SAT revokes Sebi order in Tata Finance matter

The Securities Appellate Tribunal has quashed a two-year old Sebi ruling in a matter related to alleged manipulations in the rights issue of Tata Finance back in 2001 and also came down heavily on the regulator.

In its order, the tribunal observed that "Sebi has indulged in shielding the main culprits at the cost of the appellants which is detrimental to the interests of securities market".

A three-year ban was imposed on Pat Financial Consultants, Superior Financial Consultancy Services and A L Shilotri -- former CEO of Tata Finance Ltd's (TFL) subsidiary Niskalp Investment and Trading -- by Sebi in June 2016.

The regulator had also passed directions against late D S Pendse, who was the then managing director of TFL.

According to the tribunal, even after holding that TFL is guilty of making false declarations in its letter of offer, Sebi failed to take action against it "which is not only unusual but also bound to send wrong signal to the securities market".

The regulator did not take action even after finding Niskalp guilty of "booking fictitious profits" and against the entity's auditor, it noted.

In the 18-page order, the SAT said the regulator chose to indict the appellants on the basis of perfunctory investigation and "this clearly shows that Sebi has indulged in shielding the main culprits at the cost of the appellants which is detrimental to the interests of securities market".

Further, the tribunal has warned Pat and Superior to be "careful in future while dealing in securities".

In October 2002, TFL had filed a complaint with the Sebi following which the latter carried out an investigation into the company's rights issue, which was in March 2001.

The investigation found that false disclosures were made in the letter of offer for the rights issue about the financials of Niskalp.

Tata Finance had informed its shareholders that Niskalp had incurred an actual loss Rs 14.57 crore as on September 30, 2000 and a provisional loss of Rs 79.37 crore for the year ended March 31, 2001. But in the letter of offer, it was mentioned that there was a profit of Rs 11.46 crore for the six month period ended September 30, 2000.