IL&FS: Ravi Parthasarathy and 4 Top Executives Pay To Settle Manipulation Charge in Adani Export Stock
In February 2017, when the Infrastructure Leasing & Financial Services  (IL&FS) was already facing a liquidity crisis and its board of directors was probably discussing a fat, 144%  pay hike for chairman Ravi Parthasarathy (taking his pay to Rs26.3 crore), he was busy settling a stock manipulation charge by the Securities & Exchange Board of India (SEBI), along with four other senior employees. And what is worse, IL&FS apparently paid for this too, although it was a paltry amount in relation to his salary. 
 
In January 2014, SEBI issued a show-cause notice to five top executives of IL&FS charging them with stock manipulation and synchronised trading in Adani Exports Ltd. The charge was against Mr Parthasarathy (erstwhile chairman), Hemang Raja (managing director) and Vimal Bhandari, Arun Kumar Saha and Vibhav Kapoor, all directors of erstwhile Investmart India Ltd (IIL). 
 
While SEBI’s action remained hidden from the public, it was surely something that was serious enough to be discussed by the board, which saw it fit to reward Mr Parthasarathy even while the company faced a liquidity crisis. 
 
Typical of the shady manner in which the Indian regulator settles serious charges — on payment of money and without admission of guilt—the settlement order has minimal and sketchy details of the exact charge against the officials and SEBI’s findings.  
 
All it says is that SEBI's investigation in Adani Exports scrip during January 1999 and February 2001, revealed synchronised or structured and cross trades executed by IIL for its clients, "which resulted in manipulation of price and volume of the scrip of Adani Exports.” 
 
It further says, "IIL also alleged to have paid Rs57 crore for the sale transactions to its clients without receiving the pay-out from the exchange. The SEBI order is available here
 
The market regulator then issued show-cause notices to Mr Parthasarathy and the four executives who were in charge of affairs of IIL when the stock manipulation took place. 
 
All the five filed separate applications seeking to settle, without admitting or denying the findings of fact and conclusions of law, the pending enquiry proceedings initiated against them.
 
SEBI's high powered committee (HPC), on 14 December 2016, recommended settlement upon payment of Rs34.42 lakh each from Mr Parthasarathy and Mr Raja and Rs13.77 lakh each from Mr Bhandari, Mr Kapoor and Mr Saha. 
 
After receiving the fine, SEBI, in its settlement order issued on 13 February 2017, said, "...the proceedings initiated against the Applicants for the alleged violation are settled qua the Applicants as per the above terms, by way of this order and SEBI shall not proceed with any enforcement action against the applicant for the said defaults."
 
 
IIL later became ‘IL&FS Investmart Securities Ltd’ and, at present, is known as ‘HSBC InvestDirect Securities (India) Ltd, a SEBI-registered broker.
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COMMENTS

Liju Oommen

5 days ago

ILFS is india's lehmann. It should have been left to die and send the management which perpetrated the fraud to jail. But in india we have the habit of throwing good money after bad.

REPLY

SURAJIT SOM

In Reply to Liju Oommen 5 days ago

If we let IL&FS fail, the colateral damage will be too much. Already the bill is very high. Look at the Index















The collateral damage would be enormous. Already the damage is huge. Look at NIFTY before IL & FS downgrade (on 17th Sep 2018 ) and today. That is exactly what happened with Lehmann. Had US authorities intervened at that time ,the damage to the world economy would have been much less. An ounce of prevention is worth ton of cure. Certainly in the market. This not say that the rotten apples should be rescued every time. Exactly the opposite. such decay should be detected and eliminated at the first stage itself. Almost everybody in the system failed over a long time while the criminal gang continued their looting.


jaideep shirali

1 week ago

As more skeletons tumble out, the question that still remains is what were Directors like R C Bhargava and Jerry (Jaitirth Rao) doing on the Board of Directors ? Should'nt such Directors be penalised in some way for being mute and almost willing accomplices in this fraud ? Why are'nt the ILFS top management being charged and arrested, unless the rot goes all the way to the top levels in our country ? It seems the new Board, comprised of mainly bureaucrats will only serve the job of brushing the dirt under the carpet.

ramchandran vishwanathan

1 week ago

Spineless Regulators & equally spineless Senior Management

Ramesh Poapt

1 week ago

It appears more cases like ILFS will come out in due course...beware!

