Sucheta Dalal :Jermyn order
Sucheta Dalal

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Jermyn order  

Sep 10, 2006

Now that the Securities Appellate Tribunal has upheld the regulator's view that Jermyn Capital is 'not a fit and proper' person in the context of India's capital market, it raises questions about the inaction by other regulators and investigation agencies. This column had first pointed out that a Google search for Dharmesh Doshi immediately throws up the Central Bureau of Investigation's (CBI) red corner notice against the former managing director of a Ketan Parekh-linked entity. This, in fact, triggered further action by Sebi. We also pointed out that the notice is shockingly incomplete and shows a lack of interest in pursuing the case. The SAT order is extremely important in this context. It officially confirms several facts reported by us - that Dharmesh Doshi's Indian passport has been revoked. That Sebi's suspicion that "Andrews (the majority owner of Jermyn capital, (Dharmesh) Doshi and Ketan Parekh are hand in glove with each other and for this reason none of them enjoys a good reputation in the context of the Indian securities market" is valid. And that it is a conclusion that "any prudent person" would have drawn in judging the "fit and proper" criteria.


CBI inaction


The irony is that although Dharmesh Doshi is effectively barred from the market, neither judicial orders nor court cases have stopped Ketan Parekh from amassing wealth during this bull run. On 14 July 2006 the SAT had upheld Sebi's order against him saying, "If Ketan Parekh and his entities are allowed to continue with their operations, they would pose a serious threat to the integrity of the securities market and endanger the interests of the investors." Yet, several courts as well as the elite CBI have stood by and watched him amass money in the present bull run and repay Rs 254 crore (through accelerated repayments) that he bilked out of Madhavpura Mercantile Cooperative Bank of Gujarat to stay out on bail and keep trading. This has happened while the commodity regulator and bourses were helplessly bleating about Ketan Parekh being 'active' in the commodities market. Importantly, the Finance Minister's Income Tax sleuths are too busy pouring over Annual Information Returns to go after law-abiding tax-payers to notice Rs 254 crore that Parekh earned and paid. And the CBI is busy going after bit players in Ketan's saga to pursue the central figure himself. These are officials of banks and mutual funds, who do not have the clout of a Ketan Parekh and Dharmesh Doshi to encourage the CBI to move at snail's pace with their investigation. Sebi, which has barred Ketan Parekh from the capital market for 14 years, has also not stirred itself to find out if his newly earned wealth is in contravention of its orders.


Ketan's new victims


While Ketan Parekh's is busy amassing wealth, the CBI is clogging courts with relatively meaningless cases. Six years later, it has charged six SBI Mutual Fund (SBIMF) employees of conniving with Ketan Parekh to buy the shares of Padmini Technologies at inflated prices. Most of them will probably have their careers irrevocably destroyed, because our extraordinary justice system will ensure that there is no quick trial and verdict. While some top officials of SBIMF were indeed known to be Parekh's buddies, it is unclear if others were at all culpable. One mutual fund manager, Sandeep Sabarwal, now 34, has an excellent and proven track record of earning high returns for his investors. In another action related to the scamster's deadly influence, UTI has sacked three officials in connection with the high-profile Cyberspace Infosys scam. Here too, the promoters of Cyberspace Infosys, who pumped his company's shares and dumped them on UTI, have been left untouched after high drama that had surrounded their disappearance and arrest six years ago. There is no further action against the former UTI Chairman P Subramanyam, who presided over the disastrous downturn in UTI that led to one death and several broken lives. It is said that all people are equal before the majesty of the law, but that happens only after the investigating agencies decide who will be dragged to court and put on trial.


Ketan's other companies


While Padmini Polymers is making news because of the CBI case, what about Shonkh Technologies? This company's shares too were ramped up by Ketan Parekh along with Padmini Polymers. In fact, it was more closely identified with the scamster, who once held over 20% of its equity. With an 'International' tag attached to its name, Shonkh has turned into a major proponent of e-governance. The market grapevine now has it that the company is planning on selling its so-called 'smart card' business. The likely buyer is also a front company floated by another notorious market operator. It has also remained totally unaffected by its Ketan Parekh connection and ironically enough, bags manages to get government contracts for e-governance and smart card operations!


-- Sucheta Dalal