Welcome to a market where a murder-accused can freely tap your money

The Tauranis — Kumar, Ramesh, Renu and Varsha — own 99.85 per cent of the company, with the latter three holding a 25 per cent stake each. Ramesh Taurani has, however, made news for things besides film music. Risk Factor No 1, tucked away at the bottom of its huge six-page advertisement, says: “One of the promoters of the Company, Mr Ramesh Taurani, has been charge-sheeted and is accused in a case that has been filed in connection with the murder of Mr Gulshan Kumar in 1997.”

Let’s do a flashback. Gulshan Kumar was the music pirate who turned straight and created the T-Series brand swiftly, became a dominant player and launched several new voices in Indian popular music. In 1997, when Kumar was emerging from a temple at Andheri in Mumbai, hired assailants — allegedly belonging to the Chotta Shakeel gang — gunned him down, pumped over 15 bullets into him.

The police arrested Ramesh Taurani a little later, naming him an abettor andcharging that he paid for the murder at the instance of music directorNadeem who has since fled to London. The law allows Taurani to tap the capital market and raise Rs 6.53 crore even while the criminal trial against him takes its own slow course.

The shares are priced at a hefty premium with the floor for the bidding at Rs 325 on a Rs 10 face value. In India, justice delayed is always an advantage.

In response to our queries about the appropriateness of allowing someone who is charged as a “murder abettor” to pick up public funds, the Securities and Exchange Board of India (SEBI) had the following response: It says that after the repeal of the Capital Issues Control Act in 1992, no issuer is required to seek SEBI approval before making a public issue so long as it follows disclosure norms.

In this particular case, it says, the fact that a promoter has been chargesheeted is disclosed as the first risk factor. Further, it points to a Securities Appellate Tribunal (SAT) order which has held that “a company cannot be penalised for the acts of a director(s).”

“Notwithstanding the above,” says SEBI, “the issue of debarring a chargesheeted director from being associated with an issue is pending consideration with the Malegam Committee.” But that is for the future.

In effect, SEBI is saying it has no responsibility beyond a disclosure. It seems to forget that it has a role to play in safeguarding investors and making the market safer for them.

Though the control of capital issue was repealed in 1992, this was followed by the unprecedented primary market mania of 1993-1996 which saw thousands of unscrupulous companies raise public money and vanish. For three years after that the primary market was dead and provided ample time to tighten regulation to make the market safer.

Instead, rules which were put in place during those years have been consistently diluted after the market began to revive in 1999.

The relaxation have been particularly aimed at making it easier for information, media and technology stocks to access the capital market more easily.

V Raghunathan of the Indian Institute of Management, Ahmedabad, who is a member of SEBI’s primary market advisory committee says that no meeting has been called for over a year and that the committee wasn’t consulted when rules for media and entertainment companies accessing the market were relaxed.

Manubhai Shah, Managing Trustee of Consumer Education and Research Centre, also on this committee, points out that three key representatives who objected to the relaxation were outvoted by a committee packed with merchant bankers.

He further says that in meetings with ex-law minister Ram Jethmalani and Finance Minister Yashwant Sinha, “both in principle agreed that disclosure alone was not an answer to the validity of public offer document and was not enough for investor protection.”

Clearly, the rules do not match this sentiment and disclosures in fine print are remembered only when money is lost.

After the mania of the early ’90s, there was time to make the market safer. Instead, rules have been consistently diluted after the market began to revive in 1999 to make it easier for infotech, media, entertainment stocks

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