KALPATHY KRISHNAMURTHY

1 week ago

With substantial stakes of LIC and SBI and with top paid Auditors how did this come to pass ? Looks like Satyam Redux only much much grave...

REPLY

Sunil Rebello

In Reply to KALPATHY KRISHNAMURTHY 1 week ago

LIC investments value crashes below their cost.

Also GOI will get only paltry LTCG as most companies below their cut of rate

suneel kumar gupta

1 week ago

Another thing not pointed out is delay in deciding financial cases. 17 years for this is also questionable.

SURAJIT SOM

1 week ago

Authorities should immediately catch hold of all these criminals - including those in charge in SEBI- and throw them in a cell in any Indian jail. Certainly a PIL can be filed in a court of law. Anyway their properties should be confiscated immediately. They are nothing but loots from PSU banks, companies ,investors etc. Now the nation is paying for their sin.

Did SAT Bail Out Price Waterhouse?
The Supreme Court has pulled up the Indian government for the delay in appointment of judges to the Securities Appellate Tribunal (SAT). Almost 500 cases are pending in the Tribunal for want of a judicial member. The posts of presiding officer and judicial member have been lying vacant since then and CKG Nair, the (lone) technical member of SAT has been passing orders on a daily basis. (Read: SC To Decide if Single Technical Member of SAT Can Stay SEBI Order)
 
The presence of a judicial member is mandatory on every bench. As on date, there is only one member (Tech), Dr CKG Nair.  This raises serious apprehensions if the delay is being caused by design to perhaps bail out Price Waterhouse (PW) and some other lucky ones. The facts seem to suggest this. 
 
Securities and Exchange Board of India (SEBI) vide its order on 10 January 2018 had restrained, for two years, all the 10 audit firms referred to as ‘PW entities’ from doing any audit related work of listed entities and intermediaries registered with the market regulator. 
 
The restraining order was passed over the alleged collusion of PW network with directors and employees of the erstwhile Satyam Computer Services Ltd (Satyam), in the country’s biggest corporate accounting scandal. 
 
SEBI’s order was effective immediately but was not to affect audit assignments relating to financial year 2017-18. PW network filed an appeal with SAT, which, vide its order on 15 February 2018, allowed the firm to audit existing clients till 31 March 2019 or until a new bench was formed, whichever was earlier. 
 
Verdict of the new bench could have gone against PW network. This eventuality may have been taken care of by ensuring that new members were not appointed.   
 
Interestingly, Jog Singh retired on 19 February 2018, just four days after SAT’s order.  The presiding officer, JP Devdhar, who recused himself from the PW network case, retired on 11 July 2018. Had he not recused, the PW network case could have been heard as late as July 2018. But perhaps that was never intended. PW network was given extended time, prima-facie, surreptitiously.
 
Non-filling of the vacancies in SAT is baffling given that the retirement dates of the members were well known in advance. Two members of SAT retired after completing a five-year term and the vacancies were not caused by any abrupt exit. 
 
Mr Singh had been a member since 20 February 2013. Mr Devdhar had been a member since 12 July 2013. Interestingly, the SAT order has not been uploaded on its website till the time of writing this article even though the author had brought this to the notice of SAT vide his letter dated 12 March 2018.
 
Of course, contrary to public perception, the wheels of justice can move very fast provided you are rich and powerful.  Hearings can be delayed endlessly; appeals can be heard at midnight.
 
SEBI’s order of 10 January 2018 against Price Waterhouse had prima-facie overlooked a major criminal conspiracy despite taking nine long years. Twice it even missed the deadlines set by the Supreme Court which had castigated it for unnecessary delays. SAT’s benevolent order took just one month! When the new bench will be formed is anybody’s guess.
 
