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Pressure on Sebi to gather irrefutable Rathi evidence

Janaki Krishnan

The Securities and Exchange Board of India is under pressure to collect more evidence against former Bombay Stock Exchange president Anand Rathi failing which it would find itself unable to justify its move to impose a total ban on Rathi's trading firms.

Sources said that by April 15 -- the deadline set for an interim report to be submitted by Sebi to the finance ministry on the bear cartel -- there would have to be conclusive evidence that Rathi was indeed party to the hammering which led to the market dipping sharply on March 2, 2001.

A two-member division bench of the Bombay High Court is hearing the case at present.

In the event that no further evidence is available, Sebi might have to revoke its order and allow Rathi's firms to trade albeit with suitable restrictions -- such as certain scrips might be out of bounds, or some extra limits might be imposed on his trades, which were suggestions put forward by his lawyer.

Sebi officials agreed that the onus was on them to prove that with the information obtained Rathi did indeed manipulate the market to his own ends.

According to lawyers following the case, Sebi's order specifically talks about Rathi having made large-scale deals in the stockmarkets and it is here that his counsel will try to find a loophole, apart from his plea of natural justice.

Sebi has to make the allegations stick, otherwise it would face a setback at the outset of its investigations itself. Sebi chairman D R Mehta, refused to comment on the issue saying that the issue was sub-judice and a reply would be given in court. The next and probably final hearing is slated for April 10, Tuesday.

Sources, however, said that with so little time available to them and with so many entities to be investigated it was becoming tough for them to obtain hard evidence.

With the court case looming over them the securities watchdog has changed its stance to push the Rathi angle and work on the investigation from that end.

The "reasoned order" passed by Sebi against Rathi only hints at a possibility of manipulation saying that with the evidence and material available at this stage, "it cannot be ruled out that Rathi may have been involved in market manipulation."

The tapes and the hearings have led Sebi to the conclusion that Rathi did seek price sensitive information.

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