Share price manipulation under investigation

DCA seeks details from Sebi on inter-corporate loans by 98 firms

Rashmi Das

New Delhi, Nov 20: The department of company affairs (DCA) has approached the Securities and Exchange Board of India (Sebi) to get complete details of the inter-corporate loans taken and given by 98 companies which are being investigated by the department and the stock market watchdog for suspected violations of the provisions of the Companies Act and share price manipulation.

Senior DCA officials told The Financial Express that the department had already received inspection reports on six companies, including Himachal Futuristic Communications, Shonkh Technologies and First Global.

“The initial investigations have uncovered minor offences like late filing of returns and absence of director’s responsibility statement. We have now written to the Sebi for more details on the inter-corporate loans to see if they were misused,” a senior DCA official said.

According to sources, the mandate of DCA’s inspection was primarily the violation of the provision of the Companies Act while establishing market manipulation was the task of Sebi. “The only offence under the Companies Act which is cognisable in establishing market manipulation under sections 370-372 of the Act pertain to inter-corporate loans and investments,” sources added.

Since the Sebi’s interim report has already dug into details about the role of inter-corporate loans and investments, the department has decided to approach the market regulator for more information. In fact, the Sebi’s interim report categorically states that section 77 of the Companies Act has been violated by HFCL and Zee Telefilms. Section 77 of the Act pertains to share buyback.

The report goes on to add that the Ketan Parekh entities have received massive amount of credit from corporates like HFCL, Zee Telefilm, Global Tele-systems and DSQ Software for building up huge positions, taking deliveries or maintaining the positions aimed at creating artificial increase or for sustaining the prices of the K-10 scrips.

The market watchdog is investigating a total of 98 broking entities and group companies for downward market movements in a post-Budget market crash.

The prominent broking entities which are being investigated by both the Sebi and DCA include First Global, and the entities belonging to Nirmal Bang, RS Damani, Shailesh Shah, Ajay Keyan, Morgan Stanley and Credit Suisse First Boston.

The corporates which are being investigated include DSQ Software, Global Tele-Systems, HFCL, Pentamedia Graphics, Silverline Technologies, Zee Telefilms, Ranbaxy Labs, Shonkh Technologies, Adani Exports and Lupin Labs.