto analyst, India is a place where the auto industry is expected to boom in the long term. But in the short term, there are some issues such interest rate and excise duty hikes—however, these will not impact the demand for automobiles. The demand is strong, but the impact of these factors is yet to be seen.
“The market moves on absolute figures, the high percentage growth rates are partly due to the fact that 2007 was a bad year,” he added. Mr Kukreja said that the sales of two-wheelers will be boosted by strong rural and semi-urban demand. The passenger car segment relies mainly on urban demand. A large number of global majors are entering this segment. The sales of commercial vehicles are impacted by manufacturing, mining and other such industrial activities. If the Index of Industrial Production (IIP) numbers continue to grow by 12% to 15% annually, then it will indirectly lead to higher sales.
“There are specific periods, where you will see peaks. Segment-wise, sales of commercial vehicles are influenced by depreciation cycles, which usually result in higher sales in the second quarter. Two-wheelers and passenger cars see increased sales in the festive season. Rural demand is also influenced by crop cycles,” Mr Kukreja said.
SEBI said the CRAs will have to ensure full compliance with the guidelines by 30th June and make mandatory disclosures twice annually
Market regulator Securities and Exchange Board of India (SEBI) on Monday asked credit rating agencies (CRAs) to disclose their methodologies and fees charged from the companies they rate, a move that will promote greater transparency, reports PTI.
The disclosure guidelines, issued by SEBI against the backdrop of the recent global financial meltdown, require CRAs to frame policies and a code of conduct to deal with the issues related to conflict of interest between their analysts and entities being rated.
The market watchdog said the CRAs will have to ensure full compliance with the guidelines by 30th June and make mandatory disclosures twice annually.
The role of the rating agencies was questioned during the global financial meltdown, as many companies and their issues collapsed despite enjoying high ratings.
As per SEBI norms, the CRAs will have to maintain records of the important factors underlying the credit rating and a summary of discussions with all the stakeholders involved as well as decisions of the rating committee, including voting details and notes of dissent.
"These records should be maintained till five years after maturity of the instruments and be made available to auditors and regulatory bodies when sought by them," SEBI said in a circular, adding the CRAs will also have to publish information about the historical default rates.
The four major credit rating agencies that operate in the country are CRISIL, Fitch, ICRA and CARE. These agencies, based on the creditworthiness of companies, assign them ratings (like AAA, AA, BBB and so on), which are used by investors, banks and other institutions.