Financial Daily from THE HINDU group of publications
Friday, Feb 03, 2006
Financial Daily from THE HINDU group of publications Friday, Feb 03, 2006 |
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Regulatory Bodies & Rulings Markets - Economic Offences SEBI cracks whip on Bellary Steel Our Bureau
Mumbai , Feb. 2 SEBI, in an interim order issued on Thursday, has directed Bellary Steel & Alloys Ltd and its directors not to issue any further shares or alter its share capital till further directions. The company and its directors have been prohibited from accessing the capital market or dealing in securities, directly or indirectly. The SEBI order follows a complaint filed by Karnataka State Financial Corporation (KSFC) against Bellary Steel for its failure to redeem Rs 1.5 crore non-convertible debentures that it had subscribed in 1996. The debentures were secured by 21,50,000 Bellary Steel shares held by S N Finance Ltd (15,00,000 shares), Kodiganti Investments Ltd (5,50,000 shares) and Mrs K. Meenakshi (1,00,000 shares). KSFC approached Karvy Computershare Pvt Ltd, the share transfer agent, for having the 21.5 lakh shares transferred, following its inability to collect dues worth Rs 5.64 crore from Bellary Steel. According to KSFC's complaint, Karvy transferred the shares in favour of Panchloha Hotels Pvt Ltd in March and October 2005 and dematerialised them in November even when the original share certificates were in their possession. KSFC charged Karvy with having fraudulently transferred the shares with a malafide intention to cheat the corporation. Karvy, when asked to clarify by SEBI, said it was unaware of the Bellary Steel shares being pledged in favour of KSFC. Also, the share certificates and other transfer documents received by it were in order, Karvy said. According to SEBI, it has become clear that two sets of physical share certificates of Bellary Steel with identical details existed at some point of time. While one set of certificates was pledged with KSFC, the other set was lodged for transfer in the name of Panchloha Hotel. Thus, it was clear that one set was fake, the order said. On scrutiny, it was found that the authorised signatory of S N Finance was Mr S. Madhav who is the Chairman and Managing Director of Bellary Steel and also a Director of Panchloha Hotel. Since the authorised signatories for the transferor and transferee are the same in the case of the shares held by S N Finance, SEBI has, prima facie, held that there was connivance of Bellary Steel, S N Finance and Panchloha Hotel in the issuance of fake share certificates and in the subsequent transfer/ dematerialisation with a malafide intention to cheat KSFC. This was tantamount to fraud against investors of the securities market and also KSFC, according to SEBI. In the interim order, SEBI has also prohibited four other entities — S N Finance Ltd, Kodiganti Investments Ltd, Mrs K. Meenakshi and Panchloha Hotel Pvt Ltd — from accessing the capital market or dealing in securities. Moreover, KSFC has been directed to retain all the original documents pertaining to the transaction, including share and debenture certificates in its possession. The market regulator has directed Karvy Investments to safe-keep all documents pertaining to the transaction, including the original received by it from Panchloha Hotel for dematerialisation. NSDL and CDSL too have been directed not to effect any transfer of shares from/to the beneficial account of Panchloha Hotel till further orders.
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