Search the Internet          Tips  Sites: Finance, Investment

CBI asks Sebi to take action against ED Kar

The Central Bureau of Investigation has recommended regular departmental action against an executive director of Securities and Exchange Board of India Pratip Kar for allegedly sanctioning a mutual fund licence to the controversial CR Bhansali (CRB) group.

Besides a regular departmental action, the CBI has also recommended major penalty against Kar, who looks after secondary markets, for allegedly favouring the CRB group, which later on went on to cheat investors to the tune of several millions of rupees.

In its concluding report, the CBI said, "Kar went out of his way to favour CRB Capital Markets Limited which is inescapable in view of the statement of the erstwhile officials of mutual fund division and his admission of having changed a patently unfavourable report to a neutral one."

The CRB group has been accused of duping investors to the tune of several millions of rupees for which the CBI had initiated action against the company in 1997.

The CBI had registered a preliminary enquiry against Kar in April 1998 for his suspected role in sanctioning of licence. The agency after carrying out an investigation concluded that a departmental action would suffice.

The main accused in the case C R Bhansali, who owned the mutual fund, had fled to Hong Kong from where he was arrested and deported to India.

The CBI, in its report alleged that Kar had not followed the eligibility norm, which stated that the sponsor should have a sound track record of minimum five years.

However, in the case of CRB, even though a track record of full seven years was available, the actual performance was less than five years.

"A notional profit, which was not sufficient for paying dividends, had been construed as a dividend paying capacity," the CBI said.

"It had been wrongly emphasised in the note that the company had never made losses, while it had incurred losses in one particular year which was available on record," the CBI said.

The CBI sources said though a junior officer had not recommended granting of licence to CRB, Kar allegedly manipulated his note and gave a 'no objection certificate' to the Sebi chairman.

The mutual fund resulted into a total failure jeopardising the savings of thousands of investors and ultimately the Sebi got the administrator appointed through high court.

CBI alleged that Kar, thus abusing his official position, had favoured CRB Mutual Fund despite the fact that it violated Sebi (mutual fund) Regulations of 1993.

Tell us what you think of this report