Financial irregularities to the tune of over Rs 1 crore at the Bhubaneswar stock exchange has cast shadows over the future of this fledgling bourse.
The bourse had set up a members' welfare trust in 1996 to meet short-term financial needs of the members by giving them loans. Depending on the purpose of borrowing, the loans had specific repayment schedule and carried different interest rates.
According to the money suit filed by the exchange, the irregularities mainly pertain to sanction of Rs 99 lakh loan to the vice-president of the bourse, Babulal Sharma, in "utter violation of the provision of the trust".
Sharma was given the money between May 21, 1999, and January 12, 2000, in five instalments of Rs 10.77 lakh, Rs 35 lakh, Rs 22 lakh, Rs 16 lakh and Rs 15.25 lakh.
The money sanctioned to him was in excess of the upper limit of loan fixed in the trust deed. The document mentions that a member can avail of a maximum of Rs 5 lakh loan at a time to tide over temporary financial difficulty in payment of dues of the clearing house of the exchange.
Though it is stipulated that a member can take loan twice a year and the second loan will be made available only after the repayment of the first one, Sharma has taken five loans in eight months without repaying any of them.
The petition said that the term of each loan was for two months. But Sharma has not paid the money back even after lapse of two years.
Sharma, meanwhile, told Business Standard. "I am innocent and the money has been appropriated by other people," he told. "The very fact that I was granted loan in violation of the rules proves that there were vested interests keen to sanction me loan," he observed and asserted that he was ready to fight his case and reveal everything at "the appropriate time".
A K Singh, who is treasurer of the exchange and a trustee of the welfare trust, and himself a loanee and defaulter of the trust fund, had stood guarantee for Sharma by pledging his properties located in Bihar.
The Bhubaneswar bourse president has filed a separate money suit to realise the loan amount from Singh.
The management council of the exchange, in an emergency meeting convened here to discuss the issue on Saturday, has resolved to write to the Securities and Exchange Board of India (Sebi) informing it about the irregularities.
The corpus of the welfare trust is formed by contribution of the members (Rs 3,000 each per annum) and grants/aids from others including corporate bodies, society and trusts. According to the annual report of the stock exchange for 2000-01, Rs 78 lakh loan was given to the trust in the previous year in different instalments without prior approval of the bourse management council to facilitate sanction of loans to Sharma.
Interestingly, in the annual report for 1999-00 of the bourse, the Rs 78 lakh loan to the trust is camouflaged under the head of other receivables without proper disclosure. Similarly, the audited account of the trust for the year was omitted from the annual report, as it was done in the previous year, said a council member, adding, the directors' report was also silent on members' welfare trust.
Sources said, while the trust was advancing huge loans to a "select group" of people, it was unable to fulfill its other objectives which included payment of premium to LIC under group insurance policy of the members of the exchange for last two years, ex-gratia payment to wife of a deceased member, reimbursement of medical expenses of members for life-threatening diseases etc.
With the annual general body meeting of the Bhubaneswar stock exchange slated for September 29, the financial irregularities perpetuated by some council members of the bourse have created a tense atmosphere here. In fact, the yesterday's emergency council meeting was held amidst tight security and police bandobast.
The president of the exchange, Jagdishlal Gugnani, however, said the crisis will be overcome shortly. "We have filed cases against the defaulters and hope to recover the money," he said. The public representative in the council, M N Ray said the truth about the irregularities could be brought to light if proper investigation is held by Sebi and the Central Bureau of Investigation.
It was decided in the meeting to form a committee with Sebi-nominated public representatives in the council, namely state finance secretary Ajit Tripathy, former financial adviser to the Orissa government M N Ray and retired DIG G K Upadhyay, as members to vet the letter to be addressed to Sebi and prepare documents in support of the allegations.
In another development, the president of the exchange Jagdishlal Gugnani has filed two petitions in the court of civil judge (senior division) for realisation of Rs 1.30 crore and Rs 5 lakh (including principal and interest) from the bourse vice-president Babulal Sharma and treasurer A K Singh, respectively, who have defaulted in repayment of loans availed of by them from the exchange members' welfare trust.
