The economic offences wing (EOW) of Amravati police in Maharashtra has filed a charge-sheet against Anugrah Stock & Broking Pvt Ltd (ASBPL), its proprietor Paresh Kariya, Anil Gandhi, proprietor of Teji Mandi Analytics Pvt Ltd (TMAPL), National Stock Exchange (NSE), Vikram Limaye, former managing director and chief executive officer (MD&CEO) of NSE, Priya Subbaraman, the chief regulatory officer of NSE, Edelweiss Custodian Services and Central Depository Services Ltd (CDSL). Investors have lost over Rs1,200 crore in ASBPL, which was running an illegal portfolio management scheme that NSE failed to catch, and was instead felicitating the broker for a sharp increase in turnover
The charge-sheet is based on a first information report (FIR) filed by Rishabh Rajesh Sikchi from Amravati. The FIR registered on 28 July 2022 claims that these entities "with a common intention deceived and caused a wrongful loss of Rs18.56 crore" to Mr Sikchi and 77 other investors. Mr Sikchi, a partner in Rainbow Financial Services, claims he suffered a loss of about Rs15.02 lakh in this matter. He filed a complaint on 26 September 2021.
The FIR states 78 investors lost Rs18.56 crore in the Anugrah stock broking scam.
According to the charge-sheet, Paresh Mulji Karia has been in judicial custody since 21 December 2022, while Anil Gopal Gandhi is absconding.
Mr Limaye and Ms Subbaraman have filed a plea before Bombay HC for clubbing the cases together. However, the HC has not yet passed any order, the charge-sheet filed by Amravati EOW says.
In a series of tweets, Navnit Rana, member of Parliament (MP) from Amravati, alleges that in this case, police have seized other assets of more than Rs18 crore with many demat accounts that were not attached earlier.
She says, "From the reports provided by NSE and after questioning various people, the investigating officer (IO) has gathered details of three companies which are former companies of Paresh Kariya where Rs304 crore was siphoned off. IO is making attempts to get more details. No action was taken to recover this until now although the EY Report had highlighted this earlier. This was also known to NSE in March 2018."
"Mumbai EOW, which had registered the case in 2020, did not take any steps in any of these issues. Now the accused persons have approached the HC for transfer of investigation to Mumbai," she added.
According to the MP, despite two years, no further action is taken by NSE or EOW Mumbai to recover all assets and credits of Anugrah Stock Broking, which NSE was even duty-bound to recover as per SEBI circular. "Claims are being decided arbitrarily without any due process and relying on fabricated data of Anugrah. NSE has itself claimed that Anugrah was maintaining different ledgers and accounts to misguide people."
Last year in April, the Telangana High Court (HC) dismissed a criminal petition filed by NSE, Mr Limaye and Ms Subbaraman to quash an FIR (No 27 of 2022 dated 9 February 2022) registered at the central crime station at Hyderabad under Sections 409 and 420 of the Indian Penal Code (IPC).
In an order issued on 12 April 2022, justice K Lakshman says, "...proceedings against directors can be quashed if the evidence does not indicate any role played by such directors. Availability of evidence is sine qua non to determine whether any specific allegations are made against the directors. In other words, the proceedings against directors cannot be quashed if the role played by them in the commission of the offence is unclear and the investigation is not completed."
"...given the extent of the alleged fraud and the parties involved, the Court is not inclined to interfere with the investigation at this stage. Therefore, the present criminal petition is liable to be dismissed," the bench says.
Separately, V Balashowry, other MP, had asked the Securities and Exchange Board of India (SEBI) chairman to share steps taken in the wide-scale fraud committed by ASBPL. "It is learnt that EOW, Telangana has been investigating the matter and have recently sent a summons to senior management, including the managing director (MD) of NSE and also to Edelweiss Custodial Services Ltd. Therefore, I am eager to understand the steps taken by the market regulator in this regard. I request you to look into all these issues, including the revenue earned by the institutions in the matter and whether any conspiracy exists between various entities, as this does not seem to be a task done by one stockbroker."
Responding to the Lok Sabha MP, SEBI says, "A prosecution case against ASBPL, its directors Paresh Mulji Kariya and Sadhana Paresh Kariya, and Om Sri Sai Investments (OSSI) has been filed in the SEBI Special Court, Mumbai. The other enforcement proceedings initiated by SEBI against ASBPL and related entities are in progress and yet to be concluded."
The reply also reveals a lethargic attitude and lapses at regulatory levels. SEBI passed an order against the crisis-hit Anugrah Stock and Broking only in November 2020, even though it had conducted a joint inspection of the broker in 2018 itself.
On 9 March 2021, SEBI imposed a penalty of Rs90 lakh on ASBPL for repeated violations of regulations and compliance. The order mentions an inspection carried out by a team comprising officials from SEBI, NSE, BSE and CDSL. At the time of inspection, the market regulator was aware of the over Rs100 crore shortfall in the account of ASBPL. Yet, it initiated adjudication proceedings against the brokerage.
In an order, Prasanta Mahapatra, adjudicating officer (AO) of SEBI mentions misuse of the client's fund, which was known to NSE as early as November 2018. "On 39 out of 40 dates, the broker has misused client funds.
"Misuse of funds ranges from 5.40% to 45.69% of funds of credit balance clients. Funds of credit balance clients have been used for the purpose of debit balance clients. The broker has misused the credit client's funds in the range of Rs8.05 crore to Rs118.77 crore for the selected sample days. In addition to the above, NSE has also verified data with respect to the enhanced supervision submission for 30 November 2019. NSE has observed that the broker had a shortfall of funds amounting to Rs111.17 crore as on 30 November 2018," the March 2021 order passed by SEBI says. (Read: FIR Filed against Anugrah Stock & Broking, Tejimandi, NSE & Its Top Executives, Edelweiss and CDSL
On 4 September 2020, NSE had withdrawn all trading rights of the crisis-hit ASBPL. Earlier on 1st September, the stock exchange had withdrawn ASBPL's trading rights in futures & options (F&O), currency derivatives and commodity derivatives segments.