The Securities and Exchange Board of India (Sebi) today barred Dilip Pendse, former Managing Director of erstwhile Tata Finance, for two years from the securities market on charges of involvement in fraudulent and unfair trade practices in four firms including TELCO (now Tata Motors) and Infosys more than ten years ago.
In its order, Sebi said that it has restrained "Dilip S Pendse from accessing the capital market and prohibit him from buying, selling or otherwise dealing in the securities market, directly or indirectly, for a period of two years."
The market regulator had conducted a probe into the dealings of one Inshaallah Investments in the scrips of Himachal Futuristic Corp (HFCL), Tata Engineering and Locomotive Company Ltd (now known as Tata Motors), Infosys and Software Solutions India Ltd (SSI) following a compalint by Tata Finance in 2002.
The complaint alleged that certain illegal carry forward transactions in these scrips at the behest of Pendse in 2001.
Further, the transactions were executed on behalf of Inshaallah, in which a Tata Finance subsidiary, Niskalp Investment and Trading Company Ltd, had vital financial interest. It was stated in the complaint that Pendse was the director in both Niskalp and Inshaallah.
It was alleged that Pendse in association with two brokers -- Jhunjhunwala Stockbrokers and Pratik Stock Vision -- executed the transactions.
Sebi said that Inshaallah had agreed to buy a specific quantity of shares of HFCL, TELCO, Infosys and SSI on 'Principal to Principal' basis at specified prices on various dates.
Interestingly, on the same days Anjudi Property agreed to sell a similar quantity of shares of these companies on 'Principal to Principal basis' at price very close to the prices given by Inshaallah.
Later it was found that instead of settling these carry forward positions on the market, the shares were sold by Anjudi Property to the brokers on 'Principal to Principal' basis.
Sebi said such transaction cannot be said to be valid, as under the normal circumstances, the brokers should not have purchased shares not in possession of Anjudi Property.
It also said that the brokers also should not have sold similar quantities of shares to Inshaallah as they were not in the possession of such number of shares.
Pendse had submitted before Sebi that there has been an inordinate delay in the proceedings, but the regulator said that the proceedings have been prolonged as the investigation had to deal with complex facts and records.
"After the issuance of SCN [Show Cause Notice], the inspection of the documents also consumed time. However, delay cannot be a ground for exoneration," Sebi's Whole-Time Member Prashant Saran said in his order.
