A senior member of the ruling Bharatiya Janata Party's economic cell and companies floated by this member are at the centre of the small and medium enterprises' (SME) scam unearthed by the Securities and Exchange Board of India (Sebi) earlier this week.
Brij Kishore Sabharwal and two companies he promoted, Eco Friendly Food Processing Park and Esteem Bio Organic Food Processing, were among the 239 entities barred from the securities market by Sebi for allegedly manipulating Initial Public Offers and share prices.
Sabharwal runs a broking firm named ISF Securities. He figures as the second name in a list of members of the party's economic cell, on its website. He is also named as "programme convener" of some events organised by the cell in which some big guns of the party had participated in 2011. He was also an active participant in bodies such as Commodity Participants Association of India and the Associated Chambers of Commerce and Industry of India.
Sabharwal did not take calls on his mobile phone and did not respond to an e-mail seeking comments.
The economic cell's web page, available under the www.bjp.org website, stated: "Our cell's vision is to provide a platform for the like-minded to come together, formulate study groups of our professional brethren to go deeply into specific economic and socially relevant issues, publish documents, journals and research papers, participation in discussion and seminars, and provide valuable inputs on issues and tasks entrusted to us by our leadership."
Gopal K Agarwal, a member of the BJP national executive and national convenor of the economic cell of which Sabharwal was part of, told Business Standard: "I was heading it. The cells have been disbanded since the time Amit Shah took over as party president." Shah took charge as president of the BJP on July 9 last year.
Eco Friendly was listed on the SME platform in January 2013. The price of the scrip rose by 6,265 per cent (about 64 times) during the period between January 14, 2013 and December 31, 2014, a a span of 234 trading days. Esteem rose by 3,150 per cent (32 times) between February 7, 2013 and December 31, 2014, a span of 244 trading days.
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Sebi order
The regulator had also found evidence of alleged misuse of IPO proceeds, wherein funds raised by Eco Friendly were allegedly siphoned off and utilised for the subscription of the Esteem IPO. Sebi alleged the entire operation of misuse of the IPO platform and rigging of prices was done with an intention to launder unaccounted money. As a director, Sabharwal was allegedly guilty of omissions and commissions on several counts.
"The acts and omissions were prima facie for generating fictitious LTCG (long-term capital gains), so as to convert unaccounted income of preferential allottees and pre-IPO transferees into accounted ones, with no payment of taxes as LTCG is tax-exempt, prima facie the above modus operandi helped the entities concerned to not pay income tax on account of LTCG, and helped them to show the source of this income to be from a legitimate source i.e. stock market," the Sebi order said.
The economic cell's website has under a section titled 'Publications', a solitary report titled 'Black Money Research Report'. Published in 2011, it discussed ways to bring back undisclosed money "stashed away in foreign countries".