Sebi has initiated more than 300 attachment proceedings in about 65 different cases for recovery of close to Rs 2,000 crore from defaulters and fraudsters, including those having raised money through illicit money-pooling activities.
These cases are over and above the attachment orders passed through court orders, such as in case of Sahara group, and involve direct attachment orders passed by Sebi, powers for which was granted to the regulator through an ordinance promulgated by the Government. While this ordinance has lapsed due to non-passage of a relevant bill in the Parliament, actions taken by Sebi till January 15 would remain valid and the recovery proceedings will continue in these cases, a senior official said.
The Government would have to either pass the bill in the next Parliament Session or promulgate the ordinance for third time at a later date for resumption of these powers to Sebi. The ordinance for grant of additional powers, which included freezing of bank accounts, attachment of properties, conduct of search and seizure operations and launch of recovery proceedings, to Sebi was first promulgated in July and for the second time in September last year.
Using these powers, Sebi began passing attachment orders and launching recovery proceedings in October 2013. Since then, it has initiated at least 311 attachment proceedings in nearly 65 cases for recovery of investor money amassed through illicit schemes, as also of long-pending penalties for various market related defaults.
The Securities and Exchange Board of India (Sebi) had been seeking these powers for long to better regulate markets and take to task the fraudsters and other defaulters more effectively. Soon after the promulgation of the ordinance, Sebi began exercising these powers and also put in place necessary operational mechanism, including those requiring changes in the manpower deployment.
Under its recovery mechanism, Sebi was authorised to order attachment and sale of defaulter’s movable property and immovable properties, freezing of bank accounts, arrest of the defaulter and his detention in prison, as also appointment of a receiver for management of movable and immovable properties.
Sebi has also appointed a Recovery Officer at its Head Office in Mumbai, while it is appointing more Recovery Officers at regional offices to expedite the recovery process.A training programme was also conducted for Sebi officials on search, seizure and recovery procedures. In order to have uniformity in the recovery process, a Recovery was made for internal guidance in line with the procedures adopted by the Income Tax Department for recovery of tax.
While finalising this manual, inputs were also taken from the senior income tax officials. As part of its recovery proceedings, the regulator hasserved orders to various banks and depositories to attach the accounts of those who have not paid penalties imposed on them for violations of various securities market regulations.
These include freezing of bank accounts for recovery of funds totalling nearly Rs 2,000 crore, which includes over Rs 1,500 crore for one single case involving an illegal collective investment scheme in West Bengal. In this case, Sebi has ordered attachment of over 50 bank accounts of MPS Greenery Developers for recovery of Rs 1,520 crore, along with applicable returns, collected from investors through its illegal schemes.
Among the bank and demat accounts that have been ordered to attach are those indicted for alleged irregularities in the IPO of Suzlon and IDFC. Sebi has also issued notices for attachment of bank accounts in other matters, including Pyramid Saimira case of 2012 and IPO fraud of 2003-2005. In one of the notices issued, Sebi has ordered attachment of bank and demat accounts of stock broker Rajkumar C Basantani, to recover Rs 15 crore, one of the highest penalties imposed by the regulator on an individual, in case related to fraudulent activities in shares of Kolar Biotech.