SEBI Court Convicts Doshi Brothers, Damayanti Group Firms for Failing To Disclose Information In 1998 Manipulation Probe

Mumbai: The special Securities and Exchange Board of India (SEBI) court has convicted Dinesh Doshi, Anil Doshi and their six firms part of the Damayanti Group, linked to Harshad Mehta, in five separate cases. The conviction pertains to their failure to furnish information during a probe into the manipulation of shares of BPL Ltd and Videocon International Ltd in 1998. The court sentenced them to pay a fine of `10 lakh each in each of the five cases.

SEBI had filed a prosecution complaint against six companies: Ikshu Finvest Pvt Ltd, KRN Finvest & Leasing Pvt Ltd, Esquire International Ltd, CDP Fincap & Leasing Pvt Ltd, Starshare Investments & Finanz Pvt Ltd and Money Television and Industries Ltd. These firms had common directors, the Doshi brothers, along with Vinod Shah and Dilip Shah. Since Vinod and Dilip have died, the case against them has been abated. Collectively, the entities were known as the Damayanti Group.

As per the complaint lodged by the board before the special court in July 2014, investigations began in 1998 into alleged price manipulation involving BPL, Videocon International and Sterlite Industries. The board noticed abnormal price movements and large volumes on the stock exchange between April and June 1998. During the probe, records of certain brokers were inspected, revealing that they dealt in these shares on behalf of the five companies.

The board claimed that when it summoned the directors, they initially avoided appearing by citing medical reasons. While they eventually gave statements between July and August 1998, they failed to comply with requests for transaction records despite a show cause notice and three subsequent reminders.

The companies contended they suffered due to the misconduct of Mehta, who they claimed was behind the transactions. They argued that Jyoti, the sister of a suspect director, was married to Mehta. The defence argued that Mehta was active through fictional companies like the Damayanti Group and represented the suspects as directors without their knowledge.

The court noted that Mehta may be the key person or front in the manipulation of the share market for the Damayanti Group. However, it clarified that the prosecution was limited to the fact that the suspects failed to furnish sought information. The court said the suspect directors failed to prove that the noncompliance was committed without their knowledge or that they exercised due diligence to prevent the offence.

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