Sucheta Dalal :What's the FM doing with Srikant Mantri? (18 November 2002)
Sucheta Dalal

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What's the FM doing with Srikant Mantri? (18 November 2002)  

When Finance Minister Jaswant Singh visited the Bombay Stock Exchange a couple of weeks ago, he was escorted by stockbroker Srikant Mantri. In fact, the broker seemed more the Finance Minister’s host than the BSE office bearers and was credited with arranging Singh’s maiden visit to the BSE.

Who is Mantri? He is a partner in several brokerage and investment firms with former BSE vice president, Rajendra Banthia. And where is Banthia? He is in the custody of the Gujarat police in connection with a Rs 35 crore deal to sell his 40 per cent stake in Nedungadi Bank to a group of people who run the Anand-based Charotar Nagrik Sahakari Bank. Incidentally, Nedungadi Bank is understood to have filed a Rs 20 crore arbitration claim against Mantri with the BSE for money lost in speculative deals not sanctioned by the bank. That is why his presence with the FM raised so many eyebrows.

But Banthia’s past is much more colourful. He hit the headlines in 1992 as a close crony of the late scamster Harshad Mehta and was then known as the Bombay Dyeing bull for ramping up those shares. During the investigations, the CBI was set to file charges against him, along with Union Minister B. Shankaranand in connection with Oil Industry Development Board’s (OIDB) investment in portfolio management schemes. Since the case against Shankaranand was not pursued (CBI documents available with me show that they were all set to file charges), Banthia got away too.

He went on to become the treasurer of the BSE and later its vice president and constantly flaunted his connection with various BJP leaders. At the BSE, he suddenly turned crusader and waged a long war with Reliance Industries over Reliance’s share switching and duplicate shares for his own benefit. At the same time he was busy accumulating Nedungadi Bank shares, which were distributed among family and friends of the B. Ratnakar, the controversial Canara Bank chairman who passed away in February 1992. Banthia began to dictate bank operations and inducted two BSE directors—the late M.G. Damani and Suresh Vaidya —on the board and ensured that Nedungadi became a clearing bank of the BSE. Among his other escapades was a massive bear hammering of stocks across several stock exchanges in 1994, but that investigation too was quietly buried by Sebi after superseding the Pune Stock Exchange Board.

In 1998, he went on to abet Harshad Mehta in ramping the BPL, Videocon and Sterlite scrips and then to engineer the most shameful cover-up of a massive broker default on the exchange right under Sebi’s eyes. It was done by opening up the trading system at midnight to allow certain entities to insert fake trades at prices vastly different from the ruling market price.

When Ketan Parekh rose to stardom as the bull of 2000, Banthia became active again. He joined the Nedungadi Bank board in December 2000 and directed its lending and ‘persuaded’ it to permit him to enter into arbitrage trades on behalf of the bank, promising large returns. It was later discovered that three firms belonging to Banthia and Mantri conducted most of the arbitrage deals and had contracted trades worth Rs 1,352 crore, causing a loss of Rs 95 crore to the Calicut-based bank.

The JPC draft report indicates that it is set to recommend criminal proceedings against bank officials and also seek an investigation into the role of the RBI nominee who, it says ‘failed to discharge its regulatory function and remained a silent spectator’. Interestingly, the RBI had Banthia removed from the board of directors only last April.

Last week RBI placed Nedungadi Bank under a moratorium and in double quick time notified draft plan to merge it with PNB. Banking circles believe that RBI is in a hurry to bury Nedungadi Bank scandal in PNB before JPC finalises its report. Unfortunately for RBI, Banthia has got himself into trouble again with the management of another bank.

Since January 2001, Banthia has been making frantic attempts to get rid of his holding in Nedungadi Bank by selling it to the management of Charotar Nagrik Sahakari Bank. Banthia is alleged to have struck a Rs 35 crore deal at Rs 150 per share, which may or may not have been a ready-forward arrangement. However, the Nedungadi share has since slumped to Rs 15, and the buyers are allegedly demanding that Banthia make up the difference. Incidentally some persons connected with Charotar bank have writing repeatedly to the RBI to investigate Banthia’s deal with Chiman Sathi and Himanshu Desai of the Gujarat Bank. They have also warned of rampant diversion of funds that could cause the collapse of Charotar Bank too. RBI’s assistant general manager Reena Banerjee has acknowledged these messages on August 5 and said that the bank is investigating the complaints.

Nevertheless, but for the police complaint filed by those who dealt with Banthia there would have been no investigation. The RBI allowed him to simply resign from Nedungadi Bank in April 2001 and has not announced any investigation. Similarly, Sebi did not proceeded against the broker or his partner Srikant Mantri either in 1994 for share price manipulation, or for manipulating BPL, Videocon and Sterlite shares in 1998 or even for their role in covering up the BSE crisis that followed.

Such is his clout that even the Gujarat police allowed Banthia to return to Mumbai for a couple of days during Diwali before taking him back in custody again.

Capital market circles say that Banthia-Mantri continue to be protected by politicians in the ruling party; which is why he was allowed to destroy the well run south Indian bank over ten long years without any intervention by the RBI. The merger with PNB will now protect depositors and ensure that the scandal is quickly buried before angry stakeholders demand a detailed inquiry into RBI’s inaction. Clearly, former Finance Minister P. Chidambaram is entirely right when he said (to the JPC) that RBI should only be in charge of regulation bank and a separate body should handle supervision.

-- Sucheta Dalal