In a surprise development, the Custodian has moved the Bombay High Court to figure out the source of Ketan Parekh’s self-admitted Rs 72.2 crore repayment to Madhavpura Mercantile Cooperative Bank (MMCB) between 2002 and 2005. The Custodian’s move probably explains several recent actions of Parekh — the only scam-accused to figure in two major financial scams investigated by a Joint Parliamentary Committee (JPC). In 1992, as a young stockbroker he was a crony of the late Harshad Mehta and named an accused in a case relating to Canara Bank. In Scam 2000, the JPC declared him the central figure of the large-scale stock market manipulation that ended with a major crash.
In early April this year, we wrote that Ketan Parekh’s lawyers had told the Supreme Court of India that he would no longer be able to repay MMCB. At the same time, he and eight associate entities have sought the Court’s permission to be allowed to re-enter the capital market. This move may have resulted from the Custodian’s application to probe his income.
Parekh had been granted bail on the condition that he would repay the money siphoned out of MCCB, leading to its collapse and causing losses to lakhs of depositors. In the next few years, as Parekh began to repay crores of rupees, even the Income Tax authorities did not bother to question his source of income, although he has been barred from the capital market for 14 years.
Meanwhile, on April 27, 2007, the minister for company affairs told the Lok Sabha that the Serious Frauds Investigation Office (SFIO) had investigated 16 companies belonging to the Ketan Parekh Group and had received sanction for prosecution under the Indian Penal Code and the Companies Act. It has also forwarded its investigation report to all government investigation agencies, RBI, and finance ministry for action under their respective statutes.
Interestingly, the same 16 entities already figure in the Custodian’s application to the Special Court. The application says that since Parekh was notified in 2001 under the Special Courts Act of 1992, he ought to have taken the Court’s permission to make repayments to MMCB or any other entity over the past few years. It wants the court to direct Ketan Parekh and 23 entities/persons associated with him to make a full disclosure of their assets and income.
The application (No. 21 of 2007) names Ketan Parekh as the first respondent, while other entities named are — Navinchandra N Parekh, Panther Financial Capital, Luminant Investment Services, NH Parekh Financial Consultants, KNP. Securities, Triumph Securities, Oxford International, the partnership firms M/s Narbheram Harakchand, M/s KN Parekh, VN Parekh Securities, Saimangal Investrade, NH Securities, Nakshatra Software, Goldfish Computers, Chitrakut Computers, Manmandir Estate Developer, Panther Industrial Products, Triumph International, Panther Investrade, Classic Credit, Classic Shares & Stockbroking Services, Kirtikumar N Parekh and Kartik K Parekh. Many of these are also listed as having been investigated by the Serious Frauds Office, but the Custodian makes no reference to that investigation.
Instead, the Custodian says that in 2003 and again in 2006, Ketan Parekh was asked to file affidavits making a disclosure of his assets. In 2003 he disclosed negligible property and shares worth Rs 1.55 crore, yet in a submission to the Gujarat High Court, he admits to making payments of Rs 4.8 crore between June-December 2003.
Then, in October 2005, the Debt Recovery Tribunal in Mumbai had prevented Ketan Parekh and his company, Panther Fincap from creating any third party rights in respect of several properties. This was in a case filed by Bank of India, which did its own independent investigation to trace assets belonging to Ketan Parekh and his associate entities. The list includes multiple properties each at Lavelle Road, Bangalore (2350 sq ft), Junagad, New Bombay, and five large properties in upmarket locations of Mumbai including Nariman Point, Colaba, Marine Drive and Fort.
The Custodian too has alleged that all the properties listed above, in particular those held by Classic Credit, Classic Shares & Stockbroking Services have been purchased out of Ketan Parekh’s money and are hence his ‘benami properties’ and need to be investigated. It has sought the direction of the court to get to the bottom of Parekh’s repayment of Rs 72.2 crore to MMCB and to acquire all the immovable properties listed in the application. It has requested the Court to direct Ketan Parekh, the two Classic companies and the two Panther companies to submit their audited accounts from 2001-02 along with Income Tax returns to the Custodian for investigation.
Interestingly, while media reports from Gujarat have mentioned that Ketan Parekh has repaid over Rs 223 crore in connection with MCCB, it is not clear why the Custodian mentions a mere Rs 72.2 crore that he admits to repaying between 2002 to 2005. His own statement attached to the Custodian’s application says he has “endeavoured to repay outstanding amounts” to companies he was associated with or for which he stood guarantor. It is not clear if this actually led to any payments.
Interestingly, when this powerful bull market began in 2004, Ketan approached MCCB with the offer of a one time settlement, which the bank discussed and then rejected in 2004. It then filed for an application for cancelling his bail for his failure to pay Rs 380 crore within a three year period. This is less than half the money (Rs 880 crore) that was allegedly scammed out of MCCB by Parekh alone and mentioned in the JPC reports.
Meanwhile, Ketan continues to flaunt a luxurious lifestyle and the fact that he is dealing with different authorities and in multiple states has obfuscated details of what he owes and to whom. Why is it that neither the Custodian nor the Serious Frauds Office has sought a consolidated picture of Ketan’s activities, even though he has moved the Supreme Court to seek a re-entry into the capital market.