Finance Ministry Upholds Rcs Suspension

The appellate authority in the Union finance ministry has upheld the six-month suspension of Reliance Consultancy Services (RCS), registrar to Reliance Industries Ltd (RIL) and its group companies. The body is headed by Union finance secretary Montek Singh Ahluwalia

The appellate authority ruled on February 24 that the suspension order would now come into force with effect from March 5. The seven principal companies being serviced by RCS will be required to make alternate share transfer arrangements during the interim period.

The suspension order was imposed on October 17, 1996 by the Securities and Exchange Board of India (Sebi) on RCS for its alleged role in the share-switching and duplicate share scams. The order, which RCS appealed against, was scheduled to come into force from February 1.

 

The appellate authoritys failure to complete its hearing of the appeal by February 1 resulted in the Sebi order being stayed till the authority announced its decision.

The suspension order will now be shorter by a month since the RCS licence is valid only upto July 31, 1997, and the suspension order cannot extend beyond the validity period.

Investors have benefitted from the delay as RIL joined the depositories during the period when its case was being considered by the authority. This ensures ready availability of an alternative arrangement for investors opting for the automatic share transfer mode.

RCS had approached other registrars in the past, but none of them were willing to take on the additional load, which would call for major capital investments at their end.

The interim period has been granted by the appellate to RIL and its group companies with a view to safeguarding the interests of shareholders. By a rough estimate, over 87.4 lakh shareholders would be inconvenienced by the suspension if Reliance Industries and its group companies failed to make alternate arrangements within the time granted.

Sebi too had taken this point into consideration when deciding on RCS fate. Therefore, it opted for suspension of the licence rather than its cancellation, as recommended by the investigating officer.

However, the securities watchdog had barred Reliance Consultancy Services from working as registrars to any issue and share transfer agent of any company or mutual fund other than the seven principals which had appeared before Sebi during its hearings between October 17, 1996 and January 31, 1997.

The Sebi investigating officer had indicted RCS for its failure to maintain transaction records and for not providing complete information.

RCS was also indicated for issuing duplicate shares even when it had information that they were pending with it for transfer.