Controversial stock operator Nirmal Kotecha under ED’s scanner
Sucheta Dalal  and  Alekh Angre 28 November 2011

A fortnight ago, the ED summoned Kotecha, a self-confessed admirer of Harshad Mehta, for enquiry under the Prevention of Money Laundering Act

Controversial stockbroker Nirmal Kotecha is now under the scanner of the Enforcement Directorate in connection with an investigation into money laundering. Mr Kotecha, who is currently barred from trading in the stock market by the Securities and Exchange Board of India (SEBI) in connection with investigation into the forgery, price manipulation and insider trading in Pyramid Saimira Theatre Ltd (PSTL). Mr Kotecha was the co-founder of PSTL.

Documents available with Moneylife show that Mr Kotecha had been summoned by the ED under the Prevention of Money-Laundering Act. The summons was issued by Rajeshwar Singh, deputy director of the ED, based in Delhi who directed Mr Kotecha to be present before him on 14th November 2011.

Interestingly, the case number quoted in the summons issued to Mr Kotecha is identical to that quoted in another Enforcement case information report (ECIR) dated 9 March 2010 in connection with the 2G scam (Unified Access Service License). The ECIR lists offences under Sec 120-B of the IPC and 12(2)r/w 13 (1) (d) of the PC Act and is against certain “private persons and companies”, without naming them.

Moneylife is in possession and have reviewed both of these documents.

The ED letter dated 21 October 2011 stated that it is conducting an investigating under the section 50(2) and Section 50(3) of the Prevention of Money-Laundering Act, 2002 and it requires the attendance of Mr Kotecha for the same.

It has asked him to submit his original passport with a photocopy, details of the properties (both –moveable and immoveable), bank accounts held by him and his family in and outside India; details of the firms/companies in which he or members of his family are proprietors/ partner/ director in and outside India and details of the foreign visits he made since January 2006.

According to market circles, Mr Kotecha is associated with Mavi Investment Fund Ltd, a sub-account for a Foreign Institutional Investor (FII) – MM Warburg Bank (Scheweiz) AG.  Mavi Investment, which is registered in a tax haven, was among the few FII sub-accounts that has been banned by SEBI in September 2011 from dealing in securities or instrument with Indian securities until further orders. According to Bloomberg data, this fund holds stakes in as many as 49 companies amounting to $350 million in some large cap companies including Mundra, Adani and JSW. Blogs tracking Nirmal Kotecha’s activities claim that Mavi Investment has pooled funds from many Indian entities as well as diamond merchants.

Although he is under a SEBI ban, Mr Kotecha is constantly rumoured to be a big player in the Indian capital market even today, especially in hugely manipulated Initial Public Offerings.

Interestingly, in July this year, well after he was barred from the capital markets, Business World magazine named Mr Kotecha as second in the list of India’s non-promoter billionaires – next only to Rakesh Jhunjhunwala and his wife Rekha. The magazine put his net worth at Rs1,821 crore – although this may have shrunk given the state of the capital market. The magazine provided a long list of his investment.

According to report in India Today, an inquiry was initiated against KD Singh, a Trinamool Congress Rajya Sabha MP and close confidant of Mamata Banerjee, by the home ministry. The investigators were probing two FIIs- Mavi Investment and Somerset Emerging Opportunities Fund, which acquired stakes in Singh’s Alchemist Realty Ltd. Both of these funds were closely linked to Mr Kotecha, say market sources.

Mr Kotecha, a self-confessed admirer of the late scamster Harshad Mehta is only in his 30s and is the son of an LIC agent who also ran a medical shop in Kochi. He was also known to befriend journalists who also came under the regulator’s scanner for their involvement in the Pyramid Saimira case where a forged SEBI letter was leaked to the media. Incidentally, the forgery was traced to a SEBI manager who was also under Mr Kotecha’s influence.

Moneylife could not contact Mr Kotecha for his comments since his number available with us was unreachable. His reaction if any will be added to this report when available. Despite repeated attempts, Moneylife also did not get any further details about what transpired at the 14th November hearing of the ED as had been scheduled under the summons.

Comments
Sharad
10 years ago
Is it a mere coincidence that Mavi Investment Fund also owns around 1.45% equity in DB Realty. At time of Reliance Power IPO, a declaration on the internet says that Mavi held over 0.40% stake in Reliance power.

SEBI and stock exchanges should be having complete details of the trading patterns of Mavi, atleast the details of buys and sells in companies (alongwith associates) embroiled in the 2G scam.

And being a registered FII as per SEBI website, whats stopping the govt agencies to summon the "managers" of Mavi who in turn can lead to the owners of Mavi.

Some reports point that ED sat on hot trail of Unitech fund transfer to Pluri for 2 months. And during this time many of the accused in 2G scam got bail too.

It is also unclear if Unitech money trail to Pluri was mentioned in the status reports submitted by ED to Supreme Court.

Or all these clear flaws in the investigations intentional. Only time can tell. Unless a Subramanian Swamy or Prashant Bhushan raises them.
c s warrior cochin
10 years ago
IPO FOULPLAY IS CONTINUING EVEN NOW IN MOST OF THE PUBLIC ISSUES. WHY SEBI NOT TAKING ANY ACTIONS AGAINST THESE INVESTOR BLOOD SUCKERS.
Suman Mukherjee
10 years ago
It is not new that Mr.Kotecha is in hand and glove with Mavi Investments Ltd.

One example is Kohinoor Broadcasting Corporation Ltd where Mavi Investments which held 3.39% as of September, 2009, slowly exited the counter, as the stock price dropped suddenly (from around Rs.10--below Re.1 as of now). It is strange that after exiting Kohinoor Broadcasting he has never thought of entering the counter, as Kohinoor Broadcasting posted continuously bad quarterly numbers, since the last one year or so.

However, his deeds in ruining Pyramid Saimira Theatre Ltd (PSTL) is unpardonable. He also influenced, Mr.P S Saminathan so much that this fellow became bankrupt as the scrip tanked from Rs.400 plus to around Rs.5 in matter of few years.

I shall be obliged if Money LIfe takes the cudgel to find out what is in the horizon for the shareholders of PSTL and in view of the Securities and Exchange Board of India (Sebi) directing its promoter PS Saminathan to give an open offer to acquire shares of PSTL from public shareholders, in December, 2010.

Also, what about the Brokerage houses, like Keynote Capitals Research and Religare Research who in their 2008, research reports gave a buy with Religare putting the target as high as Rs.480.

Will they also be pulled for giving, wrong message to the shareholders?
chandra shekhar
10 years ago
ED has done its job, de want to reach the money 'stashed abroad' n work is in progress in this direction ...!
The connection between this case agst
Nirmal Kotecha & Kiran Bedi of d civil-society is, had Kotecha been in place of #Bedi, HE too would have protested on streets to suggest 'foul-play' or politically motivated n would have made it public that the court order is wrong ...!!
An offence is an offence & better would b to accept it, rather accusing the Govt. or the politicians or a party ...!!!
reg.,
Chandra .......
Dr Vaibhav G Dhoka
10 years ago
Since expose of 2G scam and new Chairperson and new directors at SEBI it seems that SEBI has started or seems to take action against scamsters .Now SEBI's new team should first clean up MIRSD department where brokers have tie up and put an end to CONSENT order it will be start a new era for investors,and will be seen as rising to its PREAMBLE.
Free Helpline
Legal Credit
Feedback