Market crash now moves to the courts

Market crash now moves to the courts
Yagnesh Kansara

Mumbai, Mar 12: A Mumbai-based investor and chartered accountant on Monday filed a public interest litigation (PIL) in the Mumbai High Court in wake of the recent capital market crisis.

The PIL has pointed to ``the failure and neglect of securities market regulator the Securities and Exchange Board of India (Sebi) to prevent the capital market crisis'' and has sought the court's intervention to stop stock lending and borrowing activity with immediate effect. The PIL also requested the court to ask Sebi to direct all the stock exchanges (SEs) to retain in an escrow account the amounts that may accrue to market manipulators.

The PIL is scheduled to come for hearing on Tuesday, March 13, and will be heard by the two-judge bench comprising Justice A P Shah and Justice S Vajifdar. The PIL was mentioned on Monday in the court of Justice A P Shah which directed the further hearing on Tuesday.

The PIL has listed four different respondents. They include the Union of India, the Sebi chairman, the Bombay Stock Exchange (BSE) president and the National Stock Exchange (NSE) chief.

The petitioner has submitted to the court that the market regulator Sebi has failed and neglected to issue urgent directives that are absolutely necessary to protect the capital market in the present crisis.

The stock markets once again on Monday continued to reel under sustained selling pressure and the benchmark BSE sensex tumbled by another 114 points to close at 3767.89 on Monday. The benchmark index has lost 499.13 points in just seven trading sessions from February 28, the day on which the finance minister presented what was generally acknowledged as a very positive Union Budget. The sensex jumped by 177 points after the presentation of the Budget and closed at 4267.04.

The PIL also says that the securities market regulator Sebi should be directed to immediately prevent stock borrowing and lending transactions from Custodians/Depositories. This is its public duty, the petitioner has urged.

The PIL has also prayed to direct Sebi to direct all the stock exchanges to retain in escrow, the differential ammounts that would otherwise enure to the benefit of market manipulators.

The petition mentions the present stock market crash particularly after the presentation of the Budget. It also talks about an active bear cartel in the market which hammered down the prices of technology and momentum stocks as a result of which the capital market saw massive erosion in market capitalisation of 13 leading stocks.

The petition says the most affected stocks during the present capital market crisis includes Himachal Futuristic Communication Ltd (HFCL), Pentamedia Graphics, Digital Equipment, Satyam Computer Services, Silverline Technologies, Tata Steel, Tata Engineering, Infosys Technologies, Global Telesystems, SSI Ltd, Aptech and DSQ Software.