Sucheta Dalal

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August 25, 2010

Forgery is a serious, non-bailable, offence under India’s criminal laws, yet SEBI seems to protect its own official, who was responsible for sending out the ‘forged letter’ to Pyramid Saimira

It is a fortnight since our report, and nearly three months since the Securities & Exchange Board of India (SEBI) discovered that its own manager in the investigation department was responsible for sending out the ‘forged letter’ to Pyramid Saimira, the Chennai-based entertainment company, asking it to make an open offer at nearly four times its ruling market price.

Forgery is a serious, non-bailable, offence under India’s criminal laws, yet SEBI seems more keen to protect its official! 
SEBI’s investigation links its official to Nirmal Kotecha, former co-promoter of Pyramid Saimira, whose many dummy accounts to manipulate several shares, attempts to con the media by faxing a false news report and, now, bribing the regulator, have all been exposed. He is barred from the capital market, but Business World (26th July) lists him only after Rakesh & Rekha Jhunjhunwala in a list of investor billionaires. His wealth: Rs2,492 crore. If SEBI is vigorously trying to fix wrongdoers, nobody has told Mr Kotecha about it.

In contrast, Pyramid Saimira, once India’s largest theatre chain with global operations, is crippled and is facing several winding-up petitions. It has lost an appeal before the Securities Appellate Tribunal (SAT) and the Supreme Court. Both these were before we broke the news that the forged letter emanated from SEBI itself and the officer responsible had even instructed the courier agency to delay delivery so that Mr Kotecha could take full advantage of the price surge that occurred.

More importantly, SEBI has never bothered to cancel the trades based on the forged letter, allowing Mr Kotecha and gang to retain the profits! Should a regulator be allowed to enrich scamsters and put a company out of business?
On 26th July, the SAT ruled in favour of a company called India Capital Markets and set aside an ex-parte order of the regulator that has virtually stopped its business. There, too, SEBI adopted a dubious strategy of instituting a surreptitious second inquiry, when its own inquiry officer recommended a mere censure.

Yet another example of SEBI’s capricious inaction is in the case of MCX-SX, which, finally, dragged the regulator to court since it would neither grant nor reject its application for a licence to start equity trading. Instead, the company was subjected to a series of media leaks, mischievous distortions and insinuations to suggest that it is ineligible. MCX-SX has almost openly alleged that SEBI’s planned (in)action was aimed at favouring a rival exchange.  — Sucheta Dalal

-- Sucheta Dalal