The Securities Appellate Tribunal has set aside an order issued by the Securities & Exchange Board of India on December 28, 2007, that restrained former Tata Finance Ltd managing director Dilip Pendse from accessing the securities market and had prohibited him from dealing or associating with the securities market for two years.
Pendse, who was the TFL managing director between June 1996 and May 2001, was charged with violating some of the provisions of the Securities Contracts Regulation Act and Sebi's Prohibition of Fraudulent and Unfair Trade Practices relating to the securities market.
The case related to a series of transactions in the shares of Global Telesystems entered into by Nalini Properties, a company controlled by Pendse, and Inshaallah Investments and Nishkalp Investments, which were TFL associates.
Sebi said that these were in violation of the SCRA.
In an order issued on Thursday, SAT said: "There is no evidence to show that the accounts and records were falsified to perpetrate the alleged fraud."
The charge of violation of SCRA stemmed from the purchase of 60,000 GTL shares by Nalini Properties on September 19, 2000, through a broker.While the company sold 35,000 shares on the Bombay Stock Exchange on the same day, the remaining shares were sold to the broker in an off-market deal. Nalini did not have physical possession of the 25,000 shares it sold as it had neither received the shares it had purchased nor made the payment as the settlement was due during the next week.
On the same day, the broker sold the 25,000 shares purchased from Nalini to Inshaallah in another off market deal.In February 2001, Inshaallah sold the shares to the broker, who in turn sold them to Nishkalp, which settled the transaction on the BSE towards the end of March.
In another set of transactions which were investigated, on December 14, 2000, a broker purchased 40,000 shares from Nalini, Khuda Gawah Investment and another company and sold them to Inshaallah in an off-market deal.In February 2001, the Inshaallah sold the shares to the broker, who sold them to Nishkalp on the same day off market. Nishkalp carried forward the transaction after carrying forward the position till the end of March 2001.
Sebi's then whole-time member had concluded that that the transactions related to GTL shares between Nalini Properties, the broker and between the broker and Inshaallah were illegal 'as the contracts were not entered into between the members and the stock exchange.
In its order, SAT, however, said, "All these transactions were clearly through or with a member broker of BSE and, therefore, in accordance with the requirements of section 13 of SCRA. Thus, the whole-time member's aforesaid conclusion was not only contrary to his own observation in paragraph 13 of the impugned order but was clearly an incorrect conclusion."