The Hindu Business Line : Memories of 2001 KP scam

THE market regulator's action vis-a-vis DSQ Software and the company's response in moving a higher legal forum brings back haunting memories of the securities market scam of 2001, which dealt a body blow to the CSE, UTI, a couple of private banks including the now defunct Global Trust Bank and several cooperative banks.

Some 13.30 lakh shares of DSQ Software, which later were found to be "dud shares" by the SEBI and the Joint Parliamentary Committee, was at the core of the first payment default at the CSE detected on March 8, 2001.

UTI bought the DSQ Software shares, which was placed by one of the 10 defaulters, Mr Harish Chandra Biyani, to CSE to clear part of his payment obligation, at Rs 25.13 crore.

This bail-out proved lethal for UTI. The JPC noted in its report: "The UTI Chairman was used or persuaded to exercise his discretion (to) bail out the pay-in by making massive purchases of dud shares owned by the defaulting brokers, inflicting serious losses on small investors, who looked upon UTI as a government-regulated mutual fund." The JPC report further had noted that DSQ was one of the half a dozen corporate groups, which had given funds to Mr Ketan Parkeh and his entities to rig the stock market. The JPC report tentatively estimated - on the basis of SEBI preliminary investigation - that the Ketan Parekh entities owed "around Rs 1,300 crore to these corporates for the value of shares taken from them".

The September 9 order of SEBI indicates that the market regulator finally has completed investigation into affairs of DSQ group and its role in the securities scam. The CSE had already initiated legal proceedings against DSQ Software and its MD, Mr Dinesh Dalmia. The Calcutta Police is still pursuing a criminal investigation against them and has declared Mr Dalmia as an "absconder".