Last week, the Securities Appe-llate Tribunal (Sat) ordered Dinesh Dalmia, the incorrigible chief of DSQ Software, to buy back unlisted shares introduced by him in the open market at rates prevalent when these were allotted. The shares were issued at the height of the bull run, when DSQ Software traded at a high Rs 2,800. Dalmia took advantage of the euphoria to increase DSQ’s capital by 50% without informing the stock exchanges. He introduced these 1.3 crore shares in the market (originally allotted to three Mauritius-based shell companies) without getting these listed.
The Sat wants Dalmia to buy back shares from original allottees who continue to hold these today and had bought them between May 20, 2000 and January 12, 2001. Dalmia has been asked to deposit a first instalment of Rs 30 crore into an escrow account to finance the buyback, while the Securities and Exchange Board of India (Sebi) has been directed to set up an authority to conduct this transaction.
The Sat order is a modified ratification of Sebi’s earlier order, barring Dalmia from the capital market for 10 years and ordering him to buy back 1.3 crore unlisted shares, place these in a separate demat account and extinguish them. Sebi had calculated the unjust benefit which’d accrued to Dalmia through the dubious issue of shares as Rs 630 crore; the value of shares issued then was Rs 945 crore. Considering that Sat is known for slashing penalties and throwing out Sebi’s most celebrated cases, this order would have been extremely heart-warming for investors, but for one major hitch. Dinesh Dalmia, who owes money to dozens of entities (many of them have court orders against him, which are not implementable) has been absconding from the country for several years. This means that even if Dalmia surfaces, these lenders may have prior claim to any money that he possesses.
Where is Dal-mia these days? As far as the Indian investigation agencies are concerned, Dal-mia is untraceable and they have put out an Interpol ‘red corner’ notice against him. But US newspaper reports tell us that he is making news in that country, living out of a palatial home in New Jersey. And, before absconding, Dalmia destroyed DSQ Software, by surreptitiously selling its most lucrative global software contracts to Scandent Network in 2002 for an estimated Rs 145 crore.
Since then, the Company Law Board (CLB) has ordered the appointment of four government nominee directors to revive the company. Dalmia himself has reportedly moved on to the BPO business and is known to be running major call centres at Gurgaon, Bangalore and Chennai! Again, Dalmia’s links with these companies is no secret and his core management team remains the same as it was in DSQ Software and affiliate companies. Yet, none of the Indian investigators have even got to the stage of establishing Dalmia’s links to the BPO businesses or to extradite him from the US.
• Absconding financier now the subject of more than one suit in US courts
• Amazing lack of progress in matching US revelations to his companies here
• One wonders at the official line about ‘active pursuit’ of the probe
The official line from the enforcement directorate and the Serious Frauds Office is that the investigation is being actively pursued. Yet, nobody seems surprised that Dalmia has an entire team acting on his behalf in absentia. Or that the DSQ Software shares continue to be actively traded on stock exchanges. For instance, al-though the Sebi order was actively contested before SAT, none of the investigation agencies used the opportunity to question Dalmia’s official representatives at those hearings about his whereabouts and activities.
Meanwhile, the Dalmia story moved into another dimension last week, when The New York Post reported that “Major US companies are in a federal bankruptcy court, demanding they get back $83 million they loaned” to Dinesh Dalmia’s New Jersey-based outfit. The Post has openly linked Dal-mia to Allserve Systems Corporation, which filed for bankruptcy on November 18 in a New Jersey court. Christopher Byron reports that Allserve has claimed in court that “its business was, in effect, swallowed by a sink-hole that opened under its offices” in Chennai last March.
After that, the company claimed that its “Chennai operation was relocated to other offices in the city,” but the “new location was gutted in a fire six weeks ago, which permanently knocked it out of business.”
The Chennai correspondent of The Indian Express, Jaya Menon, checked out the addresses listed under the Allserve name. A watchman in the building told her that there was a minor fire in the basement, but it has been redone and was operational. There was no fire that gutted the building. Also, nobody seems to have heard of any sink-hole that swallowed any office building in Chennai, although such an event would have been sensational enough to be noted by the national press. As in India, the American creditors allege there is no explanation for $35 million of cash that vanished from the Allserve books between July and October last year. Those who have contested the bankruptcy claims include Sovereign Bank, CIT Financial, Bostonia Investment Group, Qwest Communications, GATX Technologies Services and Republic Bank.
While US investigators and lenders seem far more determined at hunting down Dalmia’s global operations, the Allserve default in New Jersey and his claims to the bankruptcy court seem exactly in line with his usual method of operating. The lenders who have sued Dalmia, however, have the advantage of his physical presence in the country. It will be interesting to see if US lenders and investigators are any more successful at recovering their money.