Tehelka and the JPC

A few weeks later, the Sharma-Mehra duo bought up UD038;MD and arranged in July 2000 for their flagship company First Global to loan Rs.2.45 crore to their newly acquired enterprise. Meanwhile, the moving spirit behind Tehelka, Tarun Tejpal, registered a company called Buffalo Networks which took over the Tehelka website from UD038;MD.

Shankar Sharma received 2500 shares of a face value of Rs.25,000. Over the next four months, First Global advanced the Tehelka web-site approximately Rs. 5 crore and Sharma off-loaded his share holding to Tarun Tejpal.

Given that First Global was second only to Ketan Parekh as a domestic player in our stock markets, its stake in Tehelka was peanuts, a venture capital investment in a promising operation at a time when venture capitalists were advancing billions world-wide and in India to start-up ventures.

In the language of the market, such financing is consecrated by the name of 8216;angel investors8217;. I owe my expertise on this matter entirely to that impassioned apologist for the NDA, Wilson John, who sets all this out in his magnum opus The Tehelka Trap in a chapter significantly titled 8216;The Conspiracy8217;.

It is this conspiracy which is invoked by the Government in the affidavit filed by the Government of India on 10.10.01 before the Tehelka Commission of Enquiry. The JPC did not even refer to Tehelka, but its report dwells at length on First Global, 33 paragraphs spread over 8 pages 36-43.

It then comes to the conclusion para 4.117, page 45 that 8216;SEBI has not so far provided conclusive evidence to substantiate its conclusions8217;! So, First Global, which was targeted by SEBI from Day One, is not indicted by the JPC because in the 20 months since March 2001 that SEBI and the investigating agencies have relentlessly hounded the Sharma-Mehra duo, throwing Sharma for months together in jail, repeatedly raiding their premises, closing down their business, and filching their passports, SEBI have not been able to 8216;substantiate8217; the allegations on which the NDA government have mowed down the First Global group for the crime of assisting Tehelka in telling the truth.

Instead of acting as an independent regulator, SEBI cast itself as the hand-maiden of the government when the market failed to reflect the government8217;s expectations.

It launched its most comprehensive investigation ever into a handful of operators identified as 8216;bears8217;, that is those who sell to bring down prices. First Global was clubbed with that group, although in the relevant period it was a net buyer, not a net seller.

Extraordinarily, SEBI did not include Ketan Parekh and his notorious K-10 stocks in its initial list of entities to be investigated. Indeed, First Global might have slipped out of SEBI8217;s focus if it had not been for the Tehelka scandal breaking on March 13, 2001. After that, the NDA got its claws into Sharma and Mehra and they have been mercilessly victimized since then.

Where the JPC comes into the persecution of First Global is its findings at pages 199-200 paras 9.56-9.60 of the Report. The JPC have found that although 8216;unusual market volatility8217; has been the reason advanced by SEBI for the launch of its investigation, market volatility had been much more 8216;pronounced8217; in at least four months of the previous year without causing SEBI any concern.

8216;Large falls had occurred at least ten times in the previous year,8217; says the JPC, adding: 8216;The single day fall has been more on at least 125 days.8217; Moreover, reports the JPC, 8216;The market has fallen the day after the presentation of the budget on most occasions in the decade of the nineties. The biggest fall 8211; of 520 points 8211; was recorded the day after the budget was presented in 2000.8217; The net fall in the sensex was of precisely one point a rise of 177 points followed by a fall of 176 points when SEBI launched its investigation into a bear 8217;conspiracy8217;!

The JPC points out: 8216;Although the SEBI investigation into the volatility of the market in February and March began on 2 March, the market really collapsed several days later, between 7 and 13 March, by over 150 points compared to the closing index on 2 March, in the wake of the payments crisis in the Calcutta Stock Exchange.8217;

The JPC then points out that in the two days following the Tehelka revelations, the market did not fall. Instead, it rose 8211; 8216;by 350 points in the two trading sessions on 14 and 15 March.8217; Thus, far from being a conspiracy to discredit Sinha8217;s budget, Tehelka actually caused a depressed market to spiral skywards by a dizzying 350 points.

8216;The downward trend8217; says the JPC, 8216;became a crash on 29 March when the Ketan Parekh-Madhavpura-Bank of India imbroglio became public knowledge. In the fortnight that followed, the market lost over 400 points, the closing index on 12 April being nearly 800 points below the close on 2 March.8217;

And 8216;Thus,8217; concludes the JPC, 8216;much of the stock market crash of March-April 2001 post-dated the budget by several days and had, in fact, no relationship with the budget!8217; So much for SEBI8217;s 8216;apprehensions of possible attempts by certain entities to distort the market8217; and its wholly bogus claim of 8216;unusual market behaviour inspite of a well-received Union Budget8217;.

Just before he resigned, Justice Venkataswami had indicated that he would begin his investigation into the 8216;financial8217; dimension of the Tehelka issue, namely, the allegation that Sharma-Mehra set out to make a killing in the stock market by setting up Tehelka. Now the Commission will have to take into account the five paragraphs at pages 199-200 of the JPC report. That is the connection between Tehelka and the JPC.

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