SFIO told to file case against SHCIL arm

Written by Neha Pal | New Delhi | Updated: Mar 7 2010, 06:14am hrs
The ministry of corporate affairs (MCA) has issued instructions to the Serious Fraud Investigation Office (SFIO) for filing a prosecution case against SHCIL Services Ltd (SSL), subsidiary of the countrys largest depository, Stock Holding Corporation of India Ltd (SHCIL). The ministry has found that the SSL had diluted its promoter shareholding and also diverted the funds of the company to third parties.

The SFIO had started investigating SSL in 2007 and later submitted the report regarding its affairs to the investigation department of the ministry of corporate affairs.

The ministry of corporate affairs has completed the examination of the report on SHCIL Services Ltd submitted by the SFIO and it is pointing out towards serious irregularities, an MCA official told FE, adding that the ministry had directed the SFIO to take action against SSL by filing a case in the lower court since it had been found guilty by the ministry.

According to the official, who spoke on the condition of anonymity, former CEO of SSL S Ramanathan and chairman R Jayaraman Iyer, along with some other directors, had diluted SHCILs shareholding by allotting shares to third parties in a fraudulent manner.

SHCIL has also alleged that Iyer and Ramanathan were responsbile for the dilution of its stake in SSL to as low as 24%.

The MCA official added SSL chairman Jayaraman Iyer had deliberately introduced its Singapore subsidiary Unitec Value Solutions as an intermediary in a contract that was bagged by SHCIL to facilitate the e-stamping system in India, which was floated after the Telgi stamp paper scam.

SHCIL, which is jointly promoted and owned by banks and financial institutions like IDBI Bank and ICICI Bank, wanted to enter the contract of procuring the software for the e-stamping system with Singapores Crimsonlogic Global Pte. However, Iyer involved its own subsidiary in the agreement, resulting in huge financial loss amounting to over Singapore $5 million for SHCIL. According to the official, the idea of forming Intec was to carry out illegal activities and transfer the funds of the SHCIL out of the country.