New Delhi: Awanish Kumar Mishra, promoter of Allied Financial Services Pvt Ltd (AFSPL), which has been accused of a Rs 344-crore mutual fund scam, is a bitter man. With his business stopped and accounts frozen by the Securities & Exchange Board of India (SEBI), and his name tarnished in the media, his career as a broker and wealth manager is seriously threatened.
His misery began on 27 February, when SEBI restrained him and his associates from accessing the securities market. They were “prohibited from buying, selling or otherwise dealing in securities, either directly or indirectly, or being associated with the securities market in any manner whatsoever.” They were also barred from disposing of their assets “except with the prior permission of SEBI/NSE.”
The SEBI order, issued by whole-time member Ananta Barua, was in response to a complaint filed by Puneet Yadu Dalmia-promoted Odisha Cement Limited, a listed company with market capitalisation worth Rs 24,000 crore. It had complained to SEBI that “certain mutual fund units, valued at approximately Rs 344 crore, have been illegally and unauthorisedly transferred by the Depository Participant (DP) from the demat account(s) held by our erstwhile
subsidiaries, OCL India Limited (OCL) and Dalmia Cement East Limited (DCEL).”
OCL also filed complaints with National Securities Depository Limited (NSDL), National Stock Exchange (NSE), and the Economic Offences Wing, New Delhi.
SEBI accused Mishra, AFSPL, and others of a number of an assortment of violations: misappropriating client securities, not maintaining the requirement of continuous net worth; wrong reporting to stock exchanges; not doing segregation of clients funds from own funds; failure to settle the funds/securities of clients; giving disproportionate exposure to clients; misappropriating client securities; not reporting correct margin to Exchange F&O segment; dealing with unregistered entities; failure to do necessary due diligence while opening account of clients; and flouting of other SEBI rules.
When this correspondent asked Mishra about SEBI’s accusations, he refuted all of them. He said that the SEBI order talks about non-availability of funds to the extent of Rs 94.42 crore on 31 January 2019. This, he claimed, was “based on incorrect figures”.
Similarly, the charge of non-availability of client securities is “on account of calculation error”. While the SEBI order said that on 31 January 2019, the securities worth Rs 0.34 crore were not available in the DP account, the fact is that “securities worth Rs 0.35 crore were in excess in DP account”.
On the charge of the non-segregation of transaction between own and client bank accounts, Mishra said, that it was “based on faulty analysis done by the inspecting officer of NSE who failed to consider the fact that AFSPL was eligible to get said funds from the client bank account to its business account”. These were on account of brokerage, NSE transaction charges, and delayed payment charges, all totalling in excess of Rs 21 crore.
He refuted all the SEBI charges against him; either all facts were not considered, “faulty analysis,” “mathematical error,” “error in software,” etc.
Mishra accused SEBI of having ignored critical facts. He said that his firms paid Coin Tribe Technologies, also promoted by Puneet Yadu Dalmia and his relatives like the entire Dalmia Group, Rs 25 crore. Of this amount, Rs 15.56 crore was paid in several instalments between 10 March 2017, and 28 July 2017, by Money Mishra Financial Services.
Mishra’s point is that he received the money from the Dalmia Group for wealth management, which he claims he did satisfactorily. Payments were duly made to the group. In all, he says, his companies paid Rs 100 crore to the Dalmia Group.
“If it is a scam, there must be a beneficiary. The only person who has made good money is Mr Puneet Dalmia, about Rs 100 crore. We have just received the brokerage,” Mishra said, adding, “this is actually a non-scam, for nobody has lost money. The amount of Rs 344 crore that everybody says is the worth of the so-called scam has not been lost but is lying with ILFS Securities Services Ltd, which is the clearing agent.”
The Dalmia Group has alleged that the delivery instruction slips (DIS) used for transferring mutual fund units are forged, Mishra said. But, he added, the charge “is totally baseless…as the duly authorised signatories have signed the DIS.”
So, why the allegation? Mishra said that the merger process of their two companies, OCL India Ltd and Dalmia Bharat Ltd, started in September-October 2018. “At the time, they asked for the return/redemption of mutual fund units as external auditors wanted to verify it physically. As AFSPL had taken a position based on margin of these mutual fund units, it was not possible to return it at the time they demanded it. Mr Puneet Dalmia knew this and offered shares worth Rs 700 crore of OCL as replacement of mutual fund units.”
But shares couldn’t be transferred because of the merger process. “Since mutual fund units couldn’t be replaced, a well-planned witch-hunt was initiated and AFSPL was made a scapegoat,” Mishra claimed.
The questionnaires sent to the Dalmia Group and SEBI’s Barua did not elicit any response.
Mishra alleged that SEBI has acted against him and his companies without the application of mind and without any regard for natural justice. This, he claimed, became evident from the SEBI counsel’s statement in the Supreme Court on 15 July. The counsel said that SEBI didn’t have the manpower to look into the dispute between Dalmia and Allied.
If SEBI couldn’t find the truth about a dispute between two parties, how it could penalise one of them, Mishra asked. “The only explanation is that I am an ordinary broker and my opponents are corporate tycoons.”
Meanwhile, many more parties have got involved in this case. Further, foreign portfolio investors or FPIs are keenly observing the developments, as the course the case takes will affect their investing decisions. Therefore, it is imperative that the issue is resolved at the earliest. If there are any wrongdoers, Mishra or Dalmia, they should be penalised, but the resolution has to be as soon as possible.
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This part was added to this news report on 8 August 2019.
Following are the SEBI decisions alluded to in the news report:
