Sebi finds former Tata Finance MD guilty of illegal trades

Sebi found former Dilip Pendse had executed "illegal transactions" in stocks of four firms including Infosys & the erstwhile Telco

In a high-profile case dating back to over 12 years, the Securities and Exchange Board of India (Sebi) has found former Tata Finance Managing Director Dilip Pendse had executed “illegal transactions” in stocks of four firms including Infosys and erstwhile Telco.

The latest order, which has been passed after years of probe and various directions issued by Sebi itself and the Securities Appellate Tribunal (SAT) in between, prohibits Pendse from accessing capital markets for two years.

The present order, passed on Monday, comes into effect immediately, Sebi said that the period of prohibition already undergone by Pendse (imposed by an earlier order dated December 24, 2012) would be taken into account.

Amid a public spat between him and the Tata Group, Pendse was removed as Tata Finance chief  in 2001 after a company subsidiary ran huge mark-to-market losses and the group also filed criminal charges against him. While Pendse denied all charges, which included those related to fraud, he also had to spend time in jail.

Sebi has passed the latest order after SAT quashed Sebi’s December 24, 2012 directive against Pendse and asked the regulator to pass a fresh order “on merits and in accordance with law as expeditiously as possible and in any event within six months”.

The SAT gave these directions on April 16, 2014.

Giving the background of the case, Sebi said it began its probe after receipt of a complaint in October 2002 from Tata Finance about Pendse conducting “illegal carry forward transactions in the scrips of Himachal Futuristic Communications, Tata Engineering and Locomotive Company (presently known as Tata Motors), Infosys and Software Solutions India.

These illegal transactions were conducted by Pendse in complicity with two brokers — Jhunjhunwala Stockbrokers and Pratik Stock Vision — and on behalf of Inshaallah Investments, in which a Tata Finance subsidiary (Niskalp Investment and Trading) had a vital interest, according to Sebi.

After investigating the case, Sebi issued a show-cause notice in April 2009 to Pendse, citing violations to its Prohibition of Fraudulent and Unfair Trade Practices Regulations.

An order was passed by Sebi subsequently on December 24, 2012, which was challenged by Pendse before SAT.

Following SAT’s directions earlier this year, Sebi said, it gave an opportunity of personal hearing to Pendse and has passed the latest order after looking into all the facts of the case and submissions made before it.

Sebi ruled that Pendse has violated various provisions of the PFUTP Regulations and the Securities Contracts Regulation Act with his illegal transactions in scrips of HFCL, Telco, Infosys and SSI.