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Ketan Parekh plans Rs 50 billion defamation case against Bank of India

Savio G Pinto

Ketan V Parekh is not ready to accept the blame for manipulating the stock market. "There is no scam. We got carried away in taking a bullish view on the markets for which we paid the price. That's an error of judgement. There is no criminality involved in it," Parekh said in Bombay on Thursday in his first interview to the media after spending 55 days in custody. Parekh was released on bail on May 21.

Clearing the Rs 1.37 billion liability of the Madhavpura Mercantile Co-operative Bank is high on his list of priorities. He is also contemplating filing a Rs 50-billion case against the Bank of India. "The bank has suppressed facts and portrayed a picture which gives a totally distorted view of the actual circumstances," Parekh said.

Extracts from the interview:

How did you get into this mess?

Ironically, when the Madhavpura-BoI episode surfaced, we had already unwound all outstanding positions in the market. The BoI fiasco was more of its own making. The income tax raid and its subsequent fallout created certain technical glitches, which made BoI adopt a knee jerk reaction.

We had credit limits, which the bank had sanctioned and pay orders were discounted as a matter of routine. BoI had, in fact, discounted our pay orders totalling Rs 24 billion through the months of January and February.

On these, it earned a commission of Rs 70 million. However, all these facts have been suppressed by BoI in its submissions. What BoI has portrayed as a one-off transaction was, in fact, one among a series of transactions with it.

What has been made out to be a bouncing of pay orders has been done after the Madhavpura bank officially defaulted.

Even regarding the pay orders, which apparently bounced, why did the Reserve Bank of India and BoI return them after almost 10 days? In any case, the returning of the pay orders after Madhavpura bank defaulted constitutes a bank-to-bank transaction. How can BoI hold me responsible? If at all I have a liability, it is due to Madhavpura and not BoI.

What is your gameplan with regard to BoI?

We are contemplating filing a Rs 50-billion defamation case against BoI. A pay order cannot bounce. If BoI claims that the pay order has been returned, it has to proceed against Madhavpura bank. We have not violated any law or committed any crime. Where is the criminality in the whole issue? There has been no forgery, fraud or misrepresentation of any kind.

Any individual or any entity for that matter will approach banks for credit. It is the responsibility of the banks to see that their lending norms are met. Even when we first availed of credit facilities from Madhavpura bank, the bank was secured 100 per cent by collateral. If the value of the collateral subsequently fell, it is due to the overall decline in market valuations. But then, that is not a crime. Even if there has been a default, the nature of the liability is of a civil one.

Are you suggesting that the entire issue has been blown out of proportion?

Absolutely. Cheques bouncing or defaults on loans are routine in day-to-day commercial dealings. You cannot just arrest a person for something, which is of a civil nature.

In our case, BoI filed the complaint with the CBI on the morning of March 31. Two hours later, the CBI arrested me.

Is this the way to proceed in any matter? Is there no concept of preliminary investigation or ascertaining facts before an arrest is made? Is it fair to make a person spend 55 days in custody for something, which does not warrant it? And in any case, where is the criminality? You cannot brand the issue a scam when there is no scam.

You were a quick-footed trader. How did you go wrong?

We went wrong in taking a bullish view on the market when it was on a downturn. It was an error of judgement for which we paid the price in the market itself. We basically got carried away. The whole idea was not just to make money. Also, we were so much in the money that Rs 5 billion more or less did not make any difference. At that point of time we had formed a long-term view which ultimately turned out to be wrong. I have no one else to blame but my own judgement.

What about the Rs 8 billion that is being talked about as the actual amount of default by Madhavpura bank?

The Rs 8 billion is being attributed in a blanket fashion to the KP group, which is not correct. We are in no way responsible for what other entities may owe the bank. Our liability is not Rs 8 billion.

Did your friends in the corporate sector stand by you during your hour of crisis?

All my friends without exception stood by me. The amount that they helped me with was more than I could expect, in spite of all the constraints they faced. And the amounts that we are talking about are not something that can be brushed aside. But more than that, the moral support has been tremendous.

Do you attribute any part of the market meltdown to the bear cartel?

The market meltdown cannot be attributed to any single factor. It was a global phenomenon and we were no exception. Just as the market went up on its own steam, so also it melted. Bulls or bears will exist in any market, but to say either of them was responsible for the movement will not be correct. While people attribute the fall to a bear cartel, I personally do not have any proof to say this.

How does the future look like?

One thing is certain. There is no sense in trying to be a bull. It's foolish to be bullish, if I may say so.

What do you plan to do now?

First of all, we have to fulfil our responsibility. There is no denying that or running away from it. That is the foremost on the list of priorities. All through the months of January and February when the market was falling, we paid huge amounts to the market to meet our obligations.

The figures, which you may have come across, give an adequate indication of our intentions right from the beginning. If we were not serious about our commitments and wanted to default, we would have done so much earlier. We believe that if the monetary angle is sorted out, all other issues will automatically even themselves out.

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