Citizens' Issues
Taking Stock of 2015 Preparing for 2016
The start of a new year seems the right time to take stock of the past and to look for markers of things to come
 
Transparency & Accountability: The Indian judiciary gave us savers a reason to cheer and also to wring our hands in despair, in 2015. In December, a landmark judgement of the Supreme Court (SC) has forced the Reserve Bank of India (RBI) to share information with regard to RBI’s audit reports, action taken against banks, list of defaulters, classification of banks, fines imposed on banks and so on. In doing so, the judgement made it clear that there was no ‘fiduciary relationship’ between RBI and the banks and this could not be a reason for denying information. It demolished RBI’s excuse that providing information would endanger India’s ‘economic interest’ by terming it “not only absurd but is equally misconceived and baseless.” I expect this judgement to change the attitude of the capital market, insurance and pension regulators to queries under the RTI (Right to Information) Act and to re-ignite activism and help ferret out information on matters of public interest. 
 
Gaming the Judiciary: In contrast, investors of PACL Limited (Pearl Agrotech) were holding their breath, at the end of December, to see if the Delhi High Court would, again, admit an appeal by the company against an order of Securities & Exchange Board of India (SEBI), asking it to refund a stupendous Rs49,100 crore raised under an illegal money circulation scheme over decades. This is a case where action against dubious fund mobilisation began in 1999 (the scheme was launched in 1997); but the company managed to obtain repeated stay orders from various courts. The matter went all the way to the SC, before being remanded to SEBI and challenged before the Securities Appellate Tribunal (SAT). Meanwhile, the company continued to raise huge sums of money without any accountability, transparency or disclosure. Thousands of angry investors from very poor backgrounds are running from pillar to post trying to get the company to return their money. The responsibility for allowing the shady PACL to vacuum-suck such massive sums of money also lies at the doors of the judiciary.
 
 
Retail Investors Lose Again: In another perplexing order, the Delhi High Court dismissed a PIL (public interest litigation) by the Midas Touch Investors’ Association with regard to 5,152 companies listed only on India’s 22 regional stock exchanges (RSEs) which are being shut down one by one by SEBI. With neither of the two big national exchanges being interested in granting listing to these companies, their shares would immediately turn worthless. One could argue that most of these shares are already in limbo, since the exchanges are virtually defunct. But Virendra Jain, the veteran investor activist with many successes to his credit, was arguing precisely for those investors. His contention is that SEBI’s de-listing process was flawed and its action usurped the fundamental right of the shareholders of affected companies to seek a judicial review of the regulator’s decision. 
 
What has disappointed Mr Jain most is that the PIL was not dismissed on merit, but on the ground that it is similar to an earlier PIL that was dismissed. He says that this view is erroneous and the facts placed before the court, as well as the relief claimed by Midas Touch, are distinctly different. This is a blow to investors, because it is tough for individual activists to navigate the higher judiciary without adequate resources or the help of senior counsel willing to appear pro bono. 
 
Orders & Appeals: While on regulators and judgements, SEBI has claimed that its overall success rate with appeals filed before SAT was 90% in 
2014-15. This, it says, is better than in the previous two years. Yet, it may not be as wonderful as it sounds. Firstly, it is not clear whether the 90% includes cases where the appeal is upheld but the penalty slashed to a meaningless figure. More importantly, it excludes two of SEBI’s most significant consent orders which, by the quantum of penalty imposed, would probably account for a large chunk of its action, if one excludes the PACL order passed in August 2014. 
 
On 8th December, SAT set aside the Rs11-crore penalty imposed in 2013 on Reliance Petroinvestments (RPIL), a subsidiary of Reliance Industries, for alleged insider trading and illicit gains through information about IPCL (Indian Petrochemicals Corporation Limited). SEBI has been asked by SAT to examine the matter afresh since its order was apparently passed merely on the basis of presumption, without considering the arguments of the company. Then, on 16th December, SAT set aside a Rs13 crore penalty imposed on Reliance Industries for insufficient disclosures in violation of the listing agreement of stock exchanges. In this case, too, it has been asked to consider the order afresh. 
 
The DLF (earlier Delhi Land and Finance) matter is worse. SEBI barred DLF and its promoters from the capital market after a seven-year investigation. The order was overturned by a majority order of SAT, which pulled up the regulator for “jumbling up of rules, regulations and various provisions occurring and operating in different fields…” which has meant “grave miscarriage of justice to investors,” when the stock price crashed the day after the order. SEBI had also imposed a Rs86-crore penalty against DLF in the same case. The issue is now before the SC. 
 
