The Hindu Business Line : Ministry gets CLB nod for probe into Ketan Parekh cos

THE legal noose seems to be tightening around the Ketan Parekh group (KPG) of companies. Armed with the Company Law Board (CLB) order the Central Government can now investigate and bring out the nexus amongst various players of stock market including the lending banks and corporates that had manipulated the share market and caused losses to the investors.

Considering an application moved by the Ministry of Company Affairs for widening its scope of investigation into 16 KPG entities, the CLB Principal Bench, comprising Member, Mr K.C. Ganjwal, noted, "in the larger public interest and for going into the root cause of the acts complained of, the investigation is required to be undertaken in these case."

The Bench observed, "The whole basis of the petition seems to be arising out of the Joint Parliamentary Committee (JPC) report and the investigations conducted by the Securities and Exchange Board of India (SEBI)."

The counsel for the Central Government, Mr Sanjay Agarwal, submitted that inspection under 209A of the Companies Act - inspection of books of accounts - has a limited scope and cannot bring out the nexus amongst various players of stock market. In the bargain, the depositors who largely comprise of middle and lower middle class suffer the losses.

The Central Government intends to investigate the nexus of various players, which can only be done through proper investigation under Section 237 (b)(i) of the Act so that future remedial action can be taken not to repeat such scams, the counsel had submitted.

As per the Act the Central Government may investigate company's affairs in other cases if in the opinion of CLB there are circumstances suggesting that the business of the company is being conducted with intend to defraud its creditors.

In the instant case KPG companies not only used funds received from six corporate entities to the tune of Rs 2,218 crore but also heated up and played with market sentiments, the Bench noted.

Further, the KP group had drawn more than Rs 800 crore from Madhavpura Mercantile Cooperative Bank and also from City Cooperative Bank by not paying corporate banks their due funds.

This non-payment by KPG entities resulted into the loss of funds of the depositors of these cooperative banks who are in large numbers. Similarly, Global Trust Bank was also hit on account of non-recovery of funds, which was advanced by them to these corporates as well as directly to KPG entities.

The 16 Parekh companies include Panther Industries Products & others, Classic Share and Stock Broking Ltd & Others, Gold Fish Computer Pvt. Ltd & Others, Chitrakut Computer P Ltd & others and KNP Securities P Ltd & Others.

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