The Securities and Exchange Board of India's (Sebi) preliminary report on the recent stock market crisis reveals that Ketan Parekh group firms had infused over Rs 1,000 crore into the operations of various Kolkata brokers and broking outfits run by Sanjay Khemani, Dinesh Kumar Singhania, Ashok Poddar and Harish Chandra Biyani in about six months between October and March 2001.
The transactions were done by Parekh's group firms, Panther Fincap & Management Services Ltd and Classic Credit Ltd, the details of which were obtained from the bank statements of the firms.
Between October and March, Panther Fincap had infused Rs 813.10 crore, while sister concern Classic Credit had provided Rs 197.98 crore to Kolkata brokers in February-March.
Panther Fincap paid Rs 208.3 crore to Sanjay Khemani, Rs 222.7 crore to Khemani & Sons, and Rs 41.1 crore to Nanda Khemani. To Dinesh Kumar Singhania, Panther Fincap paid Rs 137 crore, and to his group firm Doe Jones, Rs 90 crore. To Ashok Poddar, the Parekh firm paid Rs 60 crore.
The other broking outfits which received funds from Classic Credit include Salasar Stockbroking, Prema Poddar (Ashok Poddar's wife), Biyani Securities and Goutam Bajoria. Classic Credit paid Rs 6.05 crore to Biyani Securities, Rs 2.15 crore to Salasar Stockbroking, Rs 52.6 crore to Prema Poddar, and Rs 14 lakh to Goutam Bajoria.
The Sebi's preliminary report on the recent stock market crisis, which covers the payment crisis at Calcutta Stock Exchange (CSE), has also inferred that "CSE has been irresponsible in monitoring and implementation of risk management measures."
The market regulator attributes the crisis to two key failures of the bourse. The report states: "Contrary to the Sebi guidelines, the exchange was not including deliverable positions of members in exposure calculations even though these positions continue to constitute risk for the exchange till settlement day."
Further, the report adds, "Capital deposited by members with exchange for exposure limit purposes was also being utilised to meet margin requirements, thus allowing double counting of the same deposits." Sebi also mentions in the report, "Had the exposure controls been implemented properly, excessive built-up of positions could have been avoided. If the Sebi guidelines were correctly implemented, terminals of the members who defaulted would have been deactivated much earlier at lower exposures."
In the report, Sebi has also mentioned that some CSE members crossed the threshold limit on carryforward of each individual stock of Rs 5 crore. But the report is mum on the software error in collection of margins on gross exposure which was abused by 8-10 brokers systematically over a year.
