Struck by scams, stuck with stock
As past financial scandals reveal, small investors get the roughest end of the stick. 
Offending firm: CRB Group
Offence: CRB did not maintain reserve requirements; the Reserve Bank stopped it from raising fresh deposits. Cheques bounced. CRB shut down its offices.
Hole in the pocket: Rs 11.5 lakh (approx.)
Nagpal’s story: Nagpal and his family members were impressed with the dividend yield of the shares of Bank of Punjab when they bought the shares in 1997. The shares would provide a yield in the 7-10 per cent range at that time. Only problem: The shares they received were sold by the CRB Mutual Fund. When the shares certificates (the concept of dematerialisation hadn’t yet arrived) were sent for transfer, it did not take place. Instead, the Nagpal family was asked by the registrar to return the certificates and in exchange get new shares. “It’s more than 10 years, neither do we get the dividends nor have we got the shares,” says Nagpal, who along with his father and other family members had purchased 80,000 shares for Rs 11.20 lakh. “There is no fault of us. We had not dealt with CRB,” says Nagpal.
Investor: Janak Mathuradas
Offending firm: P. Rajarathinam’s Deve Sugars & Deve Paints
Offence: Default to investors and creditors by P. Rajarathinam Associates Group of companies.
Hole in the pocket: Rs 60,000
Mathuradas’ story: A fourth-generation investor, Mathuradas is himself a market veteran. But even a seasoned investor like him was done in by a fly-by-night promoter. Mathuradas purchased 200 shares of Deve Sugars in the mid-1990s in a private placement on the advice of some of his friends and after seeing the glossy brochure of the company. The main promoter of Deve Sugars was P. Rajarathinam, a high-profile acquirer of companies in the mid-’90s. Current status? The shares have yet to get listed. Around the same time, Mathuradas sold 600-700 shares of Garware Paints, which had been acquired by Rajarathinam, and later renamed Deve Paints. The offer was made at Rs 40 a share. Mathuradas has yet to get back the money.
Investor: Pratibha Rani
Offending firm: Pentamedia Graphics
Offence: Company Law Board found the company guilty of irregularities in its financial transactions.
Hole in the pocket: Rs 1.7 lakh
Rani’s story: Rani is saddled with 5,000 shares of Pentamedia Graphics. Her late husband bought these shares after the technology bubble burst. Her husband bought 1,000 shares of Pentamedia Graphics on the advice of his stock broker after the stock price fell sharply. The stock price of the company touched around Rs 2,000 in 2000 and fell below Rs 100 after the Ketan Parekh scandal came to light. A Company Law Board order said that Pentamedia suffered huge losses in transactions with Pentasoft Technologies. When the stock price fell to Rs 20, Rani’s husband purchased another 4,000 shares to average the purchase price in 2002. But now the shares are trading at slightly over Rs 1.5 on the BSE. The price is so low now that she does not think of selling it. There are no dividends and the only thing she gets is the annual report of the company—the last one was for March 2007.