Commendable Work: The one area where SEBI has done extremely well in 2015 is to continue its relentless action against money circulation schemes. Apart from the headline-grabbing action against PACL Ltd, Rose Valley, Alchemist, MPS Greenery, Agri Gold Farm Estates, Royal Twinkle Club, Citrus Check Inns, etc, SEBI has been steadily issuing orders against hundreds of lesser-known companies that have raised funds through financial instruments that appear to have passed regulatory scrutiny, like optionally convertible debentures, redeemable preference shares, etc. Most of these companies have been barred from raising fresh funds and asked to wind up operations. Sometime in November, the regulator also issued a list of 95 companies that had been barred from raising funds and cautioned investors to stay away from them. But this is only a tip of the proverbial iceberg. There are thousands of collective investment schemes that continue to operate in each state—many are able to raise thousands of crores of rupees. For instance, in December 2015, the economic offences wing (EOW) of the Mumbai Police declared that two unknown companies—Sai Prasad Properties Ltd (Goa) and Sai Prasad Foods Ltd (Pune) which it raided across India—had raised over Rs2,000 crore from two million investors.
 
Interestingly, SEBI, which took over the commodity markets regulator in 2015, remains a reluctant regulator of collective investment schemes. This was revealed by the October 2015 report of the parliamentary standing committee on finance, on collective investment schemes. The report accepts SEBI’s suggestion to create a new regulator for all money collection schemes. This committee came up with the startling revelation that money is transferred out of Ponzi schemes to multi-state cooperatives, which are subject to a weak regulatory regime and have become “some kind of a shelter for illegitimate funds.” The parliamentary committee has recommended a special audit of these cooperative banks and wants the department of economic affairs under finance ministry to monitor the activities of independent regulators, as well as investigating agencies. Will the ministry of finance focus on these useful suggestions in 2016 to make life safer for savers? 
 

User

COMMENTS

Anil Pandey

3 days ago

I m ready to work with reliance cabs..in nagpur

Anil Pandey

3 days ago

I m ready to work with reliance cabs..in nagpur

Anil Pandey

3 days ago

Ashwani Arora5 months ago I m ready to work with reliance cabs..in nagpur

Vaibhav Dhoka

11 months ago

IN CIS or MLM once SEBI gets elm of ponzi scheme it should immediately after preliminary data collection forward investigation to local economic offence wing to attach or seize property of offender.

MG Warrier

11 months ago

Moneylife has been doing commendable work in creating awareness among savers and investors, not only about their rights and possible precautions they can take while making investment decisions, but also in helping out those whose decisions subsequently turn out wrong because of inadequate pre-investment study or the institutions in which money was invested cheating the clientele. Moneylife has also been encouraging investors to share their good and bad experiences with banks and other financial institutions. I am not aware of any other organisation engaged in educating savers and confronting institutions including regulatory bodies when they do not play or play inefficiently their mandated roles. It is in this context, one should view the observations on transparency and accountability here. Because of pre-independence legacy, our civil and criminal statutes including those applicable to financial sector carry provisions which insulate the rich and the powerful from punishment or at least help them in getting the final punishment delayed. A section of the media also plays into the hands of the rich and the powerful by blacking out the names of celebrities and the rich when they are involved in unethical practices. In such situations, presence of participants like Moneylife is comforting to the victims.

The Good, Bad and Ugly in 2015
Section 45 amendment, TDS mess, Mediclaim hike, group mediclaim still...
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Parrikar admits 'security lapses' lead to terror attack
Pathankot : Defence Minister Manohar Parrikar admitted on Tuesday that "security lapses" led to the terrorist attack on the IAF base here that left seven security personnel and six terrorists dead.
 
Parrikar also told the media after visiting the base that combing operations were still going on but "this is only for safety purposes" and that no more terrorists were believed hidden in the huge complex.
 
Some gaps led to security lapses, leading to the pre-dawn terror attack on Saturday, the minister said. He did not elaborate.
 
"What is worrying is how they (terrorists) entered the base," he added.
 
Parrikar visited the Pathankot Indian Air Force base in Punjab on Tuesday along with the chiefs of the army and air force.
 
The head of the National Investigation Agency (NIA), which is probing the audacious terrorist strike, also visited the base separately.
 
"Combing operations are (still) going on," Parrikar said. "This is only for safety purposes."
 
He said the body of one of the terrorists still had a suicide vest, with a grenade sticking out.
 
"I am very, very clear that they (our officers) should not take any risk," he said, recalling how a National Security Guard (NSG) officer lost his life earlier while trying to reportedly shift a similar body.
 
Parrikar admitted that the entire operation "is a very difficult" one.
 
"It is tedious. This has been done without compromising any assets... Not just the strategic assets but even a building."
 
He said barring one building where the terrorists took shelter, no other building was even damaged because the security personnel managed to corner the raiders in a corner of the sprawling base.
 
He said the terrorists had AK-47 rifles, pistols, Swiss knives, commando knives besides 40-50 kg of bullets. They also had improvised mortars. "They had high quality explosives."
 
The minister said the NIA had started investigation into the attack. He said it would find out "who sent them".
 
"They have got initial leads, where they have come from, how they have come."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

COMMENTS

Meenal Mamdani

11 months ago

I am glad that Parrikar has admitted that there were lapses rather than hide behind evasive replies. It shows that he is a good politician as well as a responsible administrator, willing to take responsibility for the failure of people under his charge. After this admission I feel more confident that the errors will be thoroughly examined and corrected.

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Close

To continue


Please
Sign Up or Sign In
with

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)