Tags:
Journalism of Courage
Investigation conducted by the Sebi into the recent scam has revealed that promoters of DSQ Software allotted 1.3 crore shares to three companies without receiving any money, a clear sign that the shares were used to rig up its share prices during 2000-2001. According to Sebi, these shares were then sold between friendly brokers and companies connected with the promoters to create artificial volumes, to hike up prices.
While 70 lakh shares were given to two front entities of the promoters, another 30 lakh shares were allotted to a UK-based company. The unauthorised allotment of these 1.3 crore shares and manipulation through select group of brokers led share price to rise from Rs 250 to Rs 2631 between October 1999 and March 2000.
This is the first incident of kind where a company allotted one crores shares without charging any money and they were freely traded in the market. The Sebi report has been submitted to the Joint Parliamentary Committee this month. The JPC is probing the scam.
The DSQ Software management allotted 30 lakhs shares to Dinesh Dalmia Technology Trust on October 5, 2000, and another 30 lakh on December 19. 40 lakh shares to Dr Suryanil Ghose Trustee Softee Corporation on October 24. Another 30 lakh shares were allotted to UK firm New Vision Investment Limited on May 20, without following any procedure under the Company Law. No resolution was passed by the company’s board either.
While the two Indian entities were given one crore shares without a penny, the UK-based company was allotted 30 lakh shares on preferential basis at a premium of Rs 970 per share. Records show that these 30 lakh shares were later forfeited by the company on account of non-payment of the call money. But SEBI wondered how could shares be allotted without receiving even part payment from the UK company and without following Company Law and procedures. The UK based company even sold these 30 lakh shares as ‘‘good delivery’’ though it had made no payment for the same of the preferential allotment shares. Probe to identify its promoter is still on.
A scrutiny of documents revealed that the Dinesh Dalmia Trust sold these 30 lakhs shares to three companies which were associated with the promoters themselves. Out of these 30 lakh shares the Trust sold 21 lakhs shares to DSQ Holding in two tranches, 5.25 lakhs to Powerflow Holdings and 3.75 lakh shares to Hulda. The SEBI probe revealed that DSQ Holding, Powerflow Holdings and Hulda belonged to the promoters of the DSQ Software.
Similarly, Dr Suryanil Ghose Trustee Softee Corporation which was allotted 40 lakhs shares without a penny being paid, transferred these shares to the front companies of promoters. While 10 lakh shares were transferred to Powerflow Holdings, 26.50 lakhs were transferred to Brokers Pool Account. The brokers pool account comprised of ten brokers who traded among themselves in the DSQ Software shares and rigged the entire market.
Investigations revealed that the addresses of the DSQ Software and DSQ Holdings is the same. Hulda, another company which was allotted shares operates from the same address which is the address of the DSQ Industries.
