COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Delhi high court asks govt to explain swindle by agro-forestry companies

Delhi high court today issued a show cause notice to the finance ministry on a petition alleging swindling of Rs 100 billion of investors' money by dubious and fraudulent agro-forestry companies in collusion with the Securities and Exchange Board of India and its chairman D R Mehta.

Notices were also served on the ministries of law and company affairs, agriculture, environment and forests, SEBI, Delhi government, the registrar of companies and Association of Agri Plantation Companies of India.

A division bench comprising Acting Chief Justice Mahinder Narain and Justice S K Mahajan directed SEBI to take action under Section 24 of the Sebi Act in necessary cases. The AAPCI was directed to place on record a report on the outstanding dues of the erring agro investment companies.

The bench directed the respondents to reply to the notices by September 1, when the case would come up for hearing next. Advocate Rekha Palli, appearing for the central government, accepted notices on behalf of the ministries of finance and law and company affairs.

The petition filed by president of Forum of Investors of Agro Forestry Companies of India S D Bhattacharya has raised questions of public interest regarding serious dereliction of duty, misconduct and fraudulent acts of omission and commission by SEBI, its chief Mehta and some other respondents. It alleged their collusion with some of the agro-plantation companies and negligence of some respondents including ministry of finance and the AAPCI.

These wrongful acts led to a situation where possibly Rs 100 billion of investors is in jeopardy.

The petitioners said they had alerted the respondents about the scandal but to no avail.

They submitted that as per the provisions of the SEBI Act, 1992, it was SEBI's duty to protect the interests of the investors in collective investment schemes like agriculture and plantation and to register and regulate their working. However, SEBI, the petitioners alleged, was in a ''deep-rooted conspiracy with malicious and deceitful intentions'' and in collusion with certain fraudulent companies did not take any such measure.

The petitioners submitted that by not registering and regulating such companies and by not issuing any caution or warning notice for years, SEBI led the petitioners and other investors to believe by implication that such agri-plantation companies were conducting fair business as per the law and investment in such schemes was prudent and safe.

They alleged that this trend of collusion between SEBI and companies increased after Mehta took over as SEBI chairman in 1995. During his tenure there was a sudden upsurge in the number of new plantation companies entering the investment market and raising funds from investors by increasing number and frequency of advertisements in media.

Hence, the petitioners urged the court to order the finance ministry to create or appoint an independent authority to salvage as much investment of petitioners and other investors as possible. The finance ministry should be directed to look into the matter directly and forthwith as per the provision of the SEBI Act, they prayed.

UNI