Pallav Sheth case: A quarter century for closure

Sheth's case is a stark reminder of how banks struggle to recover dues and why India ranks so low in Ease of Doing Business

Pallav Sheth, described in some accounts as rotund and jovial, was one of many brokers whose names cropped up in the 1992 securities scam investigation.

Sheth was back in action last week as the Supreme Court (SC) allowed him to enter into a financial settlement with Canara Bank. His name has been a recurring phenomenon in securities market-related cases.

In 2010, Sebi wholetime member Prashant Saran passed an order censuring Sheth’s wife, Ushma P Sheth, for dealing in shares of Prudential Pharmaceuticals in 2001-02. In the late 1990s, the Central Bureau of Investigation (CBI) had chargesheeted Sheth and other brokers in cases relating to Canbank Mutual Fund and Fairgrowth Financial Services.

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Sheth's case became interesting after reports about his transactions with a certain saffron party politician became the subject of many media reports.

In August 2001, the SC had dismissed Sheth's appeal challenging a special court’s order of one month imprisonment for contempt. It ordered him to surrender before the authorities within a week. The special court had prohibited him from transferring assets, alienating these or dealing with his bank accounts, following the scam. Sheth allegedly floated companies and partnerships in the names of close relatives and used his funds.

The SC bench headed by judge B N Kirpal, which upheld the conviction, observed the special court had been "unduly lenient" towards him, a Business Standard report of the proceedings said.

In January 2015, the Bombay High Court had acquitted Sheth in the CBI vs BR Acharya case, saying his involvement in the Canbank case had not been clearly established by the prosecution. Acharya was general manager of the bank and was accused of misappropriation of shares of Hindalco, with the help of Sheth and others.

Last week, the SC, in a criminal appeal pending since 2005, allowed Sheth and Canara Bank to do a financial settlement. The settlement offer came from Sheth, after the court seemed inclined to uphold a six-month rigorous imprisonment setnece ordered by the special court. The matter pertained to a transaction of 20,000 shares of an unspecified company, for which Sheth was supposed to pay Rs 83 lakh. He'd given two cheques of Rs 50 lakh and Rs 33 lakh, which bounced on being presented for payment in June 1992.

After lengthy proceedings, Sheth had paid a sum of Rs 20 lakh in part settlement in 2003. In 2007, the special court in Mumbai, hearing a civil suit on the matter, had passed a decree for a sum of Rs 58.1 lakh, repayable with annual interest of 18 per cent from June 1992, the date of default. While the sum payable came to Rs 2.86 crore, the bank agreed to accept a lower interest rate of 12 per cent determined by the apex court and a final settlement amount of Rs 2.03 crore was worked out.

The matter does not end here. The payment will be by two installments, first payable in three months and the second by the end of six months. The court has made it clear that if the payment is not made as agreed, the order would stand recalled and Sheth would have to serve the jail term.

Between 1993 and 1996, CBI filed as many as 34 chargesheets in 71 cases, according to media reports of that time. It is not clear in how many Sheth was named and what is the status of these now. Sheth’s case is a stark reminder of what happens to cases related to business matters in the country, how banks struggle to recover dues and why India ranks so lowly in Ease of Doing Business.