Sucheta Dalal :Operation rescue
Sucheta Dalal

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Operation rescue  

Jun 11, 2007

The Ministry of Company Affairs (MCA) has come to the rescue of Stock Holding Corporation of India (SHCIL), India’s largest depository company, at the intervention of the Finance Ministry. On May 14, an investigation was ordered into the affairs of SHCIL Services Ltd (SSL), once a wholly owned subsidiary of SSL. D K Gupta from the Registrar of Companies has been asked to investigate under Sec 247 of the Companies Act the true ownership of SSL as well as who the beneficial owner behind the scenes is. As reported earlier, R Jayaraman Iyer, chairman and managing director of SHCIL, and S Ramanathan, CEO of SSL, had “fraudulently” and “surreptitiously” diluted SHCIL’s shareholding in SSL from 100 per cent to 24 per cent and allotted the shares to three unknown individuals Gopika Vaishnav, Vivek Vaishnav of Ahmedabad and Padma Subramaniam of Hyderabad and E-Ventures Capital, a Singapore based entity. More importantly, the CLB passed orders on May 17 under Section 250 (2) of the Companies Act, freezing the shareholding and voting rights as they existed at the time SSL was set up as National Depository Company of India Ltd. Ironically, this badly worded order of MCA itself needs to be amended because it wrongly restores power to four employees who were the original signatories. Of these, one has retired, two are charge-sheeted and the last, Manoj Borker, has been actively involved in executing most of those agreements.

Under the radar

Many eyebrows have been raised at the Securities and Exchange Board of India’s (Sebi) silence over the shenanigans at SHCIL. While the regulator has gone after depositories, it has not even bothered to inspect the largest SHCIL, the largest Depository Participant (DP). In fact, it aided SSL by granting it registration to start a competing DP business, a brokerage operation and a portfolio advisory service in record time over the past year, without even checking SSL’s shareholding structure.

Tripura institute dropped

At SHCIL’s board meeting on June 2, which was held under police protection, the board decided to drop a proposal to set up a securities market training institution at Tripura, where it has obtained 3.5 acres of land free of cost from the state government. Why would SHCIL want to set up a securities training institute at all? And why set up one at Tripura or even the North-East, when it has hardly any investor population, nor is well connected to Mumbai by air? SHCIL’s new management found no justification for the move and decided to give up the land that was allotted as recently as on March 24 , 2007.

What’s new?

As anticipated by us, the board meeting on June 2 decided to remove R Jayaraman Iyer, A T Pannir Selvam (former Union Bank chairman) and T Naramsiha Rao (independent) as directors from SHCIL. These moves will be formalised at the Extraordinary General Meeting to be held on June 20. R K Bansal, the new man in charge at SHCIL, has initiated several changes that he hopes will restore staff morale. An HR consultant has been appointed to study staff issues and a long list of other consultants has been sacked. Unfortunately, this has done little to boost morale because of the enormous powers bestowed on Borker, who according to the SHCIL staff, remains Bansal’s key lieutenant.

-- Sucheta Dalal