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Monday, Mar 18, 2002

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Biyani alleges nexus between IndusInd Bank, SHCIL

Nilanjan Dey

KOLKATA, March 17

STOCKBROKER, Mr H.C. Biyani, has alleged a tacit understanding between IndusInd Bank and Stock Holding Corporation of India in the case before the Debt Recovery Tribunal (DRT) in Kolkata, marking the beginning of what could be a new chapter in the on-going legal tussle.

The broker seemed to have argued his case on two counts, maintained sources familiar with developments at DRT. On the one hand, it was alleged that the shares in question had been given to SHCIL, the process of realisation of which had not been fully completed. On the other hand, Mr Biyani indicated that his rights were passed over to the bank and that the transfer was in order.

It was also argued that both SHCIL and IndusInd had conducted themselves in a manner that underlined a certain degree of understanding between them.

The broker and SHCIL were the two respondents in the case in which IndusInd Bank (one of the clearing bankers of Calcutta Stock Exchange) was the petitioner. The moot issue related to `cash-on-payout', a facility run by SHCIL to provide liquidity to its clients.

The latest contention has gone against the grain of the argument provided by the two other parties, that is, the corporation and the bank, sources said. The formerhad maintained that both Mr Biyani and IndusInd Bank were ``at all material times fully aware of the scheme''.

The broker, it may be recalled, in the first week of March 2001, approached SHCIL for the facility in respect of 7.2 lakh shares of DSQ Software. The request for sales was received and the sale transaction was put through CSE at a price of Rs 340 per share through Biyani Securities Pvt Ltd in the rolling settlement No. 2001519. The aggregate proceeds stood at over Rs 24 crore.

According to sources, it would be worthwhile to note the features of the cash-on-payout scheme, especially so in the context of CSE's pay-in and pay-out regulations.

The chief characteristics are:

* A client with a demat account with SHCIL and planning to sell his shares will need to submit a request, giving details of the free shares in the account. He is free to choose any of SHCIL's empanelled brokers.

* Upon receipt of the client's request, SHCIL has to check the authenticity of his signature, the availability of securities in the account and listing of the scrips on the stock exchanges concerned.

* Instruction is then forwarded to the broker (chosen from the panel) for executing on the trading system or floor of the exchange. After the execution, the broker has to confirm to it by way of a contract note in the name of the client.

* The client is issued a post-dated cheque, which is dated one day after the date of payout for the respective settlement in order to ensure that the client receives payment immediately as soon as SHCIL receives payment from the stock exchange. Such post-dated cheque is issued against the expected sales proceeds to be received from the clearing house of the stock exchange.

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