SHCIL drags broking arm to CLB, seeks probe

Stock Holding Corporation of India (SHCIL) has dragged its own broking arm SHCIL Services to the Company Law Board and sought a probe after it was found the management misused authority and secretly agreed to sell up to 40% stake to a doubtful foreign investor.

SHCIL, the country's largest custodian of securities, has also accused SHCIL Services' CMD R Jayaraman Iyer, chief executive S Ramanathan and six other directors of fraud and mismanagement.

Incidentally, Iyer was also CMD of SHCIL and Ramanathan executive vice-president when the alleged fraud was committed. The two officials have since been reportedly removed by the SHCIL board. The other directors - V Subramaniam, Vivek Vaishnav, R Ravindran, Quek Jin Oon, Lee Keen Whye and Nitin Jog - were also on the payroll of SHCIL till early 2006.

Acting on the plea, CLB chairman N Balasubramanian issued notices to all directors and freezed their voting rights. SHCIL is jointly promoted and owned by financial institutions and banks such as LIC, GIC, ICICI Bank, UTI, IDBI and IFCI.

It is the country's largest depository company.

In its plea, SHCIL alleged Iyer and Ramanathan "deliberately and with ulterior motive" alloted shares of SSL to Singapore's E-Ventures Capital by FDI route. After allotment, SHCIL was left with only 24% stake in SSL.

"The shares were alloted in a clandestine and surreptitious manner without proper due diligence and proper identification... Thereby changing the management control," SHCIL contended in its petition.

E-Ventures was given 33% ordinary shares and 7% preferential shares. SHCIL alleged that E-Ventures' background was doubtful and required probe.