Mumbai: Observing that the prosecution of the accused is proper irrespective of the fact that now deceased stock broker Harshad Mehta was the key person manipulating stocks, a special court Thursday convicted six companies and their two directors, Dinesh Doshi and Anil Doshi, for failing to comply with multiple summons issued by the Securities and Exchange Board of India (Sebi). The Joshis were ordered to pay a fine of Rs 1.80 crore.The convicted companies include Starshare Investments & Finanz, Ikshu Finvest, KRN Finvest & Leasing, Esquire International,Money Television and Industries Ltd and CDP Fincap & Leasing. In six separate judgments, special Judge RM Jadhav said the accused directors failed to prove that the offence of non-compliance was committed without knowledge or that they had exercised due diligence to prevent commission of offence.The judge also pointed to Sebi’s submissions that prosecution was proposed against Harshad Mehta and that his demise will not help exonerate the accused “from the criminal liability attached for non-compliance of the summons.”In 1998 Sebi initiated a probe into significant price manipulation of shares of BPL, Videocon International and Sterlite Industries, which eventually led to a writ petition in the Bombay high court seeking a formal inquiry. During investigation, Sebi identified brokers dealing in these shares on behalf of a group of clients, including the accused companies which allegedly form Mehta’s Damayanti Group. Sebi had issued summons, requiring the accused to produce documents and financial records. While some directors eventually appeared before investigating officers, their cooperation was alleged to be superficial. It was said that they consistently failed to deliver necessary documentation.Sebi had issued a show-cause notice in Aug 1998, threatening prosecution under Section 24 of the Sebi Act for non-compliance. The accused responded by claiming their books of account were still under preparation, an explanation seen as a stalling tactic. Despite repeated summons through late 1998 and early 1999, the parties allegedly remained uncooperative. Sebi eventually filed a criminal complaint against them for hindering the probe. The matters were presented before the special court in 2014.During the trial, the defence argued that the directors were not responsible and suggested that Harshad Mehta was the actual figure running the “Damayanti Group”. They submitted that the prosecution was barred by the principle of double jeopardy, as the directors had already been convicted in similar cases involving other entities. The judge noted that Mehta may have been the key person in Damayanti Group involved in manipulation of the share market, but the present prosecution is limited to the fact that accused have failed to furnish the information and necessary documents as sought under summons.Each director was sentenced to pay a total fine of Rs 60 lakh with the court warning of simple imprisonment for one month in default of payment. The duo were also ordered to collectively pay an additional fine of Rs 60 lakh on behalf of all six companies. Proceedings against two other accused directors, Vinod Shah and Dilip Shah, were abated due to their death during trial.
