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.