Anugrah Scam: Bombay High Court Asks NSE To Release Some Money to Investors before Diwali
Moneylife Digital Team 03 November 2020
The Bombay High Court on Tuesday directed National Stock Exchange (NSE) to release some money to thousands of investor-clients of Anugrah Stock & Broking Pvt Ltd. This may be challenged by the NSE at the next hearing of the case scheduled for 5th October. 
 
At the hearing, advocate Yusuf Iqbal Yusuf, representing hundreds of investors of the failed brokerage firm, Anugrah Stock & Broking Pvt Ltd, had demanded that the NSE should be asked to release Rs25 lakh per investor as immediate relief from the investor protection fund (IPF) since the matter has arisen due to default of a broker. Under the current rules, Rs25 lakh is the maximum that can be paid from the IPF that too only for transactions on the Exchange. So it remains to be seen how this direction will apply to all of Anugrah’s investors.
 
Senior counsel Rafique Dada, representing NSE, told the bench of justice SS Shinde and justice MS Karnik that it will file reply tomorrow. After hearing this, both Dr Birendra Saraf and advocate Yusuf agreed that the matter will be further argued after NSE’s response. 
 
During the hearing, advocate Yusuf mentioned to the Court about a letter had been addressed by petitioners and other investors sharing their plight and requested the bench to take some action. He argued that the investors of Anugrah are a victim of the system and ought to be given some relief.  
 
He further told the Court that, despite the public prosecutor’s assurance about submitting a status report on the investigation, it has not been submitted to the Court. "There has been no noticeable progress in the investigation, all the accused are still moving around free, no passports have been seized and nothing substantial has happened," advocate Yusuf asserted. 
 
When the public prosecutor said that the report was already submitted, the bench noted that it was not sufficiently detailed. The HC then asked the public prosecutor to provide a detailed report consisting of a break up of what has the EOW (economic offences wing) and enforcement directorate (ED) have done on each day. 
 
The petitions (CRI WPST/2876/2020 and CRI WPST/2878/2020) were listed before the bench of justice SS Shinde and justice MS Karnik of the Bombay HC. 
 
Investors were represented by Dr Saraf of Parinam Law Associates. In his submission, Dr Saraf contended that SEBI (Securities and Exchange Board of India) has a mechanical setting to notice any fraud and non-compliance of its rules and regulations, however, no action has been taken by the market regulator in Anugrah matter. He further stated that it is essential to know when SEBI found out about the irregularities and what is the next step it proposes to take in the matter. 
 
Last month, investor-clients of Anugrah demanded the setting up of a multi-agency special investigation team so that the assets are consolidated and auctioned efficiently. The petition has made the NSE, the NSE Clearing Corporation and Edelweiss Custodial Services as respondents. 
 
For the high-profile case, several hundred investors have come together to try and recover their money. The amount involved and believed to be lost exceeds Rs1,300 crore. Moneylife has covered the details of this case extensively. Our articles can be read here: https://www.moneylife.in/tags/anugrah.html
 
During the previous hearing on 29 October 2020, advocate Yusuf pushed for appointment of a committee as has been done by the high courts and Supreme Court in several other cases, and a court monitored investigation. He also pushed for release of funds from IPF of the NSE and for releasing Rs460.32 crores deposited by Edelweiss as directed by NSE Clearing to investors of Anugrah.
 
The counsel for investors of Anugrah also ran through the important documents such as the contract notes executed at 00:00 hours and the margin statement issued by Anugrah and the corresponding CDSL (Central Depository Services Ltd) statement which showed close to NIL balance. He also went through all the import SEBI circulars, which require clearing members and brokers to have a pre-authorisation from the investor or client before conducting any trade and also that an investors' shares cannot be used towards the trading obligations of another investor. 
 
Adv Yusuf informed the bench of justice SS Shinde and justice MS Karnik that directors of Teji Mandi had absconded to the US, where they are enjoying their ill-gotten wealth and there have been no attempts to bring them back. He also pointed out that even after two months, the EOW of Mumbai police has not made any arrest. Furthermore, he pointed out that no requisitions have been made to the ED about such a matter of grave public importance.  
 
Sharing a grievance of one investor, Jaidev, the counsel informed the Court how the investor sold his house to invest Rs85 lakh with Anugrah just three months before the scam took place. There is not a single trade executed on the account of Mr Jaidev and his entire investment is siphoned off by Anugrah and Teji Mandi, advocate Yusuf told the bench.
 
The counsel for investors further insisted that the order passed by NSE Clearing should be released since it was not a confidential document. However, this demand was vehemently opposed by senior counsel Virag Tulzapurkar stating that NSE Clearing was in the process of challenging the same. However, senior counsel Venkatesh Dhond, representing NSE, stated that they were ready to produce the order if the Court directs. 
 
The bulk of investors in Anugrah have come through an associate firm, called Teji Mandi Analytics which was apparently running a derivatives portfolio of over Rs1,000 crore like a Ponzi scheme with assured monthly returns. 
 
On 4th September, NSE had withdrawn all trading rights of crisis-hit Anugrah Stock and Broking Pvt Ltd. Earlier on 1st September, the stock exchange had withdrawn Anugrah's trading rights in future & options (F&O), currency derivatives and commodity derivatives segment.
 
In a circular, NSE says, "On account of the regulatory concerns observed, the relevant authority of Exchange has decided to withdraw the trading rights of the member in all segments of the Exchange with immediate effect. Accordingly, in addition to the aforementioned segments, Anugrah Stock & Broking Pvt Ltd shall also be disabled in all other segments of the Exchange from 4 September 2020 before market hours."
 
Anugrah Stock and Broking, which won a reprieve from Securities Appellate Tribunal (SAT) on 17th August, was unable to deposit Rs165 crore with the NSE by 1st September. The Exchange then had withdrawn its trading rights and also seized its computers and books, the brokerage firm has told investors thronging to its office. 
 
Last month, the EOW of Mumbai police has registered a case of cheating against the troubled stock-broking house, Anugrah Stock & Broking Pvt Ltd, for duping an investor of Rs8 crore. As Moneylife has reported in the past, the extent of investor losses in Anugrah could be as high as Rs1,000 crore and investigators have confirmed that more complaints having been subsequently coming to the EOW.
 
The case was registered by Ashutosh Shah at Juhu police station against the firm’s director Paresh Kariya, and Kalap Shah and Anil Gandhi of Teji Mandi Analytics and others, under criminal breach of trust and criminal conspiracy. However, no arrests have been made yet.
 
Comments
mailved
10 months ago
There are a lot of greedy investors who have gone to anugraha ,, the sebi has been sleeping too ,. fraud and loss of capital is penalty to greedy investors , who will penalize SEBI and agencies which sleep and dont even monitor such unscrupulous operators .. Why are the promoters and management not behind bars ?
radenj
Replied to mailved comment 9 months ago
Bullshit. Many Investors are older people who have invested their life savings with these brokers because they trusted them not because they were greedy . They promise 15% return. V few people would be able to resist the temptation
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