Bellary Steel directors take KSFC for a ride

KSFC had subscribed to Rs 150 lakh redeemable non-convertible debentures of BSAL during May 1996 which were secured by the 21,50,000 shares of BSAL held by SN Finance, Kodiganti and Meenakshi (pledger entities/persons).

Bellary, which made a loss of Rs 78 crore in fiscal 2005, failed to redeem the non-convertible debentures (NCD) and pay interest and KSFC was unable to recover the dues of Rs 564 lakh.

KSFC approached Karvy Computer Share Private Ltd—the share transfer agent—for transfer of shares and dematerialization of the same in favour of KSFC. However, Karvy informed KSFC that the pledged shares have already been transferred during March and October 2005 in favour of Panchaloha Hotel P Ltd, and the same were dematerialized in November 2005.

According to KSFC, Karvy had transferred the shares when the original share certificates were in their possession and alleged that pledger entities/persons in connivance with BSAL and Karvy have fraudulently transferred the shares with a malafide intention to cheat KSFC.

“Two sets of physical shares certificates with identical details existed at the same point of time…that is one set of certificate was pledged with KSFC and the other set was lodged for transfer in the name of Panchaloha Hotel P Ltd,” Sebi said, adding, “as two sets of physical share certificates bear the same distinctive numbers, it stands to reason that at least one of them is fake.”

Sebi also observed that neither the share certificates lodged for transfer in favour of Panchaloha Hotel P Ltd nor the share certificates pledged with KSFC has any superscription to the effect that the certificates in question have been issued in lieu of the original certificates.

“On scrutiny of the documents (transfer deeds) provided by Karvy, it is observed that the authorised signatory for SN Finance Ltd is Madhav, who is the chairman & MD of BSAL and also a director on the Board of Panchaloha Hotel P Ltd,” Sebi said.