Sucheta Dalal :Technically correct
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal

 

MoneyLife
You are here: Home » Column Topics » Indian Express - Different Strokes » Technically correct
                       Previous           Next

Technically correct  

May 7, 2006



As always, the lawyer community has scented a major business opportunity in finding flaws and picking holes in the Securities and Exchange Board of India’s (Sebi) order in the ‘demat scam’. Sometimes, the pithy sound bites aimed at reassuring those indicted by Sebi are rather amusing. One lawyer told a TV channel that a Depository Participant (DP) had followed Know Your Customer (KYC) norms because the depository accounts that Sebi had dubbed as fictitious had a real person behind them. He suggested that it was irrelevant that the person happened to be a ‘slum dweller’ who couldn’t possibly be the real investor. Trust a lawyer to reduce KYC norms to a simple filling of forms in order to build a technical defence instead of encouraging them to approach the regulator and offer to clean up their operations and made amends. In the barrage of criticism that its order has attracted, one lawyer has defended the ‘tentative’ but ‘interim’ nature of its order and he happens to be the Finance Minister.

 

Lacking horse sense

 

Members of Mumbai’s snobby Royal Western India Turf Club (RWITC) are caught in the crossfire of poison mail exchanged between management committee members, primarily two well-known industrialists—the hot-air balloon world champion Vijaypat Singhania and Cyrus Poonawala, a well-known horse breeder who owns Indian Vaccines. The angry correspondence available with me indicates that this petty war of words was triggered by impending elections to the management committee of the club. An indicator of the nastiness contained in the letters is clear from references to ‘petty horse breeders’ and petulance over not being ‘honoured’ by the RWITC chairman and allegations about ‘ravings and rantings’ of these otherwise respected members of society. More amusingly, it appears that the club is not new to such tantrums. The documents being circulated include the photocopy of a handwritten missive by the hot-air industrialist asking the club’s chairman to ‘stuff’ a torn up letter into a specified part of his anatomy. This was in July 1998. When the club’s secretary sternly asked the industrialist if he had indeed written this letter, he resigned with an apology for ‘indecent expression’ of his feelings. Eight years later, club members are watching with a mix of curiosity and disgust to see where the battle for control is headed.

 

Ownership trail

 

This column had reported how a group of investors obtained a stay order from the Company Law Board (CLB) against the attempt by Nalwa Sons Investments (holding company of the Jindal Group) to allot shares worth over Rs 30 crore to 19 recently-recruited employees under a hastily hatched Employee Stock Purchase Plan (ESPS). We now learn that some curious activity had preceded the Jindal bid to enhance their voting power in the holding company (it is unclear why business houses list their holding companies and collect public money if they are reluctant to share benefits with minority shareholders). On October 10, 2005, a Sebi official wrote to Ricky Ishwar Dass alleging that he along with Persons Acting in Concert (PAC) had crossed the 15% threshold under takeover regulations that trigger off the need to make an open offer. The investor, along with his PAC, holds a 13% stake in Nalwa and has dragged it to the CLB. Sebi claimed that five other investors were also part of his group and had not reported their links as PAC with Ricky Ishwar Dass. The list included Copthall Mauritius, a FII sub-account that Sebi should remember. The investor not only denied the charge but in an unusual move has hit back at Sebi asking why these holdings do not figure in the quarterly reporting of shareholding pattern to exchanges. Where then did Sebi get these names and on what basis did it link them to one NRI investor? Ricky Ishwar Dass asks Sebi to ‘‘shed some light in this regard’’, but there is more to it than meets the eye.

 

Curious allottees

 

Meanwhile, Ricky Ishwar Dass has done his own sleuthing about the 19 new employees of Nalwa Sons who were to be get a Rs 30 crore bonanza guised at ESPS at just Rs 0.77 crore. In a letter to the regulator, he alleges that these employees are in fact ‘Persons Acting in Concert’ with the promoters. Providing specific names, designations and documents he proves that as many as five employees are directors of other Jindal group companies. With the scheme already stayed by the CLB, it is clear that the Jindals will soon find another way to enhance their voting capital while keeping minority shareholders out of the loop in their effort to formalise the separation of shareholding and control of group companies between the brothers. The battle is bound to turn more interesting.

 

http://www.indianexpress.com/iep/sunday/story/3930.html

 


-- Sucheta Dalal



 



Recent Comments