Sebi has let off Tata Motors Ltd with a warning to be "more careful" in its future dealings in the securities market, saying any adverse orders passed against the company at this stage may not practically serve any purpose for the events accrued over 18 years ago.
Apart from Tata Motors Ltd (TML), the market regulator has cautioned Niskalp Infrastructure Services, formerly known as Niskalp Investment and Trading Ltd, to be cautious in its future dealings.
The case relates to a backdated transaction in the shares of Global Telesystems Limited (now known as GTL Ltd) and Global E-Commerce Services Ltd, an unlisted company that merged with GTL in 2001.
"For the events that accrued more than eighteen years ago, any adverse orders passed against TML at this stage though legally will be valid but may not practically serve any purpose since TFL (Tata Finance), which brought the Rights Issue, has been merged with TML 17 years ago with effect from June 24, 2005, and is no longer in existence," Sebi Whole Time Member SK Mohanty said in his 54-page order.
Further, the regulator noted that the present board of directors of TML is completely different from all the directors of TFL, who are all senior citizens and have long since retired from the board of TFL and Niskalp.
"In view of the aforesaid mitigating factors and the facts that substantial and positive remedial measures have been proactively taken by TML and Niskalp against the erring officials and the subscribers of the rights issue of TFL were given options twice to exit from the said Rights Issue by TFL if they wish to do so, the end of justice would be met if the Noticee nos 1 (TML) and 11 (Niskalp) are warned to be careful in their future dealings in the securities market," Sebi said.
It was alleged that TFL concealed the true and correct facts from the investors and disseminated untrue and misleading statement of facts about the financials of Niskalp, which was one of the subsidiary companies of TFL, in the letter of offer of its rights issue.
Further, to show the inflated and fictitious profit in the books of account of Niskalp, it was alleged that TFL has knowingly engaged in the acts of backdating the transactions of sale-purchase and accounting entries with respect to the scrip of GTL and GECS in the books of accounts of Niskalp and consequently in the offer document of the TFL, to give a better picture of the accounts of Niskalp in the 'letter of offer' of TFL to induce purchase/subscription to the rights issue of TFL by its shareholders.
The order came after Sebi received a complaint in October 2002 from Tata Finance, alleging instances of irregular transactions in securities based on backdated and fictitious contract notes or bills, for the sale and purchase of shares of Global Telesystems Ltd and Global E-Commerce Services Ltd by DS Pendse and AL Shilotri, who executed the trades on behalf of Niskalp Investment and Trading Ltd (now known as Niskalp Infrastructure Services Ltd) and TFL, respectively.
Following the complaint, Sebi conducted an investigation into the alleged backdated transactions in the shares of GTL and GECS to ascertain a possible violation of the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms.
