Sources said that either SEBI or the finance ministry which files the ATR before Parliament, may have been responsible for an omission.
Midas Touch Investors’ Association (MTIA), an entity which deposed before the joint parliamentary committee (JPC) probing the Rs6,400-crore stock market scandal of 1999-2001 (involving then ‘Big Bull’ Ketan Parekh (pictured alongside) and several companies including Himachal Futuristic Communications Limited or HFCL), has contended that periodic updates — action taken reports or ATRs — to Parliament on the JPC recommendations have omitted details of HFCL’s consent deal with the Securities and Exchange Board of India (SEBI), the capital markets regulator.
Sources said that either SEBI or the finance ministry which files the ATR before Parliament, may have been responsible for the omission.
MTIA has informed the Delhi High Court as much in a hearing on April 10 this year.
The hearing followed an MTIA petition seeking inclusion in a public interest litigation (PIL) against the settlement of the scandal-related cases through consent orders. The PIL was filed by Delhi-based businessman Deepak Khosla.
A consent order is a means for those accused of violating securities market regulations to pay a monetary fine without admitting or denying guilt. SEBI started the consent order system in April 2007.
As HFCL was accused of various violations in the scandal, its promoters, directors and associates had proposed settlement through consent through their letters in May and June 2008. They submitted a revised proposal to SEBI in September 2009.
On December 16, 2009, SEBI, acting on the views of its advisory committee, informed HFCL that the case may be settled if the applicants agree to make a payment of `10 crore toward settlement charges. On December 30, 2009, both Sebi and HFCL agreed to this arrangement.
MTIA says the December 2009 ATR report had stated, well before SEBI and HFCI actually formalised the consent deal, that no action remains pending against HFCL. This was “factually incorrect”, according to the MTIA document filed in the court. The consent order was “issued much later”, on January 28, 2010.
Strangely, MTIA said, even the latest ATR report dated June 2011 does not mention that the HFCL case was settled through consent.
Furthermore, MTIA said an unreasonably high number of consent orders have been passed by the regulator so far. “SEBI has displayed remarkable efficiency in disposal of consent applications. During four years since its (the consent system’s) inception, it received 2,296 applications and disposed of 1755, giving a disposal rate of 77%. Over 30% or 1,012 cases were settled. This is very high, compared to action initiated or completed by SEBI under the provisions of the SEBI Act and SCR Act during last ten years,” said the MTIA petition.
The court had given Deepak Khosla and SEBI four weeks to reply to MTIA’s appeal to be made a part of the PIL proceedings. They are expected to reply around 10th May, well before the next hearing on August 8.
An email to SEBI seeking more information on the matter remained unanswered.
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