Tribunal says duty-bound to bring ‘serious anomalies’ to SEBI’s notice, ensure such lapses don’t recur
The Securities Appellate Tribunal (SAT) has refused to revoke its order in which it had sharply criticised the Securities and Exchange Board of India (SEBI) for letting off Tata Finance Ltd. (TFL) despite finding serious violations in a 2001 preference share issue.
“We will be failing in our duty if these serious anomalies are not brought to the notice of SEBI with a view to ensure that such lapses do not occur again in the future,” said the tribunal.
SEBI had filed an appeal with SAT asking that the tribunal expunge the adverse remarks made in an order issued by it on May 30.
The tribunal had pulled up the capital markets regulator for not taking any action against Tata Finance despite senior SEBI officials finding serious violations in a preference shares issue that also led to the then managing director Dilip Pendse being barred from the capital markets for three years.
“SEBI has indulged in shielding the main culprits... which is detrimental to the interests of securities market,” SAT had said in the order issued on May 30.
While hearing the SEBI appeal, the tribunal said that it would, however, replace the words “for the reasons best known to SEBI” with the words “for extraneous reasons” in the earlier order.
‘No reason to delete’
“We see no reason to delete the observation made in our order that in the present case SEBI has not acted impartially, because once it was found that TFL has made false declaration in its letter of offer, then, unless there were compelling reasons to the contrary, SEBI was bound and liable to take action against TFL,” SAT ruled.
The case dates back to 2001 when SEBI received a complaint alleging that TFL had made false disclosures in the letter of offer for the rights issue of 9% cumulative convertible preference shares (CCPS). According to the complaint, TFL allegedly did not disclose in its document the losses incurred by its subsidiary Niskalp Investment and Trading Company.
A SEBI probe concluded that certain back-dating and reversal of trades was done at the behest of the then managing director Mr. Pendse who was also a former director of Niskalp, A. L. Shilotri, the then CEO of Niskalp, in connivance with broking firms, Pat Financial Consultants and Superior Financial Consultancy Services.
In June 2016, SEBI barred all four entities from the securities market for three years while further barring Mr. Pendse and Mr. Shilotri from holding any key managerial position in any listed company for three years.
SAT in its ruling on May 30 quashed the directions issued against Pat Financial and Superior Financial while warning them “to be careful in future while dealing in securities.”
