The Ministry of Company Affairs (MCA) has come to the rescue of Stock Holding Corporation of India (SHCIL), India’s largest depository company, at the intervention of the Finance Ministry. On May 14, an investigation was ordered into the affairs of SHCIL Services Ltd (SSL), once a wholly owned subsidiary of SSL. D K Gupta from the Registrar of Companies has been asked to investigate under Sec 247 of the Companies Act the true ownership of SSL as well as who the beneficial owner behind the scenes is. As reported earlier, R Jayaraman Iyer, chairman and managing director of SHCIL, and S Ramanathan, CEO of SSL, had “fraudulently” and “surreptitiously” diluted SHCIL’s shareholding in SSL from 100 per cent to 24 per cent and allotted the shares to three unknown individuals Gopika Vaishnav, Vivek Vaishnav of Ahmedabad and Padma Subramaniam of Hyderabad and E-Ventures Capital, a Singapore based entity. More importantly, the CLB passed orders on May 17 under Section 250 (2) of the Companies Act, freezing the shareholding and voting rights as they existed at the time SSL was set up as National Depository Company of India Ltd. Ironically, this badly worded order of MCA itself needs to be amended because it wrongly restores power to four employees who were the original signatories. Of these, one has retired, two are charge-sheeted and the last, Manoj Borker, has been actively involved in executing most of those agreements.

Under the radar

Many eyebrows have been raised at the Securities and Exchange Board of India’s (Sebi) silence over the shenanigans at SHCIL. While the regulator has gone after depositories, it has not even bothered to inspect the largest SHCIL, the largest Depository Participant (DP). In fact, it aided SSL by granting it registration to start a competing DP business, a brokerage operation and a portfolio advisory service in record time over the past year, without even checking SSL’s shareholding structure.

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