Search the Internet          Tips  Sites: Finance, Investment

Harshad used Damayanti as front to rig prices: Sebi

K Giriprakash

The Sebi confidential report on market manipulations has revealed that Harshad Mehta used the Damayanti Group of companies as a front for manipulating the stock prices of BPL, Videocon and Sterlite.

"Investigations revealed that certain brokers of the BSE and NSE who were dealing in the BPL, Videocon and Sterlite scrips on behalf of the Damayanti Group as a front for Mehta, were in receipt of funds from these companies/related entities," the report said.

Sebi is expected to issue show cause notices to the directors of all three companies and also refer the matter to the department of company affairs.

The BPL group, the report said, routed its deals through Digital Leasing & Finance to "manipulate" share prices of the group companies.

"Investigations reveal that Digital was made a focal point by Damayanti Group entities to transfer funds to various entities, brokers etc on their behalf," the report said. The Damayanti group entities listed were Rijuta Finvest Pvt Ltd, Ikshu Finvest Pvt Ltd, Damayanti Finvest Pvt Ltd, New Prabhav Finvest Pvt Ltd and Stable Construction Pvt Ltd. The report said BPL failed to furnish any explanations on funds provided by them to Digital.

"BPL could not give any plausible explanation for the funds provided by them to Digital. The explanations provided by R Balathandayutham and TC Chauhan (of the BPL group) were replete with inconsistencies and factual inaccuracies, which only show that they are trying to cover up actual facts and the reasons behind the transfer of funds from BPL to Damayanti group through Digital Leasing & Finance Ltd," the report said.

BPL Ltd has already in a press statement denied any association with Harshad Mehta or his companies. "BPL categorically denies any association with Harshad Mehta or his companies. BPL Ltd, its promoters and directors have not at any time sold their shares or are in any way involved in market manipulation," the press statement said.

It said BPL would contest the Sebi order. When contacted, a BPL spokesperson said as BPL was yet to get a copy of the order, it will not be able to comment on the findings of the report.

The confidential report has charged the promoters of the BPL group of aiding, abetting and assisting Mehta in market manipulations. "This shows (investigations) that promoters and the company first aided, abetted and assisted Harshad Mehta to build up large positions in the shares of BPL, which facilitated market manipulation and later provided an exit route when the artificial increase in price was not sustained and some of the brokers dealing for Damayanti Group got trapped," the report said.

The report also pointed out that there was no logical reason forthcoming from the group as to why the BPL Group should buy shares only of BPL during the said time. "Besides, there is no plausible explanation as to why the BPL Group should buy shares only of BPL at Rs 235 in June, 1998 when the market was falling and there were only one side sellers and no genuine buyers in this scrip," the report said.

The report said evidence gathered by the regulator clearly shows that the promoters of the BPL Group were involved in manipulating the prices of the scrips and creating a false market.

"The presence of fabricated contract notes in favour of BPL Sanyo Finance, details of transfer of funds from BPL Group to Digital Leasing & Finance Ltd, records of telephone bills linking Harshad Mehta with T C Chauhan of BPL etc in the office premises of Damayanti Group entities which were front for Mehta, coupled with admissions of Digital Leasing & Finance Ltd and corroboration through other statements show that promoters of BPL were involved in creating a false market and manipulating the prices of the scrips, in connivance with Harshad Mehta," the report said.

The report said investigations also reveal that BPL Ltd and its associate concerns, BPL Sanyo Utilities and Appliances Ltd placed Rs 470 million at the disposal of SSKI, a member of the BSE, for purchase of around Rs 2 million shares of BPL through a web of entities.

"Investigations into ultimate use of this fund, brings out clearly that transfer of funds from BPL group was to provide accommodation to those select brokers who were dealing on account of Damayanti Group. A camouflage of investment in preference shares by different entities in an associate company of SSKI was created to hide the real nature of transactions," the report said.

Powered by

YOU MAY ALSO WANT TO READ:
The Capital Markets Crisis
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report