The intention seems to be clear. Delay as much as possible, public memory is short, something bigger will come. This prayer has also been answered. We now have the IL&FS fiasco which dwarfs Satyam.
 
 
(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.)
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COMMENTS

Shankar g

2 weeks ago


Sorry state of affairs.......and disheartening to note that the basic morality and work ethics is being forgotten majorly in every institution whether private or public, despite growing number of Professionals .

Governance Lessons for India from US SEC in Elon Musk & Tesla Case
Elon Musk, credited with building Tesla into one of America’s most valuable car companies, has been fined $20 million by the Securities and Exchange Commission (SEC) of the US.  Additionally, he has to step aside as chairman for three years. Not only Musk, but the company has also been fined $20 million. The crime: an irresponsible tweet from Musk, just last month.
 
Musk had boasted on 7 August 2018 on Twitter that he had secured funding for a buyout of his electric car company. 
 
 
The immediate effect was a surge in Tesla shares.  The tweet promised to turn the public company into a private one. Musk entered into the settlement with SEC involving such a hefty fine just two days after being sued by it for misleading investors. 
 
The message from SEC is clear. When companies and corporate insiders make statements, they must act responsibly including endeavouring to ensure the statements are not false or misleading.
 
In mera mahaan Bharat,, such a tweet would not have even raised an eyebrow. Here fraudsters enjoy a life time duping investors and banks of billions of rupees and when the going gets tough, simply walk away. Some do not feel the need to do even this. Yet, life goes on as usual for them.
 
Remember Satyam, the largest accounting fraud till date in the history of corporate India. Two US regulators, including the SEC, the Serious frauds Investigation office (SFIO), Central Bureau of Investigation (CBI) and the special CBI court, found the Satyam management and two auditors of PricewaterhouseCoopers (PwC) guilty of falsification of accounts in 2009. Even nine years later, the Satyam management and PwC auditors are out on bail. No one feels the need to challenge it.  
 
Auditors are now getting smarter. They just dump the audit when the going gets tough.  To hell with their fiduciary duties. In the past three months since my earlier article highlighting how it could be fatal for public interest, the number of auditors resignations has climbed from 37 to close to 200. 
 
The resigning auditors include the big boys: Deloitte in case of Nirav Modi’s outfits to  PwC in the case of Vakrangee where the ministry of corporate affairs (MCA) has ordered a probe.
 
Taking a cue from the auditors, some directors are also adopting the same modus operandi. And what has MCA done so far? Precious little. Reportedly, it is now in the process of initiating review of audit standards, making  the auditors more accountable and is planning  a new form for more disclosures from the resigning directors. 
 
It is high time the Indian government takes lessons from the Musk episode. Cosmetic changes, scores of committees, endless paperwork but devoid of willingness to act against the rich and powerful are all meaningless. Only deterrent financial action makes sense, that too if taken swiftly.  
 
If the US can do this in such a high-profile case and for something as trivial as a tweet, why can’t India do the same in scams running into thousands of crores of rupees and where a mountain of evidence exists?  
 
How about Satyam, Vijay Mallya, Nirav Modi, Mehul Choksi, Religare for starters.
 
You may also want to read…
 
 
 
 
 
 
 
(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.)
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COMMENTS

Nagarajan Ramachandran

2 weeks ago

Well, it is all relative. The fine is a not even a gentle slap on the wrist for both the company and Musk given their net worth(s). Also, he is agreeing to step down from the wrong job; Tesla needs a new CEO not a chairman. With Musk's visionary abilities, he would make a better chairman than CEO. The larger point about India of course is bang on. It is not just SEBI; show me one regulator that has the guts to deliver pain to the high and mighty that act with impunity. TRAI and IRDA are worse than SEBI.

Gopalakrishnan T V

2 weeks ago

In India anybody can get away with any Damn thing with right contacts and money. This is demonstrated by never ending bank frauds, regular and perennial loot of banks and corporates. Governance Standards prescribed are only in paper and not to be practised even by mistakes is what is demonstrated with all sorts of wrong doings and liberal loots seen every where. Laws of the land are meant for common people to scare him and even not to dare to question the power that govern us.

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