In a 15-year-old matter, Sebi today barred Tata Finance Ltd's former managing director D S Pendse and three other entities from the capital market for manipulations at the time of the firm's right issue in 2001.
In a 15-year-old matter, Sebi today barred Tata Finance Ltd’s former managing director D S Pendse and three other entities from the capital market for manipulations at the time of the firm’s right issue in 2001.
The watchdog has imposed a three-year ban on Pendse, A L Shilotri — former CEO of the company’s subsidiary Niskalp Investment and Trading. Besides, the debarment would be in place for two firms — Pat Financial Consultants and Superior Financial Consultancy Services.
Pendse and Shilotri have also been restrained from holding any key managerial position in any listed company for three years.
In October 2002, Tata Finance had filed a complaint with Sebi following which the latter carried out an investigation into the company’s rights issue.
Tata Finance had come out with the rights in March 2001.
The investigation found that false disclosures were made in the letter of offer for the rights issue about the financials of Niskalp.
As per Sebi, Tata Finance had informed its shareholders that Niskalp had incurred an actual loss Rs 14.57 crore as on September 30, 2000 and a provisional loss of Rs 79.37 crore for the year ended March 31, 2001. But in the letter of offer, it was mentioned that there was a profit of Rs 11.46 crore for the six month period ended September 30, 2000.
In its 43-page order, Sebi said as the CEO of Niskalp, Shilotri was required to be aware of the financial transactions of the company and “had not raised any voice or concern when the losses were converted to profits in the hands of Niskalp”.
Shilotri had submitted that investors were given options to withdraw their monies from the rights issue not once but twice and that no investor has ever lost any money due to the alleged anomalies in the letter of offer.
“This submission is of no relevance as it has already been proved that there were mis-statements in the rights issue letter of offer,” it noted.
According to Sebi, Pat and Superior by issuing letters regarding fictitious transactions aided and abetted Niskalp in making backdated/fictitious transactions in shares of GECS.
The probe prima facie found backdating of the transactions of sale of GTL and GECS shares in September 2000 by Niskalp and purchase by Tata Finance. Then, there was reversal of such trades in December 2000 which were at the behest of Pendse, Shilotri and other entities.
Such fictitious/ backdated transactions in the scrip of GTL and GECS had converted loss into a profit in the books of Niskalp, Sebi said.
“Further, such profit in the hands of Niskalp was disclosed in the offer document for the purposes of the rights issue of Tata Finance Ltd,” it added.
At the time of the issue, Pendse was managing director of Tata Finance and also a director of Niskalp. He had also signed the letter of offer pertaining to the rights issue.
“Therefore, he was fully in charge of the rights issue of Tata Finance during the relevant period and his involvement in the misleading statements cannot be wished away.
“Considering the admitted mis-statement made in the letter of offer pertaining to the rights issue regarding the accounts of Niskalp, it can be concluded that the affairs of the companies were mismanaged to commit fraud on the investors,” the order said.