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The Securities & Exchange Board of India is looking into the alleged charges of insider trading and unfair trade practices against Tata Power and Tata Sons.
A Pune-based investor has levelled the charges against the Tata companies and a copy of his complaint is available with Business Standard.
C S Kahlon, an executive director of Sebi, said, chairman G N Bajpai had marked the complaint to his department and an officer had been entrusted with the task of investigating the complaint. Kalhon said he was not in a position to say how long the investigation would take.
Business Standard had sent through e-mail a set of questions to Sebi as well as Tata Sons on the issue. Kahlon was responding to the questions.
Responding to the same questionnaire, a Tata group spokesperson said the group did not wish to comment on the issue as the person was "non-existent." On the same grounds, he said the group would not comment on the charges as well.
The investor's complaint was addressed to the Sebi chairman as well as the Union Minister of Finance, Jaswant Singh, and Union Minister of State for Finance and Company Affairs, Anandrao Adsul.
In his letter to Business Standard sent by registered post, the investor identified himself as M N Joshi, residing at 133/11 Annapurna, Mayur Colony, in Pune.
According to the investor, Af-Taab Investments Company, a wholly owned subsidiary of Tata Power, purchased shares of Tata Sons in 2000-01 at a rate that was 1300 per cent higher than the price obtained by Tata Power when it sold the same shares. The face value of Tata Sons share is Rs 1,000.
The complainant enclosed Tata Power's annual report for 2000-01 which indicated that Af-Taab Investments Co purchased 2,100 shares of Tata Sons during the year for Rs 168.83 crore (Rs 1.69 billion), indicating acquisition cost of Rs 803,000 per share.
On the other hand, he said, the same annual report revealed that Tata Power sold 2,100 shares of Tata Sons for Rs 11.73 crore (Rs 1.2 million), indicating a selling price of Rs 55,873 per share.
He said the annual report also showed Af-Taab Investments took unsecured loans of Rs 118 crore (Rs 1.18 billion) from Tata Power in 2000-01.
Based on the information, the investor has brought two charges against the Tata companies.
One, Tata Power sold shares of Tata Sons to its subsidiary, Af-taab Investment, at a high price to inflate its profits.
Two, Tata Power sanctioned loans to Af-Taab to finance acquisition of Tata Sons shares which were sold by Tata Power.
The complainant also alleged that Tata Sons purchased large number of shares of Tata Power in 2000-01 from markets.
The shares were bought for Rs 60-75 each.After Tata Sons' acquisition of Tata Power shares, the Tata Power counter witnessed a high of Rs 145 in March 2001.
His charge was that Tata Sons being the promoter of Tata Power had insider information that the Tata Power stock would go up.