DSQ scam: Tribunal tells Sebi to rescue investors

In an unprecedented move, the Securities Appellate Tribunal (SAT) has asked the capital market regulator Securities and Exchange Board of India (Sebi) to come to the rescue of DSQ Software investors who bought fraudulent and unlisted shares from the market introduced by the promoter Dinesh Dalmia. While giving the final verdict on the petition filed by Dalmia, challenging the Sebi order debarring him for of 10 years, SAT upheld the Sebi order and asked the regulator to set up an authority who will be entrusted with the task of identifying the shares which were not listed and were alleged to have been issued from May 20, 2000 to January 12, 2001 and introduced into the market by Dalmia and his associates. The Sebi investigation into the price fluctuation of DSQ Software shares revealed serious irregularities in the allotment of shares by the company as also in the dematerialization of shares so allotted and subsequent sale of such shares by brokers and entities associated with the company promoters. These shares were dumped into the market by Dalmia through his own companies using the preferential allotment route. Sebi later banned Dalmia and DSQ from the market for 10 years. SAT has now upheld the Sebi order on the ban. Moreover, a sharp fluctuation in the DSQ Soft price was noted during the period October, 1999 to March, 2001. The price shot up from Rs 250 in October 1999 to Rs 2,631 in March 2000, but fell to Rs 150 in March 2001. Shares were dumped to other investors in the market when the prices were rigged. The said movements in price were also accompanied by large volumes on all the three stock exchanges _ the Bombay Stock Exchange, National Stock Exchange and Calcutta Stock Exchange. SAT has asked the Sebi appointed authority to identify, in consultation with the company representatives, the eligible shareholders who had bought such unlisted shares during the period. The authority will also verify and satisfy itself about the price at which these unlisted shares were originally sold to the investors and thereafter arrange for refund of the purchase price to the investor after he surrenders those shares. Scam scan • Unlisted shares floated and diverted to Dalmia’s own firms • Dalmia firms dump fraudulent shares in the market • Share prices rigged up from Rs 250 to Rs 2631 • Unsuspecting investors left with dud shares • Sebi bans Dalmia, DSQ for 10 years