Sebi may be dragged to court for alleged irregularities in Bank of Rajasthan case

Alleging major irregularities in the order passed by the Securities and Exchange Board of India (Sebi) in the Bank of Rajasthan (BoR) case, some minority shareholders of the bank have decided to approach the Bombay High Court (HC) for relief.

Alleging that senior Sebi officials, including chairman U.K. Sinha and chief vigilance officer (CVO) R.K. Padmanabhan, showed favour to BoR promoters, shareholders Rajesh Agarwal and Vijay Garg, backed by some 200-odd minority shareholders, have decided to file a writ petition in HC on Friday.

The shareholders have alleged that Sebi's order that the appellant- a BoR shareholder-is not affected by the regulator's decision to lift ban on the lender's 100 promoter entities from accessing the capital market is flawed and intended to shield the promoters.

In March, Sebi had revoked the ban on the 100 entities, belonging or linked to the Tayal Group-the promoters-observing that they had been barred for last two years from the securities markets and that there is no need to continue the directions any further.

The revocation came despite an investigation finding violation by 92 out of the 100 entities. But Sebi had recommended adjudication proceedings against them. Even as the proceedings would continue, the regulator said all the 100 entities are free to participate in the market.

The promoters had conveyed to MAIL TODAY had reported on August 29 that CVO and ED investigation R.K. Padmanabhan has got an extension despite three complaints against him and in violation of CVC rules.

Sebi that they were reducing their shareholding in BoR (now merged with ICICI Bank ) from 44.18 per cent as of three months ended June 2007 to 28.61 per cent as of the quarter ended December 2009 to comply with a Reserve Bank of India directive to reduce the stake. However, Agarwal and Garg claim to have supporting documents that show that the promoters actually held 63.15-per cent of the shares. This wrongful acquisition of shares resulted in ill-gotten gains up to the tune of Rs 703 crore, they have alleged.

"And, if one includes the gains from bonus shares, the promoters made illegal gains up to the tune of Rs 1,000 crore," Agarwal said. While Sebi has the power to levy a penalty of three times this amount on the promoters, it fined them just Rs 30 crore," Agarwal added. "We informed Sebi on April 15 but it chose to ignore our complaint.

Thus, we have decided to approach the court. In our writ petition, we are seeking reinvestigation into the matter. The ill-gotten gains must be quantified and the 30,000 minority shareholders of BoR must be compensated. We are also seeking that R.K. Padmanabhan be removed as the CVO," Agarwal further added. The shareholders claim that the matter was brought to the notice of Sebi but Padmanabhan, who was heading the investigation, ignored it.